Contribution to expenses cannot by any stretch be deemed to be a consideration for any identified service rendered to members by access to the facilities or advantage by a club or association. However, if the payments are specifically attributable to such facility, advantage or service, the subscription will be taxable.

The Assessee is a members’ club providing various facilities to its members. Service tax was paid on the entrance fees under protest under Club or Association service. A refund was sought of the amount paid on account of principle of mutuality and on the ground that entrance fees is not a consideration for any service. The department denied refund and the same was upheld by the Commissioner (Appeals), accordingly the present appeal is filed.

Held

The Tribunal noted that Clubs or Associations need funds to exist. Wages of employees, energy charges, maintenance and repairs etc. are necessary expenses for sustenance. Implicit in membership of clubs and associations is the obligation to share in such expenses for maintaining the assets of the club and the contributing members are not the direct beneficiaries of such services. Contribution to expenses cannot, by any stretch, be deemed to be consideration for any identified service rendered to individual members by access to the facilities or advantage that is within the wherewithal of the “club or association”. However, to the extent that it is possible to identify the facilities, advantage or services without further payments specifically attributable to such facility, advantage or service, the subscription will be taxable. It was also observed that without an identified recipient who compensates the identified provider with appropriate consideration for an identified service, a service cannot be held to have been provided. Further, relying on the decision of the Sports Club of Gujarat [2013] 40 STT 486/35 taxmann.com 557 (Guj.), the principle of mutuality was upheld and the appeal was allowed.