| The Tax Publishers2019 TaxPub(DT) 1783 (Hyd-Trib) INCOME TAX ACT, 1961
Section 4
Even though the bank was having a corporate membership with the club/society, the principle of mutuality does not arise and nature of the transaction between assessee and bank would disqualify application of the principle of mutuality. Therefore, the transactions with the bank which was not even a member of the society could not be considered as a transaction for which principles of mutuality would apply.
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Income - Mutuality principle - Interest on deposits with corporate members of club -
Assessee, a mutual benefit society, filed its return of income admitting NIL income by claiming that income earned was exempt from tax on the principle of mutuality. AO observed that though the society was a mutual benefit society, it was seen from the Income & Expenditure that income of assessee includes the interest from bank. Assessee, inter-alia stated that it was formed with no profit motive and no commercial activity was involved in its working and to promote and encourage economic and social betterment of its members through thrift self-help and mutual aid with the principle of cooperation. Held Even though the bank was having a corporate membership with the said club/society, the principle of mutuality did not arise. The nature of the transaction between assessee and bank would disqualify application of the principle of mutuality. Therefore, the transactions with the bank which was not even a member of the society could not be considered as a transaction for which principles of mutuality would apply. Not only on the principles laid down in the subject but also on the fact that interest was received from a non-member, principles of mutuality did not apply. Thus, no merit was found in assessee's appeal.
Relied:M/s. Bangalore Club v. CIT & ANR. (2013) 350 ITR 509 (SC) : 2013 TaxPub(DT) 434 (SC), , CIT, Madras v. Kumbakonam Mutual Benefit Fund Limited (1964) 53 ITR 241(SC) : 1964 TaxPub(DT) 347 (SC), CIT, Bombay City v. The Royal Western India Turf Club Limited (1953) 24 ITR 551(SC) : 1953 TaxPub(DT) 127 (SC) CIT v. Secunderabad Club Picket & Armed Forces Officers' Co-operative Housing Society Ltd. (2012) 340 ITR 121 (AP-HC) : 2012 TaxPub(DT) 675 (AP-HC) and Followed:CIT v. Bankipur Club Limited (1997) 226 ITR 97 (SC) : 1997 TaxPub(DT) 1250 (SC), CIT v. Ranchi Club Limited (1992) 196 ITR 137 (Pat-HC) : 1992 TaxPub(DT) 765 (Pat-HC)
REFERRED :
FAVOUR : Against the assessee.
A.Y. :
IN THE ITAT, HYDERABAD BENCH
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