Division Bench of Apex Court has referred to a larger bench the question on applicability of doctrine of mutuality to clubs after the 46th amendment to Article 366 (29A) of the Constitution of India. The following questions were framed in State of West Bengal vs. Calcutta Club Limited.
In the instant case, the West Bengal Taxation Tribunal, had accepted the contention of Calcutta Club Limited that there could be no sale by the respondent-Club to its own permanent members, for doctrine of mutuality would come into play. The Tribunal held that the club was not liable for payment of sales tax under the West Bengal Sales Tax Act since supplies of food, drinks and refreshments by theclubs to their permanent members cannot be treated as 'deemed sales' within the meaning of section 2(30) of theAct. The Tribunal also found that the payments made by the permanent membersare not considerations and in the case of Members' Clubs the suppliers and the recipients (Permanent Members) are the same persons and there is no exchange of consideration. The High Court upheld the view adopted by the Tribunal.
The State, appealed before the Apex Court and contended that Clause (29A)(f) of Article 366 of Constitution clearly lays a postulate that when there is a supply by way of or as a part of supply of food or any other article for human consumption or any drink whether or not intoxicating for supply or service, for cash or deferred payment or valuable consideration would amount to deemed sale.
DOCTRINE OF MUTUALITY
Doctrine of Mutuality is predicated on the principle enunciated in Styles v. New York Life Insurance Company16 by Lord Watson in the following words:- “When a number of individuals agree to contribute funds for a common purpose, such as the payment of annuities or of capital sums, to some or all of them, on the occurrence of events certain or uncertain, and stipulate that their contributions, so far as not required for that purpose, shall be repaid to them, I cannot conceive why they should be regarded as traders, or why contributions returned to them should be regarded as profits.”
Read the Judgment here.