The High Court of Karnataka held that the companies and co-operative societies which are registered under the respective Acts can be said to be constituted under those Acts and the clubs or associations incorporated prior to July 1, 2012, were not included in the service tax net.
The respondent, Sobha Developers Limited is engaged in the business of construction of complexes and roads under the category “construction of complex services and works contract service” under the Finance Act, 1994. On the ground that respondent was rendering taxable service under the category of “Club or Association Service” as defined under Section 65(105)(zzze) of the Finance Act, 1994 and liable for payment of service tax, which is said to have come to limelight during the course of audit and observations having been made that agreements entered into by the respondent with their customers for the purpose of residential apartments and certain amounts are collected as non-refundable deposits towards “Club House and Swimming Pool”, show cause notices came to be issued to the respondent.
The substantial question of law was raised whether the principle of mutuality is applicable to services provided by the club to its members and does not amount to rendition of service from one person to another and would not be considered as taxable service for the purpose of levy of service tax.
The division bench consisting of Justice Aravind Kumar and Justice Hemant Chandangoudar in the light of the decision given by the Apex Court held that the companies and co-operative societies which are registered under the respective Acts can be said to be constituted under those Acts and the clubs or associations incorporated prior to July 1, 2012, were not included in the service tax net.
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