Case Briefs
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State Of West Bengal Vs. Calcutta Club Limited

Author: Niyush, 4th year student at Amity Law School, Delhi.

 Citation: [​2019] SC (C.A. No. 4184 of 2009)

 Date of decision: OCTOBER 03, 2019


Original copy: VIEW


Issue in question:

  • Whether the Calcutta Club Limited comes under the gambit of West Bengal Sales Tax Act 1994 and is bound to pay taxes as per the law?

 Background of the case:

  • Calcutta Club Limited filed the above motion with the Academic Court, demanding a statement that the named club is not a “distributor” for the purposes of the West Bengal Sales Tax Act 1994, as no food products are sold. 
  • Drinks and refreshments are provided by the club to its ordinary members and, as such, the club is not required to pay sales taxes under the West Bengal Sales Tax Act 1994 and to cancel formal notice letters and make the actions of the defendants avoidable, who threatened to levy a tax on supplies to ordinary shareholders. The above club did not pay sales tax, nor was it registered as a dealer under the 1994 Sales Tax Act. 
  • In force and for some time thereafter, encouraged by the judgment and order of the Hon’ble Supreme Court of May 11, 1994 in the case of Automobile Association of Eastern India v. West Bengal State. The state agency is taking steps to bring the club within the scope of the Sales Tax Act of 1994, claiming that based on the definition in Section 2 (30) of the West Bengal Sales Tax Act of 1994, the language set out in Article 366 applies the state, in consideration of the language established in the previous article of the Constitution of India, the club is now required to pay taxes for the supply of food, drink and beverages to its permanent or regular members who receive the same treatment, including or as definition of “sale” viewed. 
  • The court, after examining the arguments of the state and the association., noted that the definition of “sale” in the new law has not been materially changed by LK Gupta, the senior scientific attorney who accompanied Ms. Seba Ray in support of this motion, declaring that after the constitutional amendments and given the definition in the law from 1994 and in particular mainly because of the goodness of section (f) of section 366 (29A) of the Constitution of India. It states that subsection (f) provides for delivery versus payment. An agent cannot provide a contractor in exchange for the contractor. The agent acts for and on behalf of his client and does not put himself in opposition and does not see himself as a servant who buys for the master and the agent who buys raw materials for the client. 
  • Calcutta Club Limited confirms that the Academic Court’s judgment is well founded and will be taken into account in handling all laws relating to the existence of reciprocity and reciprocity between members and the club itself through a registered company. 


  • Article 366 (29A) was introduced by the 46th Amendment to the Constitution to expand the scope of sales tax in relation to certain specific activities related to the supply of goods or the supply of goods and services previously in the hands of the Supreme Court which relied on the report of Legal Commission 61, which recommended the amendment of the aforementioned Constitution. 
  • Three reasons were given in the report, namely:
  1. a) The number of these clubs and associations would not be very large;
  2. b) The imposition of taxes on such transactions could discourage the cooperative movement; and
  3. c) There is no serious tax evasion problem since a member of such clubs is actually taking their own property with them.
  • Another association of persons (the association or association of persons with corporate status) is taxable to its members, sales made by an unregistered association or association of persons to its members are not taxable by law, it does not exist separately from the court that did not properly understand the Supreme Court’s decision in the statement of subjects and motives in the Young Indian Men Association case.
  • It was found that the Supreme Court ruled in the Indian Young Men’s Association case that the sale of property by a registered body to its members is a sale to itself, and therefore not the sale of goods for the purpose of VAT. The constitutional amendment did not go beyond the ruling in the case of the Indian Boys’ Association and the doctrine of reciprocity remains in effect after the amendment. The court also referred to the decision of the Constitutional Court in the BSNL v. Union of India, in which it was explicitly stated that the 46th constitutional amendment replaces the decision in the case of the Indian Boys’ Association.
  • The Court found, however, that such a finding was not the ratio Decidendi and therefore cannot be regarded as legislation in this regard. The court also found that even in the case of a sale/delivery of goods by unincorporated associations or groups of people to members, the consideration requirement is not met, since there is no agreed consideration for the sale of goods for oneself under provisions of the Contracting Act of 1872. Consequently, the Court of Justice decided that there is no sale even in the case of a sale by an association or corporation of persons who are not members of a member.


Critical analysis:

  • The Supreme Court decision would include member associations and similarly situated bodies such as cooperatives, resident charities, etc., VAT (on the sale of goods to their members) or the tax on services (provision of services).
  • The ruling is historic for two reasons: first, it boldly transcends and teaches the 46th constitutional amendment, and second, it distinguishes the Constitutional Court’s observations in the BSNL case and upholds the doctrine of Mutuality.

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