The Hindu Business Line : Taxman on a school bus

MARK Twain once remarked, "I've never let my school interfere with my education." And Samuel Taylor Coleridge is of a similar view when saying, "To sentence a man of true genius, to the drudgery of a school is to put a racehorse on a treadmill."

Without going into a debate on that, let us look at an Allahabad High Court case where the taxman was trying to perch himself on a school bus: St. Mary's School vs State of Uttar Pradesh.

The school wasn't happy that the taxman had demanded additional tax and surcharge under the UP Motor Vehicles Taxation Act for the buses used for transporting students. Though the Government was willing to relent on the additional tax, it insisted that the school pay surcharge applicable to public service vehicles. "No," argued the school, "our vehicles aren't meant for public purposes but are exclusively for the transportation of students. Our vehicles don't come within the purview of `Public Service Vehicle' under Section 6 of the Act," argued the school.

That section, titled `Additional tax on public service vehicle', states that no public service vehicle other than those owned or controlled by the State transport undertaking shall be operated in any public place in UP unless additional tax has been paid.

It has a sub-section that speaks of exemption from additional tax; however, it levies a surcharge at "five per cent of the additional tax that would have been payable on such vehicle had it not been so exempted" for crediting to `accident relief fund'.

This fund is for providing relief to passengers or other persons suffering any casualty in any accident in which a `public service vehicle' is involved, or to heirs of such passengers or other persons.

Definitions

`Public service vehicle' means, "any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a maxi-cab, a contract carriage and stage carriage". The opposite, that is, `private service vehicle' is defined as "a motor vehicle constructed or adapted to any more than six persons excluding the driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying person for, or in connection with, his trade or business otherwise than for hire or reward but does not include a motor vehicle used for public purposes."

`Educational institution bus' is "an omni bus, which is owned by a college, school or other educational institution and used solely for the purpose of transporting students or staff of the educational institution in connection with any of its activities."

`Passenger' in relation to a public service vehicle is any person travelling in a public service vehicle, but does not include the operator, the driver, the conductor or an employee of the operator of the public service vehicle.

Students travelling in a bus owned by a recognised educational institution are no doubt `passengers', noted Justices R. K. Agrawal and Rajes Kumar of the Allahabad High Court. They observed that a motor vehicle used or adapted to be used for transportation of students would not be liable to be classified as a `public service vehicle' unless it is found that the transportation of students is undertaken by the institution concerned as an independent business activity for `hire or reward'.

The State's counsel submitted that the school charged a `substantial amount' or Rs 150 from the students while "the normal rate of carriage is only Rs 80".

Therefore, the amount charged is not related to the maintenance alone, argued the Government. (In a different petition, there was the instance of a school charging a monthly fare of Rs 300 per student for distances of 10-12 km.) The school's rejoinder, however, was that the amount was "only for the purposes of maintaining the costs of the vehicles".

The question for consideration before the court was whether the school bus could be called `public service vehicle'. An earlier case, All India Public Schools Welfare Society, Ghaziabad vs State of UP, was on the subject. There, the court had held that the bus owned by the educational institution exclusively used for conveyance of people to and from the institution is not a public service vehicle.

It was then clarified that the burden would be on the institution to prove that though the vehicle is registered as a public service vehicle, it is exclusively used for conveyance of the students of the institution otherwise than `for hire or reward'. "Nominal payments made by students for the facility of conveyance extended to them by the institution is to be treated as their contribution towards maintenance charges," the court had observed.

To resolve the case on hand, the court perused the registration certificate of the school's vehicles and found that they were registered as `school bus' and not as `public service vehicle'.

"There is no dispute that the vehicle is being used exclusively for carrying the students to and from the institution. It may also be mentioned here that having regard to the recurring expenditure towards maintenance, the distances, etc., the amount charged by the petitioners from the students do not fall within the purview of `hire or reward'," said the court.

"Education is what remains after one has forgotten everything he learned in school," said Albert Einstein. Likewise, it is the verdict that remains after all arguments are forgotten.

In sum, therefore, the decision in this case went in favour of the school, that the vehicles do not come within the purview of public service vehicle, and therefore not liable to surcharge.

LawLane@TheHindu.co.in

D. Murali

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