The Hindu Business Line : Does `business' include job-work?

"BESTOW your needful counsel to our business," is a Shakespeare quote from King Lear. More recently, the apex court had to bestow its counsel to the definition of `business' in Vishwanath Jhunjhunwala vs State of Uttar Pradesh.

First, the facts. The appellant VJ is a firm engaged in refining of oil on its own account and also on job work basis. For this, it brought coal from Ranchi to Varanasi. An issue arose when the sales tax authorities in Uttar Pradesh questioned the firm about using coal for job work, because Form 31 under which coal had been brought necessitated its use in connection with own business. Simply put, using coal for job work was not the same as using it in one's own business, averred the Revenue.

When the dispute had come up before the High Court, the definition of `business' under the Uttar Pradesh Sales Tax Act, 1948, was considered: "Business in relation to business of buying or selling goods, includes: any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce, manufacture, adventure or concern carried on with a motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and any transaction of buying, selling or supplying plant, machinery, raw materials, processing materials, packing materials, empties, consumable stores, waste or by-products, or any other goods of a similar nature or any unserviceable or obsolete or discarded machinery or any parts or accessories thereof or any waste or scrap or any of them (or any other transaction whatsoever) which is ancillary to or is connected with or is incidental to, or results from, such trade, commerce, manufacture, adventure or concern; but does not include any activity in the nature of mere service or profession which does not involve the purchase or sale of goods." That is almost a 1,000-characters to define business.

The High Court had laid emphasis on the `exclusion' that follows `but' and ruled that job work was an activity in the nature of mere service which does not involve the purchase or sale of goods.

However, the apex court set it aside, stating that the view taken by the High Court was not correct. It observed: "When activities of the appellant would necessarily include job work done by him and he cannot do this job work except after purchase of coal, his activities, even if stated to be one in the nature of mere service, would involve purchase of coal and in that event it falls outside the exclusionary clause in the definition of `business'."

In the process, the judgment cited observations made in the State of Andhra Pradesh vs. H. Abdul Bakshi and Bros: "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. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure."

Thus, for lawmakers and the Department, this decision is perhaps a pointer to view business more holistically, rather than with blinkers.