COMMISSIONER OF INCOME TAX Vs. WELLINGTON GYMKHANA CLUB

JUDGEMENT

(1.) These appeals are preferred by the Revenue for the assessment year 2001-02 to 2005-06, challenging the order of the Tribunal wherein, the Tribunal has allowed the appeals preferred by the assessee, in part by holding that receipts from investment with Bankss are covered by the Principle of Mutuality, by raising the following substantial questions of law:-

(2.) The facts of the cases are that the assessee is a social club formed for the benefit of its members. The Assessing Officer while completing the assessment brought to tax entire income from interest on investments made by the assessee with Banks, on the ground that the receipts did not arise from any dealing between the assessee club and its members and the said transactions were commercial transactions. The assessee's further appeal before the Commissioner of Income Tax (Appeals) was rejected. But the same was allowed by the Income-tax Appellate Tribunal on the ground that receipts from investmentS with Banks are covered by the Principle of Mutuality by holding that inasmuch as the concerned Bank is also a member of the Club and the said income was utilised by the assessee to its members, the Principle of Mutuality would apply. Challenging the said Order, the Revenue has filed the present appeal.

(3.) The questions of law raised by the Revenue are covered by the judgment of this Court in MADRAS GYMKHANA CLUB v. DY. CIT (Mad.) [2009 (226 CTR.,176)] wherein this Court has held that inasmuch as the surplus fund accrued from the investments made by the assessee with its member Bank and other institutions cannot be held to satisfy the Principle of Mutuality. It was further held that the Principle of Mutuality is confined to be income earned by the club out of the contributions received by the club from its members, but has no application in respect of the interest earned from the deposits of surplus funds in the Banks by way of income. It was held that the very fact that the Bank concerned was also an institution member of the assessee, cannot be a ground to hold that the Principle of Mutuality, would be applicable. This Court in paragraph Nos.27 and 37 of that judgment has observed as follows:-