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TMI Blog2023 (1) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ub [ 2008 (3) TMI 134 - BOMBAY HIGH COURT] hold that even if there are non-permanent members, non-life members, temporary or honorary members who are not entitled to vote or offer themselves as candidates for any elective office or to the membership of the council or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principles of mutuality. Once the assessee is governed by the principles of mutuality its income would not be income which would be assessable to tax and accordingly the additions of admission fees, interest received from banks and News letter sponsorship made by the AO and sustained by the ld. CIT(A) for the above asst. years are deleted. The grounds taken by the assessee in all the asst. years are therefore, allowed. Tribunal has held that even if there are non-permanent members, non-life members, temporary or honorary members, they are not entitled to vote or offer themselves as candidates for any elective office, or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principle of mutuality. Once an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o receipts from sale of scraps when under the memorandum of association the said amounts are to be disposed of in the event of dissolution by the members ? 4. In the hearing today, learned counsel for the appellant submits that he would confine his submissions to question Nos.1 and 3 only. 5. Sum and substance of the above two questions is whether the principle or the doctrine of mutuality would apply with reference to transactions entered into by the assessee with the non-permanent and non-life members ? 6. We may mention that appellant/assessee before us is the Jubilee Hills International Center, which is a club, but, registered as a society under the Andhra Pradesh (Telangana Area) Societies Registration Act, 1350F. It is basically a recreational club, facilities of which are to be availed of by the members. 7. In the assessment proceedings for the assessment year 2001-2002, assessing officer held that appellant would be entitled to exemption from income tax on the principle of mutuality only in respect of transactions entered into by the appellant with the permanent and life members. As a result, amounts received by the appellant under five different heads related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of by all members. 14. Before we deal with this issue, we may first advert to the doctrine or principle of mutuality. 15. In CIT v. Bankipur Club Limited (1997) 5 SCC 394, the question considered by the Supreme Court was whether in the case of a members club, a species of mutual undertaking, in rendering various services to its members which result in a surplus, the club can be said to have earned income or profits? In that case, Supreme Court held that the receipts for the various facilities extended by the club to its members as part of the usual privileges, advantages and conveniences attached to the members of the club cannot be said to be a trading activity. The surplus i.e., excess of receipts over the expenditure as a result of mutual arrangement cannot be said to be income for the purpose of the Act. 16. Again, in CIT v. Venkatesh Premises Cooperative Society Limited (2018) 15 SCC 37 , Supreme Court examined the doctrine of mutuality and held as follows: The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit from himself. An amount received from oneself, therefore, cannot be regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the principle of mutuality lies in the commonality of the contributors and the participants who are also the beneficiaries. The contributors to the common fund must be entitled to participate in the surplus and the participators in the surplus are contributors to the common fund. The law envisages a complete identity between the contributors and the participants in this sense. The principle postulates that what is returned is contributed by a member. Any surplus in the common fund shall therefore not constitute income but will only be an increase in the common fund meant to meet sudden eventualities. A common feature of mutual organizations in general can be stated to be that the participants usually do not have property rights to their share in the common fund, nor can they sell their share. Cessation from membership would result in the loss of right to participate without receiving a financial benefit from the cessation of the membership. 19. As a matter of fact, we find that in the case of the appellant itself, in three assessment years one preceding the present assessment year and two succeeding the present assessment year, Tribunal by a common order has held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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