1985 (4) TMI 51

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.... one of the assessment years by both the Department and the assessee. The common question that has been referred to this court reads as follows : " Whether, on the facts and circumstances of the case, the Tribunal was legally correct in holding that the rent receipts from the members to whom the rooms were let out by the assessee-club along with other facilities were not assessable to income-tax on the doctrine of mutuality ? " The undisputed facts are as follows : The assessee-club was formed in 1973, and was registered as a company limited by guarantee. The objects of the club were mainly to provide recreation to its members by promoting various types of sports and pastimes. Provision was also made for refreshments for the members i....

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....bar and recreation facilities available in the club house. It was pointed out that the tariff for some of the quarters was on bed and breakfast basis also. The ITO rejected the assessee's claim that the receipts in question did not constitute income. On appeal, the AAC confirmed the assessment order. The assessee, however, appealed to the Tribunal. After considering the facts and circumstances of the case, the Tribunal held that the amounts received by the club from non-members from letting out rooms was liable to be assessed and, so far as this conclusion is concerned, there is no further controversy before us. However, the Tribunal took the view that so far as the income derived by the club by letting out rooms to its members was concerne....

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....eling Club Ltd. [1985] 153 ITR 676 (Cal), have all taken the view that income derived by clubs, organised more or less on the same lines as the assessee presently in question, will not be assessable to tax. The principle is this. The club does not derive any income by letting out premises to its members. Letting out of the premises is merely a provision of a facility for members. The principle of mutuality clearly applies to the surplus earned as a result of such activities. It may be that if the income can be treated as rent derived from house property, the rent or the income derived from house property will be assessable under s. 22. That may be so because of the statutory fiction contained in s. 22 of the Act and the scheme of the I.T. A....