TMI Blog2006 (3) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, Rs. 8,13,170 in assessment year 1997-98 and Rs. 9,44,987 in assessment year 1998-99 as income from other sources and in not assessing the said income earned by the assessee from its own members, as exempt from tax on the principles of mutuality. 3. The assessee-society was formed on 18-7-1992 and had moved an application for registration with Registrar of Societies under the UP Co-operative Societies Act, 1965. During the course of assessment proceedings in the case of Mansarovar Co-operative Bank Ltd., Lucknow, it was noticed that the assessee had invested certain amounts in the said Bank, but had not filed any return. Accordingly, proceedings under section 147 were initiated and notice under section 148 was issued for assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 1996-97 and 1997-98 the Assessing Officer did not accept the assessee's status as that of Co-operative Society, but treated it as an AOP. In regard to assessment year 1998-99, since the registration certificate was granted on 3-10-1997, prior to that date, the assessee's status would be same as that in assessment years 1996-97 and 1997 -98. The Assessing Officer, however, treated the status of the assessee as AOP in all the three assessment years. The Assessing Officer denied the assessee's claim for deduction under section 80P(d) of the Act. The Assessing Officer also did not accept the assessee's contention regarding provision made in the accounts for interest due to various member co-operative banks. In assessment year 1996-97, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed on 18-7-1992 and had applied for registration with the Registrar of Societies under section 7 of the Co-operative Societies Act, 1965. The application of the assessee was not rejected by the Registrar and the registration certificate was issued in the normal course. The ld. counsel submitted that since no objection was raised by the Registrar, the registration will relate back to 18-7-1992. The ld. counsel further pointed out that the assessment order for assessment year 1996-97 was made as base and, therefore, neither the Assessing Officer nor the ld. CIT(A) appreciated the facts for subsequent years. The ld. counsel has pointed out that in any view of the mater, the income from 3-10-1997 to 31-3-1998 comprised in assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on the banking business activities. There is no dispute that RBI had not granted the licence for carrying on banking business activities and, therefore, we reject this plea of the assessee. 6. The second plea on which the assessee has emphatically relied is based on the principles of mutuality, by applying which, the assessee claimed that its income was exempt. It is not disputed that the assessee-society was formed by 20 urban co-operative banks, who had contributed share capital of the bank and this cooperative society was formed to act as umbrella to all its member societies. The money received from various registered member co-operative banks was parked with M/s. Mansarovar Co-operative Bank Ltd., who was also one of the member c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise." 8. The concept of mutuality is primarily based on the principle that one cannot make profit from himself. These principles were applied by the Hon'ble Supreme Court in the case of Bankipur Club Ltd. wherein it was held that the surplus resulting from rendering va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Here all the ingredients necessary for holding the income being exempt on the concept of mutuality are satisfied because there is complete identity between the contributors and participators. In the present case, the complete identity between the contributors and the participators is fully satisfied. The requirement of law is that the contributors to the common fund and the participators in the surplus must be an identical body. That does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid. What is required is that the members as a class should contribute to the common fund and participators as a class must be able ..... X X X X Extracts X X X X X X X X Extracts X X X X
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