In the case of Bharatiya Vidya Bhavan, the Andhra Pradesh High Court (HC) has held that the food supplies to hostel students as an ancillary function of education trust can’t be brought to tax.
The petitioner, Bharatiya Vidya Bhavan’s Residential Public School is a public trust registered under the Bombay Public Trust Act. The petitioner’s school was established in the year 1983 with the object to provide education on a non-profit basis.
It was established by the Philanthropist’s development of society and is run on a non-profit basis. The school offers courses from LKG to 10th standard as recognized by the Central Board of Secondary Education (CBSE), New Delhi. Apart from the donations, the petitioner’s school collects nominal fees and mess charges from the students.
During the financial year 2004-05, the petitioner’sinstitution had a surplus of Rs.2.87 lakhs which were remitted to Bharatiya Vidya Bhavan Society. The petitioner’s school does not retain any surplus amounts with it. It was further submitted that the maintenance of hostels by the petitioner’s school is incidental, ancillary and connected with the main object and activity of imparting education.
The supply of food by the petitioner’s school to its students is not being made in the course of business and running a restaurant, eating house or hotel. Whereas, Section 2(10(d) of the VAT Act specifically refers to only a restaurant, eating house or hotel.
The Court observed that the 2nd respondent has passed the impugned assessment order though thepetitionerunder the law does not come under the purview of “dealer” as per the provisions of the AP VAT Act, 2005. Therefore, the impugned order was passed wholly without jurisdiction and isnot maintainable.
While allowing the writ petition, a two-member bench comprising Justice U Durga Prasad Rao and Justice T Malli karjuna Rao held that “the 2nd respondent in directing the petitioner school to obtain registration as a dealer under AP VAT Act, 2005 and the further action of respondents in assessing the petitioner’s school to VAT under the provisions of AP VAT Act, 2005 for the period from 01.04.2005 to 31.12.2005 vide order dated 08.03.2006 is held as illegal, arbitrary and contrary to provisions of AP VAT Act, 2005 and accordingly the said order is set aside”
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