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SC gives tax relief for food at incorporated clubs
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- Recently,SC has held that supply of food, drinks and beverages by an incorporated members’ club to its permanent members is not liable for sales or service tax.
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- In case of sales tax, both incorporated and un-incorporated members’ clubs are exempt from liability.
- As per court such supply of good lacks the essential aspect of a sale- a seller and a buyer.
- The legal entity called the “club and its members” are one and the same and club is an agent of its members.
- Recalling the “Young Men Indian Association case” it held that doctrine of mutuality between the club and its members would dominate the relationship between anclub and its permanent members.
- It also held that since there is no transfer of property from one (club) to another (members), there is no sale eligible for tax.
- The 46thamdt had brought Article 366(29-A) which dealt with the taxation of sale of goods.
(1) Its clauses (e) and (f) said supply or service of “goods” like food or drink by an unincorporated association or body of persons would be taxable.
- The before the bench was whether the supply of food and beverages in incorporated members clubs would be taxable.
- Also the rendering of service by the petitioner-club to its members is not taxable service under the Finance Act, 1994.
Source
The Hindu