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TMI Blog2010 (7) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... cted. The character of the society, needless to say, cannot be said to have changed. - the society, to cater to the needs of the members, have constructed the shops and no outside consumers are allowed to the complex of the society. The shops were built after obtaining proper certificate from the concerned engineer - the principle of mutuality would apply to the above income. – regarding interest, once the identity of the contributor to the fund of recipients is accepted, the principle of mutuality would get attracted. – ITAT decision in favor of assessee sustained. X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as capital nature and assessed as the same. As far as the receipt of interest is concerned, the assessing officer came to hold that for the relevant assessment year the assessee had shown interest receivable from the members and not being incorporated in account and as the assessee was following the mercantile system, it was treated as income. Being of this view, the assessing officer added Rs.27,13,797/- towards income and deducted Rs.50,000/- under Section 80P. In addition to the same, interest under Section 234 B was charged and a proceeding under Section 271(1)(c) for imposition of penalty was initiated. 4. Being grieved and dissatisfied, the assessee preferred an appeal before CIT(A) and contended that the conclusion arrived at by the assessing officer was totally unjustified, violative of principles of natural justice and against the concept of mutuality as is understood in law. It was also contended that the order passed by the assessing officer was perverse inasmuch as she has not appreciated the facts in proper perspective. The appellate authority held that no exemption from taxation of the income of the society was available as there was no obligation on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mutuality is applicable inasmuch as the object of the society as enumerated under clause 8 goes a long way to show that the assessee society could do all such things which are incidental or conducive to attain or any or all of the other objects and the clauses of the bye laws pertaining to development and construction of residential houses / flats for the members to provide common amenities and facilities as may be found practicable by the Delhi Development Authority and Municipal Corporation of Delhi and such other authorities and, therefore, the doctrine of equalization gets attracted; the maintenance fund and entry fee from the power of attorney holders are in direct relation with the members of the society and the funds are also collected from the members of the society and the shops having been constructed within the premises of the society having been approved by the concerned government authority it could be irresistibly concluded that the shops were constructed to cater to the needs of the members of the society only and no outside customer is allowed in the complex of the society and there has been necessary sanction for construction of such buildings, therefore, principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: "3. The issue with regard to the concept and principle of mutuality has been elaborately examined by the apex Court in Chelmsford Club v. CIT (2000) 243 ITR 89. Their lordships have held that where a number of persons combine together contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus generated cannot in any sense be regarded as profits chargeable to tax. It has been observed that what is required to be seen is whether there is a complete identity between the contributors and participators. Once the identity of the contributor to the fund of the recipients of the funds; the treatment of the company, though incorporated as a mere entity for the convenience of the members, in other words as an instrument obtained to their mandate; and the impossibility that the contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves is established, the doctrine of mutuality is established." 8. In the case at hand, the tribunal has appreciated that a member who was registered earlier and the member ..... X X X X Extracts X X X X X X X X Extracts X X X X
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