TaxTMI 
TaxTMI 
2006 (7) TMI 146
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.... The club is running on commercial lines for the assessment year 1989-90. The assessee declared a total income of Rs. 2/26/991. The assessee deposited a surplus amount of Rs. 76/16/054 in fixed deposit with the abovestated four banks. The fixed deposit earned an interest of Rs. 7/87/648. This interest was claimed as deduction by the assessee on the principle of mutuality. It was stated that the four banks being members of the club constitute a common entity and that therefore tax could not be levied as it would amount to levying tax on oneself. The assessing authority did not accept the same and he disallowed the claim. An appeal was filed and the Appellate Commissioner set aside the order of assessment. A second appeal was filed and it sto....
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....e amount deposited in non-member banks have been subjected to tax. It is only member banks fixed deposit interest that is claimed as deduction on the ground of mutuality. He would support the order. He also relies on several judgments. After hearing, we have carefully perused the material on record. The Assessing Officer has chosen to disallow the claim of interest, i.e., on the deposit made in the member banks. He has noticed that there exists no mutuality in the case on hand. When the same was challenged, the Appellate Commissioner holds that the activity of keeping the liquid asset i.e., cash in the custody of its members for safe custody cannot be tainted with commerciality to come within the purview of business income. The appellate ....
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....provided recreational and refreshment facilities exclusively to its members and their guests. The club house in the club was owned by the assessee. The club house was not assessable. The apex court reversed the judgment of the High Court and ruled that the assessee's business was governed by the doctrine of mutuality. The facts in that case are clearly distinguishable. Since in that case what was involved was letting out of a building in terms of the findings of the court. In fact in somewhat similar circumstances, the Gujarat High Court in Sports Club of Gujarat Ltd. v. CIT [1988] 171 ITR 504 has considered the mutual concern theory in respect of a club in its judgment. In the said case, the court noticed that the club was incorporated a....