TMI Blog2006 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in favour of the Revenue. The order passed by the Tribunal is accordingly set aside and the matter is remitted to the assessing authority for fresh consideration - - - - - Dated:- 27-2-2006 - Judge(s) : K. S. RADHAKRISHNAN., K. T. SANKARAN. JUDGMENT The judgment of the court was delivered by K.S. Radhakrishnan J.-The Income-tax Appellate Tribunal, Cochin Bench, on a direction given by this court in O.P. No. 7449 of 1999, has referred the following question of law for our opinion under section 256(2) of the Income-tax Act: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rental income received by the assessee from non-members was not taxable?" The Trivandrum Club, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lub [1989] 177 ITR 550. Reference was also made to a few other decisions on the doctrine of mutuality. The Commissioner took the view that the assessee is not an assessable entity under the Income-tax Act. Aggrieved by the said order the Revenue took up the matter in appeal before the Tribunal. Appeal was dismissed after noticing that the building was let out to non-members and the amounts were settled by the members and, therefore, the Tribunal took the view that there is no material difference between the assessment year 1988-89 as well as the earlier assessment year which was covered by the decision in CIT v. Trivandrum Club [1989] 177 ITR 550 (Ker). We may first examine as to whether CIT v. Trivandmm Club [1989] 177 ITR 550 (Ker) woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is involved when the club charges a member for the amenities provided to him. It follows that the respondent/assessee is entitled to exemption under the doctrine of mutuality. On these premises, the assessee is entitled to exemption." The facts we get for the assessment year 1988-89 are entirely different. Admittedly the club is having a marriage hall. The Assessing Officer verified the records and noticed that the hall was rented out to non-members. The assessing authority noticed that the hall rent was paid by non-members and not by members. Consequently identity of the contributor and participator does not exist. True, the members have joined together for the purpose of entertainment by themselves and in the course of that activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, claiming to be a "mutual concern" or "members' club", is a trade or an adventure in the nature of trade and the transactions entered into with the members or non-members alike is a trade/business/transaction and the resultant surplus is profit-income liable to tax. The court held that there must be complete identity between the contributors and the participators. The abovementioned decision was followed by the apex court in Chelmsford Club v. CIT [2000] 243 ITR 89. The court held that under the Income-tax Act, 1961, what is taxed is, the "income, profits or gains" earned or "arising", "accruing" to a "person". Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual position that no non-member was enjoying the facilities of the club. The facts in this case are different. The marriage hall was admittedly being rented out to non-members making them as temporary members only for the purpose of letting out the marriage hall and the amounts received from non-members are provided at the hands of the assessee. Principle of mutuality therefore in our view would not apply in such a facts situation. Under such circumstances we hold that the Tribunal was not justified in holding that the rental income received by the assessee from non-members was not taxable. We, therefore, answer the question in favour of the Revenue. The order passed by the Tribunal is accordingly set aside and the matter is remitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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