The ‘landmark’ Calcutta Club verdict changes GST norms for clubs

The Supreme Court has said that service tax need not be charged by clubs for services to its members. The same should hold true for the GST, which replaced service tax

Under tax laws, every now and then, a decision is delivered which gets the “landmark” prefix. Names such as BC Srinivasa Shetty, Bacha F Guzdar and the Azadi Bachao Andolan became familiar because of landmark judgments. The features of landmark decisions are that they resolve an issue in a critical area of the law which has been litigated for ages, are decisive judgments and are invariably given by the Supreme Court.

Recently, the Supreme Court pronounced a landmark judgment under service tax laws in the Calcutta Club case. The decision was that clubs are not entitled to charge, collect and pay service tax on any services made to members. The rationale for the decision was that if there are no members, there is no club and vice-versa. A few years earlier, the Jharkhand High Court gave a similar ruling in a case involving the Ranchi Club.

The Supreme Court followed its earlier decision on the same topic in the case of CTO versus Young Men’s Indian Association, (1970) 1 SCC 462. The necessity for the Supreme Court to rule on this matter arose because of the insertion of Clause (e) in Article 366 (29-A) in the Constitution of India through the 46th Amendment. This clause stated that tax on purchase or sale of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member for cash, deferred payment or another valuable consideration.

The Supreme Court needed to decide whether the doctrine of mutuality has been done away with by Article 366 (29-A) (e), and whether the ratio of Young Men’s Indian Association would continue to operate even after the 46th Amendment.

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INCOME TAX ON CELL TOWER RENT WHICH IS ILLEGAL UNDER BYE LAW 169

Many cooperative societies have rented a portion of their respective terrace for cell tower installation.  In the income tax such earning should be shown as income from house and not from other source of income.  in income return one should show the cell tower space rent as “income from house property” and can get 30% set off in computation of taxable income.  In case cell tower rent is shown as “Income from other sources” or “income from business” the 30% set off will not be allowed.  Since terrace is a portion of “house”, such income from House property is justified.
However, Bye Law 169 prohibits renting of common areas, therefore, such earning are illegal earning.  Therefore, an offence.
Audit of many societies are in progress.  Take proper care for computation of taxable income.
Dr P K Banerjee  drpkbanerjee@hotmail.com
982 097 4449 / 8850 771 660

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