2019 (11) TMI 1439 - HC - VAT and Sales Tax

High Court upholds mutuality doctrine for clubs in tax assessments.

The High Court declined to rule on the challenge to the definitions of Sec. 2(15)(ix) and Sec.2(33)(vi) of the Tamil Nadu Value Added Tax Act, 2006, as ... Doctrine of mutuality - Constitutional Validity of definition of Sec. 2(15)(ix) to Explanation I and Sec.2(33)(vi) to Explanation I of Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- Hon'ble Supreme Court has settled the issue in the case of STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT]. The issue before the Hon'ble Supreme Court was whether the judgment and order passed by the Division Bench of the Hon'ble Calcutta High Court affirming the view expressed by the West Bengal Taxation Tribunal and disposing of the appeal preferred by the dealer along with other connected appeals holding, inter alia, that the assessee, the Calcutta Club Limited, was not liable for payment of sales tax under the provision of the West Bengal Sales Tax Act, 1994. The Hon'ble Supreme Court by judgment dated 04.05.2016, referred the matter to the Larger Bench - In the light of the decision of the Larger Bench upholding the view of the Hon'ble High Court in the Calcutta Club case, the doctrine of mutuality will continue to apply to incorporated and unincorporated members' clubs after the 46th Amendment adding Article 366(29-A) to the Constitution of India. In the light of the recent decision of the Larger Bench of the Hon'ble Supreme Court, we have to necessarily interfere with the show cause notice issued by the Assessing Officers proposing to levy tax on the writ petitioners. However, we are convinced of the fact that there may be other issues, which may require to be adjudicated by the Assessing Officer and since the prayer sought for in these writ petitions are for declaratory relief, we dispose of these writ petitions by holding that the law laid down by the Hon'ble Supreme Court in the case of Calcutta Club Limited, holds good and it shall enure in favour of the petitioner's club. The petitioners are permitted to give suitable reply to the notice issued by the Assistant Commissioner and in the light of the decision of the Hon'ble Supreme Court, the theory of mutuality will apply to both incorporated and unincorporated clubs and this issue should be taken into consideration by the respective Assessing Authorities - petition disposed off. Issues:Challenge to the definition of Sec. 2(15)(ix) and Sec.2(33)(vi) of Tamil Nadu Value Added Tax Act, 2006 as unconstitutional and void.Analysis:The writ petitions sought to declare the definitions of Sec. 2(15)(ix) and Sec.2(33)(vi) of the Tamil Nadu Value Added Tax Act, 2006 as null and void, unconstitutional, and unenforceable. However, the High Court decided not to rule on this prayer as the Supreme Court had recently settled a similar issue in the case of State of West Bengal & Ors. vs. Calcutta Club Limited. The Supreme Court had considered whether the doctrine of mutuality applies to incorporated clubs after the 46th amendment to the Constitution of India. The Supreme Court held that the doctrine of mutuality continues to be applicable to both incorporated and unincorporated members' clubs after the 46th Amendment. The judgment in the Calcutta Club case was upheld, and it was concluded that the theory of mutuality will apply to both incorporated and unincorporated clubs.The Larger Bench of the Supreme Court's decision necessitated the High Court to intervene in the show cause notice issued by the Assessing Officers proposing to levy tax on the petitioners. While acknowledging that other issues may require adjudication by the Assessing Officer, the High Court disposed of the writ petitions by affirming the law laid down by the Supreme Court in the Calcutta Club Limited case. The petitioners were permitted to respond to the notice issued by the Assistant Commissioner, with the understanding that the theory of mutuality applies to both types of clubs, and this aspect should be considered by the Assessing Authorities. Consequently, the writ petitions were disposed of with no costs, and the connected miscellaneous petitions were closed.