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TMI Blog2022 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT FACTS: The submissions made by M/s. The Poona Club Limited, the applicant, are as under:- 2.1 As per the Clauses of Articles of Association (Definition clause 2) : Member means and includes: (i) Permanent Member but shall not include a Subsidiary Member, (ii) Life Member but shall not include a Subsidiary Member. "Subsidiary Member" means and includes : (i) Corporates Member ; (ii) Gymkhana Subscriber (iii) Honorary Member ; (iv) Spouse Subscriber ; (v) Games playing subscriber ; (vi) Visiting subscriber ; (vii) N.R. I Subscriber ; (viii) Lady Subscriber 2.2 Club dues are defined in sub clause (d) as : "Club Dues" in relation to a Member, means & include, aggregate amount outstanding against such Member on the date of billing on account of any one or more of the following: (i) Fees prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of his trade, profession or vocation; Explanation:- Any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities shall be deemed to be business." 2.6 Sub-clause (e) is a specific clause made for associations, clubs and societies. Therefore, the general terms of sub-clause (a) cannot apply on the basis of the principle that the specific clause ousts the general clause. It is to be seen that sub-clause (a) specifically speaks of profit motive, but sub-clause (e) does not. Therefore, the intention of the Legislature is clear that profit motive is not ousted from sub-clause (e) though it is ousted from sub-clause (a). 2.7 Assuming but not admitting that profit motive is not required in sub-clause (e), it is well settled that where the main objects of the entity is not of a "commercial nature", then that activity cannot be called "business", whether or not the Legislature makes profit motive irrelevant. The very term "business" requires commercial character. Sub-clause (e) ultimately occurs within the definition of "business" and therefore there must be some underlying commercial natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (e) of Section 2 (17) in such a case or a "supply" or "service" as required under charging section 7 where mere internal maintenance and administration is done. Second purpose is to provide the facilities and services to members for which members are charged as and when members use the facilities and to the extent of use. This has no nexus to the membership fees charged in the present case which do not give any right to use facilities of the Poona club. 2.12 The activity of pooling resources by members for the club by way of membership fee (contribution to corpus), is one-time payment and there is no nexus with any particular goods or services as required in the charging section. The funds raised do not entitle anyone to claim any facility or benefit from the club. There is no element of service which is given in reciprocation of the contribution. The entire membership fees are capitalized. It is similar to capital contribution by partners in case of Partnership firm or share capital in case of Companies or sinking funds and reserves created in a co-operative housing society and therefore appellant's view is that the initial contribution i.e. membership fee is not a supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " irrelevant. In the earlier Sales Tax era, the Supreme Court has held in Commissioner of Sales Tax v Sai Publication Fund [(2002) 4 SCC 57] that even after making profit motive irrelevant in the definition of "business" in the Bombay Sales Tax Act, 1959, the Legislature has not made commercial object test irrelevant. The Supreme Court had specifically held that the question of profit motive being irrelevant by statute does not mean that the activity automatically becomes a "business". It was held that if the main object of the trust is not commercial in nature, then the fact that the incidental objects require sale and purchase of goods is irrelevant. Thus, if the main object is not commercial in nature, then the entire activity falls outside the definition of "business". 2.19. It is submitted that, if the intention of the Legislature was to tax every supply, then there was no necessity to place the limitation of in the course or furtherance of business" in the charging section. This shows that the definition of "business" in Section 2(17) is to be read in a restrictive sense and not in an expansive sense. 2.20 The association as a formal entity is merely an agent for carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HEARING 4.1 Preliminary e-hearing in the matter was held on 08.06.2021. The applicant was represented by Authorized Representatives Shri. G. Y. Patwardhan, Advocate, Shri. Ishaan Patkar, Advocate, Smt. Swati Mokashi, Applicant Side. Jurisdictional officer was absent. The Authorized Representative made oral submission with respect to admission of their application. 4.2 The application was admitted and called for final e-hearing on 26.11.2021. The Authorized representative of the applicant, Shri. Ishaan Patkar, learned advocate, Shri. G. Y. Patwardhan, learned advocate and Smt. Swati Mokashi, employee were present. Jurisdictional officer was absent. 4.3 Heard the matter 05. DISCUSSIONS AND FINDINGS: 5.1 We have perused the documents on record and considered the oral and written submissions made by the applicant. 5.2 The applicant has submitted that, "Membership associations like Poona Clubs are formed for creation of common infrastructure for members, maintain the same and administer the club. There are two distinct activities. One purpose is administration of the club and maintenance. Second purpose is to provide the facilities and services to members for which members are cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- 1. a supply of goods and not as a supply of services; or 2. a supply of services and not as a supply of goods. 5.4.4 Vide clause 99, an amendment was proposed in the CGST Act, 2017, whereby, in section 7, in sub-section (1), after clause (a), the following clause was to be inserted and deemed to have been inserted with effect from the 1st day of July, 2017, namely: "(aa) the activities or transactions, by a person, other than an individual, to their members or constituents or vice versa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and their members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;". 5.4.5 The amendment mentioned above has received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of services/goods" and is covered by the scope of the term "business". The club and the member are two distinct persons. The principle of mutuality has no application after this amendment. All the other case laws relied upon, also do not provide any guidance on the legal situation, particularly after the amendment. 5.5.1 Applicant has submitted that, the ordinary meaning of "business" requires profit motive to be established. The applicant has reproduced the definition of the term "business" defined u/s 2(17) of CGST Act 2017 and has stated that even though clause (e) of the said Section 2 (17) mentions that the 'provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members as the case may be', is termed as business,, is clear that profit motive is not ousted from the said sub-clause (e). Further the applicant has also submitted that assuming but not admitting that profit motive is not required in sub-clause (e), it is well settled that where the main objects of the entity is not of a "commercial nature", then that activity cannot be called "business", whether or not the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit' is not correct. Further, Sub-clause (e) is a specific clause made for associations, clubs and societies and the same does not talk about any profit motive to be attributed to any club for the activities to be considered as 'business'. The said clause only speaks of Provision by a club, association, society, or any such body of the facilities or benefits to its members for a subscription or any other consideration. Therefore the question whether profit motive is ousted or not, does not arise in this case at all. 5.6 The applicant has substantially borrowed from the observation/decision of the Hon'ble Supreme Court, made in the case of Commissioner of Sales Tax v Sai Publication Fund [(2002) 4 SCC 57]. We find that the issue in the said case was related to the erstwhile Bombay Sales Tax Act, 1959 and is therefore not applicable under the GST Laws. 5.7 The applicant has also submitted that the amendment to Section 7 of the CGST Act, 2017, mentioned above, was brought about by Section 108 which was not yet notified as on the date of the final hearing. We find that, Notification No. 39/2021-Central Tax dated: 21st December, 2021 has been issued whereby the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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