TMI Blog2006 (7) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... ee club?" - it is clear to us that what has been done by the club is nothing but what could have been done by a customer of a bank. The principle of "no man can trade with himself" is not available in respect of a nationalised bank holding a fixed deposit on behalf of its customer. The relationship is one of a banker and a customer. - questions of law are answered in favour of the Revenue. The order of the Commissioner of Income-tax and the order of the Tribunal are set aside - - - - - Dated:- 21-7-2006 - Judge(s) : R. GURURAJAN., JAWAD RAHIM. JUDGMENT The judgment of the court was delivered by R. GURURAJAN J.-The Revenue is before us challenging the order of the Income-tax Appellate Tribunal dated January 7, 1999. The order of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the four banks who are also members of the assessee-club, especially when the fund is raised from contribution of several members including the four banks and the interest derived from it is utilized by several members of the assessee club?" The parties have entered appearance. Arguments were heard. Learned counsel for the Revenue would contend that both the Tribunal and the appellate authority are wrong in accepting the principle of mutuality in the present circumstances. He would say that the amount deposited in the bank earned interest and that interest is taxable as rightly ruled by the assessing authority. He would also say that the relationship between the club and the banks is the relationship of a customer and banker. He wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In CIT v. Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241 the Supreme Court has considered the mutual benefit theory and ruled as under (headnote) : "The essence of mutuality lies in the return of what one has contributed to a common fund, and if profits are distributed to shareholders as shareholders the principle of mutuality is not satisfied." Subsequently, the Supreme Court in CIT v. Bankipur Club Ltd. [1997] 226 ITR 97 has ruled as under: "A host of factors may have to be considered to arrive at a conclusion. 'Whether or not the persons dealing with each other, are a "mutual club" or carrying on a trading activity or an adventure in the nature of trade', is largely a question of fact." Therefore what is clear to us is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession would not be exigible to tax on the principle of mutuality. The Gujarat High Court after noticing CIT v. Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241 (SC), ruled that the assessee's income from interest was not from mutual activity and as such it was exigible to tax. A Division Bench of this court after referring to various case law on the subject considered the principle of mutuality in CIT v. I.T.I. Employees Death and Superannuation Relief Fund [1998] 234 ITR 308 and ruled as under: "The principle that no person can trade with himself does not arise in this case as the monies had been invested by the assessee with the bank to earn income to enable the assessee to discharge its obligations created under the trust. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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