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service tax

saravanan (accountant) (111 Points)

28 March 2009

Dear Friends,

aAny new notification regarding non applicability of service tax on Clubs. this is recently judgemnt in supreme court, i have read in hindu news Paper. do u have any notification from govt pls send it to me.

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3 Replies

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 28 March 2009

No tax is payable on mutuality of interest.

saravanan (accountant) (111 Points)
Replied 28 March 2009

sorry i cant understand . pls explain more.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 28 March 2009

Well, a person cannot do business with oneself, a person cannot provide service to oneself, a person cannot earn income from oneself. On such transaction no tax can be levied. The principle is well settled from the case of Harris v. Irvine [4 TC 221].

Thus if there is a club, consisting of members, where memebers contribute to the functioning of the club and club provide services to its members or their guests, club and members are same person and it is not a business transaction. On such transaction no tax is leviable, be it VAT, Income Tax or Service Tax.

The issue is well settled in case of Shri Mumal Club v. CCE [2006(1) STR 111]. Even when such club provide some pther service, like Mandap Keeper service to its members, Service Tax is not leviable as held in Saturday Club v. ACCE [2005 (180) ELT 437].

Even when such association of person is incorporated as a limted company, the priciple has been applied as in case of Saturday Club Limited, Deharadun Club Limited [2007 (7) STR 519]. However, court didnt consider the point of incorporation and therefore separate juristic person has not been examined in these case, as it was never pleaded by the revenue. In an Income Tax case, in Royal western turf club limited [1953 (24) ITR 551], it was held that Income Tax is payable.