TaxTMI 
TaxTMI 
2010 (12) TMI 643
X X X X Extracts X X X X
X X X X Extracts X X X X
....dquo;doctrine of mutuality‟ and therefore, no tax was payable thereupon. The Assessing Officer (AO) as well as CIT(A) did not accept this submission of the assessee. However, the assessee succeeded before the Income Tax Appellate Tribunal (hereinafter referred to as „the Tribunal‟), as by the impugned order dated 30.09.2009, the Tribunal has allowed the appeal of the assessee holding that the „doctrine of mutuality‟ shall apply even on the aforesaid income. 2. After hearing the learned counsel for both the parties at length, we are of the opinion that the aforesaid finding of the Tribunal is correct on facts and in law, which does not call for any interference. The issue, in fact, stands covered by at least three judgments of this Court, which are as under: (i) The Director of Income Tax Vs. All India Oriental Bank of Commerce Welfare Society [2003] 130 Taxman 575 (Delhi). In this case, the members of the welfare society, who were the employees of the Oriental Bank of Commerce had earned interest income on deposits made out of contribution from the members of the society, i.e., the contributions which were given by the members of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... allowable for tax. (ii) Commissioner of Income Tax Vs. Talangang Co-operative Group Housing Society Ltd. [210) 195 Taxman 110 (Delhi). In this case, the assessee was a co-operative housing society and its preliminary activity was to collect money from their members for construction of flats/houses and subsequently allot the same to them. There was no issue that on these contributions from the members, no tax was payable and principles of mutuality would be applicable. However, it was found by the Assessing Officer that certain income was derived from other than construction activities, viz., equalization charges from new members, maintenance fund and entry fee from power of attorney holders, interest on delayed payments and more significantly (which would be relevant for our purposes) interests from bank from FDRs. All these were not treated as taxable income by the AO. This order of the AO was upheld by the CIT(A), but the Tribunal reversed the aforesaid orders after applying the principle of mutuality and deleted the additions made by the AO. The Department filed an appeal against the order of the Tribunal in the Court, which was dismissed. Insofar as the income genera....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utors to the fund and the recipients from the fund. 2. The organization exists only for mutual benefit. 3. The funds can be expended for mutual benefit or returned to the contributors." 18. At this stage, we may also take note of the judgment of Gujarat High Court in the case of Sports Club of Gujarat Vs. CIT where the Court held that the principle of mutuality is not destroyed by the presence of transaction, which are non mutual in character. This principle can, in such case, be confined to transactions with members. The two activities, in appropriate case be supported and the profits derived from non-members, can be brought to tax. 19. In the present case, as already noted above, the respondent is incorporated as a society and the main objective is to improve the purpose of public enterprises. The membership of the society is open to public sector enterprises of Central/State Governments. It is, thus, performed for the benefit of its members, which are public sector enterprises. It is not indulging in any "commercial activities" in traditional sense, but is catering to the needs of its members. In its building at Lodhi Road, New Delhi, it h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir performance and role. Thus, all the three ingredients laid down by the Supreme Court in Chelmsford Club would be applicable in the present case. 21. We may also refer to the judgment of the Calcutta High Court in the case of Dalhousie Institute Vs. Asstt. Commissioner, Service Tax Cell, 2006 (3) STR 311. Though it was a case where „mandap‟ facilities were provided by the club to its members and the question of service tax had arisen, the Calcutta High Court applied the principle of mutuality holding that the aforesaid facilities provided by the club to its members for such functions cannot be termed as commercial activity. Following observations are to be noted in this behalf: "The principle of mutuality in this case is also squarely applicable, as going by the definitions of mandap, mandap keeper and the taxable service, in this case the facility of use of the premises to the members by its club cannot be termed to be a letting out nor the members of the club using the facility of any portion of the premises for any function can be termed to be a client. The services rendered by any person to his client presupposes the element of commerciality an....