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2023 (1) TMI 672 - HC - Income TaxPrinciple or the doctrine of mutuality - transactions entered into by the assessee with the non-permanent and non-life members - whether principle of mutuality would apply with reference to transactions entered into by an assessee with non-permanent and non-life members in the context of a club, facilities of which are availed of by all members? - HELD THAT:- As it is not the case of the revenue that subscriptions and other receipts from non-permanent members and non-life members haven’t gone to the common fund of the assessee-society or the assessee has earned any profit by trading it or the same has gone otherwise than the common fund of the Club. In the absence thereof, we respectfully following the decision of Bankipur Cub Ltd., [1997 (5) TMI 392 - SUPREME COURT] and the decision of Secunderabad Club [1975 (12) TMI 6 - ANDHRA PRADESH HIGH COURT] and also the recent decision in the case of CIT v. Willingdon Sports Club [2008 (3) TMI 134 - BOMBAY HIGH COURT] hold that even if there are non-permanent members, non-life members, temporary or honorary members who are not entitled to vote or offer themselves as candidates for any elective office or to the membership of the council or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principles of mutuality. Once the assessee is governed by the principles of mutuality its income would not be income which would be assessable to tax and accordingly the additions of admission fees, interest received from banks and News letter sponsorship made by the AO and sustained by the ld. CIT(A) for the above asst. years are deleted. The grounds taken by the assessee in all the asst. years are therefore, allowed. Tribunal has held that even if there are non-permanent members, non-life members, temporary or honorary members, they are not entitled to vote or offer themselves as candidates for any elective office, or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principle of mutuality. Once an assessee is governed by the principle of mutuality, its income would not be construed to be an income within the meaning of the Act and liable to be taxed. We are of the view that Tribunal was not justified in taking the view that the principle of mutuality would not apply with reference to transactions entered into by the appellant with the non-permanent and non life members. Decided in favour of the appellant/assessee
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