«…. According to settled case-law, the exercise of a commercial activity in such a way that they and customers are the same persons does not generate profits or tax benefits and, therefore, no assessment can be made in respect of the activity. Any surplus from this form of exchange represents only the extent to which participants` contributions have been found to exceed needs. Such a surplus is considered their own money and can be returned to them. For this liberating element of reciprocity to remain, it is essential that profits can be returned at some point and in some form to the people to whom the goods or services were sold. Under the Income Tax Act, it is important to understand, in determining tax collection, that surplus returned to contributors cannot be considered a profit. It is necessary to maintain a complete identity between contributors and participants. Fees arising from facilities granted by a club to its members were exempt for reasons of reciprocity.  This judgment stated that a tax cannot be levied for two reasons. First, the definition of «sales tax» in the Constitution is not consistent with the definition of «sale» in sales tax legislation.
Second, even if the club is registered and treated as a separate entity, as long as the club acts as a representative or administrator of its members, the principle of reciprocity is not lost. 46. The amendment dealt with only one aspect, the definition of «sale», and did not deal with the other. The tax office before the big bank argued that the definition of «association or association» excluded any person who had been established or established by or on the basis of a law currently in force and that associations or associations could not be considered constituted or constituted and therefore did not fall within the exclusion zone and were taxable. The Board of Governors rejected this argument, stating that the term «constituted» included associations or associations constituted on the basis of the respective laws, even if they could not be qualified as established. Consequently, the Grande Banque considered that registered associations or associations are not obliged to pay tax on services provided to their members (this is not due to the principle of reciprocity, but to the specific exclusion of the taxable supply). The enlarged Court then returned to the position of taxing supplies made by unincorporated clubs to its members, stating that the definition of «consideration» under the Indian Contract Act of 1872 recognizes two separate persons, and since the Young Men`s Indian Association has determined that, in light of the doctrine of reciprocity, there is no transaction between the club and its members, There can be no sale of goods to oneself and conclude that the relationship of the Young Men`s Indian Association has not been eliminated by the limited fiction introduced by Article 366 (29-A(e). The principle of reciprocity does not apply to transactions between an organization and a member that go beyond mutual agreement and are commercial in nature. In this situation, the fact that the organization is dealing with a member is irrelevant. The Supreme Court thus equated the involvement of a non-member in the affairs of the mutual group with the introduction of a commercial stain in its transactions, thus rejecting the foundations of the principle of reciprocity. This is because non-members do not deal with matters of mutual interest and benefit and do not contribute in a different capacity than members.18 There are mutual funds or corporations to whose income the principle of reciprocity would normally apply. An entity subject to the principle of reciprocity is generally referred to as a mutual concern.
An association or mutual enterprise is an association of persons who agree to contribute funds for a mutually beneficial common purpose and to receive the surplus on the same basis as they made the contribution. Therefore, the capacity as contributors and participants remains the same. They do not contribute to trade with an idea, but with the idea of helping each other. The receipt in their hands is not really a gain, for no man can make a profit on his own, just as he cannot make a trade or business with himself. – CIT v. West Godavari District Rice Millers Association, 150 ITR p.394 (AP). On the basis of the foregoing, the Bench Division raised the question in relation to the case referred to in Cosmopolitan Club (cited above) and Fateh Maidan Club (cited above). O.) None of the cases really determines whether or not the doctrine of reciprocity is applicable, but it is based on this principle and on previous judgments. Accordingly, the Division Bench referred the matter to the largest bank to determine specifically whether the doctrine of reciprocity under the 46th Amendment Act still applies to registered associations or associations and whether the judgment of the Young Men`s Indian Association is still valid under the 46th Amendment Act. The recent decision of the three-member chamber of the Honourable Supreme Court in the Calcutta Club Limited case concerning the concept of reciprocity in tax laws has raised more concerns than it solves the dust. The ruling in question has major implications for the current Goods and Services Tax (GST) system, where clubs could take this decision as a precedent and stop paying taxes, which could lead to another round of litigation lasting decades. This article attempts to address the concept of reciprocity and its applicability under the GST system.
It was decided that the main purpose of the subscription was to obtain facilities for participation in the races, since the enjoyment of the club`s facilities on non-race days was only incidental or subsidiary, which was not the case when some persons contributed funds that united for commercial or non-commercial purposes without making a profit.