R.L. Gulati, J.
1. This is a reference under Section 11(1) of the U. P. Sales Tax Act at the instance of the assessee.
2. The assessee is the Khurshed Bagh Co-operative Housing Society Ltd., Lucknow, which is a society registered under the Co-operative Societies Act (No. 2 of 1912). The assessment year involved is 1957-58. The dispute relates to the sales tax levied upon the turnover of bricks which the assessee is alleged to have sold to its members during the assessment year in question. The case of the assessee throughout has been that a brick-kiln had been set up not with the funds of the assessee-society but with the contributions made by some members, who wanted bricks for the construction of their houses and that the society merely acted in a supervisory capacity and distributed the bricks to its members after they had been prepared without charging any profit or commission. The Sales Tax Officer disregarded the plea of the assessee and passed an assessment order against the assessee levying sales tax on the turnover of bricks. On appeal the appellate authority annulled the assessment order taking the view that the supply of bricks made by the society to its members did not amount to sale, because the members who formed the society could not sell their goods to themselves. On a revision petition presented by the Commissioner of Sales Tax, the Judge (Revisions) reversed the order of the appellate authority holding that the assessee was liable to sales tax and the assessment made against it by the Sales Tax Officer was valid and proper. At the instance of the assessee the Judge (Revisions) has submitted this statement of the case for the opinion of this court on the following question of law :
Whether under the circumstances of this case the applicant effected sale of bricks to its members as a 'dealer' in the regular course of business
3. When the reference came up for hearing before a Bench of this court of which one of us (Honourable Gulati, J.) was a member, it was felt that the statement of the case was not complete so as to enable it to answer the question referred for its opinion. The Bench found that in the statement of the case the Judge (Revisions) had mentioned that the assessee was a society registered under the Societies Registration Act of 1860, whereas the Judge (Appeals) in his appellate order had stated that the assessee was a society registered under the Co-operative Societies Act. In its application under Section 11(1) also the assessee had stated that it was a co-operative housing society registered under the Co-operative Societies Act (No. 2 of 1912). The Bench accordingly directed the Judge (Revisions) under Section 11(4) of the Act to submit a definite statement as to whether the assessee was a society registered under the Co-operative Societies Act, 1912, or under the Societies Registration Act, 1860, or under both.
4. In the supplementary statement submitted by the Judge (Revisions) it has now been definitely stated that the society was registered under the Co-operative Societies Act, 1912.
5. The second point upon which the supplementary statement was called for by the Bench was as to the source of investment in the manufacture of bricks. In the supplementary statement the Judge (Revisions) has stated that there is no material on the record to show as to whether some of the members of the society only contributed money or all the members of the society contributed money in order to set up the brick-kiln, nor is there any evidence on the record to show whether the bricks were distributed to all the members or to some of the members. From a perusal of the statement of the case as also the revisional order passed by the Judge (Revisions) it appears that the assessee was held to be liable to sales tax because it was a distinct legal entity having been registered under the Societies Registration Act and secondly because the bricks manufactured during the year 1957-58 were supplied to various members of the society in their individual capacity against payment of price.
6. We are of opinion that the approach of the Judge (Revisions) was erroneous. We, of course, agree with the Judge (Revisions) that a cooperative society which is registered under the Co-operative Societies Act, 1912, is a legal entity distinct from its members. But whether it was liable to sales tax on the so-called turnover of bricks is a question which cannot be decided merely on the finding that the society distributed bricks to its members on payment of price.
7. Under the U.P. Sales Tax Act it is only a dealer, who is liable to pay tax, and a 'dealer' has been defined as a person who carries on business of buying and selling goods. In order that a person should be liable to tax, two things have to be established, firstly that there has been a transaction of sale and secondly that such a transaction of sale has taken place in the course of business of buying and selling carried on by the person concerned.
8. In the Joint Commercial Tax Officer, Madras v. The Young Men's Indian Association (Regd.), Madras (1970) 1 S.C.C. 462, the Supreme Court had to decide the question as to whether the assessee which was a registered club was liable to sales tax on the supplies made by it to its members of eatables and beverages. In that case, it was found that the club provided certain facilities to its members one of which was a mess together with a canteen which supplied to its members eatables and beverages. The employees of the club used to purchase the various articles required for supplying the refreshments etc., and the cost and the expenses incurred therefor inclusive of the salaries of cooks, servers and others were totalled up and divided among the members participating in the mess. The Supreme Court concurring with the judgment of the High Court held that the club was neither a dealer nor was there any sale within the meaning of Section 2(n) read with explanation I of the Madras General Sales Tax Act, 1959. Shah, J., summarised the legal position in the following words:
The test in each case is whether the club transfers property belonging to it for a price or the club acts as an agent for making available property belonging to its members.
9. Now let us apply the test formulated by the Supreme Court to the facts of the present case.
10. The contention of the assessee from the very beginning has been that the brick-kiln was run not with the share capital of the society but from the, separate contributions of the members. This is evident from the letter dated 10th October, 1960, written by the President of the assessee-society to the Sales Tax Officer (Special Investigation Branch), Lucknow, wherein it was stated:
We are running the same kiln even at present not out of share capital of the society but from the separate contributions of the members to whom the bricks are distributed for constructing their own residential houses in the colonies of the society.
11. This plea was reiterated by the secretary of the society, Sri R. Misra, in his letter dated 20th June, 1961, addressed to the Sales Tax Officer, Sector III, Lucknow. Paragraph 3 of that letter reads:
That the expenses incurred in running the brick-kiln were rateably contributed by its members and according to the supply of bricks to the members, which is apparent from the fact that the members had already made their respective contributions for meeting the expenses of the kiln long before it actually started.
12. The Sales Tax Officer in the assessment order dated 31st July, 1961, has noticed this plea as is apparent from the following extract from the assessment order:
On the date of hearing Sri Rameshwar Misra, Honorary Secretary, attended and stated that the society was not liable to pay sales tax because it was running in accordance with its bye-laws and it did no business but distributed goods, i.e., bricks manufactured by the society to its own members. There was no investment of the society but the brick-kiln is run from the investment of its members and bricks were distributed to them on no profit and no loss basis.
13. Unfortunately the sales tax authorities have not paid proper consideration to this plea of the assessee. However, there is no finding recorded by any of the sales tax authorities that the share capital of the assessee was invested in setting up and running the brick-kiln. On the other hand, there is an implied admission on the part of the authorities concerned that the brick-kiln was run with the contributions made by its members. In fact in the supplementary statement submitted by the Judge (Revisions) he has stated that there is no material to show as to whether the contributions were made by all the members or only by some of them, but this does imply that the contributions came from the members alright. Had that not been the case, the Judge (Revisions) would have clarified the position in the supplementary statement of the case that it is not the members' contributions with which the brick-kiln was set up but with the share capital of the society. In the circumstances we would be justified in presuming that the plea of the assessee that the brick-kiln was run with the investments provided by its members is correct.
14. The only consideration which seems to have prevailed with the Sales Tax Officer as also with the Judge (Revisions) appears to be that the society maintains accounts in respect of the manufacture and distribution of bricks as also all the amounts realised from the various members in respect of the supplies made to them. This fact, in our opinion, cannot be taken to be decisive of the position that the assessee was a dealer and the transactions in dispute were transactions of sale. In fact the course adopted by the assessee-society in maintaining accounts is not inconsistent with its plea that the funds for the venture were provided by the members. The assessee-society was bound to maintain accounts because it had to render accounts to the respective members and had also to work out the cost in order to fix the price of the bricks which was to be charged from the members.
15. The real question is as to whether the assessee-society sold its own goods or it acted merely as an agent for the distribution of the bricks belonging to the members. Now when the society did not invest its own capital but the funds were contributed by the members for the manufacture of the bricks, it is clear that the property in the bricks did not at any time vest in the assessee and so long as the property in the bricks did not vest in the assessee, there was no question of its selling the same. The fact that one of the objects of the society, according to its bye-laws, was to build or cause to be built residential houses for the convenience of the members and for this purpose to purchase in bulk the necessary building material or to start brick, lime and other kilns and to provide necessary technical guidance and supervision is of no consequence whatsoever. It is not the bye-laws which determine the nature of a particular transaction. From the facts of the instant case it is clear that the brick-kiln in question was not the property of the society, but it was a joint venture undertaken by the society on behalf of its members. The fact that the society took out the licence in its own name for setting up the brick-kiln is of no consequence. We are of opinion that the circumstances of the case clearly bring it within the law laid down by the Supreme Court in the case of Joint Commercial Tax Officer v. The Young Men's Indian Association, Madras (1970) 1 S.C.C. 462.
16. In a recent decision of the Supreme Court in Commissioner of Sales Tax, M.P. v. Purshotiam Premji (1970) 2 S.C.C. 287, it has been held that before a transaction can be considered to be a sale, there must be a transfer of property in goods and without a transfer there cannot be any sale, and since the ballast was never the property of the assessee there was no question of his transferring any property to the South Eastern Railway.
17. The case of Deputy Commercial Tax Officer, Saidapet, Madras, and Anr. v. Enfield India Ltd. Co-operative Canteen Ltd.  21 S.T.C. 317 (S.C) is clearly distinguishable. That was also a case of a co-operative society registered under the Madras Co-operative Societies Act, 1932, which was formed with the object of providing a canteen for supplying refreshments to the employees of a limited liability company without a profit-motive. The Supreme Court held that the society was liable to sales tax on the supplies so made. In that case the Supreme Court, however, found that there was nothing on the record to show that the society was acting merely as an agent of its members in providing facilities for making food available to the members and that the refreshments supplied to the employees of the limited company were the assessee's own goods. In the instant case, we have clearly indicated that the society was acting as an agent of its members for providing the facility of manufacturing and distributing bricks.
18. For the reasons stated above, we answer the question referred to us in the negative in favour of the assessee and against the department. The assessee will be entitled to its costs which we assess at Rs. 100. The counsel's fee is assessed at the same figure.