State of West Bengal & Ors. vs Calcutta Club Limited

(ii) Whether the judgment of Supreme Court in Young Men’s Indian Association case still holds the field even after the 46th Amendment? and (iii) Whether the 46th Amendment, by deeming fiction provides that provision of food and beverages by the incorporated clubs to its permanent members constitute sale, thus liable to sales tax? – In C.A. No.7497 of 2012 and connected matters, issue involves levying of service tax by Finance Act, 1994 upon members’ clubs, majority of them being registered as Companies u/s.25 of the 1956 Act, or as co-operative societies under various State Acts – Held: Young Men’s Indian Assn. made no distinction between a club in the corporate form and a club by way of a registered society or incorporated by a deed of trust – What is the essence of the judgment is that the holding of property must be a holding for and on behalf of the members of the club, there being no transfer of property from one person to another – In members’ clubs there is a complete identity between contributors and participators – Thus, in members’ clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself – What is of essence in applying the doctrine of mutuality is that there is no sale transaction between two persons, as one person cannot sell goods to itself – Ratio of Young Men’s Indian Assn. has not been done away with by the limited fiction introduced by Art.366(29-A)(e) – Questions answered (i) Doctrine of mutuality continues to be applicable to incorporated and unincorporated members’ clubs after the 46th Amendment adding Art.366(29-A); (ii) Young Men’s Indian Assn. and other judgments which applied this doctrine continue to hold the field even after the

46 th Amendment; and (iii) Sub-clause (f) of Art.366(29-A) has no application to members’ clubs – No interference called for in the findings of fact or declaration of law in this case – Further, in C.A. No.7497/12 and connected matters- Argument on behalf of the respondents that incorporated clubs or associations prior to 1st July, 2012 were not included in the service tax net is accepted – What has been stated in the present judgment so far as sales tax is concerned applies on all fours to service tax– Explanation 3(a) to s.65B(44) of the Finance Act, 1994 does not apply to members’ clubs which are incorporated – From 2005 onwards, the Finance Act, 1994 does not purport to levy service tax on members’ clubs in the incorporated form – Jharkhand High Court and the Gujarat High Court correct in their view of the law in following Young Men’s Indian Assn. Case – Thus, show-cause notices, demand notices and other action taken to levy and collect service tax from incorporated members’ clubs are void and of no effect in law – West Bengal Sales Tax Act, 1994 – ss.2(5), (10), (30) & s.9 Constitution of India – Art.366(29-A)(e)(f) – Companies Act, 1956 – s.25 – Constitution (Forty-sixth Amendment) Act, 1982 – General Clauses Act – Income Tax Act, 1961 – s.2(24)(vii), 2(31), 44, 45(2) – Finance Act, 1994 – ss.64(3), 65(25a), (25aa), 65(105)(zze), 65(A), 65B(37), Explanation 3(a) to s.65B(44), 66B, 66D, 67, 68 – Finance Act, 2006 – Finance Act, 2012 – Interpretation of Statutes – Central Sales Tax Act, 1956. Constitution of India – 46 th Amendment to Art.366(29-A) –

61 Law Commission Report – Plea on behalf of the appellants, referring to the said Report, which preceded the enactment of Art.366(29-A); the ‘Statement of Objects and Reasons’ appended to the 1981 Bill, which led to the insertion of Art.366(29-A); and in st

particular to Art.366(29-A)(e), (f) to contend that Art.366(29-A)(e) was inserted in order to do away with the doctrine of mutuality, insofar as it applied to members’ clubs and, therefore, sought to do away with the basis of the judgment in Young Men’s Indian Assn. case – Held: Statement of Objects and Reasons has not read the case of Young Men’s Indian Assn. in its correct perspective – Young Men’s Indian Assn. had three separate appeals before it, in one of which a company was involved – To state, therefore, that under the law as it stood on the date of the 46th Amendment, a sale of goods by a club having a corporate status to members is taxable, is wholly incorrect – Proceeding on this incorrect basis, the 46th Amendment then sought to bring to tax sales by clubs which have no separate existence from that of their members – In so doing, the 46 th Amendment used the expression “any unincorporated association or body of persons” – This expression, when read with the Statement of Objects and Reasons, makes it clear that it was only clubs which are not in corporate form that were sought to be brought within the tax net, as it was wrongly assumed that sale of goods by members’ clubs in the corporate form were taxable –”Any” is the equivalent of “all”– This word, therefore, also lends itself to the aforesaid interpretation, as the emphasis of the legislature is on all unincorporated associations or bodies being brought within subclause(e) – Constitution (Forty-sixth Amendment) Bill, 1981 – Constitution (Forty-sixth Amendment) Act, 1982 – Interpretation of Statutes – Doctrine of Mutuality.

Words & Expressions – “unincorporated association or body of persons” in sub-clause (e) to Art.366(29-A) – Plea on behalf of the appellants that the said expression must be read disjunctively and thus, would include incorporated persons such as companies, cooperative societies etc. – Held: On the assumption that “unincorporated association or body of persons” must be read disjunctively, “a body of persons” cannot be equated with “person” – “Person” as defined by the General Clauses Act (which applies to the interpretation of the Constitution vide Art.367) states that “person” shall include any company or association or body of individuals, whether incorporated or not – Art.366(29-A) does not use this expression, as “person” would then include corporate persons as well – “body of persons” is used to make it clear beyond doubt that corporate persons are not referred to – Further, contrast in the language of the 1961 Act and Art.366(29-A)(e) again leads to the conclusion that “body of persons” would not refer to the corporate form unless “person” by itself is accompanied by the expression “whether incorporated or not” – Constitution of India – Art.366(29-A)(e), 367 – General Clauses Act – Income Tax Act, 1961 – s.2(31) – Interpretation of Statutes. Contract Act, 1872 – s.2(d) – Plea on behalf of the respondent that s.2(d) makes it clear that consideration must flow from one person to another and in the absence of two players, as in the case of Young Men’s Indian Assn., Art.366(29-A) would have no application – Held: “supply” of goods by an unincorporated association or body of persons has to be to a member for cash, deferred payment or other valuable consideration – Correctly argued by the respondents, the definition of “consideration” in s.2(d) of the 1872 Act necessarily posits consideration passing from one person to another – This is further reinforced by the last part of Art.366(29A), as under this part, the supply of such goods shall be deemed to be sale of those goods by the person making the supply, and the purchase of those goods by the person to whom such supply is made – As the Young Men’s Indian Assn. case and the doctrine of mutuality state, there is no sale transaction between a club and its members – Ratio of Young Men’s Indian Assn. has not been done away with by the limited fiction introduced by Art.366(29-A)(e) – Constitution of India – Art.366(29-A) – West Bengal Sales Tax Act, 1994 – ss.2(5),

(30) – Doctrine of Mutuality.

Constitution of India– Art.366(29-A)(e), (f)– Applicability of sub-clause (f) to members’ club – Held: Reason for sub-clause (f), as stated in the Statement of Objects and Reasons, is the doing away with of two judgments of Supreme Court, viz., Associated Hotels of India Ltd. and Northern India Caterers – This is also clear from the subject matter of sub-clause (f) (which does not include “goods” in their entirety, but only food or any other article for human consumption, or any drink), which is the serving of such food or drink in hotels or restaurants – This is further made clear by s.6 of the 46 th Amendment Act, which is a validation and exemption provision – s.6(1)(a) specifically refers to transactions referable to the aforesaid two Supreme Court judgments – Sub-clause (a) of s.6(2) refers to 07.09.1978, which is the date on which Northern India Caterers was pronounced and sub-clause (b) refers to 04.01.1972, when Associated Hotels of India Ltd. was pronounced – 46th Amendment Act, therefore, when read as a whole, would make it clear that Art.366(29-A)(f) refers only to an undoing of the aforesaid two judgments, the subject matter being the taxability of food or drink served in hotels and restaurants – Thus, the taxability of food or drink served in members’ clubs is not the subject matter of sub-clause (f) – Subject matter of sub-clause (f) is entirely different and distinct from that of sub-clause (e), and cannot possibly apply to members’ clubs – Thus, expression “in any manner whatsoever”, being part and parcel of sub-clause (f) cannot be held to extend to a supply of all goods so as to bring such goods to tax when applied to members’ clubs – Constitution (Forty-sixth Amendment) Act,1982 – s.6.

Income Tax Act, 1961 – ss.2(24)(vii), 44, 45(2) – Held: Doctrine of Mutuality has not been done away with by sub-clause

(e) to Art.366(29-A) is also clear when sub-clause (e) is contrasted with s.2(24)(vii) of the 1961 Act r/w s.44 – A reading of the said provisions make it clear that when profits and gains of a mutual insurance company are sought to be brought to tax, they are so done by express reference to the fact that the business of insurance is carried on by a mutual insurance company – Absence of any such language in sub-clause (e) of Art.366(29-A) is also an important pointer to the fact that the doctrine of mutuality cannot be said to have been done away with by the said 46th Amendment – Also, s.45(2) is an example of a provision by which a deemed transfer by a person to himself gets taxed – Modalities such as these to bring to tax amounts that would do away with any doctrine of mutuality are conspicuous by their absence in the language of Article 366(29A)(e) – Constitution of India – Art.366(29-A)(e) – Constitution (Fortysixth Amendment) Act, 1982 – Doctrine of Mutuality. Words & Expressions – Expression “body of persons” occurring in the explanation to s.65 and s.65(25a) and (25aa) – Meaning of – Held: Said expression does not refer to an incorporated company or an incorporated cooperative society – Finance Act, 1994 – Explanation to s. 65, ss.65(25a), (25aa); s.65B(37) and Explanation 3(a) to s.65B(44) – Finance Act, 2006. Finance Act, 1994 – Explanation to s.65, ss.65(25a), (25aa); s.65B(37) and Explanation 3(a) to s.65B(44) – Applicability of explanation 3(a) to s.65B(44) to incorporated members’ clubs – Discussed – Finance Act, 2006 – Finance Act, 2012. Dismissing the Civil Appeal No.4184 of 2009 and the appeals of the Revenue, while allowing the Writ Petition (Civil) No.321 of 2017 in terms of prayer (i) therein, the Court HELD: 1.1 Young Men’s Indian Association made no distinction between a club in the corporate form and a club by way of a registered society or incorporated by a deed of trust. What is the essence of the judgment is that the holding of property must be a holding for and on behalf of the members of the club, there being no transfer of property from one person to another. Proprietary clubs were distinguished, as there the owner of the club would not be the members themselves, but somebody else. The present appeal deals with a company that is registered under Section 25 of the Companies Act. In these companies, payment of dividend to shareholders is prohibited, and the profits, if any, have to be applied to promote the objects of the company. Bacha F. Guzdar did not deal with a Section 25 company - it dealt with two tea companies which were Public Limited Companies, registered under the Companies Act. Given the differences pointed out in Cricket Club of India between clubs registered as Companies under Section 25 of the Companies Act and other companies, it is clear that the ratio decidendi in the judgment in Bacha F. Guzdar would not apply to such clubs - there being no shareholders, no dividends declared, and no distribution of profits taking place. Such clubs, therefore, cannot be treated as separate in law from their members. If persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members – it is enough that there is a right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference. What is of essence, therefore, in applying this doctrine is that there is no sale transaction between two persons, as one person cannot sell goods to itself. [Paras 26, 30] [908-B-D, H; 909-A; 911-C-D; 914-B-D]

C.T.O. v. Young Men’s Indian Association (1970) 1 SCC

462 : [1970] 3 SCR 680 – explained.

Bacha F. Guzdar v. Commissioner of Income Tax, Bombay [1955] 1 SCR 876 – distinguished.

Cricket Club of India Ltd. v. Bombay Labour Union [1969] 1 SCR 600 ; Bangalore Club v. Commissioner of Income Tax and Anr. (2013) 5 SCC 509 : [2013] 1 SCR 267 – relied on.

1.2 The 61st Law Commission Report had observed that there cannot be said to be any evasion of tax as a member of members’ clubs “really takes his own goods” and, therefore, did not seek to tax such goods. The framers of the 46th Amendment thought otherwise, and made it plain that they sought to bring to tax sales made by unincorporated clubs or an association of persons to their members, as it was thought that such transactions were not taxable, as such club or associations in law has no separate existence from that of the members. The Statement of Objects and Reasons has not read the case of Young Men’s Indian Association in its correct perspective. Young Men’s Indian Association had three separate appeals before it, in one of which a company was involved. To state, therefore, that under the law as it stood on the date of the 46th Amendment, a sale of goods by a club having a corporate status to members is taxable, is wholly incorrect. Proceeding on this incorrect basis, what the 46 th Amendment sought to do was to then bring to tax sales by clubs which have no separate existence from that of their members. In so doing, the 46 th Amendment used the expression “any unincorporated association or body of persons”. This expression, when read with the Statement of Objects and Reasons, makes it clear that it was only clubs which are not in corporate form that were sought to be brought within the tax net, as it was wrongly assumed that sale of goods by members’ clubs in the corporate form were taxable. “Any” is the equivalent of “all”. This word, therefore, also lends itself to the aforesaid interpretation, as the emphasis of the legislature is on all unincorporated associations or bodies being brought within sub-clause (e). Thus, it is clear that even going by the argument as to the intention of the legislature, as seen through the object that the legislature sought to achieve, would lead to the aforesaid expression applying only to clubs which were not in the corporate form. [Paras 32-34] [914-F-H; 915-A-D]

1.3 Even otherwise, on the assumption that

“unincorporated association or body of persons” must be read disjunctively, “a body of persons” cannot be equated with “person”. “Person” as defined by the General Clauses Act, (which applies to the interpretation of the Constitution vide Article 367) states that “person” shall include any company or association or body of individuals, whether incorporated or not. Article 366(29-A) does not use this expression, as “person” would then include corporate persons as well. On the other hand, “body of persons” is used to make it clear beyond doubt that corporate persons are not referred to. The definition of “person” in other Acts such as the Income Tax Act, 1961 is also very wide, and includes an association of persons or body of individuals, whether incorporated or not– Section 2(31) of the Income Tax Act, 1961. Quite clearly, this language was available and in common usage by the legislature, as the definition of “person” under the Income Tax Act has stood in the statute book since 1961. The contrast in the language of the Income Tax Act, 1961 and Article 366(29A)(e) again leads to the conclusion that “body of persons” would not refer to the corporate form unless “person” by itself is accompanied by the expression “whether incorporated or not”. Even otherwise, the “supply” of goods by an unincorporated association or body of persons has to be to a member for cash, deferred payment or other valuable consideration. The definition of “consideration” in Section 2(d) of the Indian Contract Act, 1872 necessarily posits consideration passing from one person to another. This is further reinforced by the last part of Article 366(29-A), as under this part, the supply of such goods shall be deemed to be sale of those goods by the person making the supply, and the purchase of those goods by the person to whom such supply is made. As the Young Men’s Indian Association case and the doctrine of mutuality state, there is no sale transaction between a club and its members. there cannot be a sale of goods to oneself. the ratio of Young Men’s Indian Association (supra) has not been done away with by the limited fiction introduced by Article 366(29-A)(e). [Paras 35-38] [915-E-H; 916-A-C, H; 917-A-B]

Pollock and Mulla, The Indian Contract & Specific Relief Acts (16th Edn.) – referred to.

1.4 The reason for sub-clause (f), as has been stated in the Statement of Objects and Reasons, is the doing away with of two judgments of this Court, namely, State of Punjab v. Associated Hotels of India Limited AIR 1972 SC 1131 and Northern India Caterers (India) Ltd.. This is clear not only from the Statement of Objects and Reasons, but from the subject matter of sub-clause

(f) (which does not include “goods” in their entirety, but only food or any other article for human consumption, or any drink), which is the serving of such food or drink in hotels or restaurants. This is further made clear by Section 6 of the 46th Amendment Act, which is a validation and exemption provision. Section 6(1)(a) specifically refers to transactions referable to the aforesaid two Supreme Court judgments. The exemption provision puts the matter beyond doubt. Sub-clause (a) refers to 7th September, 1978, which is the date on which Northern India Caterers was pronounced and sub-clause (b) refers to 4th January, 1972, which is the date on which Associated Hotels of India Ltd. was pronounced. The 46th Amendment Act, therefore, when read as a whole, would make it clear that Article 366(29-A)(f) refers only to an undoing of the aforesaid two judgments, the subject matter being the taxability of food or drink served in hotels and restaurants. This being the case, it is obvious that the taxability of food or drink served in members’ clubs is not the subject matter of sub-clause (f). A members’ club may supply goods which are not food or drink – for example, soap, cosmetics and other household items. These items would be “goods”, but would not be within sub-clause (f) - not being food or drink, and cannot, therefore, be taxed under sub-clause (f), leading to the absurd situation of the supply of food and drink being taxable in members’ clubs, and the supply of other goods in such clubs being outside the tax net. For this reason also, it is clear that the subject matter of sub-clause (f) is entirely different and distinct from that of subclause (e), and cannot possibly apply to members’ clubs. In this view of the matter, the expression “in any manner whatsoever”, being part and parcel of sub-clause (f) cannot be held to extend to a supply of all goods so as to bring such goods to tax when applied to members’ clubs. [Paras 39-42] [917-C-E; 918-B-F] Northern India Caterers (India) Ltd. v. Lt. Governor of Delhi (1978) 4 SCC 36 : [1979] 1 SCR 557 ; State of Punjab v. Associated Hotels of India Limited AIR 1972 SC 1131 : [1972] 2 SCR 937 – referred to.

1.5 That the doctrine of mutuality has not been done away with by sub-clause (e) is also clear when sub-clause (e) is contrasted with certain provisions of the Income Tax Act, 1961. Section 2(24)(vii) of the Income Tax Act, 1961 has to be read with Section 44 of the Income Tax Act, 1961. A reading of the aforesaid provisions makes it clear that when profits and gains of a mutual insurance company are sought to be brought to tax, they are so done by express reference to the fact that the business of insurance is carried on by a mutual insurance company. The absence of any such language in sub-clause (e) of Article 366(29-A) is also an important pointer to the fact that the doctrine of mutuality cannot be said to have been done away with by the said 46th Amendment. Also, Section 45(2) of the Income Tax Act, 1961 is an example of a provision by which a deemed transfer by a person to himself gets taxed. It can be seen from this provision that profits or gains arising from a transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business, is by a deeming fiction brought to tax, despite the fact that there is no transfer in law by the owner of a capital asset to another person. Modalities such as these to bring to tax amounts that would do away with any doctrine of mutuality are conspicuous by their absence in the language of Article 366(29-A)(e). [Paras 45, 46 and 48] [920-E, H; 921-C, F; 922-C]

Income Tax Officer, Mumbai v. Venkatesh Premises Cooperative Society Limited (2018) 15 SCC 37:

[2018] 3 SCR 214 – referred to.

1.6 The three questions posed by the Division Bench in State of West Bengal v. Calcutta Club Limited are answered as follows:

(1) The doctrine of mutuality continues to be applicable to incorporated and unincorporated members’ clubs after the 46th Amendment adding Article 366(29-A) to the Constitution of India.

(2) Young Men’s Indian Association and other judgments which applied this doctrine continue to hold the field even after the 46th Amendment.

(3) Sub-clause (f) of Article 366(29-A) has no application to members’ clubs.

No interference is called for in the findings of fact or declaration of law in this case. C.A. No. 4184 of 2009 stands dismissed. [Paras 49, 50] [922-E-H]

State of West Bengal v. Calcutta Club Limited

(2017) 5 SCC 356 : [2016] 6 SCR 748 – referred to. C.A. No.7497 of 2012 and other connected matters

2.1 Service tax was introduced for the first time by the Finance Act, 1994. Under Section 64(3), Chapter V of the Finance Act applied to taxable services as defined, with effect from 16th June, 2005. Under Section 65(25a), “club or association” was defined. Under Section 65(105)(zze), “taxable service” was defined. With effect from 1st May, 2011, “club or association” was defined by Section 65(25aa). 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. 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 such manner as may be prescribed. Under Section 67, where service tax is chargeable on any taxable service with reference to its value. With effect from 1st July, 2012, Sections

65 and 65A were made inapplicable, and a new Section 65B introduced, in which under Section 65B(37), the term “person” was defined. Under Section 65B(44), “service” was defined. A new Section 66B was then introduced. 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. [Paras 58-63, 65-68] [925-F; 926-C-D, H]

2.2 The definition of “club or association” contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody “established or constituted” by or under any law for the time being in force, is not included. Companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, the argument on behalf of the Respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the service tax net is accepted. [Paras 72, 73] [931-E-F; 932-G-H]

R.C. Mitter & Sons, Calcutta v. CIT, West Bengal, Calcutta [1959] Suppl. 2 SCR 641 – relied on.

DALCO Engineering Private Limited v. Satish

Prabhakar Padhye and Ors. Etc. (2010) 4 SCC 378 : [2010] 4 SCR 15 ; CIT, Kanpur and Anr. v. Canara Bank (2018) 9 SCC 322 : [2018] 7 SCR 866 –

referred to.

2.3 The definition of “service” contained in Section 65B(44) is very wide, as meaning any activity carried out by a person for another for consideration. “Person” is defined in Section 65B(37) as including, inter alia, a company, a society and every artificial juridical person not falling in any of the preceding sub-clauses, as also any association of persons or body of individuals whether incorporated or not. What has been stated in the present judgment so far as sales tax is concerned applies on all fours to service tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members’ clubs, there has to be an activity carried out by one person for another for consideration. It has been seen how in the judgment relating to sales tax, the fact is that in members’ clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when the definition of “service” is construed under Section 65B(44) as well. However, Explanation 3 has now been incorporated, under sub-clause (a) of which unincorporated associations or body of persons and their members are statutorily to be treated as distinct persons. [Paras 75-77] [933-B-E]

2.4 The definition of “service” contained in Section 65B(44) is very wide, as meaning any activity carried out by a person for another for consideration. “Person” is defined in Section 65B(37) as including, inter alia, a company, a society and every artificial juridical person not falling in any of the preceding sub-clauses, as also any association of persons or body of individuals whether incorporated or not. What has been stated in the present judgment so far as sales tax is concerned applies on all fours to service tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members’ clubs, there has to be an activity carried out by one person for another for consideration. In the judgment relating to sales tax, the fact is that in members’ clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when the definition of “service” under Section 65B(44) as well is to be construed. However, Explanation 3 has now been incorporated, under sub-clause (a) of which unincorporated associations or body of persons and their members are statutorily to be treated as distinct persons. The explanation to Section 65, inserted by the Finance Act, 2006 is in substantially the same terms as Article 366(29-A)(e) of the Constitution of India. Earlier in this judgment qua sales tax, it has already been 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. “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) as “anybody established or constituted by or under any law for the time being in force”. “Body of persons”, therefore, would not, within these definitions, include a body constituted under any law for the time being in force. When the scheme of service tax changed so as to introduce a negative list for the first-time post 2012, services were now taxable if they were carried out by “one person” for “another person” for consideration. “Person” is very widely defined by Section 65B(37) as including individuals as well as all associations of persons or bodies of individuals, whether incorporated or not. Explanation 3 to Section 65B(44), instead of using the expression “person” or the expression “an association of persons or bodies of individuals, whether incorporated or not”, uses the expression “a body of persons” when juxtaposed with “an unincorporated association”. The expression “body of persons” occurring in the explanation to Section 65 and occurring in Section 65(25a) and (25aa) does not refer to an incorporated company or an incorporated cooperative society. As the same expression has been used in Explanation 3 post-2012 (as opposed to the wide definition of “person” contained in Section 65B(37)), it may be assumed that the legislature has continued with the pre-2012 scheme of not taxing members’ clubs when they are in the incorporated form. The expression “body of persons” may subsume within it persons who come together for a common purpose, but cannot possibly include a company or a registered cooperative society. Thus, Explanation 3(a) to Section 65B(44) does not apply to members’ clubs which are incorporated. The expression “unincorporated associations” would include persons who join together in some common purpose or common action. The expression “as the case may be” would refer to different groups of individuals either bunched together in the form of an association also, or otherwise as a group of persons who come together with some common object in mind. Whichever way it is looked at, what is important is that the expression “body of persons” cannot possibly include within it bodies corporate. The Jharkhand High Court and the Gujarat High Court are correct in their view of the law in following Young Men’s Indian Association. From 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members’ clubs in the incorporated form. 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.[Paras 75-85] [933-B-H; 934-A-H; 935-A-B]

Deputy Commercial Tax Officer, Saidapet & Anr. v. Enfield India Ltd., Co-operative Canteen Ltd. [1968] 2 SCR 421 – explained.

Cosmopolitan Club v. State of T.N (2017) 5 SCC 635 ; Fateh Maidan Club v. CTO (2017) 5 SCC 638 ; State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 1 SCR 618 ; BSNL v. Union of India (2006) 3 SCC 1 : [2006] 2 SCR 823 ; State of Madras v. Gannon

Dunkerley AIR 1958 SC 560 : [1959] SCR 379; Union of India and Ors. v. Margadarshi Chit Funds Private Limited and Ors. (2017) 13 SCC 806 : [2017] 7 SCR 375; All-India Federation of Tax Practitioners and Ors. v. Union of India and Ors. (2007) 7 SCC 527 : [2007]

9 SCR 147; ICT, Bombay North, Kutch and Saurashtra, Ahmedabad v. Indira Balkrishna [1960] 3 SCR 513 – referred to.

K. Damodarasamy Naidu & Bros. and Ors. v. State of T.N. and Anr. (2000) 1 SCC 527 ; Federation of Hotel and Restaurant Associations of India v. Union of India and Ors. (2018) 2 SCC 97 : [2017] 12 SCR 503

– relied on.

Inland Revenue Commissioners v. Westleigh Estates Company, Limited 1924 K.B. 390; Walter Fletcher v. Income Tax Commissioner (1972) Appeal Cases 414; Graff v. Evans (1882) 8 Q.B. 373 ; Trebanog Working Men’s Club and Institute Ltd. v. Macdonald (1940) 1 K.B. 576 ; Thomas (Inspector of Taxes) v. Richard Evans & Co. Ltd. (1927) 1 K.B. 33 ; Currie v. Misa (1875) LR 10 EX 153 – referred to.