The Delhi High Court on Thursday asked Delhi Gymkhana Club to pay Rs 1.45 crore, out of total Rs 2.92 crore for three accounting years since 2009, as luxury tax to the city government.
A bench of justices B D Ahmed and S Mridul asked the club to make part payment of the tax due to the government as a pre-condition to hear its plea that it cannot be levied as the club serves to members only.
The court, meanwhile, asked the Delhi government to lift attachment order passed against the club and issued notices to the Excise, Entertainment and Luxury Tax Department. The order led to attachment of three bank accounts of the club.
‘Issue notice. Counter affidavit be filed by Respondent (Commissioner of the Tax department) within four weeks and rejoinder, if any, thereafter by the petitioner in two weeks,’ it said and fixed the matter for arguments on 15 October.
‘Meanwhile, Delhi Gymkhana Club will deposit 50 per cent (Rs 1.45 crore) of the total amount due to Deputy Commissioner of the department of Delhi government by July 21,’ it said.
Delhi government opposed the court’s order saying that 50 per cent formula should not be adopted and ‘It should have been considered only if they have come to this court after winning the tax case in courts/tribunals below.’
The court, however, did not entertain the submission and said it will deal with it later.
It was hearing a petition filed by Delhi Gymkhana Club alleging that the order passed on July 1 asking it to pay tax of Rs 2.92 crore within seven days under the Delhi Tax on Luxuries Act is ‘wrong and was done without hearing it’.
The petitioner said it is a social club, governed by the principle of ‘mutuality’.
‘They (Government dept) have considered the club as a hotelier and demanded the luxury tax on the amount collected from its members for making available accommodation to them.
‘...no luxury tax is payable on its transaction because it is providing its facilities to member. There cannot be any transaction between petitioner and its members because it is organising its activities as per the principle of mutuality,’ the counsel for the club said.
The club, in its plea, further stated that the provision of Delhi Tax on Luxuries Act are not applicable on it as the club is for members and provides amenities and facilities to them only.
‘It is not conducting any business. It is serving its member as their agent. No one can have business transaction with oneself.
‘For this reason alone, the provision of the Act are not applicable. These provision are intended to levy on business transaction only,’ the petition said.
It further said the tax department failed to appreciate that the such clubs are self-serving organisation.
‘It has not entered into any transaction with anyone other than the members for providing facilities to its members.
Therefore, it cannot be considered as proprietor providing Luxury to its customers for the purpose of Delhi Tax on Luxuries Tax Act,’ it said.