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2014 (3) TMI 388 - HC - Income TaxClaim of exemption u/s 28(iii) of the Act Income derived from chit dividend Held that:- The assessee is just a subscriber to the Chit Scheme thus, it is difficult to draw the principle of mutuality to hold that the surplus received as by way of dividend was merely distribution of what was contributed by the assessee Relying upon Soda Silicate and Chemical Works vs. CIT [1989 (4) TMI 63 - PUNJAB AND HARYANA High Court] - chit transaction being one, where the members of the chit made contributions to the fund by monthly installments and receive lumpsum amount, but at a discount - the discounted amount would be distributed to the members as dividend and the contribution made to the chit fund - the contribution made to the chit fund could not be treated as business expenditure or the receipt of lumpsum amount or the dividend could be regarded as business activity of the assessee - the nature of the business of the assessee, the Court held that the receipt from the Chit fund could not be regarded as 'income from business activity' the order of the Tribunal is upheld in disallowing the assessee's claim of loss in the chit fund during the year. Principle of mutuality Held that:- The decision in CIT vs. Bankipur Club Limited [1997 (5) TMI 392 - SUPREME Court] followed - the assessee is only a subscriber to a chit run by another concern - thus, the question of invoking the mutuality principle does not arise by the mere chance of other participants subscribing to the chit scheme - the dividend income received over and above what had been subscribed by the assessee liable to be assessed as income of the assessee thus, the order of the ITAT upheld Decided against Assessee.
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