9911796707
TMI Blog2012 (12) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... g the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature. - The plea of the assessee for tax exemption on the ground of mutuality, therefore, must succeed. - Decided in favor of assessee. - IT APPEAL NO. 1156 (KOL.) OF 2011 - - - Dated:- 19-10-2012 - PRAMOD KUMAR AND MAHAVIR SINGH, JJ. Sanjay Kr. Kejriwal for the Appellant. R.K. Saha for the Respondent. ORDER Pramod Kumar, Accountant Member - By way of this appeal, the assessee-appellant has challenged Commissioner of Income Tax (Appeals)'s order dated 22nd July, 2011, for the assessment year 2006-07 on the following grounds :- (1) That the ld. CIT(A) was unjustified in holding that the income of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) but without any success. The assessee is not satisfied and is in further appeal before us. 3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 4. We have noted that the CIT (Appeals) has confirmed the action of the Assessing Officer primarily on the ground that "the learned A.R. could not explain the provisions under which the income of the appellant association was exempt" and has, on this basis, simply brushed aside the exemption on the ground of mutuality. The law is fairly well settled on the issue. In the case of CIT v. Bankipur Club Ltd. [1997] 226 ITR 97. Hon'ble Supreme Court has observed as follows :- "6. Under the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king; but, where a club extends facilities to non-members, to that extent the element of mutuality is wanting " (Emphasis, italicised in print, supplied) Simon's Taxes Vol. B, 3rd Edn., paragraphs BI.218 and BI.222 (pages 159 and 167), formulate the law on the point, thus: " it is settled law that if the persons carrying on a trade do so in such a way that they and the customers are the same persons, no profits or gains are yielded by the trade for tax purposes and therefore no assessment in respect of the trade can be made. Any surplus resulting from this form of trading represents only the extent to which the contributions of the participators have proved to be in excess of requirements. Such a surplus is regarded as their own m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme for their mutual benefit, having no dealings or relations with any outside body, they cannot be said to have made a profit when they find they have overcharged themselves and that some portion of their contributions may be safely refunded. It has also been established that the same principle applies although the contributors incorporate themselves into a separate entity to carry out the mutual scheme and the surplus contributions are put to reserve and not immediately returned. For this doctrine to apply it is essential that all the contributors to the common fund are entitled to participate in the surplus and that all the participators in the surplus are contributors, so that there is complete identity between contributors and partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus precisely what he has paid." The Madras, Andhra Pradesh and Kerala High Courts have held that the test of mutuality does not require that the contributors to the common fund should willy-nilly distribute the surplus amongst themselves: it is enough if they have a right of disposal over the surplus, and in exercise of that right they may agree that on winding up the surplus will be transferred to a similar association or used for some charitable objects .." 8. The crucial issue that arises for consideration in cases where it is claimed that on the basis of the principle of mutuality, the receipts by the 'Society' or 'club' is exempt from taxation, has been succinctly stated by the Judicial Committee of the Privy. Council in Fletcher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt is to be taken as taxable receipt, it is only elementary that conduct on the part of the person making payment cannot determine character of receipt in the hand of recipient. That apart, it is also a fact of life that sometimes taxpayers err on the side of excessive caution and deduct taxes as a measure of abundant caution. The mere deduction of tax at source by person making the payment in our humble understanding, cannot lead to the conclusion that receipt was taxable in nature. It is too na ve to the accepted or to be even given a serious consideration. The factors relied upon by the authorities below, in rejecting assessee's plea, are not germane to the context and devoid of legally sustainable merits. The plea of the assessee for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
