TaxTMI 
TaxTMI 
2013 (7) TMI 510
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....d, Sports Club of Gujarat Limited, Rajpath Club Limited and Karnavati Club Limited are before this Court making almost identical prayers. Prayer made in SCA No.13654 of 2005 by petitioner - Sports Club of Gujarat Limited in Para.16(A) is as under : "16(A) Your Lordships be pleased to issue a writ of or in the nature of mandamus declaring Section 65(25a), Section 65(105) (zzze) and Section 66 of the Finance (No.2) Act, 1994 as incorporated /amended by the Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, as being ultra vires, beyond the legislative competence of the Parliament, unconstitutional, illegal and void." ....
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.... we have noticed that petitioner's contention is that petitioner is a club and also registered company under the Companies Act, 1956. The petitioner is giving service to its members but the club is formed on the principle of mutuality and, therefore, any transaction by the club with its member is not a transaction between two parties. However, being a company, it may enter into a transaction with anybody, a 3rd person, not a member, then in that situation, this club becomes a legal entity and can certainly enter into any transaction and such transaction are not on the principle of mutuality and, therefore, may be liable to any tax as a transaction between two parties. However, when the club is dealing with its members, it is not a separ....
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....ioner's own case i.e., Commissioner of Income Tax Vs. Ranchi Club Limited reported in 1992(1)PLJR 252 (Pat) (Fb). The Full Bench of this Court while considering the identical issue in the matter of imposition of income tax, observed that no one can earn profit out of himself on the basis of principle of mutuality and held that income tax cannot be imposed on the transaction of the club with its members." (emphasis supplied.) 5. Learned Senior Advocates for the petitioners invited attention of the Court to Para.15, 16 and 17 which are reproduced for ready perusal. "15. The question which was considered by the Hon'ble Supreme Court in the case of Joint Commercial Tax Officer, Harbour Division, II- Madras Vs. The Y....
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....a club has all the characteristics of a members' club consistent with its incorporation, that is to say, where every member is a shareholder and every shareholder is a member, no licence need to be taken out if liquor is supplied only to the members. If some of the shareholders are not members or some of the members are not shareholders, that would be the case of a proprietary club and would involve sale. Proprietary clubs stand on a different footing. The members are not owners of or interested in the property of the club and then the Hon'ble Supreme Court observed that above view was accepted by the various High Courts in India. The Hon'ble Supreme Court, relying upon other judgements held that members' club is only struct....
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....dulge in activities which are partly mutual and partly non-mutual. True, keeping in view the principle of mutuality, the surplus accruing to a Members' Club from the subscription charges received from its members cannot be said to be income within the meaning of the Act. But, if such receipts are from sources other than the members, then still can it be s aid that such receipts are not taxable in the hands of the club? The answer is obvious. No exemption can be claimed in respect of such receipts on the plea of mutuality. To illustrate, a Members' Club may have income by way of interest, security, house property, capital gains and income from other sources. But such income cannot be said to be arising out of the surplus of the recei....
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.... has been already considered and decided by the Hon'ble Supreme Court as well as by the Full Bench of this Court in the cases referred above, therefore, this issue is no more res integra and issue is to be answered in favour of the writ petitioner and it can be held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. However, so far as services by the club to other than members, learned counsel for the petitioner submitted that they are paying the tax."....