Value of Land Can’t Be Included in Taxable Value for ‘Club or Association Service’: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad Bench, has held that the value of land provided along with club membership cannot be included in the taxable value for service tax under “Club or Association Services.” The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) partly allowed the appeal filed by Country Club (India) Ltd., now known as Country Club Hospitality & Holidays Ltd., and remanded the matter to the adjudicating authority for re-determination of tax liability after excluding the cost of land. The dispute arose from ten show cause notices issued for the period 2005-06 to 2013-14, proposing service tax demands under the categories of “Club or Association Services” and “Health Club and Fitness Centre Services.” The department alleged that the company had failed to pay service tax on amounts collected from members, including those who opted for membership packages that also included a plot of land. Country Club offered various membership schemes such as permanent membership, life membership, and memberships bundled with land allotment. Members received club facilities like banquet services, swimming pools, fitness centres and other amenities, while some categories also included a plot of land transferred through a sister concern, Amrutha Estates. The department contended that the entire membership fee, including the component related to land, formed part of the taxable value for service tax. Based on this interpretation, service tax demands along with penalties were confirmed by the adjudicating authority. The appellant argued that the amount collected towards land represented a transfer of immovable property, which is excluded from the definition of “service” under the Finance Act. The company submitted that the land component was transferred to its sister concern, which subsequently allotted plots to members. It further contended that the membership fee was a composite amount and that the cost attributable to land must be excluded while computing the taxable value of services. The appellant also maintained that it had already paid service tax on the service portion on a cum-tax basis and had provided financial records and a Chartered Accountant’s certificate showing the transfer of funds to the sister concern towards land acquisition and development. The Tribunal observed that earlier orders in the matter had already clarified that land value cannot be subjected to service tax under the category of club or association services. The only remaining issue was to determine the correct value attributable to land so that it could be excluded from the gross taxable value. It noted that the members opting for “membership with land” paid a consolidated amount which included both the club membership fee and the cost of land. However, since the land was ultimately transferred to members through the sister concern, the portion representing land value could not be treated as consideration for services. The Bench emphasized that the mode of transfer—whether through sale deeds or gift deeds—was not material, as long as it established that land was transferred and that a corresponding amount had been paid for it. The Tribunal directed that the value of land be determined based on a Chartered Accountant’s certification, verifying the amounts transferred by the appellant to its sister concern towards land provided to members. The adjudicating authority was instructed to accept the CA-certified value of land transferred to members through the sister concern. Exclude that value from the gross membership fee while computing service tax liability. Recompute the tax liability, if any, after allowing cum-tax benefit and eligible CENVAT credit. The Tribunal also set aside penalties imposed under Section 78, observing that the issue involved interpretation of law and had been subject to prolonged litigation, including the eventual ruling of the Supreme Court in the Calcutta Club case on the doctrine of mutuality. Given the interpretational nature of the dispute, the Bench held that extended limitation and penal provisions were not justified, and any demand could survive only within the normal limitation period. Accordingly, the Tribunal set aside the impugned order to the extent of service tax demand and remanded the matter for fresh computation in accordance with its directions. The adjudicating authority was directed to complete the exercise within two months after the appellant furnishes the CA certificate. The appeal was partly allowed by way of remand, bringing temporary relief to the appellant while directing a fresh determination of tax liability after excluding the value of land. Case Details Case Title: Country Club (India) Ltd Versus Commissioner of Central Tax Secunderabad - GST Citation: JURISHOUR-381-CES-2026(HYD) Case No.: Service Tax Appeal No. 30232 of 2016 Date: 13.03.2026 Counsel For Appellant: Nagarajan. N, Advocate Counsel For Respondent: B. Sangameshwar Rao, AR Click Here To Read Order Read More: CESTAT Quashes Service Tax Demand on Residential Complex Construction Prior to July 2010

Value of Land Can’t Be Included in Taxable Value for ‘Club or Association Service’: CESTAT

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