Trusts which are formed for the "advancement of any object of public utility"
are recognised in India as charitable trusts and they are exempted from making
payment of taxes. They're often described as a "tax- efficient vehicle" for
investing and contributing funds for charitable purposes. These trusts are
mainly formed for the purpose of discharging certain charitable/religious
sentiments of the persons forming the same.
While managing the trust, they may
undertake activities which involve making sales of certain items, from which
they derive income. In such cases, it becomes essential to determine whether the
proceeds of such sales, made by the trust, can be taxed even if the primary
purpose of the transaction is not financially motivated.
The present case is an appeal against the judgement of the High Court of Mumbai
(Bombay) with respect to the payment of sales tax on income earned by a trust
fund, from the publication and sale of books, pamphlets, stickers, and other
literature containing religious messages. The primary question that had to be
determined in this case was whether the sales were made in the course of a "business."
The question was first referred to the Deputy Commissioner of Sales tax and the
matter finally appeared before the Supreme Court with two fundamental issues
including issues regarding the amended definition of "business" as provided in
The Bombay Sales Tax Act, 1959, and its implication in the present case.
Facts Of The Case:
The assessee (respondent) in this case, is a charitable trust which was formed
by four devotees of Saibaba of Shridi with the intent of spreading the word of
Saibaba and thus furthering their religious interests. To realize their
objective, the assessee published various books, booklets, literature, and other
publications bearing Saibaba's message, under the sponsorship of Sai
Publications, and the same were then made available to the devotees for a modest
fee to cover costs. The sale proceeds from such publications were appropriated
by the trust, which further constituted the property of the trust and could be
made use of only for advancing their goals.
The trust then made an application, in pursuant to Section 52(1)(a) of the
Act, to the Deputy Commissioner of Sales, to determine whether it is a "dealer"
and whether it could be said to be carrying on a "business". It was determined
by the Commissioner that the Trust's activity of publishing and selling books,
among other things, constituted business as defined by Section 2(5A) of the
Act in view of the amendment of 1989 as per which profit motive is immaterial
for considering an activity as business. It was also held that the trust was a "dealer" as defined in section 2(11) of the Act. Consequently, the trust was
required to pay sales tax on the amount realised from the sales.
On appeal, the tribunal, after careful analysis of opposing arguments regarding
the trust's object and its activities, held in favour of the Trust. The tribunal
however also referred the matter to the High Court, at the request of the
Revenue wherein the High Court was required to consider "whether the tribunal
was justified in holding that Sai publications is not a "dealer" based on the
facts of the case and provisions of the Act as amended by the Maharashtra Tax
Laws (Levy, Amendment and Repeal) Act, 1989.
The High court decided the question in favour of the Trust, which led to the
filing of the present appeal before the Supreme Court.
The questions that arose before the court were two-fold:
- Whether the respondent is a dealer in accordance with Section 2(11) of
The Bombay Sales Tax Act, 1959?
- Whether the trust, by publishing and selling booklets and other
literature bearing Saibaba's words, can be said to be engaged in a "business" as
contained under Section 2(5A) of the Act?
The statutory provisions as applicable to the case of CST v Sai Publication Fund
are as follows:
- Section 2 (11) of The Bombay Sales Tax Act, 1959.
- Section 2 (5A) of the Bombay Sales Tax Act, 1959.
- Maharashtra Tax Laws (Levy, Amendment and Repeal) Act, 1989
Contentions Of The Parties:
The arguments submitted before the Supreme Court by both the parties are as
Submissions by the Appellant:
The appellants argued that the term "business" has a broad and encompassing
definition. It was submitted that the judgement of High Court was erroneous as
it failed to consider the amended definition of business as per Section 2(5A) of
the Bombay Sales Tax Act, 1959, which specifically provides that having a "profit motive" is irrelevant to consider an activity as a
further submitted that having regard to the facts, the respondent engaged in
publishing books and selling the same, on a regular basis, and thus they must be
held liable to pay tax for the value realized by the sales. They also claimed
that all the elements of "business" have been complied with in the present case.
They supported their contentions citing different case laws.
Submissions by the Respondent:
The Respondents argued that the primary intention of the Trust was to preach the
words of Saibaba which is a charitable activity and the same can be inferred
from contents of the trust deed. To achieve this goal, they also undertook to
publish and sell literature which is merely incidental to the primary activity
of spreading the word of Saibaba, and thus cannot amount to "business." The
objects included in the trust deed further, makes it apparent that the trust was
not created to pursue a business.
It was further submitted on behalf of the respondent that it was not a "dealer"
as defined under the act as it was not engaged in any commercial activity.
The ratio decidendi and obiter dicta of the present case have been discussed
If the trust's primary activity is not a "business," any transaction, however
incidental or secondary, would not be considered business unless the primary
intent is "profit motive." Publishing and selling books and other publications
with the aim of spreading a religious message or raising public awareness is
incidental to the main idea behind the formation of the trust and the same
cannot be classified as a business.
The phrase "carrying on business" involves more than just making sales and
purchasing items. The court also noted that if the legislature meant to tax
every single transaction of sale and purchase without having regard to the
purpose which led to the transaction, then it would not have been necessary to
declare that the individual must be "carrying on a business"
The following observations were made by the Court in the present case:
- The definition of "dealer" as contained under Section 2(11) of the Act
presupposes that the person is engaged in a business. However, in the
present case, since business isn't the main activity and merely an
incidental activity, such persons cannot be considered as a "dealer".
- The Court further observed that even though the term "business", without
profit motive has a broad and encompassing definition as contained under
Section 2(5A), since the primary activity of the trust, in this situation
does not amount to business, any incidental transaction would not generally
be considered as "business" unless an intention to pursue "business" as part
of the incidental activity has been proven.
Further, citing the case of State of Tamil Nadu & anr. V. Board of trustees of
the port of Madras, the burden of proof lies on the Revenue Department to
prove that the principal intention of the trust was to engage in a business.
In the present case, the court noted that the revenue had not established the
The court also cited numerous other precedents to justify its reasoning such as
the case of State of Bombay Vs. Ahmedabad Education Society, wherein an
educational institution was required to establish a college for which certain
buildings had to be constructed. In this case it was determined that the
educational institution could not be deemed to be pursuing a business for
selling unused bricks and thus will not be chargeable to pay sales tax. It was
emphasised in the case that the intention of the person undertaking such
activities, is relevant and needs to be considered.
Further, the court considered the case of Girdharilal Jiwanlal vs. CST,
wherein the High Court decided that, just because an agriculturalist sold
commodities, he/she will not necessarily be considered a dealer unless it is
proved that he is running a business.
In University of Delhi v. Ram Nath, it was ruled that serving food in a
canteen cannot amount to a "business" and thus sale of the same will not be
liable to tax.
The amended definition of business also caused confusion, with respect to its
applicability in different cases, one such case is of Indian Institute of
Technology v State of UP, wherein an issue was raised concerning the lodging
accommodation provided by the IIT to students. Here it was determined that
maintenance and provision of boarding facilities could not be considered as
Institute's primary activity, however it is intrinsic to the main activity of
providing an education. Thus, IIT could not be said to be pursuing a business.
Finally, decision in the case of State of T.N. v. Cement Research Institute of
India, was also considered, wherein it was ruled that, sale of cement
manufactured during the course of research cannot be considered as a
- In the present case, the court observed that the primary condition that
needs to be satisfied, is that the person must be engaged in "trade,
commerce, manufacture or adventure in the nature of trade or commerce", only
then can the consideration of profit motive arise. In the present case, the
trust could not be considered as a "dealer" due to its charitable nature and
further the activity would not amount to business irrespective of the profit
- The court also noted that the questions with respect to whether a person
could be called a "dealer" and whether the person could be said to be
carrying on a "business" depend on the facts and circumstances of each
Based on the aforementioned principles and cases cited, the two judge bench
upheld the judgement of the High Court and decided in favour of the Respondent
holding that the trust, "Sai Publication Fund" is not a "dealer" in accordance
with the provisions of the Bombay Sales Tax Act, 1959, and their act of
publishing and selling literature for furthering religious interests, cannot
amount to a "business" and further it was clarified that the sales made by the
trust cannot be made subject to Value added Tax or Sales tax.
The prominent issues involved in the present case were with respect to the
definition of a "dealer" and "business" as contained under the act and also the
amended definition of business which was brought forth by the Maharashtra Tax
Laws (Levy, Amendment and Repeal) Act, 1989.
The amendment of the act has resulted in a lot of confusion pertaining to the
applicability pf the amended definition to charitable activities, which appear
to be in the nature of a "business"
In a plethora of decisions, the court has reiterated that charitable activities
will not be regarded as a business or a commercial activity merely because there
is a surplus. Further, surplus income cannot amount to a profit, as was observed
in the case of Director of Income tax (Exemption) v Gujarat Cricket
Association, and thus, the findings of the present case were made applicable
in the aforementioned case.
Through the case of CST v Sai publications, the court established that the trust
was not carrying on any commercial/business activity and hence does not come
within the ambit of section 2(5A) which defines business. It is pertinent to
note in the present case, that the subsidiary activity is connected to the main
idea of advancing Saibaba's philosophies which led the Supreme Court to conclude
that the subsidiary activity cannot be regarded as a business.
reasoning will not have any bearing where the activity under consideration has
no connection to the prime object, and functions independently even though the
income accrued from this activity is used to fund the main object. It also
cannot apply in situations where the activity in question has resulted in the
generation of a considerable amount of money. Furthermore, the ruling in the
present case was made in relation to a "dealer." As a result, once it is
determined that the assessee is not a dealer, the sales it makes are not subject
However, the decision given in this case has an implication with respect to the
liability of trusts to pay GST. Back in 2017, the Central Board of Indirect
Taxes and Customs (CBIC) released a notification pertaining to GST provisions,
highlighting that the GST exemption for trusts doesn't extend to all the
services, and thus GST will be levied on the trusts, for goods supplied by them.
Thus, the decision given in the present case could support claims of a trust or
an NGO, not wanting to pay GST with respect to the sales that are made by them
for furthering a charitable activity, particularly those sales which are not
made in the course of business.
The findings of the court, in the present case, have been relied upon by
different judges while deciding cases involving similar issues, one such example
is the case of Adit (exemption)-ii (1, Mumbai v. Jeevan Vidya Mission,
wherein it was observed that circulating DVD's and books, whether by sale or any
other means, by "Jeevan Vidya", would not amount to a commercial activity as the
activity was undertaken to raise awareness about the respondent's initiative of
It can be concluded that the rule laid down, in this case, has been made
applicable to different situations involving similar questions of law. However,
the question as to whether reliance can be placed on the present decision needs
to be determined in the light of the factual circumstances of each case.
ideal approach would be to examine each activity based on the facts and
circumstances of each individual case and to be circumspect in ascertaining that
the activities under consideration are not undertaken in the course of business
to determine the applicability of the rule laid down in the present case.
- The Bombay Sales Tax Act, 1959, no. 51, § 52 cl 1(a).
- The Bombay Sales Tax Act, 1959, no. 51, § 2 cl 5A: "business includes
any trade, commerce or manufacture or any adventure of concern in the nature
of trade, commerce or manufacture whether or not such trade, commerce,
manufacture, adventure or concern is carried on with a motive to make gain
or profit and whether or not any gain or profit accrues from such trade,
commerce, manufacture, adventure or concern  or trade, commerce or
manufacture and any transaction in connection with, or incidental or
ancillary to, such trade, commerce, manufacture, adventure or concern 
and any transaction in connection with, or incidental or ancillary to, the
commencement or closure of such trade, commerce, manufacture, adventure or
- Maharashtra Tax Laws (Levy, Amendment & Repeal) Act, 1989.
- The Bombay Sales Tax Act, 1959, no. 51, § 2 cl 12: "Dealer means any
person who whether for commission, remuneration or otherwise carries on the
business of buying or selling goods in the State, and includes  the
Central Government, or any State Government which carries on such business,
and also any society, club or other association of persons which buys goods
from or sells goods to its members."
- (1999) 4 SCC 630.
- 1956 7 STC 497 (Bom).
- (1957) 8 STC 732 (Bom).
- AIR 1963 SC 1873.
- (1976) 38 STC 428 (All).
- (1992) 86 STC 124 (Mad).
- Tax Appeal No. 268 of 2012.
- Income Tax Appeal No. 770 (Mum.) Of 2014.