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2015 (10) TMI 1896 - AT - Income TaxApplication u/s 12AA rejected - applicability of Principles of mutuality - Held that:- A perusal of the Clauses demonstrate that the principles of mutuality are not attracted in this case, for the reason that, there is no identity between the contributor and the participant of the funds. The main object, does not lay down, that the participants are confined to the persons who are Members of the Society. The argument of the Ld.Counsel for the assessee, that Clauses 10 (rules and regulations) and Clause 12 of the MOA cannot be applied, for the reason that no such activity has taken place during the year, or that the happening of dissolution is hypothetical is not correct. When the constitution of the Society authorizes receipt of money by way of funds, donations, contributions, grants, in addition to subscription and charges received by the Members, then non receipt of the amounts during the year, cannot be a ground to come to a conclusion that the concept of mutuality applies to the assessee. Similar is my view on Clause 12 of the MOA read with Clause 18 of the Rules and Regulations in Annexure-I, lead me to a conclusion that concept of mutuality claimed by the assessee was rightly rejected by the Revenue. The Hon’ble Supreme Court in the case of Chelmesford Club (2000 (3) TMI 4 - SUPREME Court) held that “where there is identity in the character of those who contribute and of those who participate in the surplus, the fact of incorporation may be immaterial and the incorporated company may well be regarded as a mere instrument, a convenient agent for carrying out what the members might more laboriously do for themselves”. Their Lordships have laid down the three tests before the principle of mutuality can be applied. In a nutshell, these tests are: (i) the identity of the contributors to the fund and the recipients from the fund; (ii) the organization exists only for mutual benefit; (iii) the funds can be expended for mutual benefit or returned to the contributors. It is only when these tests are fulfilled that the principle of mutuality can be applied. In the present case, the assessee is under no obligation to return the funds to the contributors. - Decided against assessee.
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