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2016 (4) TMI 743 - BOMBAY HIGH COURT

2016 (4) TMI 743 - BOMBAY HIGH COURT - TMI - Addition on contribution from the members - taxability of excess of income over expenditure - application of doctrine of mutuality - Held that:- The contributions made by the members to the respondent-assessee cannot be a subject matter of tax merely because the part of its excess of income over expenditure is invested in mutual funds. It is also not the case of the Revenue that the dividend received from mutual funds have not been offered to tax by t .....

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he contribution received from its members. In fact the decision of this Court in Common Effluent (2010 (6) TMI 52 - BOMBAY HIGH COURT ) concludes the issue in favour of the respondent assessee. - Income Tax Appeal No. 2455 of 2013 - Dated:- 31-3-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Petitioner : Mr Ashok Kotangale i/b Ms Padma Diwakar For the Respondent : Mr B V Jhaveri JUDGMENT 1. This Appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 (the "Act") .....

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e Assessing Officer on the Assessee?" 3. The respondent-assessee is an association of Air Cargo Agents in India. During the subject assessment year 200708 it received subscription/contribution from its members in three forms i.e. annual subscription, member's annual convention and member's training programmes aggregating to contribution from the members of ₹ 54.07 lakhs. In its Return of Income the assessee offered an amount of ₹ 12.06 lakhs as its Income. However, the a .....

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. In the circumstances by the Assessment Order dated 20th November, 2009 the Assessing Officer brought the entire contribution of ₹ 54.07 lakhs received from its members as income chargeable to tax. 4. Being aggrieved the respondent-assessee carried the issue in appeal to the Commissioner of Income Tax (Appeals). By order dated 14th December, 2011 the Commissioner of Income Tax (Appeals) allowed the appeal holding that the petitioner has been assessed as mutual concern for earlier assessme .....

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excess of income over expenditure is invested in fixed deposits. Thus the contribution by members of the association would not result in the contributions being exigible to tax. Thus, the addition made by the Assessing Officer of ₹ 54.07 lakhs in respect of contribution from members was deleted. 5. Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. The Tribunal by the impugned order held that the contribution received by the members were utilized for the benefit of .....

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n of the Apex Court in Bangalore Club v/s. CIT 350 ITR 509 and submits that in view of the aforesaid decision, the concept of mutuality will not be applicable/available to the respondentassessee. This is for the purpose that some part of its excess of income over expenditure has been invested in Mutual Funds. On the other hand, Mr. Jhaveri, the learned counsel for the Assessee reiterates the reasoning in the impugned order of the Tribunal and further points out that the dividend received on the .....

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tself. Therefore the test to be satisfied before an association can be classified as a Mutual concern are complete identity between the members i.e. contributors and the participants, the action of the mutual concern must be in furtherance of its objectives and there must be no scope of profiteering by the contributors from a fund. These tests have in fact been reiterated in Bangalore Club case (supra). However, the facts therein are completely distinguishable. Amongst the members of the Bangalo .....

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