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TMI Blog1981 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO, the assessee took the stand that it is a mutual association formed to guard and protect their interests. The sources of income are from membership subscriptions, donations and bank interest. It was submitted that the membership fee is not liable to tax on principle of mutuality. It was also pointed out that subscription fee is a charge on members, a condition precedent to becoming a member, and not income from its specific services performed. Thus, it was claimed that the subscription fee received from the members was not liable to tax. 3. The ITO was not satisfied with the contentions of the assessee. According to him, similar point was in issue in the assessment year 1974-75 and in that year also such income was taxed. The ITO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount from its funds for salaries, office rent, entertainment programmes, education, over and above for audit, administrative or other matters as deemed fit by the institute. It was also contended that if the institute stops its activities and its members by majority vote declare it closed, the balance of movable or immovable properties of the institute can be transferred or distributed to any charitable institute or social institute, as per the meeting's decision. As a matter of fact, the association acts for protecting the interests of its members. Thus, it was contended that the assessee is a mutual concern and as such the membership fee is not taxable under the Income-tax Act, 1961 ('the Act'). 6. On behalf of the revenue it was conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame. They contribute, not with an idea to trade but, with an idea of rendering mutual help. They receive back the surplus which is left out after meeting the expenditure which they have incurred for their common purpose, in the same capacity in which they have contributed. Thus, they receive back what was already their own. The receipt thus coming in their hands is not a profit because no man can make a profit out of himself, just as a trader cannot enter into a trade or business with itself. Therefore, the main test of mutuality is complete identity of the contributors with the recipients. If such a mutual concern received any such income and the surplus goes back to those who contributed the said income, it is not liable to tax because, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the institute can be transferred or distributed to any charitable institute or social institute as per the meeting's decision." The said clause shows that at the time of the dissolution of the association its surplus was liable to be distributed even amongst the non-members. As a matter of fact, the surplus of the assessee shall at the time of its dissolution be used in the manner proposed in the resolution passed by the association. It is apparent that any resolution which may come up for consideration in future would not necessarily provide for the distribution of surplus assets only amongst the members of the association. If, therefore, the assets of the association are not liable to be returned to the members, the identity between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income, unless it is expressly exempt. There is nothing in the Act to indicate that the source must be one which is recognised under the law. Even income derived from an illegal business could be liable to tax. Reference may be made to the ratio of the decision in the case of CIT v. Smt. Shanti Meattle [1973] 90 ITR 385 (All.). The word 'income' came up for consideration before the Privy Council in the case of CIT v. Shaw Wallace Co. 6 ITC 178. The Privy Council observed as under : "... Income... in this Act connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The subscriptions received by it from its members cannot, therefore, be charged to tax under the head 'Profits or gains of business or profession'. But that does not settle the question of taxability of subscriptions received by the assessee from its members because if these subscriptions amount to 'income', tax on that 'income' would be chargeable under the residuary head 'F.---Income from other sources' which relates to income from other sources. 15. Therefore, the pertinent question which would arise, and to be considered, is whether the receipt of subscription by the assessee from its members amounts to the receipt of 'income'. From the aforesaid decision, it is clear that the assessee gets the receipts with some sort of regularity o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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