Tax Case Appeal No.397 of 2008 filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal 'B' Bench, Chennai in I.T.A.No.537/Mds/2005 dated 23.03.2007, for the assessment year 1996-97.
2. The common question of law involved in these appeals are as to "whether the Tribunal was right in holding that the interest income of the assessee clubs received from its corporate members, on the investment of surplus funds as Fixed Deposits with them, is not exempted from tax on the concept of Mutuality". In some appeals, a further question of law as to "whether the Tribunal is right in holding that the re-opening of the assessment under
Section 147 of the Income Tax Act was valid in respect of the assessee clubs".
3. As far as the first question is concerned, the activities of the clubs viz., Madras Gymkhana Club, Madras Club and The Coonoor Club is for the benefit of its members, in as much as, the club members are provided with various facilities such as Restaurant, Gymnasium, Library, Bar, Coffee Shop, Swimming Pool and other facilities for indoor and outdoor games such as Table Tennis, playing of Cards, Tennis Court etc., In so far as the surplus funds derived by the clubs while running and maintaining the various above activities for the benefit of its members are concerned, the Revenue did not make any demand. Apart from such surplus funds derived from such activities, the clubs also made certain investments in the form of Fixed Deposits (Long Term/Short Term), discount bonds, security deposit and savings bank accounts as well as in granting advance/loans to its staff members. From and out of such deposits/investments/loans made and granted, the clubs earned some interest. It is also common ground that such deposits/investments were made with institutional members who were either banking institutions or Public Sector Undertakings.
4. In fact in the case of the Madras Gymkhana Club is concerned, the order of the original authority viz., the Assistant Commissioner of Income Tax, dated 31.03.2004, disclose that various investments ranged between Rs.2,00,000/- to Rs.4,00,000/- in all a sum of Rs.2,11,17,711/- and interest earned from such deposits/investments/loans were to the tune of Rs.25,45,272/- which was the figure at the relevant point of time viz., the assessment year 1997-98 (previous year 1996-97).
5. In respect of such interest earned by the clubs, the clubs did not come forward to pay any tax while submitting their return of income by contending that the activities of the clubs and its income are covered by the concept of Mutuality and therefore exempted from tax. The Assistant Commissioner of Income Tax, issued notice under
Section 148 of the 1961 Act to the assessee in so far as the Madras Gymkhana Club was concerned. Consequent to such notice, necessary enquiry was held and ultimately the order of assessment came to be passed determining a sum of Rs.25,45,272/- obtained by way of interest by Madras Gymkhana Club as income apart from certain other items such as interest on loans to several miscellaneous income and water charges in all a sum of Rs.27,15,353/-. The income tax payable thereon was assessed at Rs.10,60,141/- and by adding the interest worked out under Sections 234(A) and
234(B), the total liability was determined at Rs.33,79,727/-.
6. The Madras Gymkhana Club preferred their appeal to the Commissioner of Income Tax, who also confirmed the order of the Assistant Commissioner of Income Tax and there was a further appeal by the appellant before the Income Tax Appellate Tribunal, which rejected the appeal preferred by the appellant and hence the present appeals have been preferred.
7. We heard Mr.T.V.Ramanujam learned senior counsel, Mr.J.Balachander and Mr.B.Raveendran learned counsel appearing for the appellants as well as Mr.K.Subramaniam, Mrs.Pushya Sitaraman and Mr.J.Naresh Kumar learned standing counsel appearing for the Income Tax Department.
8. While M/s. T.V.Ramanujam and J.Balachander contended that the interest earned by the clubs from and out of Fixed Deposits and other investments of its own constituent institutional members are covered by the principle of mutuality, the learned counsel appearing for the Department contended that even though such institutions and Public Sector Undertakings were institutional members, the investments by way of Fixed Deposits or other form of investments cannot be brought within the concept of Mutuality and that such investments were in the regular course of business of such institutions which have no nexus to either the membership or the regular activities of the clubs and therefore the interest cannot be exempted from payment of income tax on the ground of Mutuality principle.
9. The learned counsel also referred to the Rules and Bye-Laws of the Madras Gymkhana Club. Under Rule 1(A) (3) & (4), it is provided as to how to accept membership fees in the form of subscriptions and contributions apart from donations and gifts for the betterment of the Club. Under Rule 1(C)(c), the Club is empowered to invest its surplus funds with banking companies or undertakings of the Central or State Governments who are members of the Club and also invest such moneys in immovable properties with the prior approval of the general body.
10. Mr.T.V.Ramanujam, learned senior counsel appearing for some of the appellants, in support of his submissions mainly relied upon the decisions reported in 243 ITR 89 (Chelmsford Club Vs. Commissioner of Income Tax), (2009) 308 ITR 202 (Karn) (Canara Bank Golden Jubilee Staff Welfare Fund Vs. Deputy Commissioner of Income Tax) and sought to distinguish the decision reported in (2006) 287 ITR 263 (Karn) (Commissioner of Income Tax and another Vs. Bangalore Club).
11. On the side of the Revenue Mr.K.Subramaniam, Mrs.Pushya Sitaraman and Mr.J.Naresh Kumar appearing for the Department in different appeals relied upon 260 ITR 241 (Mad) (Wankaner Jain Social Welfare Society Vs. Commissioner of Income Tax), 287 ITR 263 (Karn) (Commissioner of Income Tax Vs. Bangalore Club), 243 ITR 89 (SC) (Chelmsford Club Vs. Commissioner of Income Tax) in support of their respective submissions.
12. Dealing with the second question of law in the first instance, viz., whether the re-opening of the assessment under
Section 147 of the Income Tax Act was valid in law in respect of the assessee in Tax Case Appeal No.397 of 2008, the contention was on the footing that the assessment related to the years 1996-97, 1997-98 and 1998-99, whereas the notice under
Section 148 of the Act came to be served on the assessee only on 04.04.2003, which was beyond the prescribed time limit specified, whereas the date of return was 03.05.1999.
13. This question can be straightway answered by making a reference to the main part of
Section 147 which does not prescribe any period of limitation in respect of the case where the tax for any assessment year has escaped assessment which was not covered by an order of assessment made under Section 143(3) of the Act or an order passed under
Section 147 itself. Limitation has been provided only in the proviso to
Section 147 which reads as under:
"
Section 147. Income escaping assessment:-......provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of
section 142 or
section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal reference or revision, which is chargeable to tax and has escaped assessment."
14. The period of four years mentioned therein will have no application, where there was no order under Section 143(3) or any provisional order passed under
Section 147 itself on the ground of escaped assessment.
15. In this context, we wish to rely upon the decision of the Hon'ble Supreme Court reported in (2007) 291 ITR 500 (SC) (Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd.). In paragraph 17, the Hon'ble Supreme Court has stated the scope and effect of
Section 147 as also
Sections 148 to
152, which reads as under:
"17. The scope and effect of
section 147 as substituted with effect from April 1, 1989, as also sections 148 to
152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of
section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under
section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under
section 148 read with
section 147(a). But under the substituted
section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to
section 147. The case at hand is covered by the main provision and not the proviso."
In the case on hand, the assessees filed nil return and since the Assessing Authority by invoking substantive part of
Section 147 sought the interest earned by the assessees from the surplus income deposited with the financial institutions and Public Sector Undertakings as one of escaped assessment, the question of limitation does not arise. It is not the case of the appellant that there was any order passed under Section 143(3) prior to the assessment to the present notice under
Section 147 of the Act. In the said circumstances, the question of law raised on that score is answered against the appellants.
16. Before answering the first question viz., as to whether the interest income of the assessee received from its corporate members on the investments of surplus funds as Fixed Deposits or Debentures etc., is exempted from tax on the concept of Mutuality, it will be worthwhile to refer to the principles laid down on the Doctrine of Mutuality in the decisions of the Hon'ble Supreme Court as well as some of the High Courts.
17. In the decision reported in (2000) 243 ITR 89 (SC) (Chelmsford Club Vs. Commissioner of Income-tax) as a proposition of law, the Hon'ble Supreme Court extracted the conditions stipulated by the Judicial Committee in the case of English and Scottish Joint Co-operative Wholesale Society Ltd. Vs. Commr. of Agrl. I.T.(1948) 16 ITR 270 (PC), the existence of which establishes the doctrine of Mutuality. The said conditions as extracted in the decision of the Hon'ble Supreme Court are as under:
"(1) the identity of the contributors to the fund and the recipients from the fund, (2) the treatment of the company, though incorporated as a mere entity for the convenience of the members and policyholders, in other words, as an instrument obedient to their mandate, and (3) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves."
The Hon'ble Supreme Court made it clear that
Section 2(24) of the Act recognise the Principle of Mutuality and is exclusive of businesses involving such business except those mentioned under clause (vii) of that Section.
Section 2(24)(vii) which is a part of the definition of income includes the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with
Section 44 or any surplus taken to such profits and gains by virtue of provisions contained in the First Schedule.
18. None of the assessees who came forward with these appeals would fall within the said
Section 2(24)(vii). Therefore, if the well laid down condition as extracted in the above referred to decision of the Hon'ble Supreme Court are satisfied by virtue of the fact that the object of the appellants club are for providing of various facilities and provisions exclusively for the benefit of the members of the club, which would satisfy the fundamental doctrine that no person can earn for himself as its activities are otherwise governed by the principles of Mutuality, the appellant club is entitled to claim the benefit of exemption under the said doctrine.
19. When the activities of the club vis-a-vis its members and the involvement of the funds generated from and out of the contributions made by the members for conducting the regular business of the club is considered, it would satisfy the conditions referred to above.
20. The question for consideration is that apart from its regular activities as a club when the surplus income derived in the course of its business of operating club activities is not utilised for the benefit of such activities but was invested in the form of Fixed Deposits, with the member banks and out of such deposits when interest is earned, such interest income could still be held to satisfy the main conditions of identity of contributors to the fund and the recipients from the fund. The appellants would contend that such surplus income derived from the contributions of its members having regard to the fact that it runs to several lakhs, the same could not be retained in the club premises and had to be necessarily kept in some secured manner till such funds could be utilised for the benefit of the club and therefore they were kept either in the fixed deposits with the member banks or with the other corporate members in the form of Fixed Deposits or Securities.
21. It is therefore contended that such deposits having been made with the member banks/corporate members, the utilisation of such funds are by the members of the club only and thereby it satisfy the condition viz., identity of contributors and the participants. In support of such a stand, reliance was heavily placed upon the Division Bench decision of the Karnataka High Court reported in (2009) 308 ITR 202 (Karn) (Canara Bank Golden Jubilee Staff Welfare Fund Vs. Deputy Commissioner of Income Tax). In that case the appellant is a registered society comprising of employees of Canara Bank, especially with an object of promoting welfare activities amongst its members who contributed towards the corpus fund. The Assessing Officer disallowed deduction of interest income and dividend on shares which was also confirmed by the C.I.T. (Appeals) as well as the Tribunal. It was then contended that the funds collected by the assessee were used to provide monetary assistance to its members, that as a matter of precaution the surplus fund was kept in the bank not with the prime object of earning interest but to keep it in safe custody and that the interest earned has been used only for the ultimate benefit of its members. The Division Bench took note of the fact that the object of the assessee was to give assistance to its members towards economic, social and moral advancement and that the source of fund comprised mainly of donations received from the banks itself or any member of the assessee which are non-refundable apart from Entrance Fee, Deposit by members and interest on dividend or other returns on loan etc., and the further fact noted was that during the two relevant assessment years in question, the source of fund were all received from members and no outsider contributed to the fund. The Division Bench ultimately held as under in paragraph 25 :
"25. It is noticed that the funds of the assessee have been invested in a term deposit with a bank which is not a member of the assessee's welfare fund and earned interest on the investment made. The bank, in which the surplus fund is deposited, no doubt, forms a third party vis-a-vis the assessee, but, in our view, it cannot be said that, the identity between the contributors and the recipients is lost. Accordingly, the interest on investments of Rs.42,13,690/- and dividend income on shares of Rs.55,760/- have to be treated as non-taxable incomes."
22. In contrast to the above decision, another Division Bench of the Karnataka High Court in the decision reported in (2006) 287 ITR 263 (Karn) (Commissioner of Income Tax Vs. Bangalore Club) took a diametrically opposite view. In fact the facts involved in that case are identical in nature in respect to the facts involved in these appeals. Like in the present case, the assessee in the Karnataka case is also a club registered as a Society under the provisions of the Societies Registration Act. It had two scheduled banks, State Bank of Mysore and State Bank of India as its corporate members. The Club deposited substantial sum of around Rs.76 lakhs in Fixed Deposits with four of its member banks which earned interest of nearly Rs.8 lakhs. In its returns, the club claimed deduction of the interest earned on the principle of Mutuality. The Assessing Authority and the Appellate Authority rejected the stand of the club, which was taken up on appeal to the High Court and the High Court in its decision held that the deposits made by the club in its member banks is nothing but what any other customer of a bank would have done and that it should be construed as a relationship as between a banker and a customer. In the said Division Bench Judgment reliance was placed upon the decisions reported in (1998) 234 ITR 308 (CIT Vs. I.T.I. Employees Death and Superannuation Relief Fund) and (1988) 171 ITR 504 (Sports Club of Gujarat Ltd. Vs. CIT). It also referred to the decisions of the Hon'ble Supreme Court reported in (1964) 53 ITR 241 (SC) (CIT Vs. Kumbakonam Mutual Benefit Fund Ltd), (1997) 226 ITR 97 (CIT Vs. Bankipur Club Ltd.) and (2000) 243 ITR 89 (SC) (Chelmsford Club Vs. CIT).
23. When we considered the Division Bench decision of this Court as held in Wankaner Jain Social Welfare Society case, while deliberating on the principle of Mutuality, the Division Bench made it clear that the identification between the contributor and the participant is mandatory as held by the Hon'ble Supreme Court in the case of CIT Vs. Kumbakonam Mutual Benefit Fund Ltd. (1964) 53 ITR 241 and that to fulfil the concept of Mutuality, the identity was required to be established in relation to the income and as regards those contributing to the income and those participating in the distribution of that income. In other words, according to the Division Bench, the identity should exist in the matter of contribution as well as availing of the benefit in equal proportion and then and then alone it can be held that the concept of Mutuality gets fulfilled. This was also explained by way of an analogy even in the case of such clubs, where while on the one hand the contribution from the members in the form of subscription or otherwise is collected which is in turn utilised in developing the various activities of the Club by way of recreational facilities or in the form of boarding or lodging and such facilities are made available for the benefit of the members in equal proportion without there being any special benefit conferred on any particular member in either enjoying or availing the benefit in an exclusive manner.
24. With the above principles in mind, when the deposit of surplus funds even with a member bank, is considered, one can easily visualise that the deposit of such funds would enure to the benefit of that member alone, who would be in a position to utilise the said deposit in any manner it likes and thereby depriving of such benefit for the other members to enjoy which would under no circumstances satisfy the test of identity of the contributors and the participants. In fact in the Madras case, even though the interest earned from the borrowings made from some of the members was equally distributed to all the members, the Division Bench pointed out that in those circumstances, the identity between the contributor and the participant was not existing in as much as such distribution of interest was made both to members who borrowed the monies and who have not borrowed the monies whereby the identity of the contributor and the participant was lost.
25. When we looked into the rules and by-laws of the appellant club viz Madras Gymkhana Club, the main objective of the club is to provide facilities, promote and encourage sports in general. It is also to provide sporting facilities for its members as well as social, cultural, recreational and other facilities. Under Rule 1 A (2) it is stated that the object is also to promote camaraderie and fellowship among its members. Rule 1 A (3) states that the object is also to run the club for the benefit of its members from and out of the subscriptions and contributions of its members and its income from other sources keeping in view its financial viability. Provision has also been made in the Rules to receive donations and gifts without conditions for the betterment of the club. The General Committee has been authorised under the Rules to use its discretion to accept sponsorship for sporting activities, without any pre-conditions and by providing advertisement by the sponsors in the limited manner and in the event of big companies sponsoring sports events to allow commercialisation for two or three days.
26. The further object of the club is to undertake measures for social service at the time when natural calamities or disasters take place either locally or at the national level. Provision has also been made to hold various activities in the sports sector in association with other clubs or persons. The club has also been empowered to construct new buildings and go in for demolition and reconstruction of existing buildings with the prior sanction of the appropriate authorities. Under Rule 1C (c), the Committee of the club has been empowered to invest its surplus funds in banking companies as defined in the Banking Regulation Act, 1949 or units issued by the Unit Trust of India or in securities of undertaking of the State Government or in the Government of India provided such investments are made in the institutions who are members of the club. The said rule also provides for investment to be made in immovable properties with the prior approval of the General Body.
27. The above provisions contained in the rules, no doubt, enables the club to invest its surplus funds in the manner provided therein with the financial institutions who are members of the club. But when the object of the club and the provisions made under the Rules for making the investments are read together, the position that emerges is that the investment of surplus funds has nothing to do with the objects of the club. It is true that such investments can be made in the Government securities or its banking institution members or in the form of securities which can be only with its corporate members. The contention of the assessee clubs are that when enormous surplus amount is generated, such amounts cannot be kept in hot cash or even in the regular account which are being operated for the day to day administration and therefore such amounts had to be necessarily kept in fixed deposits or in the from of securities of longer duration, which funds ultimately are meant to be utilised for the improvement of the facilities of the club.
28. It is further contended that since such investments in the form of fixed deposits or securities have been made with the member institutions, no outsider is benefited by such investments and therefore the identity of the contributor and the participant is maintained.
29. Though in the first blush such an argument looks attractive, we are not able to countenance such an argument as it will have to be stated that such investments and the earning of interest have absolutely no nexus to the objects enumerated under the Rules of the club. It was contended that merely because such investment of surplus funds have been made and thereby enormous amount of interest are earned it cannot be said that that would erase the mutual interest of the members of the club in its other activities. Even though existence of the club and its activities and facilities are for the mutual interest of its members and such mutual interest in respect of its regular activities vis-a-vis its members continue to remain, based on that alone it cannot be held that its other activities such as its financial management of depositing the surplus funds in various banking institutions and thereby earning substantial amount by way of interest should also be held to have every nexus to the regular and normal activities of the club vis-a-vis its members.
30. It is not the case of the assessee clubs that the funds which were invested in the form of fixed deposits or securities were kept in such deposit with a definite idea of using the same in any specific projects for the further development of the infrastructural facilities of the club in the form of buildings or other facilities. On the other hand while the assessee clubs were able to generate substantial amount by way of contribution, donation etc., it had no corresponding plans or schemes to improve its infrastructure facilities or that such surplus funds were earmarked for any particular developmental activity in the interest of all the members of the assessee clubs and that since incurring of the expenses for such activities can be made in a phased manner, the amounts were being kept in such a way that it could be drawn for spending as and when the requirement for such spending is necessitated.
31. On the other hand, the simple stand of the assessee was that collection of the contributions, donations etc., resulted in generation of surplus funds and that there was no requirement for spending such amounts in the near future and it had to be necessarily kept in safe deposit or securities with their corporate members. Based on such a claim of the assessee clubs it cannot be straightaway held that such investments with corporate members should be equated or brought within the concept of mutuality and the benefit of tax exemption should be extended even in respect of such deposits in respect of the surplus income.
32. The various principles set out on the concept of mutuality which have been spelt out in the decision of the Hon'ble Supreme Court reported in (2000) 243 ITR 89 (Chelmsford Club Vs. Commissioner of Income Tax) is as follows:
"(1) the identity of the contributors to the fund and the recipients from the fund, (2) the treatment of the company, though incorporated as a mere entity for the convenience of the members and policyholders, in other words, as an instrument obedient to their mandate, and (3) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves."
Similarly in CIT Vs. Bankipur Club Ltd., reported in (1997) 226 ITR 97 while setting out the benefits based on the principle of Mutuality, the Hon'ble Supreme Court held as under:
"Under the Income-tax Act, what is taxed is the 'income, profits or gains' earned or 'arising', 'accruing' to a 'person'. Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise." (emphasis added)
33. In the above case the facts as set out in the decision discloses that the various clubs viz., Bankipur Club Ltd., Ranchi Club Ltd., Cricket Club of India and Northern Indian Motion Pictures Association were in receipt of surplus funds arising from the sales of drinks, refreshment etc., or amounts received by way of rent for letting out the buildings and amounts received by way of admission fees, periodical subscription and receipts of similar nature from its members. The Tribunal as well as the High Court had found that the amounts received by the clubs were for supply of drinks, refreshments or other goods as also the letting out of building for rent or by way of admission fees, periodical subscription, etc., from the members of the club to meet the charges for the privileges, conveniences and amenities provided to the members which they were entitled to as per the rules and regulations of the respective clubs. It was also found that different clubs realised various sums on the above counts only to afford to their members, the usual privileges, advantages, conveniences and accommodation. It was not done with private motives or tainted with commerciality. The facilities were offered only as a matter of convenience for the use of the members and their friends, if any, availing of the facilities occasionally.
34. As far as the Division Bench judgment of the Karnataka High Court in the case of Commissioner of Income Tax and another Vs. Bangalore Club reported in (2006) 287 ITR 263 (Karn) is concerned, the facts are identical and the assessee in that case is also a club having identical nature of membership and activities. The various reasoning adduced in the said judgment squarely applies to the facts of this case and therefore we adopt the said reasoning also to support our conclusions.
35. As far as in the other judgment of the Karnataka High Court viz., ((2009) 308 ITR 202 (Karn) (Canara Bank Golden Jubilee Staff Welfare Fund Vs. Deputy Commissioner of Income Tax)) the assessee is a Society formed by the employees of the bank and the object of the Society varies in very many respects when compared to the objects of the Club which is out-and-out meant for recreational purposes. The object of the society was mainly intended for fulfilling various welfare activities of its members in contradistinction to the club where the main activities are purely recreational. Therefore, whatever stated in the said judgment will have to be construed to have been stated in the special facts and circumstances of that case and it cannot have universal application. We are not therefore inclined to follow the said judgment as in our considered opinion, the same is not applicable to the facts of this case.
36. Therefore what is relevant is to see as to how the funds generated by way of contribution, donation etc., from the members as well as the outsiders are expended and that utilisation of such funds were with a view to fulfil the object of providing various recreational and other facilities to the members and then alone it can be held that the principle of identity between the contributor and the participator is fulfilled which is the basic requirement in the concept of mutuality of the enterprise.
37. At the risk of repetition, it will have to be held that investment of surplus fund with some of the member banks and other institutions in the form of Fixed Deposits and securities which in turn result in earning of huge surplus amounts by way of interest cannot be held to satisfy the mutuality concept. As held in the decision of the Karnataka High Court reported in (1998) 234 ITR 308 (CIT Vs. I.T.I. Employees Death and Superannuation Relief Fund) the principle of Mutuality could be confined in respect of the income earned by the club out of the contributions received by the club from its members but it will have no application in respect of the interest earned from the deposits of surplus funds in the banks by way of income.
38. Having regard to our above conclusion, the first question of law as answered by the Tribunal will have to be upheld equally the second question of law is also answered against the assessee. In the result, the appeals fail and the same are dismissed. No costs.
kk To
1. The Deputy Commissioner of Income Tax, Business Circle-VI, Chennai 600 034
2. The Income Tax Appellate Tribunal 'B' Bench, Chennai