TMI Blog2015 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 - - - Dated:- 11-9-2015 - V S Sirpurkar And Shri S S Rana, JJ. For The Appellant : Shri B J Raichandani, Adv For The Department : Shri Amresh Jain(AR RULING M/s Emerald Leisures Limited (hereinafter also referred to as applicant) is resident Public Limited Company. Applicant has entered into the business of establishing and running an indoor sports complex and club. The facilities and amenities to be provided at the upcoming indoor sports complex and club include lawn tennis courts, badminton court, swimming pool, table tennis, billiards, card room, board games, virtual sports, kids play area, a library, restaurant, spa, gymnasium, banquet halls and room to stay. Applicant proposes to invite membership from prospective members in terms of proposed scheme. The said scheme includes proposal for refundable interest free security deposit ranging between ₹ 3 lakhs / ₹ 4.5 lakhs up-to ₹ 10 lakhs to be received from each potential member in addition to non-refundable membership fee for an amount ranging from ₹ 50,000/- to ₹ 5,00,000/- depending on the category of membership. The maximum term of membership is 20 years. The club facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual concern; that similar view was taken in case of Saturday Club Ltd Vs. CCE 2006 (0pr3) STR 305 (Cal) ; that in case of Joint Commercial Tax officer, Madras vs. Young Men's Indian Association 1970 (1) (SCC) 462 it was held by the Hon'ble Supreme Court that in spite of definition contained in Section 2 (n) of Sales of Goods Act, 1930 read with Explanation I, if there is no transfer of property from one to another, there is no sale, which would be exigible to tax. The Hon'ble Supreme Court further observed that if the club, even though a distinct legal entity, is only acting as an agent for its members in matter of, supply of various preparations to them, no sale would be involved as the element of transfer would be completely absent; that similar view was taken by Full Bench of the Patna High Court in case of CIT vs. Ranchi Club (1992 196 ITR 137 Patna) wherein it was inter-alia held that keeping in view the principle of mutuality, the surplus accruing to a Members' Club from the subscription charges received from its members cannot be said to be income within the meaning of the Act; that if such receipts are from source other than the members, no exemption can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration undertaken or proposed to be undertaken by M/s Emerald Leisures Limited, is purely a business activity by M/s Emerald Leisures Limited for profit motives; that the name given The Club does not seem to signify the conventional Club providing services to its members, wherein there are no shareholders and consequently the question of distribution of the profit arising out of the activities of the club to the shareholders may not arise; that in the present case, M/s Emerald Leisures Limited, undertakes activities purely on profit motive and the profit arising out of the activities are required to be distributed only amongst the shareholders; that therefore, the issue of principle of mutuality is of no relevance or consequence for the issue under consideration in view of the material facts. Further, in view of the Section 66B read with Section 65 B (37) and Section 65B (44), the services provided by the applicant, which is a Public Limited Company and the profit of the company is shared amongst shareholders and not to the so called members of the Club is clearly a taxable service provided by one person (applicant) to another person (members of the club) and are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to them, no sale would be involved as the element of transfer would be completely absent. It is noticed that the Hon'ble Supreme Court in this judgment observed as under: With regard to incorporated club, a distinction has been drawn. Where such club has all the, characteristics of a members' club consistent with its incorporation, that is to say, where every member is a shareholder and every shareholder is a member, no license need to be taken out if liquor is supplied only to the members. If some of the shareholders are not members or some of the members are not shareholders that would be case of a proprietary club and would involve sale. Proprietary clubs stand on a different footing. The members are not owners of or interested in the property of the club. The supply to them of food or liquor through a fixed tariff is a sale. 10. In concurring judgment, Justice Shah observed as under; It appears on the findings recorded by the High Court that the clubs or associations sought to be rendered liable in these appeals were not transferring property belonging to them but merely acting as agents for and on behalf of the members. They were not selling goods but were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholesale Society Ltd. vs. Commissioner of Agriculture Income Tax, Assam 1948 AC 405, existence of which establishes the doctrine of mutuality. They are; a) the identity of the contributors to the fund and the recipients from the fund. b) the treatment of the company, though incorporated as a mere entity for the convenience of the members and policy holders, in other words, as an instrument obedient to their mandate and c) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. It is noticed that in the instant case before us, the applicant has number of businesses and share-holders, who may not be members of the club and vice-versa. Further, the applicant's prime objective is profit making and dividends are distributed among share-holders, who may not be members. Therefore, condition number (b) and (c) above are not satisfied and thus principles of mutuality are violated. Similarly, ratio of judgments of Hon'ble High Courts relied upon by the applicant in Ranchi Club Ltd. vs. Chief Commissioner of Central Excise Service Tax, Ranchi Zone (W.P. (T) NO. 2388 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest earned on said deposits results in enriching the applicant by additional consideration which should be taken as part of gross consideration under Section 67 of the Finance Act, 1994; that if members do not give said interest free security deposits, the cost of providing services would increase and such burden would shift to members. Revenue further submits that the legislative intent for determining value under Section 67 ibid is to determine the true value of the service in ordinary course of trade and value should be such which must be the sole consideration for the service. Revenue also relied upon stay order dated 07.07.2015 in case of Phoenix International Ltd vs. CCE ST, Noida. 18. Applicant submits that as per Section 66B (44) of the Finance Act, 1994, in order to attract Service Tax, the service provider has to undertake an activity for another person (service receiver) for a consideration; that applicant is not going to undertake any activity per se for the members. Applicant further submits that refundable security deposit not retained by him, cannot be considered as a consideration; that receipt of said deposit is a condition of the contract and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as follows: (1) Subject to the provisions of this Chapter, Service Tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of Service Tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. 22. It is noticed from Section 67(1)(i) ibid that consideration received in money for services rendered is liable to Service Tax. In the case before us, refundable security deposit ranging from ₹ 1.50 lakhs to ₹ 10 lakhs is to be taken by the applicant for a period of 20 years, for most of the categories of members. Since refundable security deposit is proposed to be taken from members in money (ranging from ₹ 1.50 lakhs to ₹ 10 lakhs), Section 67 (1) (ii) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a race-goer is required to make in addition to the price of admission ticket if he wants to witness the race from the Club enclosure, but on that account it does not become part of the price for admission. The admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. 25. Applying the ratio of judgment of Hon'ble Supreme Court in CIT vs. Tollygunge Club Ltd. to the case before us, it can be concluded that refundable security deposit and interest thereon, is not a consideration. Therefore, it cannot be charged to Service Tax. 26. Revenue has relied upon a Stay Order No. SO/52213/2015-CU [DB] dated 07.07.2015 of CESTAT in case of Phoenix International Ltd vs. CCE ST, Noida by enclosing a copy of said order. It is not explained as to how said stay order is applicable to be present issue. On the other hand, applicant has relied upon Tribunal's judgment in case of Murli Realtors Pvt. Ltd. vs. CCE, Pune-II - (Appeals Nos.: ST/86521/2014, ST/85382/2013 ST/86957/2014, ST/89511/2013, ST/89898/2013, ST/85580/2014, ST/86118/2014, ST/86243/2014, ST/85471/2014, Date : 16-07-2014) wherein it is held that notional interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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