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TMI Blog2021 (8) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... the events organized are only open to the members of the club. The Appellant club is established on mutuality concept and therefore any transaction between the club and the members cannot be construed to be between two different parties and hence no Service Tax can be levied on the said transactions. 3. The Appellant states that an investigation proceeding was conducted by the officers of the Anti-Evasion wing of the Service Tax Department as regards alleged nonpayment of Service Tax on the 'club or association services' being provided by the Appellant to its members. Accordingly, two Show Cause Notices for the period from 2006-07 to 2008-09 and from 2009-10 to 2010-11 were issued to the Appellant demanding the Service Tax on the income as reflected in the audited financial statements submitted by the Appellant to the Department. The Appellant contested the same on the grounds of mutuality as well as decisions of various High Courts regarding non applicability of Service Tax on members only club. However, the demand was confirmed by the Adjudicating authority along with interest and penalty for the period covered in the SCN's by a common adjudication order (Order-in-Original) dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 65(25aa) as follows: "club or association" means any person or body of persons providing services, facilities or advantages, primarily to its members for a subscription or any other amount but does not include- (i) anybody established or constituted by or under any law for the time being in force, or (ii) any person or body of person engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry, or (iii) any person or body of person engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature, or (iv) any person or body of persons associated with press or media. 61. Likewise, in Section 65(105)(zzze), the expression "or any other person" was added after the expression "to its members", thus making it clear that the tax net had now been widened so as to include non-members of clubs or associations as well. 62. Under Section 66, it was stated that there shall be levied the tax (referred to as "the service tax") at the rate of 12% of the value of taxable services referred to in sub-clauses...(zzze) of clause (105) of section 65, and collected in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. xxx xxx xxx Explanation 3. For the purposes of this Chapter;- (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons." 67. A new Section 66B was then introduced, which states as follows: "66B. Charge of service tax on and after Finance Act, 2012 There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed." 68. As was stated hereinabove, service tax was thus leviable on all services as defined, short of a negative list of services which was then set out in Section 66D of the Act. 69. In an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d w.e.f. 1-5- 2011 by Notification No. 30/2011-ST dated 25-4- 2011. Thus, the service tax was on a total of 115 services. 20. Thus, right from 1994 till 2011, the mode adopted was to specify those services on which it was intended to levy service tax. However, Parliament by the Finance Act, 2012 w.e.f. 1-7-2012 has introduced altogether new system of taxation of services by making a paradigm shift. Now, the scheme of taxation of services is based on negative list of services. Therefore, earlier list of taxable services is no longer applicable. Instead two things have happened. First, the term "service" is defined whereas there was no definition of "service" in the Finance Act, 1994 which position remained till 2012. Earlier, each individual service on which tax was levied (known as taxable service) was defined. Secondly, the definition of "service" given now contains a negative list which is contained in Section 66-D of the Act. In other words, it specifically excludes certain transactions from the ambit of service. Thus, those transactions which are specifically excluded are not liable for service tax. Any other kind of service which qualifies the definition of "service" contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strue what is meant by "constituted" under an instrument of partnership, which words occurred in Section 26A of the Income Tax Act, 1922. The Court held: "The word "constituted" does not necessarily mean "created" or "set up", though it may mean that also. It also includes the idea of clothing the agreement in a legal form. In the Oxford English Dictionary, Vol. II, at pp. 875 & 876, the word "constitute" is said to mean, inter alia, "to set up, establish, found (an institution, etc.)" and also "to give legal or official form or shape to (an assembly, etc.)". Thus the word in its wider significance, would include both, the idea of creating or establishing, and the idea of giving a legal form to, a partnership. The Bench of the Calcutta High Court in the case of R.C. Mitter and Sons v. CIT [(1955) 28 ITR 698, 704, 705] under examination now, was not, therefore, right in restricting the word "constitute" to mean only "to create", when clearly it could also mean putting a thing in a legal shape. The Bombay High Court, therefore, in the case of Dwarkadas Khetan and Co. v. CIT [(1956) 29 ITR 903, 907] , was right in holding that the section could not be restricted in its application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons and their members are statutorily to be treated as distinct persons. 78. The explanation to Section 65, which was inserted by the Finance Act of 2006, reads as follows: "Explanation: For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration:" 79. It will be noticed that the aforesaid explanation is in substantially the same terms as Article 366(29-A)(e) of the Constitution of India. Earlier in this judgment qua sales tax, we have already held that the expression "body of persons" will not include an incorporated company, nor will it include any other form of incorporation including an incorporated co-operative society. 80. It will be noticed that "club or association" was earlier defined under Section 65(25a) and 65(25aa) to mean "any person" or "body of persons" providing service. In these definitions, the expression "body of persons" cannot possibly include persons who are incorporated entities, as such entities have been expressly excluded under Section 65(25a)(i) and 65(25aa)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in their view of the law in following Young Men's Indian Association (supra). We are also of the view that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members' clubs in the incorporated form. 85. The appeals of the Revenue are, therefore dismissed. Writ Petition (Civil) No.321 of 2017 is allowed in terms of prayer (i) therein. Consequently, show-cause notices, demand notices and other action taken to levy and collect service tax from incorporated members' clubs are declared to be void and of no effect in law. 6. We find that the above judgment of the Supreme Court was also referred to in the case of COMMISSIONER OF SERVICE TAX, KOLKATA & ORS. Versus THE BENGAL ROWING CLUB & ANR in APO 86 of 2019 With Writ Petition 534 of 2006 ,OCOT 2 of 2019, wherein the Hon'ble Calcutta High Court has also dismissed the appeal filed by the Revenue in a similar matter concerning taxability between the members of the club and the club itself. 7. By respectfully following the judgement of Hon'ble Supreme Court in the case of Calcutta Club Ltd (supra), we allow the Appeal with consequential relief, if any, to the Appellants. The Appeal is thus disposed of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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