TaxTMI 
TaxTMI 
2020 (2) TMI 895
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....2/2018-19/B-88 dated 13.08.2019 = 2019 (8) TMI 819 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case 1. "Rotary" is an International organization having clubs in 216 countries engaged in humanitarian and charitable services. These services are executed through various districts comprising of many Clubs. In order to facilitate the meetings and administration, reimbursements are collected from members. These amounts are then used for administration and meetings. In some cases, the amount so collected is likely to exceed Rs. 20 lacs, being the threshold for registration under GST Act, 2017. 2. Clarification as regard to "Nature of Reimbursements". 3 There are three administrative layers; i) Clubs in Rotary (like that of the appellants). ii) District of Rotary: Comprises of many clubs, normally 100 & above where district policies for the clubs are formulated. iii) Avenues of District: Comprises of various member from Rotary fraternity, who are head of various committees that conduct social activities. 4. Receipts of Rotary Club can be broadly divided into following categories: - i). Club receiving Reimbursements from....
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....members and no actual service is being extended to the members. 9. Furthermore, on perusal of the Constitution & Bye-Laws, it clearly indicates that the administration and working of the Association and Implementation of policies are established and are implemented on the concept of mutually. Each member is equally represented with Individual Identity and status thereby, establishing the fact of complete transparency i.e. the Identity between the contributors and the participators of the Association and Foundation. 10. For the purposes of the accounting of the said affairs of the Administration Account, the year IS followed from 1st July to 30th June of the following year. 11. Office Bearers are all holding Honorary Posts and are holding such posts for a period of only 1 year, hence their address keeps changing each year. Our address, for correspondence is also office of another Honorary Office Bearer who has allowed us to use his address for communication. 12. Rotary International and all its member clubs are required to maintain two separate bank accounts, one for administrative expenses and other for donations/charity. The receipts in donations/charity account are us....
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....ore the Members for approval. 19. Based on the approval towards the budget for the following year, the annual reimbursement charges to be recovered from each member will be finalised which would then be formally communicated to each member to remit. The said reimbursement would include the reimbursement towards payment for RI per capita dues, a subscription to The Rotarian or a Rotary regional magazine, district per capita dues, towards the meetings, and any other Rotary or district per capita assessment. 20. Appellants decided to seek advance ruling about taxability or otherwise under the Act, of contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses. 21 Accordingly, on 2903.2019 appellants filed application for advance ruling u/s.97 of the Central Goods and Services Tax Act, 2017, seeking an advance ruling in respect of the following questions: 1. Whether contributions from the members in the Administration Account, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses....
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....effect. 26. The Hon'ble Authority for Advance Ruling, vide impugned Order No. GST-ARA-142/2018-19/B-88 Mumbai dated 13.08.2019 = 2019 (8) TMI 819 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, Maharashtra State, Mumbai has answered the questions as under: - Question 1 - Whether contributions from the members in the Administration Account, recovered for expending the same for the weekly and other meetings and other petty administrative expenses Incurred including the expenses for the location and light refreshments, amounts to or results in a supply, within the meaning of supply? Answer - Answered in the affirmative. Question 2 - If answer to question no, 1 is affirmative, whether it will be classified as supply of goods or services? Answer - It will be classified as supply of services. Question 3 - Whether the applicant would be a taxable person under the provisions of the Act? Answer - Answered in the affirmative, subject to provisions of Section 22 of the GST Act. Question 4 - If answer to question no. 3 is affirmative, who shall be person responsible under GST, as office bearers keep on changing every year? ....
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....he application would be deemed to be accepted and no order could be passed beyond the date when 90 days since the application made had passed, since the issue had become barred by limitation of time as specified in the statute / Act itself with no exceptions or alterations prescribed for the same, A.6 In this regard, reliance is placed on the decision of the Hon'ble Supreme Court rendered in the case of Commissioner of Income Tax, Kanpur & Ors. Vs. Society for The Promn. Of Edn., Allahabad (Civil Appeal No.1478 of 2016 SLP(C) No.9705 of 2009]; Order dt 16.02.2016) = 2016 (2) TMI 672 - SC ORDER. A.6 The issue in this appeal was related to deemed registration of an application u/s.12AA of the Income Tax Act' 1961 since the same was not responded to within the statutorily prescribed period of 6 months from the date of application. The Hon'ble Allahabad High Court had held in this case that under said circumstances, it would be taken that the application is (deemed) registered under the said provisions. The Hon'ble Allahabad High Court had held that the registration of the said petitioner would be deemed to have been granted since the Income Tax Department failed to act within th....
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....he application of the same to the facts of the present case has been dismissed without giving any proper reasoning. Hence, the impugned order is liable to be set aside on this ground as being passed in violation of principles of natural justice. B. No GST applicable on the Principal Mutuality B.1 The appellants believe that the principal of mutuality applies in the present case wherein the contributions are being collected merely to spend back on the members themselves. There is no other commercial consideration whatsoever. Going with principal of mutuality, two distinct persons are missing. Even in case of a visiting guest at the meetings, estimated amount of expense at cost are recovered from the Guest in the form of Guest Reimbursements, thus ensuring the collections on this account are spent entirely on the members only. B.2 Since, there is no commercial consideration involved in the process, just that the funds are collected in a common pool for meeting the expenses for the weekly meetings and other petty expenses incurred in meeting the common objective of betterment of society. The amount being collected from the members is reimbursement of expenses or share of cont....
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....nce of which establishes the doctrine of Mutuality. They are as follows (page 559). 1) The Identity of the contributors to the fund and the recipients from the fund. 2) The treatment of the company, though incorporated as a mere entity for the convenience of the members and policy holders, in other words, as an instrument obedient to their mandate, and 3) The Impassibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. B.8 In the case of CIT vs. Bankimpur Club Ltd. 226 ITR 97 = 1997 (5) TMI 392 - SUPREME COURT also the Hon'ble Court discussed the principles of mutuality and at page 103 held as follows. "It should be noticed that in the case of a mutual society or concern (including a member's club), there must be complete identity between the class of contributors and the class of participators. The particular label or form, by which the mutual association is known is of no consequence. The said principle which has been laid down in the leading decisions and emphasized in the leading English text books mentioned above, has been explained with refer....
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....there is no Business D.1 The term "business" is defined u/s.2(17). For our discussion clause (e) of said definition is relevant and hence reproduced below for ready reference; (17) "business" includes-- (e) provision by a club association society or any such body (for a subscription or any other consideration) of all the facilities or benefits to its members". D.3 From the above definition it is clear that for getting satisfied under the term 'business', there must be facilities or benefits to its members'. In case of Rotary Club, as we have discussed above, the members of the club come together only for social cause and there is neither furtherance of any business of benefits or facilities to the members. D.3 From the above it can be interpreted that, to satisfy the definition of "Business there must be some benefit/facility to its members. In our case there is no benefit facility to the members of the Rotary club. Further it can be seen whether the supply of services between club and its members is for a consideration. E. No GST applicable since there is no Consideration involved E.1 It is worthwhile to refer to the definition of "supplier" as pro....
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....ation of persons or a body of individuals, whether incorporated or not, in India or outside India. Further, Schedule II of CGST Act, 2017 enumerates activities which are to be treated as supply of goods or as supply of services. It states in para7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods, A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services. The above entry in schedule Il is analogous to and draws strength from the provision in Article 366(29A)(e) of the Constitution according to which a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration." E.4 Following observations may be noted in reference to the above circular. a. Above circular has not considered the def....
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....e percent or more of the outstanding voting stock or shares or both of them, v) One of them directly or indirectly controls the other; vi) Both of them directly or indirectly controlled by a third person; vii) Together they directly or indirectly control a third person; or; viii) They are the member of the same family; b) The term "person" also includes legal persons; c) Persons who are associated in the business of one another that one is the sole agent or sole distributor or sole concessionaire, howsoever described, shall be deemed to be related. E.7 On perusal of above list one can conclude that there must be two or more persons who can be considered as related owning to the above conditions. PRAYER In view of the foregoing, it is respectfully prayed that this Hon'ble Appellate Authority may be pleased to: (a) set aside the Order No. GST-ARA-142/2018-19/B-88 dated 13.08.2019 = 2019 (8) TMI 819 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA passed by the Hon'ble Advance Ruling Authority, Maharashtra State, Mumbai (to the extent it is against the appellants) and allow the present appeal in full with consequential....
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....e or furtherance of business. Now, before applying the above condition in the context of the impugned transaction, we would like to discuss the meaning of "business" as provided under section 2(17) of the CGST Act, 2017, the relevant extract in the context of the instant case is reproduced herein below: (17) "business" includes- (a).................. (b).................. .................. (e) provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; .................. In the instant case, it has been submitted by the Appellant that entire subscription/membership amount collected by the Appellant from its members is utilized solely towards expenditures incurred in the meetings, communication and other administrative expenses like printers, stationeries etc. They have categorically submitted that they do not provide any facility or benefit to any of its members against the said subscription or membership fee. Thus, on perusal of the above submissions, it is observed that the Appellant is not providing any specific facility or bene....