Whether principle of mutuality is applicable to services provided by club to its members?

PJ/Case Law/2019-2020/3599

COMMISSIONER OF SERVICE TAX VERSUS SOBHA DEVELOPERS LTD. C.E.A. No. 45/2015 dated 4.3.2020
BRIEF FACTS:-The appeal has been filed by revenue department to consider the following substantial questions of law:-

Whether the principle of mutuality is applicable to services provided by club to its members and do not amount to rendition of service from one person to another and would not be considered as taxable service for the purpose of levy of service tax?
Whether under the facts and circumstances of the case, the CESTAT is right in holding that the services are not taxable on the principle of mutuality of overriding the statutory provisions contained in section 65(105) (zzze) and 65(25)(aa) of the Finance Act, 1994?
Whether under the facts and circumstances of the case, the activities of club amount to service provided to members and liable to service tax?

ISSUE:-Whether principle of mutuality is applicable to services provided by club to its members?
APPELLANT’S CONTENTIONS:-It was submitted that CESTAT had failed to appreciate that clubs are either incorporated under the Companies Act or registered under the Societies Registration Act, which would constitute separate legal entity or in other words, having a separate legal identity from its members and therefore, doctrine of mutuality between the members and clubs bears no significance in the context of taxable service provided by clubs and association and vis a vis to its members.
RESPONDENT’S CONTENTIONS:- The respondent would support the order passed by the Tribunal by placing reliance on the judgment of the Apex Court in the case of STATE OF WEST BENGAL VS. CALCUTTA CLUB LIMITED in Civil Appeal No.4184/2009 and other connected matters reported in 2019 SCC ONLINE SC 1291.

REASONING OF JUDGMENT:-After considering the submissions, the Hon’ble High Court relied upon the decision given by the Apex Court in the case of STATE OF WEST BENGAL VS. CALCUTTA CLUB LIMITED and held that the issue is no longer res integra and held that the companies and cooperative societies which are registered under the respective Acts can be said to be constituted under those Acts and the clubs or associations incorporated prior to 1.7.2012 were not included in the service tax net. Therefore, the substantial questions of law were answered against the revenue and in favour of the respondent assessee.
COMMENT:-The principle of mutuality in case of club and its members has been time and again been a matter of discussion in various appellate forums. However, the Hon’ble Supreme Court has put full stop on the leviability of service tax on service provided by club to its members by its landmark decision in the case of Calcutta Club Limited. The Hon’ble Apex Court has held that the intention of the government was only to tax unincorporated clubs since 16.06.2005, including the negative list era. The decision also affirmed the applicability of principle of mutuality. The hon’ble Karnataka High Court also rendered the decision by following the law laid down by the Apex Court.
Prepared By- CA Neetu Sukhwani

Comments

PJ/Case Law/2019-2020/3599

Post a Comment

Query