9911796707
TMI Blog1957 (3) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained a secretariat, whose advice and services were available to the members as well as to those that represented their interests in the Central and State Legislatures and in the Local Boards. Annual contributions were levied by the Fund as subscriptions from its members, the quantum of which was determined by the resolutions of the executive committee of the Fund. The Fund had no written rules or by-laws to governs its constitution or to regulate its income and expenditure or to regulate the surplus, if any, of its receipts over the expenditure. That there was a surplus in each of its accounting years, the calendar year, from 1942 was not in dispute. In the relevant accounting year with which we are concerned., 1945, ₹ 4,609 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem by the association." The Assistant Commissioner agreed with the Income-tax Officer that the sum of ₹ 4,609 should be brought to charge as income under the head "business". He did not explain either the basis on which it could be held to be income of the Fund from any business that it carried on. We confess we found it even more difficult to discover the real basis on which the Tribunal came to the conclusion that the surplus in question should be treated as income from business. In paragraph 6 of its order the Tribunal held : "There is no doubt that there is no mutuality so as to bring the case within section 10(6). " Earlier in paragraph 5 it recorded the finding : "Here there is no such tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act were not satisfied, the Fund could not be deemed to have carried on business, and the surplus could not be treated as profits and gains from the activities of the Fund which the legal fiction enacted in section 10(6) constituted business. Section 10(6) run : "A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and profits and gains therefrom shall be liable to tax accordingly." The finding of the Department authorities, which was confirmed by the Tribunal, it should be remembered, was that the Fund was not a mutual benefit ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them all. Only members made their contributions and not the others, for example, the members of the Legislatures. Even had the services of the Fund been confined to its members, that by itself would not conclude the question, was the Fund a mutual benefit association. The crucial test of mutuality was laid down by Lord Macmillan in Municipal Mutual Insurance Ltd. v. Hills (H. M. Inspector of Taxes : "The cardinal requirement is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund; in other words, there must be complete identity between the contributors and the participators. If this requirement is satisfied, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) such remuneration should be definitely related to those services. In the present case the contention of the assessee was that, whatever services the Fund rendered, no separate or specific charge was made for those services. The contributions were paid by the members, whether or not the services were rendered to the contributing member. There could, therefore, be no question of correlating the contributions paid by the members to any concept of remuneration for services, or correlating that remuneration to the services actually rendered by the Fund. It may not, however, be necessary to examine what the position of the assessee would have been had it been a mutual benefit association. We have pointed out that the evidence on record failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he surplus, after the expenditure of the Fund had been met, was assessable income. In our opinion it was assessable income from other sources within the scope of section 12. It was income, and as the Tribunal pointed out, if the assessee could not show any statutory basis for exemption from taxation, the income became assessable. As we said, it was income from other sources within the scope of section 12. It is on that basis that the question referred to us will have to be answered in the affirmative and against the assessee, though it was not quite put on that basis by the Tribunal.
In our opinion this is a fit case where there should be no order as the costs of this reference.
Reference answered in the affirmative. X X X X Extracts X X X X X X X X Extracts X X X X
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