TMI Blog2014 (3) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. - Tax Case (Appeal) No.2601 of 2006 - - - Dated:- 13-2-2014 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Petitioner : Mr. R. Kumar For the Respondent : Mr. N. V. Balaji ORDER (The Order of the Court was made by Chitra Venkataraman, J.) The assessee is on appeal as against the order of the Income Tax Appellate Tribunal, dated 26.04.2006, relating to the assessment year 1996-97. 2. The assessee is an individual, who was a subscriber to a Chit scheme. During the assessment year 1996-97, the assessee received chit dividend of Rs.90,140/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running chit, on the other hand, he is only a subscriber to the Chits Scheme floated by another person. It is not denied by the assessee, that what was received by the assessee as by way of dividend was over and above what was contributed by him under the Chit Scheme. Thus, the assessee being just a subscriber to the Chit Scheme, it is difficult for us 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. 8. In this connection, the decision relied on by the assessee in the case of Soda Silicate and Chemical Works vs. CIT, reported in 179 ITR 588 merits to be considered. The assessee therein joined the chit fund and made contributions to it. He secured a chit at discounted amount and on the discount, he sought for deduction in computing the net assessable income. The Assessing Officer disallowed the claim on the ground that it was not the business of the assessee to contribute towards chit funds, thus, the loss incurred was neither incidental to the business nor even remotely related to the business. The Appellate Authority, however, allowed the claim on the ground that the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion take advantage of the facilities which it offered does not affect the mutuality of the enterprise. The Supreme Court further pointed out to the leading decisions in English Law as well as the Law and Practice of Income Tax by Kanga and Palhivala, and held that where persons carrying on trade in such a manner that they and customers are the same persons, no profits or gains are yielded by the trade for tax purposes; such a surplus is regarded as their own money and returnable to them. Referring to the members' club, the Supreme Court further pointed that in respect of profit is derived from affording its facilities on members, the income was assessable. The Apex Court further pointed out that the doctrine of 'mutuality' applied to mutual insurance companies to certain municipal undertakings and members' clubs and mutual associations, whether incorporated or unincorporated, the only requirement is, there must be complete identity between the class of contributors and class of participators. Thus, the crucial issue for consideration in cases where it is claimed that on the basis of the principle of mutuality is as to whether, the receipts are exempt from taxation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome received by the assessee in the chit scheme, participated by the assessee. 12. Learned counsel appearing for the assessee placed before us the unreported decision of this Court in T.C.(A).No.1023 of 2007, dated 22.08.2007, [Shri Sunil Koliyot vs. The Income Tax Officer]. The facts therein were that the assessee was engaged in the business of interior decoration and the assessee was a member in chit fund; while completing the assessment, the Assessing Officer disallowed the claim of deduction in respect of chit loss on the ground that running a chit fund or being a member in a chit was not the business of the assessee; that the lumpsum amount received did not give rise to any income, assessable to Income Tax Act. Thus, the Officer rejected the contention of the assessee that he had been financing his business by subscribing to the chits; hence, the interest payment made on the chit bid was allowable as deduction. As against the assessment order, the appellant preferred appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) accepted the contention of the appellant and deleted the disallowance. Aggrieved by this, the Revenue preferred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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