Background and Evolution of the Doctrine of Mutuality
Controversy:
The controversy surrounding the taxability of transactions
between clubs or associations and their members is long-standing.
It has engaged courts for over half a century and remains
ongoing.
In the case of The Joint Commercial Tax Officer vs Young
Men's Indian Association, Madras and
Others1 in the context of sales tax under the
Madras General Sales Tax Act, 1959, it was held that sales tax is
not leviable on refreshments, beverages and other preparations by
the club to its members. It was held that:
- There is no transfer of property from one to another.
- If the club, even though a distinct legal entity, is 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.
