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TMI Blog2009 (12) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... the Trade Tax Act is not applicable in the petitioner's case as the petitioner-assessee club is being run exclusively for the benefit of its members. The members enjoy the foods and amenities available in the club. There is no sale to self. The object of the club is based on the principle of mutuality and not involving in any trade activity. For this purpose he read out section 2(h)(v)(vi) of the U.P. Trade Tax Act, 1948 which follows as under: "Section 2(h)(v): the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; and (vi) the 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 drink (whether or not intoxicating) where such supply or service is for case or deferred payment or other valuable consideration." He submits that there is no transfer of the property in the goods because there cannot be a sale to self. According to him, section 2(h) is not applicable in the petitioner's case as there is no transfer of the goods. There must be at least two parties for a "transfer". In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it was understood commonly or in law. The club might be a juristic entity but the nature of the payment made by the members for the use of facilities like the rooms let out to them with various conveniences, was payment by them to themselves as members of the club. Therefore, on the principle of mutuality, the income was exempt form tax. He further submits that this court in the case of Cawnpore Club Ltd. [1984] 146 ITR 181 (All) observed as under (at page 188): "Coming now to the question whether the income of the assessee was exempt from levy of any tax on the principle of mutuality, we may notice first the real principle which, in our opinion, clearly is that a person cannot trade with himself so as to yield an assessable income. The assessee is a club offering facilities to its members alone and to no outsider. The income received from these members is applied for the benefit of the members of the club alone. There is no trading activity in the sense in which it is understood commonly or in law. The club may be a juristic entity (like a company in the present case) but the nature of the payment made by the members for use of the facilities like to rooms let out to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down in the case of Commissioner of Income-tax v. Bankipur Club Ltd. [1998] 109 STC 427 (SC); [1997] 226 ITR 97 (SC) where it was observed that there was no sale by the club to any outsider and one cannot sell to himself on the basis of doctrine of mutuality. The learned counsel for the petitioner further submits that soon after receipt of the notice for the assessment years 1990-91 to 1996-97, the petitioner preferred an application under section 35 of the Act on June 8, 1999. The Commissioner has refused to exercise his jurisdiction under section 35 of the Act as per his order dated August 14, 2001. Lastly, he submits that the trade tax is not applicable in the assessee's case. So, the impugned notices for the assessment years mentioned above, may kindly be quashed. On the other hand, Sri Sanjieva Shankdhar, learned counsel for the Department has relied on the impugned notices. He submits that the Constitution (46th Amendment) Act, 1982 came into existence on February 2, 1983 and the same is applicable retrospectively. In the object and reasons, it was stated that the proposed amendment would help in the argumentative of State Revenue to a considerable extent. Clause 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of Income-tax but for the purpose of sales, the said principle is not applicable and the assessee is liable to pay the trade tax. We have heard both the parties at length and gone through the material available on record including written arguments submitted by the learned counsel for the petitioner. The assessee, originally was established as an Army Club in the year 1931. For the assessment years mentioned above, the Department has already made out the provisional assessments and levy the trade tax on the supply of snacks, food, etc., to its members as well as the sale of magazine, papers, play cards, etc. The said provisional assessments were stayed in these writ petitions by this honourable court as an interim measure. By the impugned notices, the Department has asked to produce the books of account and the assessee never produced the same. The assessee preferred to obtain the stay order by this honourable court in these writ petitions. It is the main argument of the learned counsel for the petitioner that the members of the club are jointly owner of the property and all the goods of the club belong to them as trustee. Doctrine of mutuality is applicable in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of fact. Further, in the instant case, the consumable items are brought or prepared for a price. There is a difference between the club and a restaurant. Restaurant is run for profit to the owner and in the case of club the profit earned is to be the income of the club. So, the doctrine of mutuality is applicable regarding income/profit only. It will not apply to trade tax specially after Constitutional (46th) Amendment. Heavy reliance was placed by the counsel of the petitioner on the ratio laid down in the case of Young Men's Indian Association case [1970] 26 STC 241 (SC). In the said case, the question was considered whether the supply of various preparations by each club to its members involved a transaction of sale or not. The honourable Supreme Court did not lay down in that judgment that the supply of goods by incorporated bodies were not sale. The honourable court only held that in the case of members' club, though incorporated where service or supply is only to members and there are no shareholders who are not members, the supply of refreshments to such members would not amount to sale. The supply of food, drink or refreshments having been expressly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in all clubs in this State was regarded as sale and tax was levied thereon. Shortly after independence, courts followed the English law of the period, prior to independence for holding that such supplies do not constitute a sale. Parliament had therefore to step in, and it did so by amending the Constitution and expanding the width of the definition of "sale or purchase of goods". After the enactment of corresponding amendment to the State Sales Tax Act, it is no longer open to any club, whether incorporated or unincorporated, whether proprietary or non-proprietary, to contend that the delivery or supply of food articles, etc., to its members is not a sale and that tax is not leviable on such sales. In the light of the above discussion and by considering the totality of the facts and circumstances of the case, we are of the view that the petitioner during the assessment years under consideration was subject to Trade Tax Act and impugned notices were rightly issued to the petitioner by the Department. It is painful to mention that earlier this honourable court has dismissed the writ petition of the petitioner vide order dated August 30, 2008 (Writ Petition Nos. 5319 (M/B) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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