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TMI Blog2010 (7) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on behalf of the Revenue. 3. In the assessee's appeal the assessee has raised three issues, the first one being against the action of the learned CIT(A) in confirming the action of the AO in holding that the interest income received by the assessee to an extent of Rs. 28,29,845/- from the investments made in the banks who were not of the members of the assessee club as not being eligible for exemption on account of the principle of mutuality; the second being against the action of the learned CIT(A) in confirming the action of the AO in treating the donations received for sport tournaments as receipts from non-members especially when they were voluntary receipts and contribution by the donors and the third being against the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held to have every nexus to the regular and normal activities of the club vis-a-vis its members. 30. It is not the case of the assessee clubs that the funds which were invested in the form of fixed \ deposits or securities were kept in such deposit with a definite idea of using the same in any specific project for the further development of the infrastructural facilities of the club in the form of buildings or other facilities. On the other hand while the assessee clubs were able to generate substantial amount by way of contribution, donation etc., it had no corresponding plans or schemes to improve its infrastructure facilities or that such surplus funds were earmarked for any particular developmental activity in the interest of all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or returned to themselves. Similarly in CIT vs. Bankipur Club Ltd. (1997) 140 CTR (SC) 102 (1997) 226 nR 97 (SC) while setting out the benefits based on the principle of mutuality, the Hon'ble Supreme Court held as under: Under the n Act, what is taxed is the 'income, profits or gains' earned or 'arising', 'accruing' to a 'person'. Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eniences and accommodation. It was not done with private motives or tainted with commerciality. The facilities were offered only as a matter of convenience for the use of the members and their friends, if any, availing of the facilities occasionally. 34. As far as the Division Bench judgment of the Karnataka High Court in the case of Bangalore Club (supra) is concerned, the facts are identical and the assessee in that case is also a club having identical nature of membership and activities. The various reasoning adduced in the said judgment squarely applies to the facts of this case and, therefore, we adopt the said reasoning also to support our conclusions. 35. As far as in the other judgment of the Karnataka High Court viz., Canara Bank G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earning of huge surplus amounts by way of interest cannot be held to satisfy the mutuality concept. As held in the decision of the Karnataka High Court reported in cn vs. LT.L Employees Death Superannuation Relief Fund (supra) the principle of mutuality could be confined in respect of the income earned by the club out of the contributions received by the club from its members but it will have no application in respect of the interest earned from the deposits of surplus funds in the banks by way of income. 38. Having regard to our above conclusion, the first question of law as answered by the Tribunal will have to be upheld equally the second question of law is also answered against the assessee. In the result, the appeals fail and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that this basic principle of mutuality has been violated and consequently this income cannot be exempted by applicability of the principle of mutuality. In the circumstances, respectfully following the decision of the jurisdictional High Court in the assessee's own case, referred to supra, the finding of the learned CIT(A) on this issue stands confirmed. 8. In respect of the issue of the donations received for the sports tournament it is noticed that the donations are nothing but the advertisements which had been received from the non-members. Again on the same principle as that of the interest as the receipts are from the non-members the income from the said advertisement would be liable to tax and the principle of mutuality wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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