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2017 (12) TMI 109 - AT - Income Tax‘Principle of mutuality’ - assessee club has been formed under the control of Haryana Urban Development Authority (HUDA) which is authority established by Haryana Government - Held that:- There can not be said to be straight jacket formula to say that in every a mutual concern the members must be entitled to a share in the surplus. In the aforesaid case laws as discussed by the Hon’ble Supreme Court in Banglore Cliub’s (2013 (1) TMI 343 - SUPREME COURT) if the scheme or the mechanism of functioning of a mutual organization is so devised that a taint of commerciality is involved, the income of the organization can be subjected to tax. As observed by the hon’ble supreme court, it is difficult and vexed question as to at what point of time the relationship of mutually ends and that of trading begins. Since the affairs of the assessee trust are controlled by the serving officers of HUDA, hence it has to pass through greater scrutiny as the chances of it crossing the thin line between the mutuality and commerciality are very high. However, at this stage, so far the Assessment Years under consideration are concerned, the revenue could not point out the taint of commerciality in the contribution, management and application of the surplus collected through contributions and subscriptions from the members and for price of the facilities availed by its members, hence, the same cannot be said to be taxable income of the society. Receipt from interest on FDR’s - It is held that for the assessment years under consideration, the assessee is entitled to the benefit of the doctrine of mutuality in respect of the surplus amount received as contributions or price for some of the facilities availed by its members. However the amount of interest earned by the assessee from the fixed deposits in the banks will not fall within the ambit of the mutuality principle and will therefore, be exigible to Income-Tax in the hands of the assessee-club. Our above decision will apply mutatis-mutandis to all the captioned appeals. In view of the above all the captioned appeals are treated as partly allowed.
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