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2011 (8) TMI 752 - HC - Income TaxAssessee is a social club not registered as association or society - receives monthly subscription for use of facility from its members - earned interest on the fixed deposits kept by it with Andhra Bank, Lloyds Finance Ltd etc which are its corporate members - Revenue contended interest accrued on the fixed deposits, parked with commercial banks, is liable to tax - Assessee replied corporate members, are not tainted with commerciality, interest income not taxable on the principle of mutuality - Held That:- An unregistered association, like the Secunderabad club, parking their surplus funds with corporate member banks to earn interest is altogether different from an association of persons lending money only to its members. Therefore if an incorporated entity is engaged in trade, the profit from it, even if they are transactions with members, would be taxable and the principle of mutuality would have no application. Further In view of Bankipur Club Ltd. (1997 -TMI - 5595 - SUPREME Court), "a host of factors need to be considered to arrive at a conclusion as to at what point does the relationship of mutuality end and that of trading begin". - the nature of the transaction between the assessee and the bank/banks would disqualify application of the principle of mutuality. - Decided against the assessee.
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