Horses Are ‘Cattle’ Under Law; Oats Used To Feed Them Qualify as Cattle Feed: Telangana High Court Affirms Concessional Tax for Hyderabad Race Club

“Club Not A Dealer – Sale of Oats Not a Commercial Activity; Legislative Intent Must Be Given Liberal Construction in Tax Entries”: In a significant judgment addressing the scope of sales tax liability under the Andhra Pradesh General Sales Tax Act, 1957, the Telangana High Court dismissed a batch of Tax Revision Cases filed by the State Government against Hyderabad Race Club, holding that the club is not a “dealer” under Section 2(e) of the APGST Act and that oats supplied to horse trainers qualify as “cattle feed” under Entry 80 of the First Schedule, thus attracting concessional tax rates.

The Division Bench of Justice P. Sam Koshy and Justice Narsing Rao Nandikonda, in a detailed and reasoned judgment, upheld the order of the Sales Tax Appellate Tribunal (STAT), Hyderabad, which had granted relief to the club in respect of assessments for six different financial years ranging from 1993-1994 to 1999-2000.

The Court ruled, “The essence of being a dealer under the APGST Act presupposes carrying on business with a profit motive. Since the respondent’s operations are driven not with profit intent and the funds are applied towards charitable purposes, the respondent cannot be classified as a dealer within the meaning of the Act.” [Para 39]

Advocate Mr. Swaroop Oorilla Argues Club Is a Dealer, Oats Should Be Taxed As General Goods – Court Rejects Revenue’s Plea

Mr. Swaroop Oorilla, learned Special Standing Counsel for Commercial Tax, appeared for the State of Andhra Pradesh and argued that the Hyderabad Race Club was clearly engaged in commercial activities including sale of food and drinks to outsiders, sale of oats to trainers, tender forms, gunnies and scrap, and was therefore liable to be treated as a “dealer” under Section 2(e) of the APGST Act.

He further contended that oats could not be treated as cattle feed and must be taxed as “General Goods” under the Seventh Schedule, taxable at higher rates. The State sought taxation on the purchase value of ₹52.30 lakhs rather than the sale value of ₹10.66 lakhs, which the club had charged from trainers at subsidised rates.

The Revenue argued, “All such activities by the club amount to business transactions. The sale of oats, tender forms, and food items to members and outsiders proves a commercial character and brings the club within the ambit of a dealer.”

However, the Court firmly rejected these arguments, holding that the club's activities were incidental to its main function of promoting horse racing, which is not conducted for profit, and that the subsidised sale of oats was aligned with its charitable objective.

Senior Advocate Mr. S. Ravi Successfully Defends Club’s Status and Tax Treatment of Oats as Cattle Feed

Appearing for the Hyderabad Race Club, Senior Advocate Mr. S. Ravi, on behalf of Mr. CH. Pushyam Kiran, successfully defended the STAT's order by arguing that the club’s primary purpose was not profit-oriented business but the promotion of equestrian sports, and that sales were merely incidental.

He stressed that the club was not a dealer under Section 2(e), and that “no commercial profit was earned from the sale of oats which were sold at subsidised rates to horse trainers.” He further contended that horses must be legally treated as cattle for the purposes of interpreting tax entries, referring to Section 3 of the Cattle Trespass Act, 1871, which explicitly includes horses within the definition of cattle.

“Oats supplied by the club are specifically used as feed for horses and are not fit for human consumption. Therefore, they fall squarely under ‘cattle feed’ within the meaning of Entry 80 of the First Schedule,” he argued, further relying on Supreme Court and High Court decisions including Glaxo Laboratories (India) Ltd. v. State of Gujarat and Royal Hatcheries Pvt. Ltd. v. State of A.P.

The Court agreed and observed, “Oats are traditionally and practically used as feed for horses. Since horses are included in the legal definition of cattle under the Cattle Trespass Act, oats are rightly classified as cattle feed.” [Para 31]

“Oats Are Cattle Feed; Entry 80 Must Be Interpreted Broadly” – Court Upholds Liberal Interpretation of Tax Entries

Reiterating the principle of liberal and purposeful interpretation of tax statutes, especially in relation to entries granting concessional rates, the Bench held that Entry 80 of the First Schedule is not to be interpreted in a narrow sense.

The Court observed, “Each general word in a legislative schedule should be held to extend to all the ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended within it.” [Para 41]

Relying on multiple judicial precedents including Venkataramana Hatcheries v. CTO and CIT v. Kasturi & Sons Ltd., the Court held that taxing entries are not to be construed restrictively unless the legislature expressly provides so.

It noted, “The legislative intent behind Entry 80 was to provide for feed meant for livestock. The later amendments introducing Entry 80A and 80B clearly show that a broader scope was originally intended, and oats used to feed horses clearly fit within that purpose.” [Para 43]

Tax To Be Levied Only On Sale Value, Not Purchase Value – Court Clarifies First Point of Sale Rule

The High Court also clarified the point of taxation under Entry 80, holding that tax is payable on the first sale value, not on purchase value.

In this case, while the oats were purchased for ₹52.30 lakhs, they were sold to horse trainers at a subsidised price of ₹10.66 lakhs. The State attempted to levy tax on the higher purchase value.

Rejecting this approach, the Court held: “Since Entry 80 of the First Schedule prescribes taxation at the point of first sale, the taxable turnover has to be computed on the actual first sale value, which is ₹10.66 lakhs, and not on the purchase value.” [Para 18, 42]

“Club’s Sales Were Incidental and Non-Profit; No Tax Liability as a Dealer”: Tribunal’s Finding Upheld

Upholding the findings of the Sales Tax Appellate Tribunal, the High Court reaffirmed that the Hyderabad Race Club did not qualify as a “dealer” under the statutory definition, as its transactions lacked commercial profit motive and were incidental to its charitable objectives.

The Court concluded, “There is no merit in the contentions raised by the State. The Tribunal has rightly held that the respondent is not a dealer, and oats sold by it fall under Entry 80 of the First Schedule. The tax revision cases deserve to be dismissed.” [Paras 45–46]

Date of Decision: 13 November 2025