TMI Blog1987 (6) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments for the three years 1974-75 to 1976-77 are reassessments effected under section 143(3) read with section 147(b) of the Income-tax Act, 1961. The assessments for the years 1977-78 and 1978-79 are regular assessments. The respondent/assessee received subscriptions of Rs. 6,850, Rs. 5,800, Rs. 5,700, Rs. 5,500 and Rs. 5,150 for these years from its members. The question that was considered by the Appellate Tribunal and again raised for our consideration is regarding the assessability of, the subscription paid by the members of the assessee-association to the assessee for the various years. The assessee claimed that the above subscriptions are not taxable since it is a mutual association. The Income-tax Officer negatived the said plea. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961, recognises the position that the receipts from the members by way of subscription or otherwise, would not be income in the hands of the association ? (4) Whether, on the facts and in the circumstances of the case the Tribunal was correct in law in holding that the receipts of a trade association from its members by way of subscription or otherwise are receipts that partake the character of mutual receipts and is not consideration of receipts 'otherwise' unwarranted and wrong ? (5) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law and on facts in holding that neither the incorporation under section 26 of the Companies Act nor clause V of the memorandum of association of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated will not destroy its mutual character. It was further submitted that the provision in the articles of association that on winding up or dissolution of the club, the surplus left was to be transferred to some other institution having similar objects cannot mean that they were not participators in the surplus. It was only a fetter in the manner of disposal. They continue to have the disposal over the surplus. On hearing the rival contentions of the parties, we are of the opinion that the plea raised by the Revenue should fail. The matter is fully governed by the decision of the Madras High Court in CIT v. Madras Race Club [1976] 105 ITR 433. The two aspects stressed before us were also highlighted in the Madras decision. Placing r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus, if any, at the time of winding up, it cannot be said that they are not participators in the surplus. The clause is only a fetter in the manner of disposal. The participation envisaged on the principle of mutuality is not that the members should willy-nilly take the surplus to themselves. It is enough if they had a right of disposal over the surplus to show that they were the participators." It is evident therefrom that the members of the respondent/assessee have a right of disposal over the surplus to show that they are participators and it cannot be said that the provision dealing with the surplus left over in the instant case will nullify the principle of mutuality. The two aspects, highlighted by the Revenue, have been expressly d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in para 7 of its appellate order. The decision of the Appellate Tribunal holding that the respondent/assessee is a mutual association and the subscriptions received from the members cannot be considered to be income in the hands of the assessee, is clearly justified in law. The Appellate Tribunal also referred to section 44A of the Income-tax Act to reinforce its conclusion. It was held that the said provision would recognise the position that, but for section 44A of the Act, the excess of the expenditure of the nature contemplated which were to have been met out of the subscriptions from the members over the receipts from the members could not be claimed as a deduction from the receipts which would be assessable as business receipts. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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