2008 (6) TMI 3 - AT - Service Tax

Applicability of Service tax as mandap keeper on allowing use of its space to its members by a club - held that, Income-tax is applicable if there is an income. Sales tax is applicable if there is a sale. Service tax is applicable if there is a service. Members and club both are same entity. One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service and not liable to service tax.

Summary

Issues:
1. Appeal against setting aside service tax demand.
2. Whether the club is liable to pay service tax when services are provided to its members.

Analysis:
1. The appeal was filed by the Revenue against an order setting aside a service tax demand by the Commissioner (Appeals). The Revenue argued that the respondent, a company limited by guarantee registered under the Companies Act 1956, is a separate legal entity from its members, who are considered clients when using the club's facilities.

2. The Tribunal referred to the decision of the Hon'ble Calcutta High Court in the case of Dalhousie Institute and Saturday Club Ltd. In the Dalhousie Institute case, the Court held that the principle of mutuality applied, and the services provided by the club to its members could not be considered commercial transactions with third parties. Similarly, in the Saturday Club Ltd. case, the Court emphasized that in a members club, where members and the club are the same entity, there is no separate transaction for the imposition of service tax. The Court differentiated between a "members club" and a "proprietary club," stating that a members club allowing its own members to use its premises does not fall under the purview of service tax.

3. Based on the above legal precedents, the Tribunal found no error in the impugned order and dismissed the appeal. The Tribunal concluded that the club, in allowing its members to use its facilities, did not engage in transactions that attract service tax as there is no separate entity apart from the members and the club itself.

This judgment clarifies the application of service tax in cases involving clubs and their members, emphasizing the principle of mutuality and the absence of separate transactions within a members club for the imposition of service tax.