The Andhra Pradesh High Court (HC) ruled in the case of Bharatiya Vidya Bhavan that the food supply to hostel students are an ancillary duty of the education trust and cannot be subject to taxation. A public trust that has been registered under the Bombay Public Trust Act is the petitioner, Bharatiya Vidya Bhavan‘s Residential Public School. The school of the petitioner was founded in 1983 with the purpose of offering education on a non-profit basis.
It was started by philanthropists who cared about the advancement of society, and it is operated on a non-profit basis. The Central Board of Secondary Education (CBSE), New Delhi, recognised courses at the school range from LKG to 10th standard. The petitioner’s school also receives little fees and mess fees from the kids in addition to donations. The petitioner’s institution had a surplus of Rs. 2.87 lakhs during the fiscal year 2004–2005, which was transferred to Bharatiya Vidya Bhavan Society. There are no surplus funds held by the petitioner’s school. The upkeep of hostels by the petitioner’s school was further argued to be incidental, adjunct, and linked to the primary goal and activity of education.
The petitioner’s school does not provide meals to its students in the process of operating a restaurant, eating establishment, or hotel. In contrast, only restaurants, eating establishments, and hotels are specifically mentioned in Section 2(10(d) of the VAT Act. The Court noted that even while the petitioner, under the law, does not fall under the definition of “dealer” as per the terms of the AP VAT Act, 2005, the second respondent had passed the contested assessment order. The contested order cannot be upheld because it was entirely made without authority.
When granting the writ petition, a two-member bench made up of Justices U. Durga Prasad Rao and T. Mallikarjuna Rao stated that “the second respondent’s direction to the petitioner school to obtain registration as a dealer under the provisions of the AP VAT Act, 2005 and the subsequent action of respondents in assessing the petitioner’s school to VAT under the provisions of the AP VAT Act, 2005 vide order dated 08.03.2006 is held.
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”
