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TMI Blog2023 (7) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... b should not make any profit. On that principle the income of the club involving contributors and participators is not taxable. Revenue contended that the space provided by the club was in the exclusive occupation of Reliance. It was not being used as a facility of the club. It was an independent transaction between the club and Reliance . Although Reliance may be a corporate member it had entered into a lease agreement with the club not in the capacity of a corporate member but an independent body. Now, these are questions of facts. These facts had to be established threadbare before any opinion on the substantial question of law could be expressed. On examination of the order of the Assessing Office, CIT (Appeal) and the tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Limited for occupation of a portion of the club premises. In the assessment year 2008-09 this receipt was Rs.78,49,798/-. It may have been a little different in the other assessment years. Now, Reliance Industries Limited is also a corporate member of the assessee club. The substantial question of law, which arises, is whether this sum received by the appellant/assessee on account of rent is taxable under the head Income from house property ? Section 22 of the Income Tax Act, 1961 provides that the annual value of a property of which the assessee is the owner shall be chargeable to income tax under the head Income from house property . Section 23 (2) clarifies that where the property consists of a house or part of a house wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation claiming to be mutual concern in a fixed deposit with the banks the complete identity between the contributors and the participants in the funds or the amounts invested in member banks is ruptured. It held that till the surplus funds were generated and was used only amongst the members/contributors, the complete identity between contributors and participants continued. However the moment the funds are invested in fixed deposits with the banks and the funds are used for advancing loans etc. by the Bank to its customers, the identity of participants and contributors is sapped. Thus the interest earned on fixed deposits is to be brought to tax. Aggrieved by this order, the assessee the Saturday Club Limited has preferred these ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the members. The members may get it back either in the shape of reduction of price or extension of facilities that are to be provided to the members in future. The important point is that the company is not acting as a business concern or a trading company on its own for the purpose of making gain. The company is being used by the members for the purpose of obtaining goods and services as their agent. A company can make profit out of its members when members are treated as customers. Where, however, all that a company does is to collect money from a certain number of people and retain the surplus fund for the benefit of those people not as shareholders of the company but as people who subscribed to it or paid for it, then there is no profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent from that of his members. However, there is a difference between the legal identity of a body corporate and that of a recreational club in certain matters. It is in these matters that the principle of mutuality is involved. The members of the club are seen both as contributors and participators. The club and its members are seen as one person. Usually a member has to pay to avail of the services and facilities provided by the club. By way of subscription or contribution a member may contribute a sum of money to the club in a particular month. Similarly other members may also contribute this amount or any lesser or greater sum. This sum may be utilised by the club to bring in stocks of food, drinks, sports gears and other items and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facility of the club. It was an independent transaction between the club and Reliance. Although Reliance may be a corporate member it had entered into a lease agreement with the club not in the capacity of a corporate member but an independent body. Now, these are questions of facts. These facts had to be established threadbare before any opinion on the substantial question of law could be expressed. On examination of the order of the Assessing Office, CIT (Appeal) and the tribunal we do not find any analysis of the facts, which would go to show whether the principle of mutuality was being maintained in the subject transaction between the club and Reliance. We find that in these orders that only conclusions are made with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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