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TMI Blog2004 (6) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... lub is allowing his own member to do so who is, by virtue of his position, principal of the club. If any outside agency is called upon to do the needful it may raise a bill along with the service tax upon the club and the club as an agent of the members, is supposed to pay the same. The authority cannot impose service tax twice once upon the people carrying out the business of mandap keeper as well as the members club for the purpose of using the space for constructing or using it as mandap . Therefore, apart from any other question possibility of double taxation cannot be ruled out. If I explain my first query as above it will be crystal clear that if a person being an owner of the house allows another to occupy the house for the purpose of carrying out any function in that house it will not be construed as transfer of property. But if such person calls upon a third party mandap keeper to construct a mandap in such house then in that case such mandap keeper can be able to raise bill upon the user of the premises along with the service tax. Therefore, I cannot hold it good that members club is covered by the Finance Act, 1994 for imposition of service tax to use its space as mandap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prietary club. Therefore, it is not supposed to pay service tax for using the space as mandap as per requirement of the members. It is governed by its own Memorandum and Articles of Association as well as rules and bye-laws connected therewith. From the relevant clause under objects being Clause 3(a) of the Memorandum and Articles of Association is quoted hereunder : "3(a) To afford to its Members all the usual privileges, advantages, conveniences and accommodation of a Club and the promotion of Social Amusement and Entertainments, the Pursuit of Literature and the facilitation of Study in Languages and the Arts". The question of profit would also govern by Clause 86 of the Articles of Association under Chapter V which deals with financial part of it. Such portion is also quoted hereunder : "The profits of the Club whencesoever derived, shall be applied solely towards the benefit of the Club or otherwise in the promotion of the objects of the Club as set forth in the Memorandum of Association, and no portion thereof shall be paid by way of dividend or bonus to the Members of the Club". 3.As per bye-laws sales tax would be levied extra in respect of using roo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of mandap including the facilities provided to the client in relation to such use and also the charges for catering, if any". 9.Now it is duty incumbent upon the Court to understand whether service tax as per the Act can be levied upon the club in using the space as mandap or not. 10.He cited various judgments in support of his contentions. From 1970 (XXVI) Sales Tax Cases 241 (Harbour Division-II, Madras v. Young Men's Indian Association Madras, and Ors.) it has been found that the six Judges' Bench of the Supreme Court held that if a members' club even though a distinct legal entity acts only as an agent for its members in the matter of the supply of various preparations and articles to them no sale would be involved as the element of transfer would be completely absent. Members are joint owners of all the club properties. Proprietary clubs stand on a different footing. The members are not owners of or interested in the property of the club. To show the difference of characteristic between the 'members' club' and 'proprietary club' the Supreme Court held that where every member is a shareholder and every shareholder is a member then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular form the association takes. Trading between persons associating together in this way does not give rise to profits which are chargeable to tax. Facilities were offered only as a matter of convenience for the use of the members. It was further held in 2000 (243) ITR 89 (Chelmsford Club v. Commissioner of Income-tax) that the surplus from the activities of the club is excluded from the levy of the income-tax. 11.Mr. Dipak Shome, learned Counsel, with able assistance of Mr. Biswanath Samaddar, learned Counsel, contended before this Court that providing 'mandap' by a club as a 'mandap keeper' cannot be the usual course of business activities under the objects of the Memorandum of Association of the club. He called upon to show clause 86 of the Articles of Association as above. By showing the relevant part of the bye-laws he said that the club is charging more as against rental and other costs and even thereafter they are levying payable sales tax. Therefore, the club authorities are using the space as against the consideration and thereby making profit out of it which cannot be called as a usual privilege to the members. Many of the clubs accepted the imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd will raise a bill along with the service tax upon the owner. There is no dispute to that extent. But here the case is different. In the instant case, whether there should be collection of service tax by a owner of the property if he voluntarily allows any of his known persons to use his premises for the purpose of carrying out the marriage or other ceremony or not. There cannot be any applicability of service tax in between themselves since there is no question of transfer of property amongst them. So far as the second point is concerned he said there is no difference among all the three types of taxes principally. Thereby the ratio of the judgments cited by him will be applicable in the present case. 16.According to me, I have no much of say as against the petitioner's cause. The proceedings which was initiated as against the petitioner club is not a simpliciter show cause but imposition of service tax giving an opportunity to show cause as to why the same will not be levied. One of the relevant portions to draw an inference on that score is as follows : "The club is letting out its premises for organising social or official function for a consideration. Therefore, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent when there is no transfer of property available question of imposition of service tax cannot be made available. It is true to say that there is a clear distinction between the 'members' club' and 'proprietary club'. No argument has been put forward by the respondents to indicate that the club is a 'proprietary club'. Therefore, if the club space is allowed to be occupied by any member or his family members or by his guest for a function by constructing a 'mandap' the club cannot be called as 'mandap keeper' because the club is allowing his own member to do so who is, by virtue of his position, principal of the club. If any outside agency is called upon to do the needful it may raise a bill along with the service tax upon the club and the club as an agent of the members, is supposed to pay the same. The authority cannot impose service tax twice once upon the people carrying out the business of 'mandap keeper' as well as the members' club for the purpose of using the space for constructing or using it as 'mandap'. Therefore, apart from any other question possibility of double taxation cannot be ruled out. If I expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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