COMMISSIONER OF INCOME TAX Vs. TRIVANDRUM CLUB

JUDGEMENT

(1.) THE Revenue is the petitioner herein. THE respondent is a voluntary club. THE matter relates to the assessment year 1974-75. THE respondent claimed exemption of the income on the doctrine of mutuality. THE Income-tax Officer rejected the plea. He held that the rules and bye-laws of the club enabled it to allow non-members to enjoy the facilities of the club. In appeal, the Commissioner of Income-tax referred to the statement of the secretary of the club to the effect that the club had not allowed any person other than a member to occupy the club during the year ending December 31, 1973, and so the facilities available in the club were used exclusively by the members. It was held that the club is entitled to exemption. In further appeal, the Appellate Tribunal held that the Commissioner of Income-tax (Appeals) was justified in relying on the statement of the secretary and on that basis it was held that during the relevant period no non-member was allowed to occupy any room of the club. After discussing the legal position, the Appellate Tribunal held that no person can trade with himself and make an assessable profit and no trading element is therefore involved when the club charges a member for the amenities provided to him. In the circumstances, it was held that' the income of the respondent/assessee is entitled to exemption under the doctrine of mutuality. THE Revenue filed an application before the Appellate Tribunal under Section 256(1) of the Income-tax Act to refer certain questions of law for the decision of this court. It was declined. THEreafter, this original petition was filed under Section 256(2) of the Act praying that this court may be pleased to direct the Appellate Tribunal to refer the questions of law formulated in para 8 of the original petition.

(2.) WE heard counsel for the Revenue, Mr. Nair, as also counsel for the assessee. The Commissioner of Income-tax (Appeals) as also the Income-tax Appellate Tribunal have concurrently held that during the relevant accounting period, no non-member was allowed to enjoy the facilities of the club, and that, so long as the occupation of the room is referable to the amenities provided for the members themselves, no income can be said to have been earned. This is a pure finding of fact. On the basis of this finding, the conclusion is inevitable that no trading element is involved when the club charges a member for the amenities provided to him. It follows that the respondent/assessee is entitled to exemption under the doctrine of mutuality. On these premises, the assessee is entitled to exemption.