1. This judgment will dispose of Sales Tax References Nos. 6 to 11 of 1976, Sales Tax References Nos. 5 to 11 of 1974 and Sales Tax References Nos. 12 to 15 of 1978. All the references have been made to the High Court under the provisions of Sub-section (2) of Section 21 of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, read with Sections 45 and 73 of the Delhi Sales Tax Act, 1975. The common questions of law which arise for being answered are, though differently framed in different references, whether the transactions of sale effected by the society, namely, sales of various articles by the canteen run by the society, to the members of the society are transactions of sale which attract the levy of sales tax ; and whether in the circumstances of the case the society will be a 'dealer' as postulated by the Bengal Finance (Sales Tax) Act, 1941.
2. The Income-tax Co-operative Supply Society Ltd. is registered as a co-operative society under the Bombay Co-operative Societies Act, 1925, as extended to the Union Territory of Delhi. This society came into existence in view of a Central Government policy to open canteens in various Government offices wherein refreshments could be made available to the staff of the offices which were both of standard quality and at reasonable rates. In this welfare activity conceived by the Government the refreshments were to be supplied at subsidised rates. The co-operative societies to be formed under this scheme were to conduct the activity of supplying healthy and cheap refreshments and other commodities obviously to counteract the high prices that Government servants have to pay for such things if they were to go outside. The heads of departments were required to sponsor such co-operative societies. After enrolment of members the society was to act through a duly elected committee, elected by the general body of the members. The committee of management was generally to be presided over by the head of the department or his nominee. A society like that came into existence, known as the Income Tax Co-operative Supply Society Ltd. and it composed of officers and officials of the income-tax department. This society duly opened a canteen and in time extended its activity from mere providing of refreshments to keeping articles of daily need and necessity. The society did not register itself as a 'dealer' as in its view it was only acting as an agent or trustee of the officials of the income-tax department and supplying to its members refreshments and other articles at subsidised rates. In other words, the transactions of so-called sales were really the supply of refreshment and other articles by the nominees of the members to the members themselves, i.e., by the members to themselves.
3. The sales tax department, however, took a different view. Accordingly, the society was assessed to sales tax for the various periods of the assessment years 1964-65, 1965-66,1966-67, 1967-68 and 1968-69. The society went up in appeal to the Assistant Commissioner, Sales Tax, but the appeals were dismissed. Revisions were then filed which met the same fate. On further revisions to the Additional District Judge, Delhi, the two questions that came up for consideration were as formulated by us above. The learned Additional District Judge, Delhi, disposed of the revision petitions by a common order dated 20th December, 1975. He examined the questions from the point of view of whether the transactions were 'sales' within the meaning of the term given in the statute. In that behalf he looked into the document of incorporation of the society containing its objects. On a reading of the objects of the society he came to the conclusion that 'the statement of objects clearly postulates activities of purchase and sale of consumer goods and making of profit and distribution thereof and thus profit-motive (inheres) in the situation and there is nothing in the activities presently followed by the petitioner which may point to the contrary'. Construing the first Explanationn of Clause (g) of Section 2 of the Bengal Finance (Sales Tax) Act, the learned Additional District Judge came to the conclusion that a co-operative society which sells goods to its members is a dealer and according to the definition of the term 'sale' as given in Clause (g) of Section 2 of the said Act any transfer of property in goods by one person to another for cash, etc., is a sale. He relied on Deputy Commercial Tax Officer v. Enfield India Ltd.  21 S.T.C. 317 and distinguished the decisions in Joint Commercial Tax Officer v. Young Men's Indian Association  26 S.T.C. 241 and the Chelmsford Club Ltd. v. Sales Tax Officer Civil Writ No. 177-D of 1961 decided on 22nd January, 1971 (Delhi High Court). He also made reference to Commissioner, Sales Tax v. Roshanara Club Ltd. I.L.R.  Del 164. The revisions were, accordingly, dismissed. The assessed thereupon moved for having a reference made to this Court and that is how References Nos. 6 to 11 of 1976 are before us.
4. A similar case of a canteen run by the Deputy Commissioner's Office Cooperative Store (Canteen), New Delhi, another co-operative society formed under similar circumstances as mentioned above, comes up for consideration in Sales Tax References Nos. 5 to 11 of 1974. In these cases the revision petitions of the assessed were accepted by the Financial Commissioner to the extent that sales effected to members did not attract the incidence of sales tax but sales to persons other than members would attract the incidence of sales tax and for those sales the assessed would be a dealer. The Financial Commissioner referred to a large number of decisions cited before him and also to the Government of India's policy contained in its Memorandum No. F. 4(25)/56-Fin (E) dated 23rd July, 1959. According to him the sales to the members were really in the nature of supply of goods by members to themselves and to that extent the co-operative society was a service organisation. The Commissioner of Sales Tax thereupon moved the Lt. Governor of Delhi to make a reference to this Court for its opinion on the two questions which we have already formulated above.
5. Sales Tax References Nos. 12 to 15 of 1978 are also of the Income-tax Co-operative Society Ltd. and have been made by the Appellate Tribunal, Sales Tax, like Sales Tax References Nos. 6 to 11 of 1976 but at the instance of the Commissioner of Sales Tax after the Financial Commissioner had allowed the revision petition of the assessed. In these references four questions have been formulated but in effect the only questions which arise for our opinion are as stated by us earlier. However, as there may be some difference between the so-called sales to the members and non-members, we would adopt the four questions in Sales Tax References Nos. 12 to 15 of 1978 as the basis for giving our opinion because answering these four questions would cover every possible contingency. For the sake of convenience we set out these questions :
(a) Whether, on the facts and in the circumstances of the case, the society can be regarded as a 'dealer' within the meaning of Clause (c) of Section 2 of the Bengal Finance (Sales Tax) Act, 1941, as then in force in Delhi ?
(b) Whether, on the facts and in the circumstances of the case, the supply of eatables/drinks, etc., by the society to its members constituted 'sale' within the meaning of Clause (g) of Section 2 of the local Act ?
(c) Whether the supply of eatables/drinks by the society to non-members constituted 'sale' within the meaning of Clause (g) of Section 2 of the local Act?
(d) Whether, on the facts and in the circumstances of the case, the society was liable to pay sales tax in respect of its transactions of supply of eatables/ drinks to its members and non-members ?
6. It is not in dispute (i) that the assesses-cooperative societies came into existence in consequence of a welfare scheme formulated by the Central Government and in accordance with the said scheme ; (ii) the canteens run by the co-operative societies provided refreshments and other articles of daily necessity to members and non-members at cheap rates on more or less a no-profit-no-loss basis and that the Government was subsidising the running of the canteens; and (iii) that to partake of the refreshments supplied at subsidised rates not only members but non-members also visited the canteens. The major portion of sales were, however, to members and the sales to non-members were in the neighborhood of 10 per cent of the total sales.
7. The contention on behalf of the revenue is that inasmuch as the incidence of sales tax is attracted on a gross turnover exceeding a minimum of all sales effected during a year or a period by the assessed, which is a distinct legal entity capable of entering into a contract, unless the doctrine of mutuality applies or the principle of agency is attracted the assessed would be liable to pay sales tax.
8. On behalf of the assessed, on the other hand, it has been urged that, in the facts and circumstances of the present cases, liability to pay sales tax would be attracted on the gross turnover from the so-called sales only if the transactions are in the nature of conduct of business by the assessed ; in other words, if the assessed is carrying on business of sale and purchase. The incidence of tax would be attracted only if Section 4, which is the charging section, of the Bengal Finance (Sales Tax) Act, as in force at that point of time, is attracted. The relevant part of this section at that time was in the following terms :
4. Incidence of taxation.-With effect from such date as the Chief Commissioner may, by notification in the official Gazette, appoint, being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the date so notified.
(2) Every dealer to whom Sub-section (1) does not apply, shall if his gross turnover calculated from the commencement of any year exceeds the taxable quantum at any time within such year, be liable to pay tax under this Act, on the expiry of two months from the date on which such gross turnover first exceeds the taxable quantum on all sales effected after such expiry.
Explanation.-In this sub-section, and in Sub-section (4) the expression 'period' means a period not exceeding twelve months from the commencement of a year.
9. We may here also read some of the other relevant provisions. Clause (c) of Section 2 of the said Act defines the term 'dealer' and sets out that 'dealer' means any person who carries on the business of selling goods in the Union Territory of Delhi and includes the Government. Explanationn 1 of Section 2(c) lays down that a co-operative society or a club or any association which sells goods to its members is a dealer. Clause (g) of Section 2 defines 'sale'. It reads:
'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on hire-purchase or other system of payment by Installments, but does not include a mortgage or hypothecation of or a charge or pledge on goods....
10. Sections 7 and 8 have some relevance because the assesseds in the present cases did not originally register themselves as dealers and were compelled to do so. The relevant portions of sections 7 and 8 read as under :
7. Registration of dealers.-(1) No dealer shall, while being liable to pay tax under Section 4 of this Act, carry on business as a dealer unless he has been registered and possesses a registration certificate.
8. (3) Every dealer who has been registered upon application made under this section shall, for so long as his registration remains in force, be liable to pay tax under this Act.
(4) The registration of a dealer upon application made under this section shall be in force for a period of not less than three complete years and shall remain in force thereafter unless cancelled under the provisions of this Act.' From a mere reading of the provisions set out above it is apparent that liability to pay sales tax on a gross turnover of sales is only on a registered dealer. thereforee, what needs to be clearly understood is not merely as to whether a transaction is a 'sale' within the meaning of the Act but also whether the assesseds in the present cases can be regarded as 'dealers'.
11. There can be no doubt and, indeed, there has hardly been any debate on the question of whether the transactions entered into by the assesseds in the present cases were sales. For the purposes of the law of contract and for the purposes of suing and being sued, there can be little doubt, that incorporation of the assesseds, under the Societies Registration Act makes them separate legal entities. There cannot also be much dispute that in the conventional approach the transactions entered into by the assesseds would be contracts of sale. The moot point is whether the assesseds are 'dealers' within the meaning of the Act and can be said to have entered into the sales in question as commercial transactions.
12. Mr. Chawla, the learned counsel appearing for the revenue, was at some pains to bring to our notice that the assesseds had a capital structure, they had shareholders who were entitled to dividends on profits and, thereforee, their venture was a commercial venture which means that the assesseds were carrying on business. He, however, very fairly conceded that if in the circumstances of the case the principle of mutuality or agency could be established then the profit-motive or the profit aspect would not have much relevance.
13. In Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd.  21 S.T.C. 317, J. C. Shah, J. (as he then was), deciding an appeal which arose from a petition under Article 226 of the Constitution of India, observed : 'It will suffice to state that it cannot be urged as a proposition of law that when a co-operative society supplies to its members refreshments for a price under a scheme for distribution or supply of refreshments, the transaction can in no event be regarded as a sale of the refreshments supplied for a price.' This observation was made in the context of the challenge put forth by the assessed to proceedings taken for assessing the society's liability for sales tax in respect of its transactions and the contention was that the Explanationn to Section 2(g) of the Madras General Sales Tax Act, 1959, was ultra virus the State Legislature inasmuch as the Madras Legislature exceeded its legislative power by creating a fiction by which the concept of the word 'sale' was extended to include transaction which properly speaking would not amount to sale. Holding that the Explanationn to Section 2(g) of the Madras Act was only clarificatory the liability of the society to pay tax under the Madras Act was confirmed. It was further observed on a reading of the various provisions of the Madras Act that, 'For turnover from a transaction to be taxable under the Act, the transaction must have constituent elements, viz., (1) parties competent to contract; (2) mutual assent; (3) thing, the absolute or general property in which is transferred from the seller to the buyer ; and (4) price in money paid or promised. When a co-operative society supplies to the members for a price refreshment in the canteen maintained by it, the four constituent elements of sale are normally present: the parties are competent to contract ; there is mutual assent; refreshments which belonged absolutely to the society stand transferred to the buyer and price is either paid or promised.' The Supreme Court noticed that there was nothing on the record of the case to show that the society was acting merely as an agent of its members in providing facilities for making food available to the members or the fact that the society supplied refreshments to its members. Thus, this decision only goes so far as to establish that turnover from sales in some cases and in certain circumstances may attract the incidence of sales tax.
14. In Joint Commercial Tax Officer v. Young Men's Indian Association  26 S.T.C. 241 , relied upon on behalf of the revenue, once again the question that arose for determination was of legislative power. In that context it was observed that commercially speaking an individual and a company have separate economic existence but unlike an individual a company has an economic existence only. No activities other than making and spending of money are open to it. The contention before us is that the assesseds indulged in economic activity and, thereforee, were distinct from their members. There can be no doubt on this proposition but as we have said earlier the point for decision is whether the economic activity entered into by the assesseds is in the nature of an activity postulated by Clause (c) of Section 2 of the Act.
15. The principle of mutuality was well-enunciated by the House of Lords in New York Life Insurance Co. v. Styles (Surveyor of Taxes) (1889) 2 Tax Cas. 460 (commonly known as the Styles' case). This principle came up for examination and has been dilated upon by the Supreme Court in Commissioner of Income-tax v. Royal Western India Turf Club Limited : 24ITR551(SC) . It was held that the principle of the Styles' case (1889) 2 Tax Cas. 460 cannot apply to an incorporated company which carries on the business of horse-racing and realises money both from members and from non-members for the same consideration, namely, by the giving of the same or similar facilities to all alike in course of one and the same business carried on by it. After noticing the various English decisions in which the ratio of the Styles' case (1889) 2 Tax Cas. 460 had been commented upon the Supreme Court observed as under :
It is clear to us, taking the facts admitted or found in the case before us, that the principles of Styles' case (1889) 2 Tax Cas. 460, as explained by subsequent decisions noted above, can have no application to this case. Here there is no mutual dealing between the members inter se in the nature of mutual insurance, no contribution to a common fund put up for payment of liabilities undertaken by each contributor to the other contributors and no refund of surplus to the contributors. There being no mutual dealing the question as to the complete identity of the contributors and the participators need not be raised or considered. Suffice it to say that in the absence, as there is in the present case, of any dealing between the members inter se in the nature of mutual insurance the principles laid down in Styles' case (1889) 2 Tax Cas. 460 and the cases that followed it can have no application here. The principle that no one can make a profit out of himself is true enough but may in its application easily lead to confusion. There is nothing per se to prevent a company from making a profit out of its own members. Thus a railway company which earns profits by carrying passengers may also make a profit by carrying its shareholders or a trading company may make a profit out of its trading with its members besides the profit it makes from the general public which deals with it but that profit belongs to the members as shareholders and does not come back to them as persons who had contributed them. Where a company collects money from its members and applies it for their benefit not as shareholders but as persons who put up the fund the company makes no profit. In such cases where there is identity in the character of those who contribute and of those who participate in the surplus, the fact of incorporation may be immaterial and the incorporated company may well be regarded as a mere instrument, a convenient agent for carrying out what the members might more laboriously do for themselves. But it cannot be said that incorporation which brings into being a legal entity separate from its constituent members is to be disregarded always and that the legal entity can never make a profit out of its own members....
16. In Commissioner of Income-tax v. Kumbakonam Mutual Benefit Fund Ltd. : 53ITR241(SC) , the Supreme Court reiterated its earlier view and observed that, 'the essence of mutuality lies in the return of what one has contributed to a common fund, and if profits are distributed to shareholders as shareholders the principle of mutuality is not satisfied'.
17. A large number of authorities were cited before us on behalf of the revenue on the question of mutuality but it is not necessary to notice all of them. We will, however, notice one of the later pronouncements in Cricket Club of India v. Bombay Labour Union : (1969)ILLJ775SC . In this case the question that arose was whether the activity of the Cricket Club of India at Bombay was that of an industry within the meaning of the Industrial Disputes Act, 1947. Bhargava, J., speaking for the court, observed as under:
In our opinion, the Tribunal was right in holding that the circumstance of incorporation of the club as a limited company is not of importance. It is true that, for purposes of contract law and for purposes of suing or being sued, the fact of incorporation makes the club a separate legal entity ; but. in deciding whether the club is an industry or not, we cannot base our decision on such legal technicalities. What we have to see is the nature of the activity in fact and in substance. Though the club is incorporated as a company, it is not like an ordinary company constituted for the purpose of carrying on business. There are no shareholders. No dividends are ever declared and no distribution of profits takes place. Admission to the club is by payment of admission fee and not by purchase of shares. Even this admission is subject to balloting. The membership is not transferable like the right of shareholders. There is the provision for expulsion of a member under certain circumstances which feature never exists in the case of a shareholder holding shares in a limited company. The membership is fluid. A person retains rights as long as he continues as a member and gets nothing at all when he ceases to be a member, even though he may have paid a large amount as admission fee. He even loses his rights on expulsion. In these circumstances, it is clear that the club cannot be treated as a separate legal entity of the nature of a limited company carrying on business. The club, in fact, continues to be a members' club without any shareholders and, consequently, all services provided in the club for members have to be treated as activities of a self-serving institution.
18. A Bench of this Court in Delhi Cloth & General Mills Company Limited v. Union of India : (1969)ILLJ775SC considered all the above cases, and many more, while deciding four writ petitions and three sales tax references where the common contention was that the turnover of sales effected by the assesseds in their canteens was not liable to be included in the taxable turnover for the purposes of levy of sales tax under the Bengal Finance (Sales Tax) Act, 1941. The argument was that the assesseds were not dealers and the transactions in question were not sales, similar to the question before us. Tatachari, C. J., speaking for the Bench, negatived the contention on behalf of the revenue that turnover from all sales was liable to be taxed and observed that the argument ignored 'that though the word 'business' does not occur in Section 4, the term 'dealer' occurs in it, and the term 'dealer' has been denned in the Act as one who carries on the 'business of selling goods'. The concept of 'business' is thus brought in by the use of the term 'dealer' and, consequently, the requirement of profit-motive is attracted'.
19. In Ambica Mills Ltd. v. State of Gujarat  15 S.T.C. 367, the Gujarat High Court was also concerned with a similar problem. It was observed: 'The word 'business' having a wide connotation, spreading over a vast and an indefinite field of activity, the courts have to apply different tests to different types of sales involving a variety of articles or goods in order to ascertain whether they fall under the category of sales effected in the course of business. In the nature of things, it would be impossible to lay down a hard and fast rule which would uniformly or in a symmetry govern all cases. thereforee, though different tests governing different sets of circumstances have been laid down, such as volume and degree of frequency, continuity and regularity of transactions, the nature of the goods sold, the initial intention at the time of their manufacture or purchase, etc., each test so laid down must be taken as governing the facts to which it was applied, and at best, is an indication which however would be liable to be offset by other circumstances existing in a given case. The proper way is to examine the facts and circumstances of each case and then ascertain whether the sales in question were effected in the course of business of selling, in other words, as business activity, and whether there are circumstances which would lend to the sales the distinctive character of business.' The Supreme Court also in State of Andhra Pradesh v. H. Abdul Bakshi and Bros. : 7SCR664 observed: 'The expression 'business' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit.... Mere buying for personal consumption, i. e , without a profit-motive will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The legislature has not made sale of the very article bought by a person a condition for treating him as a dealer :...the buying of the commodity...must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal.' The crux of the problem thereforee is the nature of activity carried on by the assesseds in the present cases. It is conceded that the transactions are sale of goods for money or of providing meals/refreshments for money. It is also on record that the Government subsidises the supply of cheap meals and goods at reasonable rates. Although there is shareholding and there is provision of distribution of profits but the shareholders are all members and it is the members who get the benefit of any profit.
20. On behalf of the assesseds the contention is that the sales in the canteens are really in the nature of service or amenity provided to the members or guests of members and so, are not really activity postulated by the term 'dealer'. A large number of decisions have been cited of club activities in support of this contention. There can be no doubt that mere effecting of sales would not invite the incidence of tax under the Act. The sale must be effected by a person in the course of carrying on business of sale and purchase. Section 2(e) of the Delhi Sales Tax Act, 1975, which defines 'dealer' clarifies this position and speaks of sales effected 'whether in the course of business or not', but we are not concerned with the provisions of the 1975 Act. Perhaps, the legislature clarified this position because of a possible view taken regarding some sales, that the same were not effected during the course of carrying on business. We are concerned with the provision at the relevant time and the interpretation to be given to the words 'carries on business of sale, etc.'. Keeping in view the circumstances in which the co-operative societies in the present cases started the activity of running canteens it has to be found out whether the sales effected by them would be during the course of carrying on business of sale or whether the principle of providing service or amenity is attracted.
21. Although a Bench of this Court in the case of the Delhi Cloth & General Mills Company Limited  38 S.T.C. 403 has observed that the concept of business as brought in by the use of the term 'dealer' and consequently the requirement of profit-motive is attracted, in our view, and we say this with respect, business can be said to be conducted even if there is no primary or prime profit-motive. Similarly, as was observed by the Supreme Court in the case of Cricket Club of India v. Bombay Labour Union : (1969)ILLJ775SC , the incorporation of a club or society or company or the reason for that incorporation is not all that relevant. What has to be seen is the nature of the activity in fact and in substance. thereforee, if mutuality or agency can be spelt out in the activity of the co-operative society it can safely be said that the society was not carrying on business. If the view is that there was no mutuality or agency then the activity is (sic) not of carrying on business irrespective of the fact whether profit is earned or not earned or whether the activity is subsidised or not subsidised by the Government.
22. Great reliance has been placed on Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi : 1SCR557 , to urge that the amenities that are provided to members of the co-operative societies for which a charge is made cannot be regarded as either sale or carrying on business. In the case relied upon, the question that arose for consideration was whether the hotel, in which lodging and meals were provided on 'inclusive terms' to residents, meals which were served to nonresidents and to residents, for which a charge was levied in the case of nonresidents, but no charge was levied separately in the case of residents, would fall within the ambit of the tax contemplated by the Bengal Finance (Sales Tax) Act. The High Court had held that meals supplied on an inclusive basis to residents did not fall within the ambit of tax but meals supplied to non-residents for which a charge was made fell into the ambit of the Act. The Supreme Court in appeal held that service of meals to visitors in the restaurant of the hotel was not taxable under the Act and this would be so whether a charge was imposed for the meal as a whole or separately for each dish ordered. It was observed noting with approval the classical legal view that where a number of services are concomitantly provided by way of hospitality, supply of meals must be regarded as ministering to a bodily want or to the satisfaction of human need and, thereforee, the meals supplied to non-residents could not be regarded as sale, as supplying of meals included various intangible items of hospitality. In our view, this decision has no relevance to the facts of the present cases. The sale of refreshments and other commodities to members and non-members is not in the nature of supplying or providing any amenity. The amenity provided is the cheaper rates and nothing else. At what price meals and articles are sold is not relevant. What is relevant is whether this is a normal activity in the nature of carrying on business. The canteens have been set up with a specific purpose of providing meals and other things at cheap rates which is a facility and not in the nature of self-service. No agency can be spelt out nor any mutuality because the general body of consumers, members and non-members, have no say in the conduct of the activity of the canteen. A socially desirable activity like fair price shops or super bazars started by Government does not mean that the purpose overrides the nature of the activity. The motive of starting such activity is laudable. The activity is nothing but carrying on business.
23. In the view that we have taken, we answer the four questions set out on page 6 See page 437 supra as under:
(a) The first question is answered in the affirmative.
(b) The second question is answered in the affirmative.
(c) The third question is answered in the affirmative.
(d) The fourth question is answered in the affirmative.
24. The references are answered accordingly. In the circumstances, there will be no order as to costs.