9911796707
TMI Blog1955 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... p.c. will be utilised towards office expenses and charity and the balance of 75 p.c. will be distributed amongst members as Mobadla. Therefore, briefly, the scheme was this. It was not possible for all members of the Association to get a ration card. The Association used its good office to get ration cards for some of its members. As these members benefited by obtaining ration cards and other members were with out ration cards, those who obtained ration cards were made to compensate those who had not, and the scale of compensation was laid down. The contention of the Income-tax authorities was that the surplus of 25 p.c. after legitimate deductions was the income of the asses-see which was liable to tax. The assessee contested this position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Turf Club Ltd., , to which Mr. Pandit has referred. In that case they referred with approval to the well known case of Styles v. New York Life Insurance Co., (1889) 2 Tax Cas 460 (B), and at p. 559 (of ITR): (at p. 89 of AIR), they refer to the observations of Lord Macmillan in that case: The cardinal requirement is that all con-tributsrs to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund; in other words, there must be complete identity between the contributors and the participators. If this requirement is satisfied, the particular form which the association takes is immaterial. And at p. 560 (of ITR): (at p. 89 of AIR), they point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and registration fees was not income from business, and Mr. Justice Collister in delivering the judgment points out that he refrained from expressing any view as to whether the Income-tax Commissioner was right in conceding that these payments were not income from business, for he was clearly of opinion that the department was bound by that admission. The Income-tax Offcer and the Assistant Commissioner of Income-tax both held that these payments were income from business and it was on that finding that the assessee asked the Income-tax Commissioner to refer the question to the High Court. But as just pointed out, the learned Judges took the view that inasmuch as the Income-tax Commissioner had accepted the position that the income was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held that it was a mutual association. Now, the fallacy underlying this argument is that although only a few members of the association could avail themselves of the benefit of the holiday camp and contribute to the profits, every member had a right to go to the camp and contribute to the profits. Therefore, for the purpose of mutuality it may not be necessary that contribution in fact should be made by every member, but every member should have the right to make the contribution, and Mr. Justice Finlay points out at p. 506 that in a club which gives various facilities some members may avail themselves of some facility and others may avail themselves oi other facilities, from that it does not follow that all the facilities were not ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the Income-tax Act. Undoubtedly, the association did do some work in possibly getting the ration cards and collecting the money from those members who had obtained ration cards. But inasmuch as it was paid for this service and the payment was only by a section of the members and not by all the members, the surplus receipt in the hands of the association-constituted income within the meaning of the Income-tax Act. 8. It is then urged by Mr. Pandit that the fund in the hands of the association was not at its free disposal. He points out that 75 p.c. had to be distributed among the members who did not receive the ration cards and after deducting the expenditure the balance had to be spent on charity. Now, it is difficult to under-st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
