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2015 (5) TMI 1 - HC - Income TaxPrinciple of Mutuality - taxability of 'Card guest income' and 'general guest fee' received by the club paid by the members - Held that:- There is not a finding of fact that the club receives any amount from non-members, all that the Tribunal has held is that the officer has brought the income from the costs, which is to be paid by the members on behalf of the guests. This itself goes contrary to the facts and the decision of the Apex Court in BANGALORE CLUB VS. COMMISSIONER OF INCOME TAX & ANR.,(2013 (1) TMI 343 - SUPREME COURT), on which reliance has been placed by Mr. Desai wherein observed that the first condition to invoke the principle of mutuality requires that there must be a complete identity between the contributors and the participators. However, in the very judgment, the Apex Court spelt out that caution to be exercised while looking to the mutuality or the commercial activity and it is a difficult question of fact. In this case, facts, which is to be seen from factual matrix, shows that neither the ITAT nor CIT come to the conclusion as to who contributed to the funds as non-members. Just because the nonmembers are brought to the club, it would not come out of the mutuality aspect. The decision of this Court in “SPORTS CLUB OF GUJARAT LTD. Vs. CIT”,(1987 (10) TMI 21 - GUJARAT High Court ), which is sought to be relied upon by the authorities below and Mr. Desai, this Court held that the assessee’s income from interest was not from a mutual activity and as such it was exigible to tax, and therefore, the assessee was not entitled to the benefit under Section 44A and that the entire expenditure incurred in all activities was not deductible from the assessee’s taxable income. In the said case, this Court further held that the contributors to the common fund are entitled to participate in the surplus, thereby creating an identity between the participants and the contributors. Just because the transactions, which are non-mutual in character, would not destroy the principle of mutuality. Thus, the decision in the case of “BANGALORE CLUB”(Supra) would not apply to the facts of the case on hand, since, in that case the assessee-Club had received income from interest on surplus funds kept in member banks. Hence, these appeals deserve to be allowed. - Decided in favour of assessee.
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