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TMI Blog2002 (9) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... K. RAVIRAJA PANDIAN. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J.-The memorandum of association dated November 14, 1981, of the assessee, Wankaner Jain Social Welfare Society, sets out the objects of the society. Those objects, inter alia, are to create and cultivate the habit of saving and thrift among the members of the society; to help by way of loan or other assistance to members who are in bona fide need of help for the purpose of promotion of business, trade, profession, industry agricultural, etc. The rules and regulations of the society make it compulsory for every member to participate in the scheme of deposit, which is provided for in rule 50(c). The deposit is to be a minimum of 50 paise and multiples thereof per working day. The members may seek loans. Loans are regulated by rule 52. The loan application is to be considered by the loan committee, only when a member has furnished two sureties. The decision of the loan committee will be final and binding on the applicants for loans. In the case of ladies who are not earning members, loan is limited to 90 per cent. of the deposit. The period of the loan will be from a minimum of one month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in law in holding that the principle of mutuality is not satisfied in this case? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that income arises only from those who have taken loans and hence the right to receive a portion of the income by those who have not taken the loans but have made deposits to the assessee vitiates the principle of mutuality?" For the assessment years 1989-90 to 1991-92 a further question has been referred at the assessee's instance, viz., as to whether the Tribunal is right in law in holding that the amended rule 57(b) would be operative only from the assessment year 1991-92 and not from 1990-91 in view of the fact that the amendment will come into force only after its approval by the general body of the association. For the assessment years 1989-90 to 1991-92, at the instance of the Revenue, two questions have been referred, viz., "1. Whether, the Tribunal was right in law in allowing the assessee's claim for deduction of interest on the deposits to the members of the society for the assessment years 1989-90 to 1991-92? 2. Whether the Tribunal was right in law and had valid materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s he holds a share. He has not to fulfil any other condition. His position is in no way different from a share holder in a banking company, limited by shares. Indeed, the position of the assessee is no different from an ordinary bank except that it lends money to and receives deposits from its shareholders. This does not by itself make its income any the less income from business within section 10 of the Indian Income-tax Act." The case of Styles [1889] 2 TC 460 decided by the House of Lords in 1889 concerned a mutual assurance company. Though Lord Halsbury who was one of the judges who heard that case held that the real nature of the transaction before the House was accurately described as being in the nature of a bet on the duration of life and observed that it would make no difference whether the members of the association made bets upon each other's lives or on the lives of people outside their own circle and that an ordinary betting man's gains would be assessable and they would not be the less so if his bets were confined to his own club or to an association whose rules excluded any bet except with a member of their own body, the other learned judges, who heard the case hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to become of the surplus if everything goes right? The practice is to take an account every year of assets and liabilities, and to give the insured the benefit of the surpluses, either by way of reduction of premium or by way of addition to the sum insured." It was further observed: "I do not understand how persons contributing to a common fund in pursuance of a scheme for their mutual benefit, having no dealings or relations with any outside body, can be said to have made a profit when they find that they have overcharged themselves, and that some portion of their contributions may be safely refunded." The law laid down in the case of Styles [1889] 2 TC 460 (HL) was in the context of a fact situation where there was complete identity between the persons who contributed to the earning of the so-called profit and the persons entitled to participate in that profit. The Supreme Court in the case of Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241, approved of that law and limited its application only to situations where the mutuality was clearly established by establishing the complete identity as between the contributor and the participator in the common fund. The fund whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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