Amounts Collected By Club From Its Members Can’t Be Subjected To Service Tax: CESTAT

The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand of over ₹50 lakh against Chikmagalur Golf Club, ruling that amounts collected by a club from its members cannot be subjected to service tax in view of the principle of mutuality laid down by the Supreme Court. The bench of Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) has observed that the appellant was a charitable trust functioning as a body of persons providing facilities to its members, and the amounts collected were used for providing services and benefits to those members. The dispute arose after the department initiated an investigation into the club’s activities, alleging that it had provided taxable services under the category of “Club or Association Service” but had failed to discharge service tax during the period from 16 June 2005 to 31 March 2009. The department initially alleged that the club owed ₹52.85 lakh in service tax. Following adjudication, the Commissioner confirmed a reduced demand of ₹50.98 lakh, along with interest and penalties, including an equivalent penalty under Section 78 of the Finance Act, 1994. The demand covered various receipts such as annual subscription fees collected from members, membership-related charges, deposits from Long Term Temporary Guest (LTTG) members, sponsorship amounts received for golf tournaments, and income from guest house accommodation provided to members The club argued that it is a charitable trust registered in 2000 with the objective of promoting golf, sports, and tourism. It is registered with the Income Tax Department and has also been recognized by the Karnataka government as a tourism-promoting unit. Its counsel contended that amounts collected from members cannot be treated as consideration for services because of the doctrine of mutuality, which recognizes that a club and its members are not separate entities when members contribute to a common fund for mutual benefit. The club relied heavily on the Supreme Court ruling in State of West Bengal v. Calcutta Club Limited (2019), which held that services provided by clubs or associations to their members were not taxable under the service tax regime prior to July 1, 2012. It also argued that government subsidies and donations received for construction of facilities were not consideration for services. Guest house accommodation provided to members was not taxable prior to May 1, 2011, when service tax on hotel accommodation was introduced. Sponsorship related to sports activities was excluded from service tax during the relevant period. Deposits from temporary members were refundable liabilities rather than payments for services. The department argued that the Supreme Court ruling in the Calcutta Club case should not apply because the appellant was a trust rather than a corporate entity or association of persons. On this basis, the department contended that the tax demand and penalties were valid. After examining the submissions and records, the tribunal observed that the key issue was whether services provided by a club to its own members could be taxed under the “Club or Association Service” category. The bench referred to the Supreme Court’s judgment in the Calcutta Club case, which clarified that the principle of mutuality prevents taxation of transactions between a club and its members, as they are essentially the same entity. While applying the Supreme Court’s ruling, the tribunal concluded that receipts collected from members for providing facilities cannot be treated as taxable services during the relevant period. Setting aside the Commissioner’s order, the tribunal held that the service tax demand was unsustainable. It ruled that the receipts collected from members and used for providing services within the club were not liable to service tax. The tribunal allowed the appeal filed by Chikmagalur Golf Club and quashed the tax demand, granting consequential relief as per law. Case Details Case Title: M/s. Chikmagalur Golf Club Versus Commissioner of Customs Citation: JURISHOUR-304-CES-2026(BANG) Case No.: Service Tax Appeal No. 145 of 2012 Date: 10.03.2026 Counsel For Petitioner: A Shiva Rao, Advocate Counsel For Respondent: M. Sreekanth, Supt. (AR) Click Here To Read Order Read More: CAT Issues Notice to CBIC Chairman In A Contempt Case Filed By Commissioner Satyajit Singh

Amounts Collected By Club From Its Members Can’t Be Subjected To Service Tax: CESTAT

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