LexJOINT COMMERCIAL TAX OFFICER, HARBOUR DIV. II, MADRAS versus YOUNG MENS INDIAN ASSOCIATION (REG.) MADRAS & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
680
JOINT COMMERCIAL TAX OFFICER, HARBOUR DIV. II,
A
MADRAS
v.
YOUNG MEN'S INDIAN ASSOCIATION (REG.) MADRAS &:
ORS.
February 12, 1970
[M. HIDAYATULLAH, C.J., J, C. SHAH, K. S. HEGDE, A. N. GROVER,
A. N, RAY AND I. D. DUA, JJ.]
B
Madras General S<les Tax Act, 1959, s. 2(g) Exp. I & S 2(n) Exp, 1-
MenJbers'
c:1~,b-S11pply of 1efrcs/1111entS to ine1nbers and their guests-
C
Whether, sales tax /eviable.
The respondents are members' clubs. They supply refreshments in
the form of 'food, snacks and beverages to their members or their guests
to be paid for by the members. The articles necessary for this purpose
are purchased by the clubs in the market out of club funds which consist-
ed of the subscription of the members. The preparations are made within
the club premises and are supplied to members at fixed prices.
On the
D
question whether the clubs are "dealers"
liable to sales tax under
the
Madras General Sales Tax Act, 1959,
HELD : (Per Full Court) As no transaction of sale was
involved
there could be no levy of .sales tax under the provisions of the Act.
(Per Hidayatullah, C. J. Hcgde, Grover, Ray and Dua, JJ .) The State
Legislature is only compe.tent to legislate on taxes on sale or purchase of
goods under Entry 54, List II of the 7th Schedule to the Constitution.
lf there is no transfer of property from one to anl.>ther there is no sale
which would be exigible to tax. in •pite of the definition of 'sale'
in
s. 2(n) read with Exp. I of the Act. [686 G]
In proprietary clubs where some of the shar·~holders are not members
or some of the members are not shareholders. the .members are not owners
of, nor interested in, the property of the olubs.
Unlike proprietary clubs
the case of a members' club is analogous to that of an agent investing
his own monies for preparing things for the consumption of the principal
and later recouping himself for the ex:pen~es incurred. Therefore. in the
present case, even though the· clubs arc distinct legal entities they were
only acting as agents for members in the matter of supply of various pre-
parations to them and no sale would be involved as the. element of trans-
fer would be completely absent. [685 A-B, 686 HJ
Cos111opo/itan Club, Madras v. District Co1111nert.:ial Tax Officer, Tripll-
cane (1952) I M.L.J. 401; Dep11ty Conunercial Tax Officer
TripU'cane
Dil'ision. Madras v. Cos111opolitan Club, l.L.R. [1955] Mad.
10-1-~. GraU
v. Ev<1ns. [1882] 8 Q.B.D. 37J. Trebanog Working Men's Club and lnsli·
fllti! Ltd. v. Macdonald [1940] I A.E.L.R. 454, Bengal Nr.gp11r Cotton
Ji,fills ('/uh, Rajnandangaon v. Sales Tax Officer Raip11r & Anr. 8 S.T.C.
781. Ce11111ry C/11h & Anr. v. State of My.wre. 16 S.T.C. 38. Deputy
Commercial Tax Officer v. Enfiend India Ltd. [1968] 2 S.C.R. 421, and
Inland Revenue
Co111n1issioners v. Westleigh Estate Co. Lki.
Sanze v.
So11th Behar Railway Co. Ltd. [1924] I K.B. 390, referred to.
E
F
G
H
A
B
c
D
E
F
G
H
C.T.O, v. YOUNG MEN'S ASSOCIATION (Grover, J.)
681
(Per Shah, J. concurring) : The analogy of cases decided under the
Licensing Act in the United Kingdom concerning the supply by clubs of
alcoholic drinks to their members is not appropriate.
\.Vhether refresh-
ments, beverages and other articles supplied by members' club fdr consi-
deration, to its members, are in law sold depends upon the circumstances-
in which the transaction takes place.
In each case the liability to tax of
the transaction will depend upon its strictly legal form.
If an incorporat-
ed members' club supplies its property to its members at a fixed tariff
the transaction would readily be deemed to be one for sale, even if the
transaction is-on a non-profit basis: such a transaction would be liable to
sales tax.
Where, ho\.\'ever, the club is merely acting on behalf of the
members to make available to them refreshments, beverages and other arti-
cles, the, transaction will not be regarded as a sale, for the club is the
agency through \vhich the members have ·arranged that the refreshments,
beverages and other articles should be made available.
The test in each
case is whether the club transfers property . belonging to it for a price or
the club acts as an agent for making available property belonging to its
members. t687 G, 688 Bl
State of Madras v. Gannon Dunkerley & Co. Ltd. [1959] S.C.R. 379,
Duke of West Minster v. Inland Revenue Co1n1nissioner, 19 T.C. 490,
Bank of Chettinad Ltd. v. Com'missioner Excerpt shown. Read the full judgment & AI analysis in Lexace.