TMI Blog2016 (11) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the present case. It is pertinent to observe that facts of all other years are identical. Therefore, we allow all the appeals of the assessee for statistical purpose. - ITA. No. 1051 to 1056/Ahd/2015 - - - Dated:- 25-11-2016 - Shri Rajpal Yadav, Judicial Member And Shri Manish Borad, Accountant Member Assessee by : Shri S.N. Soparkar Revenue by : Shri Prasoon Kabra, Sr.DR ORDER Per Rajpal Yadav, Judicial Member Present six appeals are directed at the instance of the assessee against separate orders of even dated i.e. 2.2.2015 passed by the ld.CIT(A) on the respective appeals of the assessee for the Asstt.Years 2006-07 to 2011-12. 2. There are common question of law and facts involved in these appeals. Therefore, we have heard them together and deem it appropriate to dispose of them by this common order. The first common issue is involved in the Asstt. Years 2006-09 to 2009-10, whereby, the assessee has challenged reopening of the assessment. It is pertinent to observe that in those assessment years, the ld.AO has passed assessment order on 27.3.2014 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. However, during the course of hearing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has segregated his proposition in two compartments. In the first compartments, he has referred to the judgments where availability of principle of mutuality was examined by the Hon ble Court in the cases of clubs, and in the second compartments, he has made reference to the decisions in the case of trade associations. He also relied upon the judgment of Hon ble Bombay High Court in the case of CIT Vs. Air Cargo Agents Association of India in order to canvas his argument that if a part of income was not covered by the principle of mutuality, then that part would be taxable. He placed on record copies of these decisions. Other decisions relied upon by the ldc.ounsel for the assessee are as under: i) CIT Vs. Bankipur Club Ltd., 226 ITR 97 (SC); ii) Chemford Club Vs. CIT, 243 ITR 89 (SC); iii) Prabhukunj Co-op. Hsg. Society Ltd., 59 taxmann.com 104 iv) Jungadh Ghykhana Vs.ITO, 56 taxmann.com 281 (Guj) v) Belvedere Estate Tenants Association Vs. ITO, 139 ITD 675 vi) CIT Vs. Cochin Oil Merchants Association, 168 ITR 240 (Ker) vii) CIT Vs. West Godavari Dist. Rice Millers Association, 150 ITR 394 (Andhra Pradesh); viii) CIT Vs. Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvantage of the facilities which it offers does not affect the mutuality of the enterprise. **** Members clubs are an example of a mutual undertaking, but, where a club extends facilities to non-members, to that extent the element of mutuality is wanting............. (Emphasis supplied) Simon's Taxes Vol.B 3rd Edition, paragraphs B 1.218 and B1.222 (pages 159 and 167), formulate the law on the point, thus: ........ it is settled law that if the persons carrying on a trade do so in such a way that they and the customers are the same persons, no profits or gains are yielded by the trade for tax purposes and therefore no assessment in respect of the trade can be made. Any surplus resulting from this form of trading represents only the extent to which the contribution of the participators have proved to be in excess of requirements. Such a surplus is regarded as their own money and returnable to them. In order that this exempting element of mutuality should exist it is essential that the profits should be capable of coming back at some time and in some form to the persons to whom the goods were sold or the services rendered. ....................... It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at most, gives rise to a surplus? 8. On the strength of the above text books and various judgments, the Hon ble Court has observed that in substance, the arrangement or relationship between the club and its members should be of a non-trading character. 9. The next decision referred to by the ld.counsel for the assessee is also of Hon ble Supreme Court in the case of Chemsford Club(supra). In this case, the assessee provides recreational and refreshment facilities exclusively to its members and their guests. These facilities are not for non-members. The club was being run on no-profit no-loss basis. The surplus, if any is used for maintenance and development of the club. The club house was owned by the assessee-club and was having used for providing facilities. The issue before the Hon ble Supreme Court was whether house property income derived by the club on the property itself would also enjoy the benefit of mutuality or not. The Hon ble Supreme Court has observed that business of assessee s club is being covered by principle of mutuality, and if that be so, then out of deemed income from its property would be covered by said principle of mutuality. The next case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble income. In the said case, this Court further held that the contributors to the common fund are entitled to participate in the surplus, thereby creating an identity between the participants and the contributors. Just because the transactions, which are non-mutual in character, would not destroy the principle of mutuality. Thus, the decision in the case of BANGALORE CLUB (Supra) would not apply to the facts of the case on hand, since, in that case the assessee-Club had received income from interest on surplus funds kept in member banks. Hence, these appeals deserve to be allowed. 8. In the result, all the appeals are ALLOWED and the question posed before us is answered in affirmative and in favour of the appellant-assessee and against the respondent revenue. No order as to costs. 10. Other judgment referred to by the ld.counsel for the assessee in the case of Cochin Oil Merchants Association, West Godavari Dist. Rice Millers Association and M/s.Air Cargo Agents Association are concerned, we do not deem it necessary to recapitulate and recite all these decisions on this legal aspects, but suffice to say that core of these decisions of the Hon ble High Courts is to the eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that till the surplus funds were generated and was used only amongst the members/contributors, the complete identity between contributors and participants continued. However the moment ' the funds are invested in fixed deposits with the banks and the funds are used for advancing loans etc. by the Bank to its customers, the identity of participants and contributors is sapped. Thus the interest earned on fixed deposits is to be brought to tax. However, it is to be noted that it did not result in the Bangalore Club being taxed on all contributions of its members. The case of the Revenue here is that having invested excess amounts in mutual funds the concept of mutuality would not extend to the contribution made by the members of the association even though the contributions are used to achieve the objectives of the association. In fact as pointed out above the Apex Court in Bangalore Club (supra) did not hold so but only brought to tax the interest earned on fixed deposit with member banks. In this case it is not disputed that the income earned on account of investments made in Mutual Funds has been offered to tax. The respondent has in effect followed the decision of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. (g) To bring the members in contact with each other in order to solve the problem of any members. (h) To study the orders, resolutions, Rules, Regulations and Policy etc. framed by the Government, Local Bodies, Local Authority, regarding the needful acts in the interest of members. (i) To comprise or to solve any problem by interfering in case of any dispute between/or amongst the members or with others on the re quest of the members of the association. (j) To collect and accept contributions from members as and when required and determined by the association and to make and create therefrom a fund for office maintenance, salary to employees, provide essential service to the members, and raise a sinking fund for emergency and/or contingency expense. (k) To carry on activity for the purpose of the education, medical relief to poor and needy, to help in natural calamities and for such other objects for attaining uplift of general public and for those purpose to start and maintain recreation, cultural, educational and medical centers. (l) To do all such other lawful things as are incidental or conclusive to the above subjects. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classes of contributors and participators. There should be a common cause for the members of the association, and the third condition is that aim of the activity is not to earn profit or loss. Then, how this aspect has been disputed in the present case ? At page no.27 of the paper book, the assessee has compiled details of its receipts and expenditure pertaining to the Asstt.Year 2006-07. Such details read as under: Particulars Member Non- Member TOTAL EXPENSES FOR EVENT Profit/Loss from event % Profit/Loss Income from Non- Member GIHED FIESTA 120900 107100 228000 387377 -159377 -69.90 -74865 Property Show 3857150 1520000 5107150 3626607 1480543 28.99 440642 3708050 1627100 5335150 4013984 1321166 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either for research or development in solving housing problems and look after progress of all members in the profession of construction. If the objects of the assessee are looked into cumulatively, then it would spell out that in order to appraise members about the latest technology in construction activities, market trend, it would not be futile to organize property show. As far as cricket match is concerned, it was not organized on commercial basis, rather participators are mainly from among the members. It is recreational activities. The ld.counsel for the assessee has pointed out that total receipts from these matches have not crossed one and half -lakhs of rupees. Therefore, this is minor contribution from non-members which has been offered for taxation, would not destroy the principle of mutuality. We find that the ld.CIT(A) has made reference to the various case laws, but not examined analytically the facts of the assessee s case. She simply concurred with the proposition laid down in those cases laws, but has not spell out how these propositions are applicable on the facts of the present case. It is pertinent to observe that facts of all other years are identical. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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