Wheler Club Meerut The Mall Cantt ... vs Commissioner Commercial Tax U.P. ...
2023 Latest Caselaw 417 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

?Court No. - 10
 

 
Case :- SALES/TRADE TAX REVISION No. - 1850 of 2008
 

 
Revisionist :- Wheler Club Meerut The Mall Cantt Meerut
 
Opposite Party :- Commissioner Commercial Tax U.P. Lucknow
 
Counsel for Revisionist :- Kunwar Saksena,Suyash Agarwal
 
Counsel for Opposite Party :- C.S.C.
 

 
Hon'ble Rohit Ranjan Agarwal,J.

Heard Sri Suyash Agarwal, learned counsel for the revisionist and Sri Rishi Kumar, learned Standing Counsel for the State.

Present revision, filed under Section 11 of U.P. Trade Tax Act read with Section 81 of UP VAT Act 2008, assails the order passed by the Commercial Tax Tribunal, Meerut Bench-II, Meerut dated 28.08.2008 in second appeal No. 44 of 2008.

Facts, in brief, are that the revisionist is a defence services club comprising of members and it was incorporated as a company. The club is being run on 'no profit no loss' basis and it supplied the foods and drinks to its members. An assessment was made by the assessing authority and assessment order was passed on 25.09.2007. The assessing authority held that the club was liable to be taxed for supplying the foods and drinks to its members. Against the order passed by the assessing authority, a first appeal was preferred and the first appellate authority remanded the matter to the assessing authority. Against the order of first appellate authority, a second appeal was preferred before the Commercial Tax Tribunal, Meerut Bench-II, Meerut. The Tribunal relying upon the definition of sale as provided under Section 2 (h)(v) and (vi) held that supply of foods and drinks to the members of club amounted to sale and the assessing authority had rightly passed the order and vide order dated 28.08.2008 set-aside the order of remand and upheld the order passed by the assessing authority. Hence, this revision.

Through this revision the assessee had tried to raise a question of law that the definition of the term 'sale' as contained under Section 2 (h) of U.P. Trade Tax Act, 1948 (hereinafter referred as the 'Act of 1948') was not applicable to the revisionist assessee as per the judgment rendered in case of CTO Vs. Young Men's Indian Association, 1970 (1) SCC 462, and decision of the Apex Court in case of State of West Bengal & Others Vs. Calcutta Club Limited & Others, AIR 2019 SC 5310.

It has been contended by learned counsel for the revisionist that the doctrine of mutuality still exists as held by the recent judgment of Apex Court in case of Calcutta Club Limited (Supra) and the judgment, earlier rendered by the Apex Court, in case of Young Men's Indian Association (Supra) still holds the field even after 46th amendment made in the Constitution. It was further submitted that Sub-clause (f) of Article 366 (29-A) has no application to the members of club, as has been held by the Apex Court. According to learned counsel the liability of tax does not arise on the assessee as it is a club, incorporated and is serving foods and drinks to its members and is running on no profit no loss basis, thus, it is not covered under the definition of 'sale' as envisaged under Section 2 (h) (V) and (VI).

Sri Rishi Kumar, learned Standing Counsel, appearing for the State, has submitted that though the judgment rendered by the Apex Court in case of Calcutta Club Limited (Supra) has held that the judgment, earlier rendered in 1970, still holds the field and the provisions of Article 366 (29-A) (f) will not operate in the present case but the constitutional amendment has not been set-aside and is still in existence. He further contends that the word 'club' finds place in Section 2 (c) which defines the word 'dealer'. According to him Section 2 (c) has to be read in harmony with Section 2 (h) and, thus, the Tribunal was right in upholding the assessment order.

I have heard respective counsel and perused the material on record.

The question which arises for consideration is that whether after the 46th Constitutional Amendment made in the Constitution which came into effect from 02.02.1983, the services in form of foods and drinks provided to the members of the club would be included under the term 'sale' and liable to be taxed.

Section 2(h) (v) of the Act of 1948 provides that in case of supply of goods by any unincorporated association or body of persons to members shall be considered as 'sale'. Further Section 2(h)(vi) provides that any services in whatsoever manner such as foods and drinks provided for human consumption shall also be encompassed under the term 'sale'. The earlier Constitution Bench decision in Young Men's Indian Association (supra) had held that where supply of various preparations by clubs to members is involved, it shall not be sale, as there is no transfer of property from one to another. If the club even though a distinct legal entity is only acting as agent for its members in the matter of supply of various pre- parations to them and no sale would be involved as the element of transfer would be completely absent. The decision of Constitution Bench occupied the area for long time. Post 46th Amendment in the Constitution, the supply of foods and drinks to the members of the club were being taxed as sale in view of Article 366(29-A)(f). The question came up for consideration of Hon'ble Apex Court in case of Calcutta Club Limited (supra), wherein the Apex Court clarified and held that doctrine of mutuality still continues to be applicable to both incorporated and unincorporated members' club, even after 46th Amendment in Article 336 (29-A) to the Constitution of India.

The Apex Court further, while answering the question posed by the Division Bench, in Calcutta Club Limited (Supra) has held that the judgment rendered by the earlier Constitution Bench in the matter of Young Men's Indian Association (Supra) continues to hold the field even after 46th amendment. According to Apex Court Sub-clause (f) of Article 366 (29-A) has no application in member's club. Relevant paragraph no. 49 of the judgment is extracted hereasunder;

"49. In light of the view that we have taken, it is unnecessary to advert to Shri Dwivedi's arguments that the explanation (1) to Section 2(10) of the West Bengal Sales Tax Act is a stand-alone provision and not an explanation in the classical sense. We, therefore, answer the three questions posed by the Division Bench in State of West Bengal v. Calcutta Club Limited (supra) as follows:

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

(2) Young Men's Indian Association (supra) 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."

In view of the above, as the matter is no more res integra and the Apex Court has clarified that Sub-clause (f) of Article 366 (29-A) does not apply to the member's club and it is not disputed that the revisionist is a club incorporated and is serving foods and drinks to its members, it is not covered under the definition of Section 2 (h) of the Act of 1948, as held by the Tribunal.

In view of the said fact, the order passed by the Commercial Tax Tribunal, Meerut Bench-II, Meerut dated 28.08.2008 in second appeal No. 44 of 2008 is unsustainable in the eyes of law and same is hereby set-aside.

Revision stands allowed.

Order Date :- 5.1.2023

Shekhar