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Sports Club of Gujarat Ltd. Vs. Commissioner of Sales Tax, Gujarat, Ahmedabad - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 4 of 1971
Judge
Reported in[1975]36STC511(Guj)
ActsBombay Sales Tax Act, 1959 - Sections 2(11), 2(28) and 52
AppellantSports Club of Gujarat Ltd.
RespondentCommissioner of Sales Tax, Gujarat, Ahmedabad
Appellant Advocate S.L. Modi and; N.I. Modi, Advs.
Respondent Advocate G.N. Desai, Government Pleader and; H.V. Chhatrapati, Adv. of Bhaishanker Kanga and;
Cases ReferredIn Kalidas v. State of Bombay
Excerpt:
sales tax - interpretation - sections 2 (11), 2 (28) and 52 of bombay sales tax act, 1959 - whether club dealer within meaning of section 2 (11) in respect of its activity of catering to invitees of members other than ordinary guests allowed under bye-law 24 - tribunal erred in making distinction between catering clause and special dinner party clause - in both cases privilege being restricted only to members - member's club did not change its character as sports club and did not assume commercial character so as to fall within definition of 'dealer' in section 2 (11) - question answered in negative. - - therefore, the tribunal had failed to take into consideration the settled legal position in this connection and it erred in holding that there was a change in the activity of the.....j.b. mehta, j. 1. the tribunal has posed the following question : 'whether, on the facts and in the circumstances of the case, the club is a dealer within the meaning of section 2(11) of the bombay sales tax act, 1959, in respect of its activity of catering to invitees of the members other than the ordinary guests allowed under bye-law 24 at special parties, lunches, dinners, etc., booked and paid by the individual members.' 2. the short facts which have given rise to this reference are as under : the petitioner, sports club of gujarat, is a company registered under the indian companies act and the liability of its members is limited. it was registered as a dealer under the bombay sales tax act, 1959, hereinafter referred to as the 'act'. its object was to provide facilities for promotion.....
Judgment:

J.B. Mehta, J.

1. The Tribunal has posed the following question :

'Whether, on the facts and in the circumstances of the case, the club is a dealer within the meaning of section 2(11) of the Bombay Sales Tax Act, 1959, in respect of its activity of catering to invitees of the members other than the ordinary guests allowed under bye-law 24 at special parties, lunches, dinners, etc., booked and paid by the individual members.'

2. The short facts which have given rise to this reference are as under :

The petitioner, Sports Club of Gujarat, is a company registered under the Indian Companies Act and the liability of its members is limited. It was registered as a dealer under the Bombay Sales Tax Act, 1959, hereinafter referred to as the 'Act'. Its object was to provide facilities for promotion of various sports. The club was open only to its members and it deals only with members. The members were about 3,120 in number. Under the relevant bye-laws, guests not exceeding four were allowed subject to various restrictions. In the catering department, the club serves not only members and their guests but the club allowed these facilities to be availed of by any member for a dinner party. The members were to book such parties for lunches or dinners for any number of invitees of such members and they were allowed a month's credit for the payment of the bills. For such dinner parties other conditions were applicable for advance payment, etc. The petitioner-club made an application under section 52 of the Act for the decision of the question whether it was a dealer under section 2(11) of the Act. The Deputy Commissioner held that in its catering activity the club must be held to be a dealer. The Tribunal, however, in appeal found that so far as the clue was giving catering facilities to its members or to the restricted number of guests as per its bye-laws, it was not carrying on any business with any outsider. Therefore, considering the settled legal position, it held that considering the main object of this club which was of promoting sports, such catering facility of supplies to the members and their families and guests was only incidental to the main object of advancement of sports. The Tribunal, however, made a distinction so far as special dinner parties were concerned. The Tribunal found that such parties by individual members to their invitees in excess of four guests allowed to a member were for their individual purposes. In the month of April, May, June and July, 1969, 47, 34, 42 and 39 members gave parties to their invitees costing Rs. 7,008, Rs. 11,725, Rs. 22,682 and Rs. 17,307 respectively, and the largest party during the period was by a single member to 600 persons costing Rs. 6,352. The Tribunal found that according to the special bye-laws for the special dinner parties for the individual purposes of the members, the catering activity in this special case could not be considered to be incidental to the main objects of the club. Looking to the purpose, the manner in which such orders were allowed and executed, they bore all the characteristics of a business, viz., the motive of profit and, therefore, to the extent to which the club catered for special dinner parties, the club was held to be a dealer within the meaning of section 2(11) of the Act. Therefore, the petitioner-club has got this reference made to us.

3. The memorandum of association discloses in clause 3(a) that the main object for which the club was established was to encourage and promote the game of cricket and other games and sports in the State of Gujarat. Under clause 3(b), the object was to lay out the ground for playing the game of cricket and for other games and sports and for other purposes of the club and to provide pavilions, refreshment rooms and other conveniences in connection therewith ..... Under clause 3(e), the object was to organise, promote and afford facilities within any premises of the club and to use any such premises for any form of game and any form of athletics, sports, recreation, sporting event, entertainment. Under clause 3(g), the object was to promote and hold either alone or jointly with any other association, club or person, cricket matches and competitions, all kinds of sporting events, entertainments ...... and to promote, give or support dinners, concerts, conferences and other entertainments. Under clause 3(i), the object was to buy, repair, make, supply, sell and deal in all kinds of apparatus and appliances and all kinds of provisions, liquid and solid, required by persons frequenting the club buildings or the sports grounds or other premises of the club. Under clause 3(v), the object was to do all such other things as are incidental or conducive to the attainment of the above objects or any of them. Under clause 4, the income and property of the club shall be applied solely towards the promotion of the objects set forth herein and no portion thereof shall be paid by way of dividend, bonus or profit to any of the members. Under clause 5, the liability of the members was limited but there was no shareholding. Clause 6 provides that every member of the club undertakes or guarantees to contribute to the assets of the club, in the event of the same being wound up during the time he is a member or within one year afterwards, for payment of the debts and liabilities of the club contracted before the time at which he ceased to be a member. Under clause 7, if upon the winding up of or dissolution of the club, there remains after the satisfaction of all debts and liabilities any property whatsoever, the same shall be paid to or distributed among the members in equal shares. Under the articles of association the members were generally divided into eight classes and as far as life or ordinary members were concerned, not being honorary or temporary member, the proposal has to be made as prescribed and it had to go through balloting before a balloting committee. The member could also be expelled in the prescribed manner.

4. Coming to the relevant bye-laws, bye-laws 24 to 30 deal with guests. Bye-law 24 provides that subject to the restrictions proposed by the bye-laws, every member other than a playing member or temporary member may introduce guests to the club. The number of guests so introduced by a member at any time shall not be more than four. The other bye-laws provide certain restrictions as to guests. Amendments in these bye-laws make provisions for the air-conditioned banquet hall for use of the members for lunches, special parties and dinners with accommodation limited to 52 persons. The charges for lunches and dinner parties are also provided and the manner of reservation is laid down. Bye-laws in respect of guests charges provide for introduction of the guests at 50 paise per guest. As for special parties, special procedure is provided for payment of the special party bills and as to the members liability in that connection. Therefore, considering these objects of the sports club, the Tribunal came to the right conclusion in so far as catering facility to the members was concerned, including the family and the limited number of four restricted guests, that this activity of catering to the members was only incidental to the main object of the promotion and advancement of sports. Such an activity was by way of service to the members and the bye-laws strictly restricted it to the members and it was not open to the outsiders and it had no business character. Therefore, section 2(11) was held not to be applicable so far as its catering service to the members, families and their four restricted guests were concerned. The Tribunal has, however, sought to make a distinction so far as special dinner parties are concerned on the ground that when extending this further privilege to the members by arranging special dinner parties for the members, who pay the special charges for this catering activity, in that activity there were all characteristics of a business, viz., profit-motive, on the ground that it was for the individual purpose of the members and the bye-laws had made a special distinction from the normal catering clause in that behalf by a distinguishing special party clause. It would differ from the ordinary catering clause which was an incidental activity of the club. The Tribunal had in this connection considered that the income of the special parties in 1966 was Rs. 1,79,476. The income from internal catering supplies was Rs. 23,942 while the net income was Rs. 27,735 before providing depreciation. The Tribunal proceeded on this thoroughly irrelevant distinction and on an erroneous assumption that the club has changed its character when the catering facility, which was ordinarily restricted to the members, families and the four guests, was extended to the members in the form of special dinner parties. The Tribunal had in this connection misconstrued the settled legal position and had wrongly sought aid of Eccentric Club's case ([1924] 1 K.B. 390 at 421-422; 12 Tax Cas. 658), whose ratio was approved by the Supreme Court in Commissioner of Income-tax v. Royal Western India Turf Club Ltd. ([1953] 24 I.T.R. 551 (S.C.))

5. Section 2(11) defines a dealer as meaning any person who whether for commission or otherwise carries on the business of buying or selling goods in the State, and includes a State Government which carries on such business, and also any society, club or other association which buys goods from, or sells goods to, its members. The term 'sale' has been defined in section 2(28) as a sale of goods made within the State, for cash or deferred payment or for other valuable consideration, and includes any supply by a society or a club or an association to its members on payment of a price or of fees or subscription, and the words 'sell', 'buy' and 'purchase', with all their grammatical variations and cognate expressions, have to be construed accordingly. Therefore, before the club can be held to be a dealer even by supplies to its members, which, in the extended definition of section 2(28), amounts to sale of goods, it had to fulfil two relevant tests, viz., of carrying on a business of such sale or supply of goods. Therefore, it is the business character or commercial character which if got imprinted on the sports club that would make it a dealer. The Tribunal rightly held that so far as catering clause was restricted to the members, families and four limited guests, the activity of the sports club does not change its character and does not assume any commercial character. When it was serving the catering needs of the members and their four limited guests, the club continued to remain a pure members' club which had no taint of commerciality. The legal position in this connection was laid down in the earliest decision of Eccentric Club Limited ([1924] 1 K.B. 390 at 421-422; 12 Tax Cas. 658), where Warrington, L.J., speaking for the Court of Appeal, laid down the true legal position of such members' clubs, where no payment for provision supplied in the club was taken from any person not a member. The learned Judge pointed out that the club proprietor, whether an individual or a company, carried on a business with a view to profit as an ordinary commercial concern, which the company did not do. The proper mode of regarding the company was as a convenient instrument for enabling the members to conduct a social club, the objects of which were immune from every taint of commerciality, the transactions of sale and purchase being merely incidental to the attainment of the main object. The learned Judge observed that what in fact was being carried on was a members' club and not a proprietary club, nor any undertaking of a similar character. Therefore, the transactions of sale and purchase of provision was held one to be merely incidental to non-commercial objects and not regarded as in themselves a trade in such self-serving members' clubs. These members' clubs would be non-profit making clubs because even after incorporation, the club would not lose its character as such, as the limited company in such cases would be looked upon as a mere convenient instrument or as an agent through which only such catering privileges of the members were arranged. Therefore, the privilege would be confined only to the members and even when guests were invited or special dinner parties were arranged, it would be only for and on behalf of the members as an agent. Such a privilege could not be purchased and would not be open to the outsiders. The Tribunal had recorded a categorical finding that even in case of special dinner parties the facility could be availed of only by the member. Therefore, even in the case of special dinner parties, the club retained its social, non-commercial character as a members' club. Therefore, the Tribunal had failed to take into consideration the settled legal position in this connection and it erred in holding that there was a change in the activity of the club or that it assumed a commercial activity when it undertook this activity of special dinner parties only for its members. In Commissioner of Income-tax, Bombay City v. Royal Western India Turf Club Ltd. ([1953] 24 I.T.R. 551 (S.C.)), their Lordships had considered this question in the context of admission tickets income from the business of the race course company. The context of the facts was that, while carrying on business of horse racing, the company realised money both from the members and from non-members, viz., by giving the same or similar facilities to all alike in the course of horse racing business. It is on this ground that their Lordships distinguished Styles' case ([1889] 14 App. Cas. 381) and the Eccentric Club case ([1924] 1 K.B. 390; 12 Tax Cas. 658), whose ratio had been approved. Their Lordships pointed out at pages 560-561 that Styles' case ((1889) 14 App. Cas. 381) was a case of mutual dealing where there was an identity between the contributors and the participants and, therefore, there was no question of any business with the members with a view to earn profits which could be taxed under the taxing statute. The Eccentric Club case ([1924] 1 K.B. 390; 12 Tax Cas. 658) was thereafter referred to and at page 563, after referring to the aforesaid observations of Warrington, L.J., their Lordships held that in that case, there was no carrying on of any business with outsiders and the dealings with members were really not in the way of any trade or business, and it was only on that basis that the profits were held not to fall within the Finance Act. These decisions were held to be inapplicable to the turf club in question because there was no dispute that the dealings of the company, which took place even with non-members were carried on with a view to profit as in any other commercial concern. Therefore, there being no mutual dealing between the members inter se, and there being no question of distribution of surplus between the members alone and, therefore, there being no question of the identity of contributors and participants, where the settled principles would be applicable that none could make profit or loss out of himself, those cases of such members' clubs were distinguished. The Tribunal was, therefore, wrong in not properly appreciating this ratio and in distinguishing the Eccentric Club case ([1924] 1 K.B. 390; 12 Tax Cas. 658) on this irrelevant distinction, and in holding that although the club was not dealing with any outsider, but only the privilege was extended to a member by the club, it assumed a commercial business character when such special dinner parties for the individual purpose of the member were arranged at the instance of a member. The Tribunal ignored the salient feature that this also was like a guest privilege, a special privilege of the member which could not be purchased or sold by or to an outsider, but it was available only to the members and it was the member who incurred the liability for the charges thereof. Therefore, the members' club would continue dinner parties for its members and would not assume a commercial character of trading with the outsiders. The whole crucial test which was laid down was that such non-profit making clubs like sports clubs would not assume the character of a proprietary club merely by reason of incorporation, but only when it assumed a commercial or business character by trading or dealing with outsiders as in a commercial concern. When it seeks to cater the needs of the members alone, whether by way of serving family and guests of the members or by special dinner parties at the instance of and at the expense of the members alone, there is no dealing with outsiders. It is only a dealing with the members inter se; and so, whatever difficulty would arise from incorporation would be clearly surmounted by necessary inference of agency or the incorporated entity being considered as only a convenient instrument to cater the needs of the members themselves. Therefore, a mere self-serving institution would surely retain its character of the members' club and that settled principle that one cannot make profit or loss out of himself would continue to apply to such members' clubs, which could not assume a business character in such incidental transactions. In Madras Gymkhana Club Employees' Union v. Management of the Gymkhana Club (A.I.R. 1968 S.C. 554), their Lordships had to consider the question in the context of the definition of 'industry'. At page 564, their Lordships pointed out that the definition of 'industry' would be fulfilled if the activity of the real employers was within the realm of 'industry'. The members' club in question did not follow a trade or business. Its activity cannot be described as a manufacture and the running of the club was not the calling of its members or its managing committee. Therefore, the only remaining part of the definition was as to an 'undertaking' in the definition of industry. It was held that unless an undertaking was one of trade or business or analogous to trade or business, it could not be held to be an industrial undertaking. Their Lordships had pointed out that the conventional Lord Campbell's definition of 'commerce' as an activity where capital was laid down and a risk run of profit or loss may not be wholly valid in such an industrial legislation as profit-motive and investment of capital would not be necessary in the case of undertakings of Government or local authorities where capital would be coming from taxation and there may not be such a profit-motive. Therefore, such industrial undertakings must have the character of trade or business or must be analogous to trade or business. Even this wider element was found to be missing in such a members' club. At page 565, their Lordships pointed out that profit-motive may not be material in the definition of 'industry' in the industrial legislation. Their Lordships pointed out that the affairs of the club were organised in the way business was organised and

there was production of material services and in a limited way, production of material goods in such catering department. Their Lordships, however, pointed out that these circumstances were not truly representative in the case of the club because the services were to the members themselves for their own pleasure and amusement and the material goods were for their consumption. In other words, the club existed for its members. No doubt occasionally strangers also took benefit from its services but they could only do so on the invitation of the members. No one outside the list of members had the advantage of these services as of right. Nor could these privileges be bought. In fact, they were available only to members or through members. Their Lordships further pointed out that if the club were to stop entry of outsiders, no essential change in its character vis-a-vis the members would take place. In other words, the circumstance that guests were admitted was irrelevant to determine whether the club was an industry. Even when the admission of guests was open, the club remained the same, that was to say, a members' self-serving institution. No doubt, the material needs or wants of a section of the community was catered for by, but that was not enough. That must be done as part of trade or business or as an undertaking analogous to trade or business. That element was completely missing in a members' club. Their Lordships further pointed out that the club had attained as existence apart from the members. Therefore, the Madras Gymkhana Club, which was a members' club, was held not to be an industry, even under the definition of industrial law where profit-motive may not be material, on the sole ground that this was self-serving members' club and the catering was to the members themselves for their own pleasure and amusement and the facility or privilege of guests of catering was not given to the outsiders but was available only to the members or through members. In the next decision in Cricket Club of India v. Bombay Labour Union (A.I.R. 1969 S.C. 276), where the facts are almost identical as in our case, even when the club catered for such special dinner parties, the club was not held to be an 'industry' as it had not changed its character as a members' club. At page 283, their Lordships pointed out that the fact that the club catered for functions of outside agencies on certain occasions, did not make the club an industry inasmuch as these functions were arranged at the request of the members of the club from whom the club realised the dues and who are responsible for payment to the club. The club, in this catering for such functions, was in fact catering for its members and was not at all intending to carry on an activity of providing the facility of catering at the instance of outsiders. Moreover, such functions did not form a systematic arrangement. When reliance was made on the aspect of the incorporation of this club to distinguish from members' club and to assimilate it to a proprietor's club, their Lordships pointed out at page 285 that the circumstance of incorporation of the club as a limited company was not of importance. It was true that, for purposes of contract law and for purposes of suing or being sued, the fact of incorporation made the club a separate legal entity, but in deciding whether the club was an industry or not, no decision could be based on such legal technicalities. What had to be seen was the nature of the activity, in fact and in substance. Though the club was incorporated as a company, it was not like an ordinary company constituted for the purpose of carrying on business. There were no shareholders. No dividends were even declared and no distribution of profits took place. Admission to the club was by payment of admission fee and not by purchase of shares. Even that admission was subject to balloting. The membership was not transferable like the right of shareholders. There was the provision for expulsion of a member under certain circumstances which feature never existed in the case of a shareholder holding shares in a limited company. The membership was fluid. A person retained rights as long as he continued as a member and got nothing at all when he ceased to be a member, even though he might have paid a large amount as admission fee. He even lost his right on expulsion. In these circumstances, it was held that the club could not be treated as a separate legal entity of the nature of a limited company carrying on business. The club in fact continued to be a members' club and without any shareholders and, consequently, all services provided in the club for members had to be treated as activities of a self-serving institution. Both these decisions were approved by a larger Constitution Bench in Safdar Jung Hospital v. K. S. Sethi (A.I.R. 1970 S.C. 1407), where their Lordships pointed out that it was the character of these establishments which made the whole difference when such non-profit making members' clubs were not held to be trade or industry. Their Lordships pointed out that this view was taken even by the House of Lords in Hotel and Catering Industry Training Board v. Automobile Proprietary Ltd. ([1969] 1 W.L.R. 697) Finally, in the decision in Joint Commercial Tax Officer, Harbour Division, Madras v. Young Men's Indian Association, Madras ([1970] 26 S.T.C. 241 (S.C.)), in the context of Cosmopolitan Club originally formed as an unincorporated association and registered under section 26 of the Companies Act, as a non-profit earning institution, a larger Constitution Bench considered this question. The Cosmopolitan Club maintained an establishment for preparing and supplying refreshments to its members. A member was allowed to bring guests with him but if any article of food was consumed by a guest it was the member who had to pay for the same. No person other than a member was entitled to participate in this catering facility of the club. Their Lordships in terms held that even when the dealer's definition included a club which sold goods to its members and the explanation I included even distribution of goods by a club to its members for cash or deferred payment, if there was no transfer of property involved in the supply or distribution of goods by a club, it would not fall within explanation I contained in the definition of 'sale' in the corresponding section 2(n) or in the definition of 'dealer' in section 2(g) in the Madras legislation. Their Lordships pointed out that the law in England has always been that members' clubs, to which category the club in the instant case belonged, even though it was incorporated, were not subject to the licensing provisions concerning sale of goods because members were joint owners of all the club property including the excisable liquor. There the supply of liquor to a member at a fixed price by the club could not be regarded to be a sale. Their Lordships pointed out that if, however, liquor was supplied to and paid for by a person who was not a bona fide member of the club or his duly authorised agent there would be a sale. With regard to incorporated clubs a distinction had been drawn. Where such a club had all the characterstics of a members' club consistent with its incorporation, that is to say, where every member was a shareholder and every shareholder was a member, no licence need be taken out if liquor was supplied only to the members. If some of the shareholders were not members or some of the members were not shareholders that would be the case of a proprietary club and would involve sale. Proprietary clubs stood on a different footing. The members were not owners or interested in the property of the club. The supply to them of food or liquor though at a fixed tariff was a sale. Thereafter their Lordships pointed out that the difficulty felt in the legal property ordinarily vesting in the trustees of the members' club or in the incorporated body was surmounted by invoking the theory of agency, i.e., the club or the trustees acting as agents of the members. Therefore, if the club even though a distinct legal entity was only acting as an agent for its members in the matter of supply of various preparations to them, no sale would be involved, as the element of transfer would be completely absent. There being no transfer form one to another, there would be not sale which would be exigible to tax. Their Lordships also referred to an earlier decision in Deputy Commercial Tax Officer v. Enfield India Ltd. Co-operative Canteen Ltd. ([1968] 21 S.T.C. 317 (S.C.)), where the explanation to section 2(g) was found to be intra vires and within the competence of the State Legislature, and where it was found that the thing supplied was the absolute or general property of the society which was transferred from the seller to the buyer and, therefore, all the elements of sale were present. Their Lordships pointed out that the mere fact that the society supplied the refreshments to its members alone and did not make any profit was not considered sufficient to establish that the society was acting only as an agent of its members. As a registered society was a body corporate, it could not be assumed that the property which it held was the property of which its members were owners. Therefore, the English decisions were distinguished on the ground that the courts in those cases were dealing with matters of quasi-criminal nature. Their Lordships were quick to point out that even in England even in taxation laws the position of a members' club, though incorporated, has been recognised to be quite different. Their Lordships pointed that in Eccentric Club case ([1924] 1 K.B. 390), where the members' club was only structurally a company, it did not carry on trade or business so as to attract the corporation profits tax. Even Sha

6. h, J., in the concurring judgment pointed out that whether refreshments and such other articles supplied by a members' club for consideration to its members would amount to sale or not would depend upon the circumstances in which the transaction took place. The liability to tax of the transaction would depend upon the strictly legal form of the transaction in each case. If an incorporated members' club supplied its property to its members at a fixed tariff, the transaction would readily be deemed to be one of sale, even if the transaction was on a non-profit basis, and such a transaction would be liable to sales tax. Where, however, the club was merely acting on behalf of the members to make available to them refreshments, beverages and other articles, the transaction would not be regarded as a sale, for the club was the agency through which the members had arranged that the refreshments, beverages and other articles should be made available. The test in each case was whether the club transferred property belonging to it for a price or a club acted as an agent for making available property belonging to its members. Therefore, even in this decision, their Lordships have approved Eccentric Club decision ([1924] 1 K.B. 390) ratio and have pointed out that the difficulty felt in legal property ordinarily vesting in the trustees of a members' club or in the incorporated entity could be surmountable by invoking a theory of agency in such cases, when members were joint owners of the club property and were having a mutual dealing inter se only. Therefore, if the club even though a distinct legal entity was only acting as an agent for its members in the matter of catering supplies, there should be no sale involved as the element of transfer to another would be completely (sic) not be considered to be engaged in any trade or business, so as to attract any sales tax as a 'dealer'.

7. Mr. Desai, however, sought to make a distinction from this settled legal position on the ground that the club on its applying for registration had become a registered dealer before it raised this question under section 52. This point was rightly not raised at any stage because as per the settled legal position there could be no estoppel against a statute, merely because the petitioner-club wronly assumed that it was a dealer when it got itself registered as a dealer. In Kalidas v. State of Bombay (A.I.R. 1955 S.C. 62 at 65), their Lordships pointed that even where an establishment had wrongly assumed itself to be a factory or a workshop and had applied for being registered under the Bombay Shops and Establishments Act, 1948, such an admission in its application for registration could not create any estoppel. The admission may even raise some inference of fact against the appellant, had nothing else been known, but when the facts were fully set out and admitted, the appellant's opinion about the legal effect of those facts was of no consequence in construing the section. Therefore, that would be a thoroughly irrelevant consideration for answering the meaning of the statutory language in section 2(11) in the definition of dealer. The learned Government Pleader next argued that the definition of 'dealer' in section 2(11) was an inclusive definition which included such a club which sold goods to its members. He particularly relied on the extended definition of 'sale' in section 2(28) which included a supply by a club to its members on payment of a price and the expression used that the words 'sell', 'buy' and 'purchase', with all their grammatical variations and cognate expressions, shall be construed accordingly. Even though supply of such catering facilities by the club to its members, which ordinarily would be under a contract of service, would be deemed to be a sale, as all doubt on that score is set at rest because of this inclusive definition of section 2(28), but in order to satisfy the definition of a dealer the club must be proved to have undertaken business of such sale of goods or such supply of catering facilities to the members which must involve the element of transferring from one to another. If the club was only an agent or convenient instrument which merely arranged for the supplies and if the property in the goods continued always to remain in the members, there was no element of transfer of property from one to the other in such self-serving members' club, and there would be no taint of any commerciality so as to satisfy the conventional Lord Campbell's definition of business or commerce or even the wider definition of an industrial undertaking. Such a sporting club would continue to retain its non-profit making character for promotion of sports, even though incidentally it may supply such privileges to its members by catering to their needs and to the needs of their families and guests or for such larger dinner parties at the instance of the members and which would be paid for by the members. The Tribunal had so far as the members and the guests were concerned refused to hold that the dealer's definition was fulfilled in this case. It, however, made a wrong distinction in the case of such dinner parties by assuming that the character of the members' club changed in the transaction, even though it was a transaction between the members inter se and the privilege was not one which could be bought or purchased but was available by and through the members alone. The learned Government Pleader next relied upon the decision in Enfield India Ltd. ([1968] 21 S.T.C. 317 (S.C.)), which was distinguished by the larger Constitution Bench in the Young Men's Indian Association (Cosmopolitan Club) decision ([1970] 26 S.T.C. 241 at 246 (S.C.)) aforesaid. This decision rests on its special definition of 'dealer' in section 2(g) in the Madras General Sales Tax Act, Where explanation I had been held to be intra vires and which includes clubs, which whether or not in the course of business sell, supply or distribute goods from or to its members in cash or for deferred payment or other valuable consideration. Their Lordships also pointed out in Young Men's Indian Association's case ([1970] 26 S.T.C. 241 at 246 (S.C.)), while distinguishing Enfield India Ltd. decision ([1968] 21 S.T.C. 317 (S.C.)), that it rested on this wider definition and because that case was of a co-operative society where it can be said that the society was holding its absolute property including in the refreshment prepared for supply to the members and it transferred that property to the members. In such a registered co-operative society with a power to hold property and capable of entering into contract, it could not be assumed that the property which it held was the property of which the members were the owners. The property in law was the property of the society. The society was a distinct legal entity and the property in the refreshment supplied to the members, which was vested in the society, could be transferred to the members and, therefore, all the ingredients of a sale were found to be present in the decision. That decision, therefore, could not apply to such a case of a pure members' club, which, as held by their Lordships in Bombay Cricket Club case (A.I.R. 1969 S.C. 276) stands on a totally different footing. That is why in the Cosmopolitan Club, Madras, case of Young Men's Indian Association ([1970] 26 S.T.C. 241 at 246 (S.C.)), their Lordships had rightly distinguished this Enfield India Ltd. decision ([1968] 21 S.T.C. 317 (S.C.)), and the learned Government Pleader could draw no inspiration from that decision.

8. In view of the aforesaid settled legal position, the Tribunal was obviously in error in making this distinction between the catering clause and the special dinner party clause. In both the cases, the privilege being restricted only to the members, the members' club did not change its character as a sports club and did not assume a commercial character so as to fall within the definition of a 'dealer' in section 2(11) of the Act.

9. The learned Government Pleader also urged that in fact the report mentioned that there was a net income and, therefore, profit was made by the club and it was on that footing that it had taken the registration as a registered dealer under the Act. That argument is wholly irrelevant, as we earlier pointed out, when it was found on the facts that the club was a members' club and it did not change its character by any taint of commerciality in these transactions with members inter se. When there was no business character whatever, it is immaterial what the net surplus is called by the concern or the club. Therefore, our answer to this reference must be in the negative. The respondent-State shall pay the costs of the petitioner-company of this reference.

10. Reference answered in the negative.


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