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TMI Blog1983 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... he main object being to regulate the relations between members and their employees and between members and members : " (i) To promote and protect the trade, commerce, industry and agriculture in which the members of the association are or may be concerned and to impose restrictive conditions on the conduct of such trade, commerce, industry and agriculture. (ii) To formulate and recommend to members common administrative policies and to settle questions of common interest and to protect the members of the association against competition. (iv) To formulate and regulate terms and conditions of employment of the employees of its members and to start, organise, establish and maintain labour relations and labour welfare organisations. (v) To consider all questions affecting trade, commerce, industry and agriculture in which members are or may be concerned and to the all necessary action in connection therewith. (vii) To engage the services of technical and other advisers and experts for the benefit of the trade, commerce, industry and agriculture in which the members of the association are or may be concerned. (x) To establish a fund or funds for the purpose of---- (a) lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich such members are contributing to the association at the time of its dissolution'. Lastly, rule 37 prescribes the procedure for the amendment of the rules. 4. For the assessment year in question the assessee filed its return showing an income of Rs. 4,498 by deducting an amount of Rs. 22,810 as the carry forward of unabsorbed losses from the gross income of the year amounting to Rs. 27,308. The ITO observed that Shri D.C. Awasthi, secretary, taxation department, was devoting his attention to the income-tax and other personal cases of the members of the Central Board, their wives and children, etc. Shri S.S. Jain, the accountant, the ITO observed, had also been attending the income-tax office in connection with the assessment proceedings of the family members. He, therefore, disallowed 75 per cent of the total expenditure claimed at Rs. 2,46,192 as not being for the objects of the assessee and framed the assessment accordingly on a total income of Rs. 1,76,468. 5. The assessee, being aggrieved, came up in appeal before the Commissioner (Appeals). Besides other contentions, the contention raised on behalf of the assessee there was that its income could not be assessed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o attract the application of this principle, the contributors to the common fund and the participators in the surplus has been an identical body. But as held in the case of Merchant Navy Club that does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid. It does not make any difference whether the surplus is paid to the members or carried to a reserve for application to the improvement of the mutual benefit or organisation and for providing better facilities for the members or that it is not distributed in precisely the proportions in which the members contribute to the surplus. In the case of Merchant Navy Club their Lordships of the Andhra Pradesh High Court referred to the observations of Wheat Craft in Law of Income-tax, Surtax and Profits Tax to the effect that "it does not matter that the class may be diminished by persons going out of the scheme or increased by others coming in". In the case of Cawnpore Club Ltd. though the headnote of the law report gives a different impression, it is seen from the full report that what the Hon'ble High Court decided was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that the objects of the association concerns only members and not any non-members. Further, as we have already seen above, no non-member is entitled to any amenity benefit, convenience, facility or service and every member has to pay subscriptions and contributions in accordance with rule 9. Rule 35 also provides for distribution of the surplus amongst members, in the event of the dissolution of the assessee-organisation. The share in the surplus which each member has, is not important. Thus, the learned Commissioner (Appeals) was not justified in observing that there was no complete identity between contributors and the participators of service. The only source of the receipts of the assessee-organisation is from subscriptions and contributions from members. The cases digested at pp. 212-213 of Chaturvedi and Pithisaria's commentary, relied upon on behalf of the revenue have been gone through and on facts they do not help it. 10. The second consideration which weighted with the learned Commissioner (Appeals) was that a number of services were being made available to persons who were non-members and who had not contributed at all to the association either by way of contribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above manner from any non-members. In our view the above submissions made on behalf of the assessee are quite correct. We have also gone through the annual report of the assessee-organisation for the period 1-1-1975 to 31-12-1975 wherein the statement of affairs shows that the activities of the assessee-organisation were for the mutual benefit of the members. It also shows that the only source of income of the assessee was from subscriptions. The assessee has given a comparative statement showing total subscription, total expenditure and total establishment expenses from 31-12-1970 to 31-12-1974 year-wise. They show that ad hoc subscription is taken from the members and if at the end of the year it is found that the total expenditure was less than the total subscription collected, the subscription taken from the members for the next year is correspondingly reduced and similarly, if the total expenditure exceeds the total subscription the subscription next year is increased. We have also seen the details of the members of the staff of the assessee-organisation and their designations and duties assigned to them. The foregoing evidence and the material clearly shows that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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