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2015 (10) TMI 1896 - ITAT DELHI

2015 (10) TMI 1896 - ITAT DELHI - TMI - Application u/s 12AA rejected - applicability of Principles of mutuality - Held that:- A perusal of the Clauses demonstrate that the principles of mutuality are not attracted in this case, for the reason that, there is no identity between the contributor and the participant of the funds. The main object, does not lay down, that the participants are confined to the persons who are Members of the Society. The argument of the Ld.Counsel for the assessee, that .....

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concept of mutuality applies to the assessee. Similar is my view on Clause 12 of the MOA read with Clause 18 of the Rules and Regulations in Annexure-I, lead me to a conclusion that concept of mutuality claimed by the assessee was rightly rejected by the Revenue.

The Hon’ble Supreme Court in the case of Chelmesford Club (2000 (3) TMI 4 - SUPREME Court) held that “where there is identity in the character of those who contribute and of those who participate in the surplus, the fact of .....

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r mutual benefit or returned to the contributors.

It is only when these tests are fulfilled that the principle of mutuality can be applied. In the present case, the assessee is under no obligation to return the funds to the contributors. - Decided against assessee. - ITA No. 5076/Del/2014 - Dated:- 7-10-2015 - Shri J. Sudhakar Reddy, Accountant Member For the Appellant : Prof. S. Sampath, C.A. For the Respondent : Smt. Rakhi Vimal, JCIT ORDER This is an appeal filed by the assessee di .....

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, (ii) conduct training programmes to serve regulatory agencies and (iiii) provide data bank of information relating to regulatory reform process and experience. The appellant filed its original return original Return of Income (ROI) on 03.09.2010 showing income of ₹ 9,59,630/-, which, later on, was revised showing Nil income on the basis of the principle of mutuality. The case was subsequently selected for scrutiny. The AO, observing that the appellant is free to accept gifts and donation .....

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refore, the AO, placing reliance on the decision of the Hon'ble Punjab and Haryana High Court in the case of Haryana State Cooperative Labour and Construction Federation Limited Vs. CIT 252 ITR 265, concluded that the members have no control over the fund of the appellant society; therefore the principle of mutuality does not applicable here. Consequentially, the AO placing reliance on the decision of the Hon'ble Supreme Court in the case of Chelmsford Club 243 ITR 89 held that the appel .....

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ct was challenged. The First Appellate Authority held that the income of the assessee is not covered by the principles of mutuality. Aggrieved the assessee is before us. 4. We have heard Prof. S.Sampath, C.A. the Ld.Counsel for the assessee and Smt.Rakhi Vimal, JCIT, Ld.D.R. on behalf of the Revenue. 5. The A.O. rejected the claim of the assessee that its income is exempt by the principles of mutuality by relying on: (a) Para 10 of the Memorandum of Association (MOA); (b) Para 12 of the MOA of t .....

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igh Court in the case of Haryana State Cooperative Labour and Construction Federation Ltd. vs. CIT reported in 252 ITR 265, was dealing with the case where the Members had no control over the funds of the Society and whereas, the facts in the present case are entirely different. He emphasized that in the case of Chelmford Club reported in 243 ITR 89 (SC), the condition laid down therein i.e. the funds can be acceptable for mutual benefit or returned to the contributors . He submitted that dissol .....

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apply to income from interest. He submits that the judgement of Hon ble Supreme Court in the case of Bangalore Club is against the assessee. On levy of interest u/s 234A, he points out that the directions of the First Appellate Authority are not implemented by the A.O. The Ld.Sr.D.R. relies on Clause no.10 and 12 of the MOA and argues that the pith and substance of this clauses demonstrates that the assessee is not governed by principles of mutuality. 6.3. After hearing rival contentions, I fin .....

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re industries; (iii) Initiate beneficial exchange of knowledge and expertise; (iv) Evolve best practices; (v) Build regulatory decision making and response capacity in South Asia; (vi) Conduct training programs to serve regulatory agencies and other stake holders; (vii) Spur research on regulatory issues; (viii) Interact, coordinate, facilitate and engage with various international developments, regulations, financial bodies and government or private entities of various countries. Further, it ma .....

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t or any other source in or outside India and the same shall be used by the association for exercising its objects and discharging its aim subject to the condition that any acceptance from foreign agencies, institutions and government will be on such terms as may be prescribed by statues or law for the time being in force. This includes: 10.1.1. A corpus fund of amount will be created with contribution from various members, individual, corporate body, association, trust, world bank, or any other .....

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time being in force. Similarly in the rules and regulations, Clause 11 read as follows:- 11. Utilisation of the funds 11.1. All the funds of the SAFIR shall be deposited, utilized or invested by the Secretariat under the general supervision of the Executive Committee as allowed under various applicable tax statutues and rules in force for the time being. 11.2. All the income and movable and immovable assets of the Association shall be utilized and applied solely for the promotion and achievemen .....

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out of pocket expenses incurred by him in connection with the work of the Association. 11.5 Notwithstanding anything contained hereinabove, any member of SAFIR may be allowed by the Steering Committee, on a recommendation made by the Secretariat, a remuneration for services rendered by him to the Association as may be considered reasonable in the circumstances of the case. Clause 18 of rules and regulations read as follows:- 18. Use of corpus in case of dissolution At any time, if it is found th .....

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other body having objects similar to SAFIR or to any charitable society to be determined by the votes of not less than three fifths of the members of the Steering Committee present at a meeting called for that purpose. 6.4. A perusal of these Clauses demonstrate that the principles of mutuality are not attracted in this case, for the reason that, there is no identity between the contributor and the participant of the funds. The main object, does not lay down, that the participants are confined .....

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