STATE OF WEST BENGAL AND OTHERSversusCALCUTTA CLUB LIMITED

                            [2016] 6 S.C.R. 748



A              STATE OF WEST BENGAL AND OTHERS
                                        v.
                      CALCUTTA CLUB LIMITED
                      (Civil Appeal No. 4184 of2009)
B                             MAY 04, 2016
           [DIPAK MISRA AND SHIVA KIRTI SINGH, JJ.]
          Constitution of India - Art. 366 (29A) - Sale of food and
    drinks to the permanent members of incorporated club or any club
    - Exigibility to sales tax - Whether on the basis of 'doctrine of
c   mutuality' such sale would not be exigible to sales tax or after
    insertion of Clause (29A) to Art. 366 of the Constitution by 46'"
    Constitutional amendment 'doctrine of mutuality' has no applicability
    and such sale would amount to deemed sale - Held: In the decisions
    in *Fateh Maidan Club case and **Cosmopolitan Club case (which
D   are post 46'" amendment cases) 'doctrine of mutuality' was regarded
    as the base of imposition or non-imposition of sales tax - However,
    these decisions have not clearly expounded as to when a club can
    be held as acting as an agent of its members and thus not be
    construed as a party which sold the goods - The decisions have
    also not addressed the issue as to whether the fact of mutuality
E
    survives after the 46'" amendment - The issue in the present case,
    therefore, has to be authoritatively decided by a Larger Bench -
    West Bengal Sales Tax Act, 1994 - s. 2(30).
          Doctrine - 'Doctrine of mutuality' - Meaning of. in the context
    of Art. 366(29A) of the Constitution of India.
F
         Referring the matter to Larger Bench, the Court
          HELD: 1. The decisions in *Fateh Maidan Club case and
    **Cosmopolitan Club case have drawn a distinction when a club
    acts as an agent of its members and when the property in the
G   goods is sold, i.e., the property in food and drinks is passed to
    the members. In the decisions principle of mutuality has been
    regarded as the base of imposition or non-imposition of sales
    tax. However, the decisions do not elucidate and clearly expound,
    when the club is stated and could be held as acting as an agent of
    the members and, therefore, would not be construed as a party
H
                                  748
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB                     749
                    LIMITED

which had sold the goods. The agency precept necessarily and         A
possibly refers to a third party from whom the goods, i.e., the
food and drinks had been sourced and provided to by the club
acting as an agent of the members, to the.said members. These
are significant and relevant facets which must be elucidated and
clarified so that there is no ambiguity in appreciating and
                                                                      B
understanding the concepts "acting as an agent of the members"
or when property is transferred in the goods sold to the members.
The Court has also not addressed the issue whether the facet of
mutuality survives after the amendment to the Constitution.
[Paras 22 and 25) [762-B-E; 764-C]
      2. The controversy that has arisen in the present case has .
                                                                      c
to be authoritatively decided by a larger Bench in view of the law
laid down in **Cosmopolitan Club case and *Fatelt Maidan Club
case. Therefore, the matter should be referred to a larger Bench
to decide the following three questions: (i) Whether the doctrine
of mutuality is still applicable to incorporated clubs or any club    D
after the 46'h amendment to Article 366 (29A) of the Constitution
of India? (ii) Whether the judgment of this Court in ***Young
Men's Indian Association case still holds the field even after the
46'h amendment of the Constitution of India; and whether the
decisions in **Cosmopolitan Club case and *Fatelt Maidan Club
case which remitted the matter applying the doctrine of mutuality     E
after the constitutional amendment can be treated to be stating
the correct principle of law? (iii) Whether the 46'h amendment to
the Constitution, by deeming fiction provides that provision of
food and beverages by the incorporated clubs to its permanent
members constitute sale thereby holding the same to be liable to      F
sales tax? [Para 27) [764-H; 765-A-E]
       Hindustan Club Limited v. Additional Commissioner of
       Commercial Taxes and Ors. (1995) 98 STC 347; The
       Automobile Association of Eastern India v. State of West
       Bengal and Ors. (2002) 40 STA 154; Bharat Sanchar
                                                                      G
       Nigam Ltd. and Am: v. Union of India and Ors. (2006)
       3 SCC 1:2006 (2) SCR 823; Fateh Maidan Club v.
       Commercial Tax Officer, Hyderabad (2008) 12 VST 598
       (SC); Cosmopolitan Club v. State of Tamil Nadu & Ors.
       (2009) 19 VST 456 (SC); Northern India Caterers
                                                                      H
750             SUPREME COURT REPORTS                      [2016) 6 S.C.R.


A             (India) Ltd. v. Lt. Governor of Delhi (1978) 4 SCC
              36: 1979 (1) SCR 557; Joint Commercial Tax Qfficer v.
              YounK Mens Indian Association (1970) 1 SCC 462 :
              1?70 (3) SCR 680; Styles v. New York Life Insurance
              Company (1889) 2 TC 460, 471 (HL); IR v. Cornish
              Mutual Assurance Co. Ltd. (1926) 12 TC 841 (HL);
B
              CIT v. Royal Western India Turf Club Ltd. AIR 1954
              SC 85 : 1954 SCR 289;' CIT v. Bankipur Club Ltd.
              (1997) 5 sec 394:1997 (1) Suppl. SCR 263;
              Chelmsford Club v. CIT (2000) 3 SCC 214 - referred
              to.
c                              Case Law Reference
      (1995) 98 STC 347               referred to             Para4
      (2002) 40 STA 154               referred to             Para4
      2006 (2) SCR 823                referred to             Para7
D     (2008) 12 VST 598 (SC)          referred to            "Paras
      (2009) 19 VST 456 (SC)          referred to             Para8
      1979 (1) SCR 557                referred to             Para 13
      1970 (3) SCR 680                referred to             Para 14
E
      (1889) 2 TC 460, 471 (HL)       referred to             Para 19
      (1926) 12 TC 841 (HL)           referred to             Para20
      1954 SCR 289                    referred to             Para 20
      1997 (1) Suppl. SCR 263         referred to             Para 20
F
      (2000) 3 sec 214                referred to             Para20
              CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4184 of
      2009.
           From the Judgment and Order dated 01.02.2008 in WPTT No.
G     652 of 2006 passed by the High Court of Calcutta.
            Kailsah Vasdev, Sr. Adv., Soumik Ghosal, Gllurav Ghosh, Umraon
      Singh Rawat, Parijat Sinha, Somnath Banerjee, Advs. for the Appellant.
           Rana Mukherji, Sr. Adv., Arijit Prasad, Ms. Sonia Dube, Shatadru,
      Chakraborty, Ms. Kanchan Yadav, (For Mis. Victor Moses &Associates)
H     Advs. for the Respondents~
 STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB 751
                     LIMITED

         The Judgment of the Court was delivered by                             A
        DIPAK MISRA, J. I. The present appeal, by special leave, is
  directed against the judgment artd order passed by the Division Bench
  of the High Court of Calcutta in W.P.T.T. No.652 of 2006, wherein it
  has affirmed the view expressed by the West Bengal Taxation Tribunal
  (for short, 'the tribunal') and disposed of the appeal preferred by the       B
  respondent along with other connected appeals holding, inter a/ia, that
  the assessee, the Calcutta Club Limited, was not liable for payment of
  sales tax under the West Bengal Sales Tax Act, 1994 (for brevity, 'the
- Act').                                   -
       2. The facts that are necessary to be stated are that _the Assistant
 Commissioner of Commercial Taxes issued a notice_to the respondent-            c
 Club assessee apprising it that it had failed to make payment of sales tax
 on sale of food and drinks to the permanent members during the quarter
 ending 30.6.2002. After the receipt of the notice, the respondent-Club
 submitted a representation and the assessing authority required the
 respond~nt-Club to appear before it on l 8.10.2002. The notice and the         D
 communication sent for personal hearing was assailed.by the respondent
 before the tribunal praying for a declaration that it is not a dealer within
 the meaning of the Act as there is no sale of any goods· in the form of
 food, refreshments, drinks, etc. by the Club to its permanent members
 and hence, it is not liable to pay sales tax under the Act. A pr~yer was
 also made-before the t(ibunal for nullifying the action of the revenue         E
 threatening to levy tax on the supply of food to the permanent members.
         3. It was contended before the tribunal that there could be no sale
  by the respondent-Club to its own permanent members, for doctrine of
  mutuality would come into play. To elaborate, the respondent-Club treated -
  itself as the agent of the permanent members in entirety and advanced F
  the stand that no consideration passed for supplies of food, drinks or
··beverages, etc. and there was only reimbursement of the amount by the
  members and therefore, no sales tax could be levied.
        4.The tribunal referred to Article 366(29A) of the Constitution of
 India, Section 2(30) oftheAct, its earlier decision in .Hindustan Club         G
 Limited v. Additional Commissioner of Commercial Taxes and
 Others1, distinguished the authority rendered in Tile Automobile
 Association of Eastern India v. State of West Bengal and Ot/1ers1
 I   (1995) 98 STC 347
 2 (2002) 40 STA 154                                                            H
752              SUPREME COURT REPORTS                          [2016] 6 S.C.R.


A      and, eventually, opined as follows:-
              "Considering the relevant fact presented before us and the different
              judgments of the Supreme Court and the High Court we find that
              supplies of food, drinks and refreshments by the petitioner clubs
              to their permanent members cannot be treated as 'deemed sales'
B             within the meaning of section 2(30) of the 1994 Act. We find that
              the payments made by the permanent members are 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."
c            Being of this view, the tribunal accepted the contention of the
       respondent-Club and opined that it is not exigible to tax under the Act.
            5. Being dissatisfied with the aforesaid order passed by the tribunal,
     the-revenue preferred a writ petition and the High Court opined that the
     decision rendered in Automobi/eAssoci(ltion ofE"stern India (supra),
D was not a precedent and came to hold that reading of the Constitutional
     amendment, as well as the provisions of the definition under the Act, it
     was clear that supply of food, drinks and beverages had to be made
     upon payment of consideration, either in cash or otherwise, to make the
    ·same exigible to tax but in the case at hand, the drinks and beverages
     were purchasedfrom the market by the club as agent of the members.·
E The High Court further ruled that the members collectively was the real
     life and the club was a superstructure only and, therefore, mere fact of
     presentation of bills and non-payment thereof consequently, striking off
     membership of the club, did not bring the club within the net of sales tax.
     The High Court further opined that in the obtaining factual matrix the
F . element of mutuality was not obliterated. The expression of the aforesaid
     view persuaded the High Court to lend concurrence to the opinion
     projected by the tribunal.
             6. We have heard Mr. Kailash Vasdev, learned senior counsel
       along with Mr. Soumik Ghosal, learned counsel for the appellants and
G      Mr. Rana Mukherjee, learned senior counsel along with Mr. Arij it Prasad,
       learned counsel for.the respondent.
              7. It is submitted Mr. Vasdex, learned senior counsel that the
        reasoning of the tribunal as well as the High Court is faulty as there has
      · been erroneous appreciation and application of clause (29A) of Article
        366 of the Constitution of India. It is urged by him that after the
 STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB                               753
              LIMITED [DJPAK MISRA, J.]

constitutional amendment, the concept of mutuality and the                      A
pronouncements made in that context have no applicability. He has
commended us to the decision in Bllarat Sane/tar Nif(am Ltd. and
anotller v. Union of India and otllers3•
       8. Mr. Mukherjee, learned senior counsel for the respondent, in
his turn, would contend that the view expressed by the High Court is             B
absolutely flawless and irreproachable inasmuch as the constitutional
amendment does not envision sale by one to himself or for that matter
by the agent to those who have engaged it as an agent. It is further
argued that the aspect of mutuality still holds the field. For the aforesaid
purpose, inspiration has been drawn from the authorities in Fatell Maidan       .C
Club v. Commercial Tax Officer, Hyderabad' and Cosmopolitan
Club v. State ~f Tamil Nadu & Others;. Learned counsel has further
submitted that the concept of deemed sale is not attracted to the present
nature of transaction and supply.
       9. At the very outset, we may mention certain undisputed facts. It
 is beyond .cavil that the respondent is an incorporated entity under the        D
 Companies Act, 1956. The respondent-assessee charges and pays sales
 tax when it sells products to the non-members or guests who accompany
 the permanent members. But when the invoices are raised in respect of
·supply made in favour of the permanent members, no sales tax is collected ..
       JO. Section 2(30) of the Act defines 'sale' as follows:-                  E
       "(30) "sale" means any transfer of property in goods for cash,
       deferred payment or other valuable consideration, and includes-
       (a) any transfer, otherwise than in pursuance of a contract, of
       property in any goods for cash, deferred payment or other valuable
                                                                                 F
       consideration;
       (b) any delivery of goods on hire-purchase or any system of
       payment by instalments;
       (c) any transfer of the right to use any goods for any purpose
       (whether or not for a specified period) for cash, deferred payment        G
       or other valuable consideration;
       (d) any supply, by way of, or as part of, any service or in any
 '(2006) 3 sec 1
 '(2008) 12 VST 59 8 (SC)
 '(2009) 19 VST 456 (SC)                                                         H
754            SUPREME COURT REPORTS                           [2016] 6 S.C.R.


A           other manner whatsoever, of goods, being food or any other article
            for human consumption or any drink( whether or not intoxicating),
            where such supply or service is for cash, deferred payment or
            other valuable consideration;
            (e) any supply of goods by any unincorporated association or bocly
B           of persons to a member thereof for cash, deferred payment or
            other valuable consideration, and such transfer, delivery, or supply
            of any goods shall be deemed to be a sale of those goods by the
            person or unincorporated association or body of persons making
            the transfer, delivery, or supply and a purchase of those goods by
            the person to whom such transfer, delivery, or supply is made, but
c           does not include a mortgage, hypothecation, charge or pledge.
            Explanation: A sale shall be deemed to take place in West Bengal
            ifthe goods are within West Bengal -
            In the case of specific or ascertained goods, at the time of the
D           contract of sale is made; and
            In the case of unascertained or future goods, at the time of their
            appropriation to the contract of sale by the seller, whether the
            assent of the buyer to such appropriation is prior or subsequent to
            the appropriation:
E           PROVIDED that where there is a single contract of sale in respect
            of goods situated in West Bengal as well as in places outside
            West Bengal, provisions of this Explanation shall apply as ifthere
            were a separate contract of sale in respect of the goods situated
            in West Bengal;." ,
F           11. The said provision has been introduced after incorporation of
      clause (29A) to Article 366 of the Constitution vide 461h amendment,
      1982, which reads as follows:-
            "(29A) "tax on the sale or purchase of goods" includes -
            (a) a taX on the transfer, otherwise than in pursuance of a contract,
G           of property in any goods for cash, deferred payment or other
            valuable consideration;
            (b) a tax on the transfer of property in goods (whether"as goods
            or in some other form) involved in the execution of a works
            contract;
H
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB 755
             LIMITED [DIPAK MISRA, J.]

         (c) a tax on the delivery of goods on hire-purchase or any system      A
         of payment by instalments;
         (d) a tax on the transfer of the right to use any goods for any
         purpose (whether or not for a specified period) for cash, deferred
         payment or other valuable consideration;
         (e) a tax on the supply of goods by any unincorporated association     B
         or body of persons to amember thereof for cash, deferred payment
         or other valuable consideration;
         (f) a tax on the supply, by way of or as part of any service or in
         any othermannerwbatsoever, of goods, being food or any other
         article for human consumption or any drink (whether or not             c
         intoxicating), where such supply or service, is for cash, deferred
         payment or other valuable consideration, and such transfer, delivery
         or supply of any goods shall be deemed to be a sale of those
         goods by the person .making the transfer, delivery or supply and a
         purchase of those goods by the person to whom such transfer,           D
         delivery or supply is made;"
       12. It is submitted by Mr. Vasdev that statutory provision is in
accord with the Constitution oflndia. Learned senior counsel would
submit that clause (29A)(f) 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        E
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. According to Mr. Vasdev, the earlier decisions
which related to the concept of mutuality have lost their force.
       13. In this context, he has referred to the decision in Northern         F
India Caterers (India) Ltd. v. Lt. Governor ofDe/Iii", the three-Judge
Bench was dealing with the issue whether in the case of non-residents
the service of meals by the appellant in the restaurant constitutes a sale
of foodstuffs. Answering the said issue, the Court held:-
         "It has already been noticed that in regard to hotels this Court has
                                                                                G
         in Associated Hotels o/1ndia Ltd. - adopted the concept of the
         English law that there is no sale when food and drink are supplied
         to guests residing in the hotel. The Court pointed out that the
         supply of meals was essentially in the nature ofa service provided
6
    (1978) 4 sec 36: AIR 1978 SC 1591
7
    State ofPunjab v. Associated Hotels ofIndia ltd., (1972) I SCC.472          H
756            SUPREME COURT REPORTS                           [2016] 6 S.C.R.



A           to them and could not be identified as a transaction of sale. The
            Court declined to accept the proposition that the Revenue was
            entitled to split up the transaction into two parts, one of service
            and the other of sale of foodstuffs. If that be true in respect of
            hotels, a similar approach seems to be called for on principle in
            the case of restaurants. No reason has been shown to us for
B
            preferring any other. The classical legal view being that a number
            of services are concomitantly provided by way of hospitality, the
            supply of meals must be regarded as ministering to a bodily want
            or to the satisfaction of a human need".
              14. Earlier the Constitution Bench decision in Joint Commercial
c     Tax Officer v. Young Men's Indian Association 8 dealing with the
      liability of a club to pay sales tax when there is supply of refreshment to
      its members, had Com1 concluded thus:-
            "The essential question, in the present case, is whether the supply
            of the various preparations by each club to its members involved
D           a transaction of sale within the meaning of the Sale of Goods Act,
            1930. The State Legislature being competent to legislate only under
            Entry 54, List II, of the Seventh Schedule to the Constitution the
            expression "sale of goods" bears the same meaning which it has
            in the aforesaid Act. Thus in spite of the definition contained in
E           Section 2(11) read with Explanation I of the Act if there is no
            transfer of property from one to another there is no sale which
            would be exigible to tax. If the club even though a distinct legal
            entity is only acting as an agent for its members in matter of
            supply of various preparations to them no sale would be involved
            as the element of transfer would be completely absent. This
F           position has been rightly accepted even in the previous decision
            of this Court".
             15. In Fatelt Maidan Club (supra), the Court was considering
      the defensibility of the judgment and order of a Division Bench of the
      High Court of Andhra Pradesh whereby it has held that the assessee
G     club was liable to pay sales tax under the Andhra Pradesh General Sales
      Tax Act, 1957 on the supplies of food and drink to their members. It
      was contended before the Court that when the club supplies food or
      drink to its members, there is no sale because a members' club only acts
      as the agent of the members. The.Court placed heavy reliance on Young
H     •(I 970) 1sec462
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB                                757
             LIMITED [DIPAK MISRA, J.]

Men's Indian Association (supra) and remanded the matters stating               A
that:-
      "In some of the present matters the appellants filed writ petitions
      11gainst notices seeking to assess them to sales tax on the supply
      of food and beverages to their members. There was, therefore,
      no determination by the fact-finding authorities of the relationship       B
      between the appellants and their members in the matter of supply
      by the former to the latter of food and drink and such like; that is
      to say, was the club acting as the agent of the members or did the
      property in the food and drink pass from the club to the members?
      In the other matters the High Court was approached after orders
      of assessment had been made and appeals filed but there was no             c
      inquiry into the said relationship. We think it appropriate, therefore,
      that the matters should go back to the assessing authorities who
      will determine, on facts in regard to each appellant. What was
      the said relationship and, with that finding in mind, decide, whether
      or not the appellants are liable to sales tax in this behalf under the     D
      provisions of the Andhra Pradesh General Sales Tax Act, 1957 ."
       16. In the case of Cosmopolitan Club (supra), the controversy
related to liability of the club to pay sales tax under the Tamil Nadu
General Sales Tax Act, 1959 for supply of food and drinks to its members.
Relying on the earlier judgment, the Court remanded the matter by holding        E
that:-
      " .... it may be further stated that the said show cause notice was
      challenged in 1993 by the Club by filing a Writ Petition in the High
      Court which came to be later transferred to the Tribunal. The
      Tribunal dismissed the matter on merits. That decision of the              F
      Tribunal has been confirmed by the impugned judgment. Suffice
      it to state that in this case there was no determination by the fact
      finding authorities regarding the relationship between the Club
      and its members in the matter of supply of food and drinks; that is
      to say, was the Club acting as an agent of the members or did the
      property in food and drinks pass from the Club to the members?             G
      At this stage it may be mentioned that after the judgment of the
      High Coutt dismissing the Writ Petition, the Assessment Order
      was passed against which the Club has preferred an appeal before
      the First Appellate Authority which has also dismissed this appeal
                                                                                 H
758               SUPREME COURT REPORTS                            [2016] 6 S.C.R.


A              and as of today the matter, being T.A.No. 17 of 2000, is pending
               before the Tribunal.
               In the circumstances, we think it appropriate that the matter should
               go back to theTribunal, who will decide, on facts, as to the exact
               relationship between the parties in the matter of supply by the
B              Club offoodand drinks to its members. In other words, the principle
               of mutuality and agency among other circumstances shall be gone
               into by the Tribunal before which the said appeal is pending."·
             17. The aforesaid decisions, thus, refer to principle of mutuality
      and agency. Submission of the learned counsel for the appellant is that
c     after the amendment the said principles cannot be made applicable. For
      the aforesaid purpose, he has commended us to the pro.nouncement in
      Bharat Sanc/1ar Nigam Ltd. (supra). Learned senior counsel has
      drawn our attention to the views expressed by Lakshmanan, J., which is
      to the following effect:-
D              " 104. Parliament had to intervene as the power to levy tax on
               goods involved in works contract should appropriately be vested
               in the State Legislatures as was pointed out in Gannon Dunkerley
               & Co 9., the passages quoted hereinabove. There were five
              ·transactions in which, foll.owing the principles laid down in
               Gannon Dunkerley & Co. relating to works contract, this Court
E              ruled that those transactions are not exigible to sales tax under
               various State enactments. Parliament, therefore, in exercise of its
               constituent power, by the Forty-sixth Amendment, introduced
               Article 366(29-A). The Statement of Objects and Reasons has
               fully set out the circumstances under which the Forty-sixth
F              Amendment was necessitated.
               I 05. The amendment introduced fiction by whid1 six instances of
               transactions were treated as deemed sale of goods and that the
               said definition as to deemed Sl)les will have to be read in every·
               provision of the Constitution wherever the phrase "tax on sale or'
G              purchase of gpods" occurs. This definition changed the law
               declared in the ruling in Gannon Dunkerley & Co. only with
               regard to those transactions of deemed sales. In other respects,
             ' law declared by this Court is not neutralised. Each\me of the sub-
               clauses of Article 366(29-A) introduced by the Forty-sixth
      9
          State of Madras v. Gannon Dunkerley& Co. (Madras) ltd.. AIR I958 SC 560
H
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB. 759
             LIMITED [DIPAK MISRA, J.]

       Amendment was a result of ruling of this Court which was sought            A
       to be neutralised or modified. Sub-clause (a) is the outcome of
       New India Sugar Mills Ltd. v. CST1° and Vishnu Agencies (P)
       Ltd. v. CT0 11 • Sub-clause (b) is the result of Gannon Dunkerley
       & Co. Sub-clause (c) is the result of K.L. Johar and Co. v.
       CT0 12 • Sub-clause (d) is consequent to A. V. Meiyappan v. CCT13 •
                                                                                  B
       Sub-clause (e) is the result of CTO v. Young Mens Indian Assn.
       (Regd.)1'. Sub-clause (f) is the result of Northern India Caterers
       (India) l,td. v. Lt. Go'i>ernor ofDelhi (supra) and State of Punjab
       v. Associated Hotels of India Ltd. (supra)."
       18. In addition to the aforesaid paragraphs, learned senior counsel
appearing for the appellant has also heavily relied on paragraphs 106             c
and 107 of the said judgment. They read as follows:-
       "106. In the background of the above, the history prevailing at the
       time of the Forty-sixth Amendment and pre-enacting history as
       seen in the Statement of Objects and Reasons, Article 366(29-A)
       has to be interpreted. Each fiction by which those six transactions        D
     . which are not otherwise sales are deemed to be sales independently
       operates only in that sub-Clause.
          107. While the true scope of the amendment may be appreciated
          by overall reading of the entirety of Article 366(29-A), deemed
          sale under each particular sub-cla.use has to be determined only        E
          within the parameters of the provisions in that sub-clause. One
          sub-clause cannot be projected into another sub-clause and fiction
         ·upon fiction is not permissible. As to the interpretation of fiction,
          particularly in the sales tax legislation, the principk ·has -been
          authoritatively laid down in BenRal Immunity Co. Ltd. v. State of
          Bihar 15 , SCR at p. 647:                                               F
         "The operative provisions of the several parts of Article 286,
         namely, clause (I )(a), clause (I )(b), clause (2) and clause (3) are
         manifestly intended to deal with different topics and, therefore,
         one cannot be projected or read into another." (S.R. Das, Actg.
         CJ.)"                                   .                                G
10
   1963 Supp (2) SCR 459: (1963, 14 STC 316
11
    t 978) 1 sec s20
     (
12 AIR 1965 SC 1082
13
   (1967) 20 STC 115 (Mad)
"(1970) 1sec462
"(1955) 2 SCR 603                                                                 H
760             SUPREME COURT REPORTS                           [2016] 6 S.C.R.



A           19. Before we proceed further, it is necessary to appreciate the
      doctrine of mutuality in proper perspective. The said doctrine or the
      general law relating to mutual concern is predicated on the principle
      enunciated in Styles v. New York Life Insurance Compmty 16 by Lord
      Watson in the following words:-
B            "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
c            returned to them should be regarded as profits.''
            20. This doctrine was subsequently explained in IR v. Cornisll
      Mufu(l/ Assur"nce Co. Ltd. 17 and it has been laid down that the mutual
      concern should be held to be carrying on business or trade with its
      members, albeit the surplus arising from such trade is not taxable as
D     income or profit. However, the principle is not free from diversity .or
      contra opinion which can relate to issues like complete identity between
      the contributors and participators or whether such doctrine would equally
      apply to incorporate company which is a juristic entity, and if so, under
      what circumstances. The principle of mutuality was examined by this
E     Court in CIT v. Roy(l/ Western India Turf Club Ltd. 18 and then in CIT
      v. B"nkipur Club Lt<l. 19 , followed by C/zelmsford Club v. CIT11'. In
      B"nkipur Club Ltd. (supra), it has been observed as under:-
             " ... The gist of the various English decisions has been succinctly
             summarised in the textbooks which we have adverted to
F            hereinabove (Halsbury s Laws of England, Simon~· Taxes,
             Wheatcroft etc.). Particular stress was laid on the decisions of
             the Supreme Court in CIT v. Royal Western India Turf Club
             Ltd. (supra), CIT v. Kwnbakonam Mutual Benefit Fund Ltd.",
             Fletcher v. CTI'-'. We do not think it necessary to deal at length
             with the above decisions except to state the principle discernible
G     16
         (1889) 2 TC 460, 471 (HL)
      11
         [1926) 12 TC 841 [HL)
      18
         AIR 1954 SC 85
      "<  1997) 5 sec 394
      "' (2000J 3 sec 214
      21 196-t SCR 204 : AIR 1965 SC 96

H     " ( 1971) 3 ALL ER I 185: (1972) 2 WLR 14 (PC)
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB                                     761
             LIMITED [DIPAK MISRA, J.]

         from them. We understand these decisions to lay down the broad              A
         proposition-that, ifthe object of the assessee company claiming
         to be a "mutual concern" or "club", is to carry on a particular
         business and money is realised both from the members and from
         non-members, for the same consideration by giving the same or
         similar facilities to all alike in respect of the one and the same
                                                                                      B
         business carried on by it, the dealings as a whole disclose the
         same profit-earning motive and are alike tainted with commerciality.
         In other words, the activity carried on by the assessee in such
         cases, claiming to be a "mutual concern" or "rnembers' club" is a
         trade or an adventure in the nature of trade and the transactions
         entered into with the members or non-members alike is a trade/               c
         business/transaction and the resultant surplus is certainly profit
         - income liable to tax. We should also state, that "at what point,
         does the relationship of mutuality end and that of trading begin" is
         a difficult and vexed question. A host of factors may have to be
         considered to arrive at a conclusion. "Whether or not the persons
                                                                                      D
         dealing with each other, is a 'mutual club' or carrying on a trading
         activity or an adventure in the nature of trade", is_ largely a question
         of fact. (Wilcock caseJ3 Tax Cases at p. 132; KB at pp. 44 and
         45)."
       21. Earlier in Kumbakonam Mutual Bene.fit Fund Lui (supra)
the Court had held that where an association or a company trades with                 E
its members only and the surplus out of the common fund is distributable
among the members, there is no mutuality and the surplus is assessable
to tax as profit, forthere is no complete identity between the contributors
and the participators. The reason being that the members, who have not
contributed to surplus as customers, are nevertheless entitled to participate         F
and receive a part of the surplus. However, where the surplus is
distributed among the customers as such, there would be complete identity
between the contributors and the participators, for only customers would
be entitled to participate in the s4rplus.
         22. In the light of the aforesaid position and the law of mutual             G
concerns, we have to ascertain the impact and the effect of sub-clause
(e) to clause (29A) to Article 366 of the Constitution oflndia, as enacted
vide461h amendment in 1982 and applicable and applied to Sales or VAT
Ta'I'.. The said clause refers to tax on supply of goods by an unincorporated
23
     1f7!cock (Inspector of Taxes) v. Pinto & Co .. 9 TC 111 : ( 1925) I KB 30. CA
                                                                                      H
762            SUPREME COURT REPORTS                          [2016] 6 S.C.R.


A     association or body of persons. The question would 6e whether the
      expression 'body of persons' would include any incorporated company,
      society, association, etc. The second issue is what would be included
      and can be classified as transactions relating to supply of goods by an
      unincorporated association or body of persons to its members by way of
      cash, deferred payment or valuable consideration. Such transactions
B
      are treated and regarded as sales. The decisions of the Court in Flltelt
      Mllidan Club (supra) and Cosmopolitan Club (supra) in that context
      have drawn a distinction when a club acts as an agent of its members
      and when the property in the goods is sold, i.e., the property in food and
      drinks is passed to the members. The said distinction, it is apparent to
c     us, has been accepted by the two Benches. However, the decisions do
      not elucidate and clearly expound, when the club is stated and could be
      held as acting as an agent of the members and, therefore, would not be
      construed as a party which had sold the goods. The agency precept
      necessarily and possibly refers to a third party from whom the goods,
      i.e., the food and drinks had been sourced and provided to by the club
D
      acting as an agent of the members, to the said members. These are
      significant and relevant facets which must be elucidated and clarified so
      that there is no ambiguity in appreciating and understanding the aforesaid
      concepts "acting as an agent of the members" or when property is
      transferred in the goods sold to the members.
E            23. At this stage, we would appropriately like to refer to some of
      the arguments raised, to understand the scope and width of the
      controversy. Learned senior counsel for the State has submitted that
      the revenue has treated it as a sale under Section 2 (30) and clause
      (29A) (e) and (t) to Article 366 of the Constitution. Mr. Rana, learned
F     senior counsel appearing for the responderit-assessee would submit that
      once a club is incorporated, it is beyond the State to impose tax or its
      provision. He would submit that clause (29AXt) would not apply and in
      any case when the Club is acting as an agent for its members in supply
      of various preparation, there cannot be any demand of any sales tax as
      the concept of mutuality is still alive after the amendment to the
G     Constitution. Mr. Vasdev has taken us through the objects and reasons
      to the 46'h amendment and stressed how various decisions of this Court
      were referred to in the objects and reasons to remove the base of certain
      judgments. Paragraph 8 of the objects and reasons which has been
      emphatically placed reliance upon is extracted below:-
H
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB 763
             LIMITED [DIPAK MISRA, J.]

      "Besides the above mentioned matters, a new problem has arisen         A
      as a result of the decision of the Supreme Court in Northern
      India Caterers (India) Ltd. v. Lt. Governor of Delhi (supra).
      States have been proceeding on the basis that the Associates
      Hotels of India case was applicable only to supply of food or
      drink by a hotelier to a person lodged in the hotel and that tax was
                                                                             B
      Ieviable on the sale of foodstuffs by a restaurant. But, overruling
      the decision of the Delhi High Court, the Supreme Court has held
      in the above case that service of meals whether in a hotel or
      restaurant does not constitute a sale of food for the purpose of
      levy of sales tax but must be regarded as the rendering of a service
      in the satisfaction of a human need or ministering to the bodily       c
      want of human beings. It would not make any difference whether
      the visitor to the restaurant is charged for the meal as a whole or
      according to each dish separately".
      24. Learned senior counsel for the State would contend that the
objects and reasons throw immense light how clause (29A) was added           D
and what it intends to cover. It is argued by him that the club has an
independent entity and it supplies food and beverages to the permanent
members and invoices are raised. Money goes to the club and, therefore,
there is supply or service for value. Mr. Mukherjee would submit that
the controversy is covered by the decisions in Young Men's Indian
Association (supra) and the concept of mutuality applies, because neither    E
clause (e) or (f) to clause (29A) of Article 366 of the Constitution has
removed the concept of mutuality oragency. It is urged by him that the
club merely acts as an agent for supply of goods and agent does not sell
the goods to the principal. It only acts as a conduit to pass on the goods
and the money whether it is in cash deferred payment or by way of            F
security.
       25. Mr. Vasdev has submitted that whether mutuality exists or not
is a question of fact, for the contention of the State is assuming the
mutuality clause applies then also the respondent assessee is liable to
pay tax, for its supply or sale to a member by the club which is a dealer.   G
In Bltarat Sanc/iar Nigam Ltd. (supra), the Court has opined that by
virtue of the constitutional amendment, the Parliament has neutralised
the rulings of this Court. In Fate/1 Mllitlan Club (supra), the three-
Judge Bench remanded the matter as there was no determination by the
fact-finding authorities as regards the relationship between the club and
                                                                             H
764             SUPREME COURT REPORTS                            [2016] 6 S.C.R.



A     its members in the matter of supply by the former to the latter of food
      and drinks and such like. The Court has also observed the relationship
      would govern the fate of imposition of sales tax. In Cosmopolitan Club
      (supra), the Court has remarked that there was no determination that
      the club was acting as an agent of the members or for that matter its
      property in food and drink has passed from the club to the members.
B
      The matter was remanded to the tribunal to decide on facts as regards
      the relationship between the parties in the matter of supply of food and
      drinks to its members. The Court clarified whether the principle of
      mutuality amongst other circumstances has to be gone into. Thus, in a
      way, the principle of mutuality has been regarded as the base ofimposition
c     or non-imposition of sales tax. It is also noticeable that the Court has not
      addressed the issue whether the facet of mutuality survives after the
      amendment to the Constitution. There is observation in the case of
      Bharat Sane/tar Nigam Ltd. (supra) that the judgment of this Cou11
      has been neutralised. Clause (29A)(t), as Mr. Vasdev would submit has
      to be understood independently and not in c01tj unction with Clause 29 A( e ).
D
      It is put forth by him that the litmus test has to be that the transaction has
      to be determined only within the parameters of provisions in that sub-
      clause. Learned senior counsel would submit that clause (29A)( e) relates
      to a different field altogether and clause (29A)(t) has a different field
      wherein it operates. In any case, according to him, the club does not act
E     as an agent. An attempt has been made to draw a distinction between
      doctrine of mutuality and principle of agency and atso between
      "unincorporated association" or"body of persons".
             26. It is appropriate to state here what has transpired in the course
      of hearing. Learned senior counsel for both sides, at one point of time,
F     had submitted that this Court following the decision in Cosmopolitan
      Club (supra) and Fatelt Maidan Club (supra) can remand the matter.
      In the said cases, the Court had observed that the authorities below had
      not recorded any finding with regard to exact relationship or the mutuality
      facet. The argument before us is that even ifthe principle of mutuality
      or agency is in existence or established, still it would be a sale on the
G     basis of clause (29A)(e) or (29A)(t). Thus, the initial suggestion by the
      learned senior counsel for the parties was not pursued and we are
      disposed to think, rightly.
             27. In our considered opinion, the controversy that has arisen in
      this case has to be authoritatively decided by a larger Bench in view of
H
STATE OF WEST BENGAL AND OTHERS v. CALCUTTA CLUB 765
             LIMITED [DIPAK MISRA, J.]

the law laid down in Cosmopolitan Club (supra) and Fate/1 Maidan                        A
Club (supra). We are d,isposed to think so as none of the judgments
really lay down that doctrine of mutuality would apply or not but proceed
on the said principle relying on the earlier judgments. It is desirable that
the position should be clear. For the aforesaid purpose, the matter should
be referred to a larger Bench and for the said purpose, we frame following
                                                                                        B
three questions.
      i. Whether the doctrine of mutuality is still applicable to
      incorporated clubs or any club after the 46'11 amendment to Article
      366 (29A) of the Constitution oflndia?
       ii. Whether the judgment of this Court in Young Me11's Indian                    c
       Association (supra) still holds the field even after the 46'h
       amendment of the Constitution oflndia; and whether the decisions
       in Cosmopolita11 Club (supra) and Fatell Maidan Club (supra)
       which remitted the matter applying the doctrine of mutuality after
       the constitutional amendment can be treated to be stating the
       correct principle of law?                                                        D
       iii. Whether the 46'11 amendment to the Constitution, by deeming
       fiction provides that provision of food and beverages by'.the
       incorporated clubs to its permanent members constitute sale
       thereby holding the same to be liable to sales tax?
                                                                                        E
       28. Let the papers be placed before the Hon'ble Chief Justice of
India for constitution of appropriate larger Bench.


K~lpana K. T~ipat~y                                  Matter referred to larger Bench.
                                                                                        F
                                                               •




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