TaxTMI 
TaxTMI 
2009 (11) TMI 830
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....ed as a limited company under the Indian Companies Act, 1956. A photostat copy of the certificate of incorporation of the petitioner-company has been filed as annexure 2 to the writ petition. The petitioner-company is a non-profit making company and is not doing any business of buying and selling, supplying or distributing goods. It runs the membership club known as Ganges Club, Kanpur. The petitioner-company only renders services to its members. It does not undertake to do any service for or to any person who is not a member of the petitioner-company. The case of the petitioner is that its activity is excluded from the purview of the U.P. Trade Tax Act, 1948. It is not carrying on any business within the meaning of section 2(aa) of the U.P. Trade Tax Act. The assessment for the assessment year 1994-95 was completed by the order dated March 31, 1998 and the petitioner was subjected to tax on the alleged turnover of sale of food and other articles served by it to its members. The said order was carried up in appeal which was allowed on March 31, 1998 and the said order has attained finality. The petitioner was assessed accordingly for the subsequent assessment year 1996-97 on Mar....
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....aged in the business of sale of cooked food, etc., at a very large scale and the allegations to the contrary as set out in the writ petition, are incorrect. The action of the Department has been sought to be justified on various grounds as set out in the counter-affidavit in detail. In the rejoinder affidavit, it is contended that the questions raised in the writ petition are purely legal and does not involve any disputed question of fact. The question of liability to tax on an incorporated club on the supply of eatables to its members and their guests, etc., is a substantial question of law of general public interest and needs adjudication by this court as it would affect all incorporated clubs in the State of Uttar Pradesh. In reply to the plea raised in the counter-affidavit that the petitioner has submitted to the jurisdiction of the assessing authority, it has been stated that the petitioner had participated in the proceedings to impress on the assessing authority that it lacks the jurisdiction. The petition is directed against the reassessment proceedings on the ground of lack of jurisdiction and the assessment proceedings for the assessment year 2000-01 and 2001-02 are co....
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....No distinction in between incorporated and unincorporated body having been made in the circular, the circular is liable to be struck down, submits the learned senior counsel for the petitioner. In contra, Sri S.P. Kesharwani, learned standing counsel for the Department, on the other hand, submits that the petition is liable to be dismissed on the preliminary ground that it is highly belated, on the principles of laches. The petitioner participated in the reassessment proceedings and on coming to know that the order is likely to go against, it rushed to this court by filing the present petition. The petitioner has concealed the material facts as pointed out in the counter-affidavit. Even otherwise also, the petition is not maintainable as it is directed against a show-cause notice. On merits, he submits that the petitioner is an incorporated body under the Companies Act, 1956. Members of a company are different persons than a company. They are different legal entity. Under the Companies Act, the word "member" has been defined. Elaborating the argument, he submits that in view of section 34 which deals with the effect of registration of a company and section 41 which defines "m....
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....of Andhra Pradesh AIR 1999 SC 1734 and Western Coalfields Ltd. v. Special Area Development Authority AIR 1982 SC 697. He also placed reliance on Tata Engineering and Locomotive Co. Ltd. v. State of Bihar AIR 1965 SC 40 (para 24) and Bacha F. Guzdar (Mrs.), Bombay v. Commissioner of Income-tax, Bombay [1955] 27 ITR 1 (SC); AIR 1955 SC 74, to show that the members are different than the company. In Heavy Engineering Mazdoor Union v. State of Bihar AIR 1970 SC 82 it has been held that an incorporated company, as is well known, has a separate existence and the law recognizes it as a juristic person separate and distinct from its members. This new personality emerges from the moment of its incorporation and its rights and obligations are different from those of its shareholders. The company is holding its property and carrying on its business is not agent of its shareholders. Now, we take up the second point. It may be noted that although in the main arguments, it was not urged by the learned senior counsel for the petitioner that the petitioner is a members club or proprietorship club. However, in the rejoinder affidavit, a feeble attempt was made by him to show that the petition....
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....d drinks; that is to say, was the club acting as an agent of the members or did property in food and drinks pass from the club to the members?" The order of remand was passed with the direction to the Tribunal to find out the exact relationship between the parties in the matter of supply by the club of food and drinks to its members. In other words, it has been provided, that the principle of mutuality and agency among other circumstances shall be gone into by the Tribunal before which the appeal was pending. Viewed as above, here also there being no pleadings and material on record of the writ petition and the fact that the matter has firstly to be investigated upon by the fact-finding authority, the plea of mutuality, the nature of supplies made by the petitioner to its members and whether the petitioner club is members' club, etc., are left open to be decided by the concerned authority. To keep the record straight, the judgment in the case of Commissioner of Income-tax v. Bankipur Club Ltd. [1998] 109 STC 427 (SC); [1997] 226 ITR 97 (SC) which was relied upon by the petitioner may be noticed. The said decision has been rendered by the apex court with reference to th....
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....ded in the light of article 366(29A) and is in line of the said article. The entire foundation of the petitioner's argument is on clause (v) of section 2(h) which provides that supply of foods by any unincorporated association or body of persons to members thereof for cash, deferred payment or other valuable consideration is included in the definition of "sale". The argument is that the petitioner being incorporated body, the said clause would not apply to it. The said argument is attractive but has no legs to stand. It is apt to notice the historical background of the legislation of clause (29A) of the Constitution of India. The entry 54 of List II of the Seventh Schedule to the Constitution empowers the State to levy "taxes on the sale or purchase of goods other than the newspapers, subject to the provisions of entry 92A of List II". The apex court in the State of Punjab v. Associated Hotels of India Ltd. [1972] 29 STC 474; [1972] 1 SCC 472 considered the plea of Associated Hotels India Limited which was running a hotel in Shimla that it was not liable to pay sales tax in respect of meals served to guests who came there to stay. It was held that supply of food-stuff ess....
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....erative society, or other society, club, firm, Hindu undivided family . . .". This being so, there is no doubt that the petitioner, incorporated as a company, is a "dealer" within the meaning of section 2(c) of the Act. The argument of the learned senior counsel for the petitioner is that the impugned circular dated February 17, 2004 issued by the Commissioner is violative of section 2(h) and article 366(29A) of the Constitution of India. The argument is that the Commissioner in the said circular has not drawn any distinction in between incorporated club and unincorporated club. The Commissioner according to the pleading of the petitioner has directed the Department to levy the tax on the sales and supplies by clubs to its members whether incorporated or unincorporated notwithstanding. Reliance was placed upon a judgment of the apex court in the case of the Joint Commercial Tax Officer, Harbour Division II, Madras v. Young Men's Indian Association, Madras [1970] 26 STC 241 wherein the respondent was a society registered under the Societies Registration Act. The association was also running a mess altogether with a canteen serving the needs of the members and members....
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....mbers. Clause (v) has been enacted to provide that even supplies by unincorporated body or association of body of persons to its members is included in the definition of "sale", by way of abundant precaution. There is another aspect of the case. Clause (vi) of section 2(h) makes it clear that supply, by way of or as part of any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drinks, is a sale within the meaning of section 2(h). Even assuming for the sake of argument, the clause (v) would not apply to incorporated bodies, in the case like the petitioner, the supply, by way or as the part of any service or in any other manner whatsoever will be deemed to be sale to its members. While interpreting the extended meaning of definition of "sale", it is useful to keep in mind the background of the legislation. The apex court has considered in depth article 366(29A) particularly in relation to transfer of property in goods involved in execution of works contract in building activity in Builders Association of India v. Union of India [1989] 73 STC 370 (SC); AIR 1989 SC 1371. It considered the recommendations of the Law Co....