1. The petitioner before us is the Electricity Department Canteen, Mount Road, Madras, and the question raised is whether the sales turnover of this canteen for the year 1954-55 is within the ambit of the Madras General Sales Tax Act. The canteen consists of about 500 members with a share capital of Rs. 2,5,00, It is stated that the object and purpose of this canteen is mainly to serve the members of the canteen with lunch and tiffin, but it is conceded that there is no prohibition in the bye-laws governing the canteen, of sale of lunch and tiffin to outside persons. The question for consideration is whether the canteen is a ' dealer ' within the Act and whether the transactions of this canteen can be called ' sales' within the meaning of that expression in the Act. Whatever may be the position, where the catering is strictly confined to the members of the canteen, if the canteen also catered to outsiders, it is impossible to hold that there has been no sale. There have been instances in the past where the canteen had supplied to an outside body, like the Burmah Shell Company. That this canteen has been supplying to persons other than the members is fully borne out by the evidence placed before the taxing authorities and in fact it is not now controverted before us.
2. Learned Counsel for the petitioner submitted that there was no profit motive on the part of the canteen when it catered to outside persons. The Tribunal has drawn the inference that there must have been a profit motive because in the year of assessment, the canteen earned a gross profit of Rs. 4,035-10-0 and a net profit of Rs. 2,210-15-9. The actual earning of profit is no doubt a relevant criterion in deciding the issue whether there was a profit motive on the part of the canteen. But even apart from the actual earning of a profit, if the activity of the canteen was not confined only to members but also extended to the supply of lunch and tiffin to others, there cannot be any absence of profit motive. Catering to persons outside the members of the canteen necessarily implies that the canteen had a business or a profit motive. It is impossible to designate sales to outsiders as not comprised in a business activity. Our attention has been drawn to the decision of the Bombay High Court in State of Bombay v. Ahmedabad Education Society (1956)7 S.T.C. 497. In that case an Education Society started Arts Colleges and in furtherance of the objects of the society they gave a contract to a contractor for construction of buildings for colleges, residential quarters for the staff and hostels for students. The surplus brick or building material which was left after the completion of the contract work was sold by the society at cost price to other societies. The question for consideration was whether this constituted a sale attracting the Bombay Sales Tax Act. At page 502, Chagla. C.J., observed as follows:
Here again, what we have to consider is what was the object of starting this brick factory and this lime kiln. If the object was to prepare bricks which would be used in the construction of the building of the society and to produce more bricks and sell them, then undoubtedly when the society ultimately sold the bricks it would be carrying on business of selling. But again the finding of fact is clear that the sole object of the society was to make bricks for their own buildings and for various reasons a larger quantity was produced, that quantity was liable to deteriorate, and therefore they had to be disposed of, and the important fact which cannot be overlooked is that these bricks were disposed of without the society making any profit whatsoever.
That was a case where there was a complete absence of any profit motive because what was sold was really the surplus stock and that was for the cost price. We are unable to see how that decision can help the petitioner to advance the contention in this case that there was no profit motive on the part of the canteen when it sold tiffin and lunch and catered to persons other than the members of the canteen. We are of opinion that on the facts found by the Tribunal in this case there were sales within the meaning of the Act and that the assessment on the petitioner's turnover is well founded. The petition fails and is dismissed with costs. Counsel's fee Rs. 100.