{"id":135607,"date":"2010-06-17T00:00:00","date_gmt":"2010-06-16T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-facility-on-17-june-2010"},"modified":"2016-10-28T15:03:25","modified_gmt":"2016-10-28T09:33:25","slug":"the-commissioner-of-income-tax-vs-facility-on-17-june-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-facility-on-17-june-2010","title":{"rendered":"The Commissioner Of Income Tax vs Facility on 17 June, 2010"},"content":{"rendered":"
Bombay High Court<\/div>\n
The Commissioner Of Income Tax vs Facility on 17 June, 2010<\/div>\n
Bench: Dr. D.Y. Chandrachud, J.P. Devadhar<\/div>\n
                                          1\n\n              IN THE HIGH COURT OF JUDICATURE AT BOMBAY \n\n\n\n\n                                                                            \n                   ORDINARY ORIGINAL CIVIL JURISDICTION\n\n\n\n\n                                                    \n                   INCOME TAX APPEAL NO.2060 OF 2009\n\n\n\n\n                                                   \n    The Commissioner of Income Tax,\n\n    City - 10, Aayakar Bhavan,\n\n\n\n\n                                     \n    4th Floor, M.K. Marg,\n                      \n    Mumbai - 400 020                                        ..Appellant.\n                     \n          Versus\n      \n\n    M\/s.Common Effluent Treatment Plant,\n   \n\n\n\n    (Thane Belapur) Association,\n\n    P-20, Anand Bhakamkar Common\n\n\n\n\n\n    Facility, Centre Khairne, M.I.D.C.,\n\n    Navi Mumbai - 400 705                                   ..Respondent.\n\n\n\n\n\n    Mr.Suresh Kumar for the appellant.\n\n    Mr.S.N. Inamdar with Ms.Aasifa Khan for the respondent.\n\n\n\n                                              CORAM : Dr.D.Y. Chandrachud &\n                                                         J.P. Devadhar, JJ.   \n<\/pre>\n
                                               DATE     : 17 June, 2010.\n<\/p>\n
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\n                                                 2<\/span><\/p>\n
    ORAL JUDGMENT  (Per Dr.D.Y. Chandrachud, J.)<\/p>\n
    1.             Leave   to   amend   the   questions   of   law   is   granted.\n<\/p>\n
    Amendment to be carried out during the course of the day, in terms of <\/p>\n
    the   draft   amendment   tendered   on   record.     Verification   is   dispensed <\/p>\n
    with.\n<\/p>\n
    2.             This is an appeal by the Revenue under Section 260A of the <\/p>\n
    Income Tax Act, 1961 against a decision of the Income Tax Appellate <\/p>\n
    Tribunal (Tribunal) for assessment year 2001-2002.  During the course <\/p>\n
    of   the   hearing,   Counsel   appearing   on   behalf   of   the   Revenue   and <\/p>\n
    Counsel appearing on behalf of the assessee addressed the Court on two <\/p>\n
    issues.   In view of the submissions which have been urged before the <\/p>\n
    Court, the questions of law raised in the appeal have been re-framed <\/p>\n
    thus with the consent of Counsel appearing on behalf of the Revenue <\/p>\n
    and Counsel appearing for the assessee :\n<\/p>\n
    A)      Whether on the facts and in the circumstances of the case, <\/p>\n
            the   Tribunal   was   justified   in   holding   that   the   excess   of
\n            income   over   expenditure   in   respect   of   the   effluent
\n            treatment   receipts   is   exempt   from   income-tax   on   the
\n            principle of mutuality;\n<\/p>\n
    B)      Whether the Tribunal was justified in holding that interest
\n            on   bank   fixed   deposits,   other   deposits   and   income-tax
\n            refunds   is   not   chargeable   to   tax   on   the   principle   of
\n            mutuality;\n<\/p>\n
    3.             The assessee is an Association incorporated under Section <\/p>\n
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\n                                               3<\/span><\/p>\n
    25   of   the   Companies   Act,   1956.     The   members   of   the   assessee   are <\/p>\n
    industries operating in the Thane-Belapur region.  The assessee was set <\/p>\n
    up with a view to provide a centralized treatment facility for industrial <\/p>\n
    effluents   and   was   incorporated   on   12   October   1994.     The   objects <\/p>\n
    underlying   the   establishment   of   the   assessee,   as   stated   in   the <\/p>\n
    Memorandum of Association (MoA), are as follows :\n<\/p>\n
           \"A.    THE   MAIN   OBJECTS   OF   THE   COMPANY   TO   BE  \n                  PURSUED   BY   THE   ASSOCIATION   ON   ITS  \n                         \n                  INCORPORATION :\n\n<\/pre>\n
           1.     To   constitute   and   maintain   an   organization   for <\/p>\n
                  treatment   of   Industrial   Effluents   generated   by   all
\n                  those User Members engaged in  the manufacture of
\n                  various products and engaged in Industrial processes
\n                  in the Trans Thane Creek Industrial Area.\n<\/p>\n
           2.     To act as an advisor for the process and treatment of <\/p>\n
                  all   kinds   of   pollution   such   as   Air   Pollution,   Water
\n                  Pollution,   Waste   Water   Pollution,   Sewage,   Industrial
\n                  Hazardous   Solid   Wastes,   Chemicals,   Gases   Effluents
\n                  from Industries, and all other kinds of environmental <\/p>\n
                  pollution related to the effluent treatment plant”.\n<\/p>\n
    4.            For assessment year 2001-2002, the assessee filed a return <\/p>\n
    of   income   declaring   the   total   income   at   Nil,   on   the   principle   of <\/p>\n
    mutuality.  The Assessing Officer rejected the claim of the assessee.  The <\/p>\n
    Commissioner (Appeals) by his decision dated 20 October 2003 noted <\/p>\n
    that the assessee owes its formation to increased levels of pollution in <\/p>\n
    the Trans-Thane Creek Industrial Area; stringent norms for the control <\/p>\n
    of effluents prescribed by the Maharashtra Pollution Control Board; the <\/p>\n
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\n                                                4<\/span><\/p>\n
    inability of each individual unit to set up a separate industrial effluent <\/p>\n
    treatment facility; and the policy of the Union Ministry of Environment <\/p>\n
    and   Forests   to   encourage   the   establishment   of   Common   Effluent <\/p>\n
    Treatment Plants.  The Commissioner (Appeals) held that the treatment <\/p>\n
    cost is recovered only from user members of the assessee and that the <\/p>\n
    principle   of   mutuality   was   established   since   there   was   a   complete <\/p>\n
    identity between contributors and participators.   On this ground, the <\/p>\n
    Commissioner   (Appeals)   directed   that   the   excess   of   income   over <\/p>\n
    expenditure (excluding interest on fixed deposits held with banks and <\/p>\n
    others) was not exigible to tax in the hands of the assessee.  However, <\/p>\n
    the Commissioner (Appeals) came to the conclusion that the interest <\/p>\n
    income of the assessee amounting to Rs.45.46 lakhs on fixed deposits <\/p>\n
    and other deposits and on income-tax refunds was taxable under the <\/p>\n
    head of income from other sources.  The decision of the Commissioner <\/p>\n
    (Appeals)   was   questioned   before   the   Tribunal   both   on   behalf   of   the <\/p>\n
    Revenue   and   the   assessee.     The   Tribunal   by   its   decision   dated   6 <\/p>\n
    February 2007 confirmed the decision of the Commissioner in so far as <\/p>\n
    it   applied   the   principle   of   mutuality   to   the   excess   of   income   over <\/p>\n
    expenditure.     The   Tribunal   noted   that   the   assessee   is   a   non-profit <\/p>\n
    company formed by units engaged in industrial activity with the object <\/p>\n
    of   setting   up   a   common   effluent   treatment   facility.     The   Tribunal <\/p>\n
    confirmed   the   finding   that   there   is   a   complete   identity   between <\/p>\n
    contributors and participators and was consequently of the view that <\/p>\n
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\n                                                5<\/span><\/p>\n
    the principle of mutuality was attracted.   On the second question, the <\/p>\n
    Tribunal   held   that   since   the   principle   of   mutuality   was   applicable, <\/p>\n
    interest on bank fixed deposits, other deposits and income-tax refunds <\/p>\n
    was   also   not   chargeable   to   tax.     The   appeal   by   the   Revenue   was <\/p>\n
    dismissed and the appeal of the assessee was allowed.\n<\/p>\n
    5.             The   Revenue   is   in   appeal   before   this   Court.     The   first <\/p>\n
    question of law that has been raised before the Court is as to whether <\/p>\n
    the Tribunal is in error in holding that the principle of mutuality would <\/p>\n
    apply   to   the   excess   of   income   over   expenditure;   the   income <\/p>\n
    representing   contributions   received   from   members.     The   second <\/p>\n
    question of law relates to the treatment that is to be afforded to the <\/p>\n
    interest received on bank and other deposits and income-tax refunds.  It <\/p>\n
    would be appropriate to deal with the two questions of law separately.\n<\/p>\n
    RE : QUESTION A<\/p>\n
    6.             The factual position as it emerges from the record before <\/p>\n
    the Court is that the assessee is a company incorporated under Section <\/p>\n
    25 of the Companies Act, 1956.  The assessee is an Association formed <\/p>\n
    with   the   object   of   setting   up   an   effluent   treatment   plant   for   the <\/p>\n
    members of the assessee, who run industrial units in the Trans Thane <\/p>\n
    Creek Area.   The income of the assessee consists of contributions by <\/p>\n
    members made for the  purposes of setting up the effluent treatment <\/p>\n
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\n                                                6<\/span><\/p>\n
    facility.     The   Association   collects   contributions   in   excess   of   what   is <\/p>\n
    required to be expended.   The case of the assessee is that the treatment <\/p>\n
    costs recovered are generally maintained at such a level, that recoveries <\/p>\n
    are normally more than the expenses of that year so as to ensure that <\/p>\n
    funds are available to meet a part of the capital cost.  According to the <\/p>\n
    assessee, the capacity of the Effluent Treatment Plant installed initially <\/p>\n
    was 12 mld which became insufficient to handle the effluents generated <\/p>\n
    and a result an additional plant was required.   Moreover, a surplus is <\/p>\n
    required to ensure that funds are available to meet sudden eventualities <\/p>\n
    such   as   major   repairs   and   replacement   expenses.   The   underground <\/p>\n
    pipeline for the supply of effluents is stated to be over 30 years of age <\/p>\n
    and the assessee maintains a surplus to deal with unforeseen situations.\n<\/p>\n
    The assessee does not collect any contributions from third parties and <\/p>\n
    the entire contribution originates from its members. The contribution is <\/p>\n
    expended only for meeting the objects of the Association, for the benefit <\/p>\n
    of the members.  According to the assessee, there is an absolute identity <\/p>\n
    between   the   contributors   and   the   participators   and,   as   a   result,   the <\/p>\n
    principle of mutuality would stand attracted.\n<\/p>\n
    Mutuality :\n<\/p>\n
    7.             The   principle   of   mutuality   postulates   that   all   the <\/p>\n
    contributors to the common fund must be entitled to participate in the <\/p>\n
    surplus and that all the participators in the surplus are contributors to <\/p>\n
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\n                                                 7<\/span><\/p>\n
    the common fund.  It is in this sense that the law postulates that there <\/p>\n
    must   be   a   complete   identity   between   the   contributors   and   the <\/p>\n
    participators.     The   essence   of   the   doctrine   of   mutuality   lies   in   the <\/p>\n
    principle that what is returned is what is contributed by a member.  A <\/p>\n
    person   cannot   trade   with   himself.     It   is   on   this   hypothesis   that   the <\/p>\n
    income which falls within the purview of the doctrine of mutuality is <\/p>\n
    exempt from taxation.\n<\/p>\n
    8.<\/p>\n
                   In  Commissioner   of   Income   Tax   V\/s.   Bankipur   Club  <\/p>\n
    Limited1,   the   Supreme   Court   considered   as   to   whether   a   surplus   of <\/p>\n
    receipts over expenditure generated from the facilities extended by a <\/p>\n
    club   to   its   members   were   exempt   on   the   ground   of   mutuality.     The <\/p>\n
    Supreme   Court   reiterated   the   principle   that   in   the   case   of   a   mutual <\/p>\n
    society,   there     must   be   a   complete   identity   between   the   class   of <\/p>\n
    contributors and of participators.  The main object of the club, noted by <\/p>\n
    the Supreme Court, was to afford to its members the usual privileges, <\/p>\n
    advantages,   conveniences   and   accommodation   provided   by   the   club.\n<\/p>\n
    The   amounts   received   by   the   club   were   for   the   supply   of   drinks, <\/p>\n
    refreshments   or   other   goods   from   the   members   of   the   club.     These <\/p>\n
    being charges for the privileges, conveniences and amenities provided <\/p>\n
    to members, such services, as observed by the Supreme Court, were not <\/p>\n
    provided with a profit motive and were not tainted by commerciality.\n<\/p>\n
    1 (1997) 92 Taxman 298<\/p>\n
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\n                                                  8<\/span><\/p>\n
    This, therefore, did not constitute a trading activity and the surplus of <\/p>\n
    receipts   over   expenditure,   generated   as   a   result   of   such   a   mutual <\/p>\n
    arrangement, did not constitute income for the purposes of the Act.  In <\/p>\n
    Chelmsford   Club   V\/s.   Commissioner   of   Income   Tax2,   the   Supreme <\/p>\n
    Court held that “the law recognises the principle of mutuality excluding <\/p>\n
    the   levy   of   income-tax   from   the   income   of   such   business   to   which <\/p>\n
    the …. principle is applicable”.  Adverting to the judgment of the Privy <\/p>\n
    Council in English and Scottish Joint Co-operative Wholesale Society  <\/p>\n
    Limited   V\/s.   Commissioner   of   Agricultural   IT,3  the   Supreme   Court <\/p>\n
    adopted   the   existence   of   the   following   principles   as   establishing <\/p>\n
    mutuality   :   “(i)   the   identity   of   the   contributors   to   the   fund   and   the <\/p>\n
    recipients   from   the   fund,   (ii)   the   treatment   of   the   company,   though <\/p>\n
    incorporated as a mere entity for the convenience of the members and <\/p>\n
    policyholders,   in   other   words,   as   an   instrument   obedient   to   their <\/p>\n
    mandate,   and   (iii)   the   impossibility   that   contributors   should   derive <\/p>\n
    profits from contributions made by themselves to a fund which could <\/p>\n
    only be expended or returned to themselves.”\n<\/p>\n
    9.              A Division Bench of the Gujarat High Court in Sports Club <\/p>\n
    of  Gujarat  V\/s.   Commissioner   of  Income  Tax4  held  that   one   of   the <\/p>\n
    essential   requirements   of   mutuality   is   that   the   contributors   to   the <\/p>\n
    2 (2002) 243 ITR 89 (S.C.)
\n    3 (1948) 16 ITR 320 (PC)
\n    4 (1988) 37 Taxman 38 (Guj.)<\/p>\n
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\n                                               9<\/span><\/p>\n
    common fund are entitled to participate in the surplus thereby creating <\/p>\n
    an identity between participators and the contributors.   Once such an <\/p>\n
    identity is established the surplus income would not be exigible to the <\/p>\n
    tax on the principle that no man can make a profit out of himself.\n<\/p>\n
    10.           Applying the principle which has been enunciated by the <\/p>\n
    Supreme   Court,   there   can   be   no   manner   of   doubt   that   the   surplus <\/p>\n
    generated by the assessee representing the excess of its income over <\/p>\n
    expenditure would fall within the purview of the doctrine of mutuality.\n<\/p>\n
    For the purposes of the first issue, it must be noted that this income is <\/p>\n
    exclusive of interest which is earned on fixed and other deposits and on <\/p>\n
    refund   of   income-tax   which   would   be   dealt   with   separately.     The <\/p>\n
    income of the assessee is contributed by its members.  The assessee has <\/p>\n
    been formed specifically with the object of providing a common effluent <\/p>\n
    facility to its members.   The income is not generated out of dealings <\/p>\n
    with any third party.  The entire contribution originates in its members <\/p>\n
    and is expended only in furtherance of the objects of the Association, <\/p>\n
    for the benefit of the members.  On these facts, both the Commissioner <\/p>\n
    (Appeals) and the Tribunal were justified in coming to the conclusion <\/p>\n
    that the surplus so generated falls within the purview of the doctrine of <\/p>\n
    mutuality and was not exigible to tax.  The first question of law would <\/p>\n
    accordingly have to be answered in favour of the assessee and against <\/p>\n
    the Revenue.\n<\/p>\n
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\n                                                 10<\/span><\/p>\n
    RE : QUESTION B<\/p>\n
    11.            During the assessment year, the assessee earned interest on <\/p>\n
    bank deposits, other deposits and income-tax refunds amounting to Rs.\n<\/p>\n
    45.46 lakhs.   The submission which has been urged on behalf of the <\/p>\n
    Revenue   is   that   (i)   The   interest   income   does   not   satisfy   the   test   of <\/p>\n
    mutuality since the income is generated not from the members of the <\/p>\n
    assessee but from third parties such as banks with whom the surplus is <\/p>\n
    kept in fixed deposits; (ii) Clause 15 of the Memorandum of Association <\/p>\n
    enables the assessee to invest any money of the Association in one or <\/p>\n
    more   of   the   modes   of   investment   specified   therein,   which   include <\/p>\n
    deposits with a Government company and the holding of securities and <\/p>\n
    investments authorized by law.   An investment made in pursuance of <\/p>\n
    the   provisions   of   clause   15   of   the   MoA   will   not   meet   the   test   of <\/p>\n
    mutuality since interest is earned out of a commercial decision of the <\/p>\n
    assessee to invest in such deposits for the purposes of earning interest;\n<\/p>\n
    (iii) The predominant view on the question as to whether interest on <\/p>\n
    bank deposits falls within the principle of mutuality is that of the High <\/p>\n
    Courts   of   Madras,   Karnataka,   Gujarat  and   Jammu   &   Kashmir,   which <\/p>\n
    have  held that interest  earned  on  surplus  funds  parked  with  a  bank <\/p>\n
    does not satisfy the test of mutuality.\n<\/p>\n
                   On   the   other   hand,   it   has   been   urged   on   behalf   of   the <\/p>\n
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\n                                              11<\/span><\/p>\n
    assessee that : (i) The source of funds invested in bank deposits is the <\/p>\n
    contribution made by the members of the assessee; (ii) The surplus is <\/p>\n
    maintained in order to deal with uncertain eventualities that are likely <\/p>\n
    to arise in the functioning of the Effluent Treatment facility; (iii) The <\/p>\n
    assessee as a Section 25 company is under a statutory obligation to hold <\/p>\n
    its   surplus   funds   with   a   Scheduled   Bank   under   Section   35   of   the <\/p>\n
    Bombay Public Trust Act, 1950; (iv)  The tenor of clause 15 of the MoA <\/p>\n
    merely contemplates that the assessee may invest its funds as a matter <\/p>\n
    of efficient handling.  In other words, the submission of Counsel for the <\/p>\n
    assessee is that the actual nature of the activity, the source of funds and <\/p>\n
    the manner in which the funds are spent should lead to the conclusion <\/p>\n
    that the earning of interest was motivated by an efficient utilization of <\/p>\n
    the funds of the assessee during the period when they are surplus to <\/p>\n
    needs.  The earning of interest, it was urged, is not branded with a taint <\/p>\n
    of commerciality.\n<\/p>\n
    12.           Clause   15   of   the   MoA   provides   that   any   money   of   the <\/p>\n
    Association may be invested in certain specified modes :\n<\/p>\n
    “15. Any money of the Association may be invested in or upon
\n         any   one   or   more   of   the   following   securities   or   modes   of
\n         investments   with   power   from   time   to   time   to   vary   such
\n         investments and securities held by the Association for others
\n         of the character hereby authorized :-\n<\/p>\n
           i)      Deposits with any Government Company.\n\n\n\n                                                        ::: Downloaded on - 09\/06\/2013 16:01:30 :::<\/span>\n                                               12<\/span>\n\n           ii)     Purchase   of   ownership   or   other   flats   in   any   co-\n<\/pre>\n
                   operative   Housing   Society   or   other   organization   for <\/p>\n
                   running the activities of the Company.\n<\/p>\n
           iii)    Any other securities or investments authorized by law.\n<\/p>\n
           iv)     To invest the funds of the Company not immediately
\n                   required   in   accordance   with   the   pattern   laid   down
\n                   u\/s.11(5)   of   the   Income-Tax   Act,   1961   as   amended <\/p>\n
                   from time-to-time and\/or as may be directed by any
\n                   authority   or   authorities   under   the   Income   Tax   Act,
\n                   1961, and\/or any other law for the time being in force
\n                   concerning the name”.\n<\/p>\n
    13.<\/p>\n
                   Several High Courts have considered the question whether <\/p>\n
    interest   earned   on   surplus   funds   originating   in   the   members’ <\/p>\n
    contribution   of   a   mutual   association   is   exigible   to   income   tax.   The <\/p>\n
    Gujarat High Court had occasion to consider the question in Sports Club <\/p>\n
    of   Gujarat   Limited   V\/s.   Commissioner   of   Income   Tax  (supra).     A <\/p>\n
    Division Bench of the Gujarat High Court noted that in that case, the <\/p>\n
    objects   clause   of   the   Memorandum   and   Articles   of   Association <\/p>\n
    empowered the management of the assessee to invest in and deal with <\/p>\n
    the moneys of the club not immediately required, in such a manner as <\/p>\n
    may   from   time   to   time   be   determined   by   it.     Under   the   clause, <\/p>\n
    investment was not confined to the holding of fixed deposits in banks <\/p>\n
    but   could   take   any   other   form   or   shape   including   an   investment   in <\/p>\n
    shares or real estate.   In that context, the Gujarat High Court held as <\/p>\n
    follows :\n<\/p>\n
                   “……..      When   income   is   derived   from   such <\/p>\n
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\n                                                 13<\/span><\/p>\n
            investment, whether by way of interest, dividend or rent, it
\n            is   derived   from   a   third   party   and   is   not   by   way   of <\/p>\n
            contribution from the members of the club”.\n<\/p>\n
    Apart from the fact that in that case the object clause empowered the <\/p>\n
    management to invest surplus funds in several categories of investment, <\/p>\n
    the   Division   Bench   also   noted   that   the   surplus,   if   it   remained   after <\/p>\n
    satisfying the  debts and liabilities  was  to be distributed amongst the <\/p>\n
    members in equal shares.\n<\/p>\n
    14.            Counsel   appearing   on   behalf   of   the   assessee   sought   to <\/p>\n
    distinguish the judgment of the Gujarat High Court on the ground that <\/p>\n
    in the present case,  unlike in the case before the Gujarat High Court, <\/p>\n
    clause   V   (6)   postulates   that   upon   winding   up   or   dissolution   of   the <\/p>\n
    assessee,   the   surplus   after   meeting   debts   and   liabilities   is   not   to   be <\/p>\n
    distributed amongst the members but is to be transferred to another <\/p>\n
    company having similar objects as determined by the members of the <\/p>\n
    company.     We   are   of   the   view   that   the   principle   enunciated   in   the <\/p>\n
    judgment of the  Gujarat High Court cannot be distinguished on that <\/p>\n
    ground because the principal basis of the determination of the Gujarat <\/p>\n
    High   Court   was   that   when   income   is   derived   from   an   investment <\/p>\n
    whether by way of interest, dividend or rent, it is derived from a third <\/p>\n
    party and it is not by way of contribution from the members of the club.\n<\/p>\n
    The principle of mutuality will hence not apply to such income.\n<\/p>\n
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\n                                               14<\/span><\/p>\n
    15.            The   Karnataka   High   Court   dealt   with   the   issue   in   three <\/p>\n
    decisions.\n<\/p>\n
                   In  Commissioner   of   Income   Tax   V\/s.   I.T.I.   Employees <\/p>\n
    Death   &   Superannuation   Relief   Fund,5  a   fund   was   created   by   the <\/p>\n
    employees   of   the   Indian   Telephone   Industries   and   interest   was <\/p>\n
    generated   by   making   deposits   by   investment   in   a   bank.     A   Division <\/p>\n
    Bench   of   the   Karnataka   High   Court   noted   that   the   ingredients   of <\/p>\n
    mutuality were missing in that case since apart from the contributions <\/p>\n
    made by the members, there were other sources of funding for the trust <\/p>\n
    fund.  The Division Bench was of the view that income was earned by <\/p>\n
    making deposits by way of investment in the bank and that was a case <\/p>\n
    where the assessee had invested its surplus funds and earned interest <\/p>\n
    on these deposits.  The High Court held that the principle of mutuality <\/p>\n
    could be confined to the surplus which has accrued to the club out of <\/p>\n
    the contributions received from the members but, this principle would <\/p>\n
    have no application to the surplus received from non-members.  The tax <\/p>\n
    was   sought   to   be   levied   not   on   the   surplus   arising   from   the <\/p>\n
    contributions   made   by   the   members   or   from   interest   earned   on   the <\/p>\n
    moneys contributed by the members.  On the other hand, the deposits <\/p>\n
    in   banks   were   made   for   earning   interest   by   way   of   income.     The <\/p>\n
    principle that no person could trade with himself would not arise as <\/p>\n
    5 (1998) 101 Taxman 315 (Kar.)<\/p>\n
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\n                                              15<\/span><\/p>\n
    moneys were invested by the assessee with the bank to earn income, to <\/p>\n
    enable   the   assessee   to   discharge   its   obligations.     Consequently,   the <\/p>\n
    income earned from an outside agency by way of interest would not be <\/p>\n
    covered by the principle of mutuality.\n<\/p>\n
                   In  Commissioner   of   Income   Tax   V\/s.   Bangalore   Club6, <\/p>\n
    the   assessee   was   a   club   which   was   registered   under   the   Societies’ <\/p>\n
    Registration Act and its members included four Scheduled Banks.  The <\/p>\n
    surplus   which   was   generated   during   the   course   of   assessment   year <\/p>\n
    1989-90 was held in fixed deposits with the four banks and the interest <\/p>\n
    that was generated thereon was claimed not to be exigible to tax on the <\/p>\n
    principle of mutuality.   A Division Bench of the Karnataka High Court <\/p>\n
    held, after adverting to the decisions of the Supreme Court, that what <\/p>\n
    had been done by the club is similar to what could have been done by a <\/p>\n
    customer of a bank.  The principle that no man can trade with himself <\/p>\n
    would not be applicable where the deposit was held by a nationalized <\/p>\n
    bank with its customers since the prevailing relationship was that of a <\/p>\n
    banker with its customer.\n<\/p>\n
    16.            The Karnataka High Court distinguished the judgment in <\/p>\n
    the  I.T.I.   Employees’  case   in   a   subsequent   decision   in  Canara   Bank  <\/p>\n
    Golden   Jubilee   Staff   Welfare   Fund   V\/s.   Deputy   Commissioner   of  <\/p>\n
    6 (2006) 156 Taxman 323 (Kar.)<\/p>\n
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\n                                               16<\/span><\/p>\n
    Income   Tax7.     In   that   case   the   assessee   was   a   registered   society <\/p>\n
    comprising of the employees of the Canara Bank, and was established <\/p>\n
    with   the   object   of   promoting   welfare   amongst   the   members   who <\/p>\n
    contributed towards the corpus fund.   The Assessing Officer taxed the <\/p>\n
    interest income on investments and dividend income on shares.   The <\/p>\n
    appeals of the assessee were dismissed by the Commissioner and by the <\/p>\n
    Tribunal.   The question before the High Court inter alia was whether <\/p>\n
    the   principle   of   mutuality   would   apply.     The   Karnataka   High   Court <\/p>\n
    noted that during the assessment years in question the source of funds <\/p>\n
    was exclusively the members and no outsiders had contributed.   The <\/p>\n
    High Court was of the view that it was the contribution of the members <\/p>\n
    which had formed the corpus of the fund.  A portion of the fund which <\/p>\n
    was not advanced to the members was invested.  The High Court noted <\/p>\n
    that the investment was “as a precaution for the purpose of keeping it <\/p>\n
    in safe custody and not with an intention to derive a profit by way of <\/p>\n
    interest”.  The High Court distinguished the decision in the case of I.T.I.\n<\/p>\n
    Employees  and came to the conclusion that taking into consideration <\/p>\n
    the objects of the assessee, the source of funds during the relevant years <\/p>\n
    and   applicability   of   the   funds   for   the   benefit   of   the   members,   the <\/p>\n
    principle of mutuality was attracted.\n<\/p>\n
    17.            The   Madras   High   Court   considered   a   similar   issue   in <\/p>\n
    7 (2009) 243 ITR 89 (SC)<\/p>\n
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\n                                                 17<\/span><\/p>\n
    Madras Gymkhana Club V\/s. Deputy Commissioner of Income-tax8.\n<\/p>\n
    The question for consideration before the Division Bench was whether <\/p>\n
    interest earned on surplus income derived in the course of the activities <\/p>\n
    of   the   club   and   invested   in   fixed   deposits   would   satisfy   the   test   of <\/p>\n
    mutuality. The Division Bench of the Madras High Court considered the <\/p>\n
    decisions   of   the   Karnataka   High   Court   both   in   the   case   of  I.T.I.\n<\/p>\n
    Employees  and in  Bangalore Club.   The Madras High Court held that <\/p>\n
    though the club existed for the mutual interest of its members, on the <\/p>\n
    basis of this alone it could not be held that the other activities such as <\/p>\n
    financial   management   of   depositing   surplus   funds   in   banking <\/p>\n
    institutions and earning a substantial amount by way of interest should <\/p>\n
    also be regarded as possessing a nexus to the regular activities of the <\/p>\n
    club in relation to its members.   The High Court observed that it was <\/p>\n
    not the case of the assessee that the funds which were invested in the <\/p>\n
    form of fixed deposits were so maintained with a definite idea of using <\/p>\n
    them for a specific project or for the development of the infrastructural <\/p>\n
    facilities of the club.   The Karnataka High Court was of the view that <\/p>\n
    such   investments   in   fixed   deposits   could   not   be   equated   within   or <\/p>\n
    brought   within   the   concept   of   mutuality   and   the   benefit   of   tax <\/p>\n
    exemption could not be extended in respect of the interest earned on <\/p>\n
    surplus income.  The Madras High Court was not inclined to follow the <\/p>\n
    decision   of   the   Karnataka   High   Court   in   the  Canara   Bank  case   and <\/p>\n
    8 (2009) 183 Taxman 333 (Mad.)<\/p>\n
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\n                                               18<\/span><\/p>\n
    confined it to the special facts as they appeared before the High Court <\/p>\n
    there.\n<\/p>\n
    18.            The High Court of Jammu & Kashmir held in Amar Singh  <\/p>\n
    Club v\/s. Union of India9 that interest received on fixed deposits and <\/p>\n
    bank deposits would not be covered by the principle of mutuality.  The <\/p>\n
    High Court observed that there was no statutory obligation on the part <\/p>\n
    of the assessee to make such deposits.  The principle of mutuality could <\/p>\n
    be applied only if interest was earned for advances \/ facilities of loan <\/p>\n
    given to the members of the club.\n<\/p>\n
    19.            Our attention has been drawn to the judgment of the Delhi <\/p>\n
    High Court in Commissioner of Income Tax V\/s. Standing Conference  <\/p>\n
    of Public Enterprises (Scope)10.  This decision of the Delhi High Court <\/p>\n
    appears to have been based on a concession made before the Court on <\/p>\n
    behalf of the Revenue and the assessee.   Before the Delhi High Court, <\/p>\n
    parties   agreed   that   the   issue   as   to   whether   receipts   on   account   of <\/p>\n
    interest earned from surplus funds deposited with the banks would be <\/p>\n
    taxable would follow by the application of the principle of mutuality.\n<\/p>\n
    The   Delhi   High   Court   was   of   the   view   that   simply   because   some <\/p>\n
    incidental activity of the assessee is revenue generating that does not <\/p>\n
    give any justification to hold that it is tainted with commerciality and
\n    9 (2009) 184 Taxman 481 (J&K)
\n    10 (2009) 319 ITR 179 (Del)<\/p>\n
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\n                                                19<\/span><\/p>\n
    reaches the point where a relationship of mutuality ends and that of <\/p>\n
    trading begins.\n<\/p>\n
    20.            On   behalf   of   the   assessee,   it   has   been   urged   before   the <\/p>\n
    Court that exigibility to tax of interest earned on fixed deposits placed <\/p>\n
    with a bank on the surplus funds of the assessee is not res-integra in <\/p>\n
    view   of   the   judgment   of   the   Supreme   Court   in  Commissioner   of <\/p>\n
    Income   Tax   V\/s.   Cawnpore   Club   Limited11.     The   judgment   of   the <\/p>\n
    Supreme Court is as follows :\n<\/p>\n
           “1. One   of   the   questions   which   the   High   Court   had
\n           decided in  other cases  relating  to the  same  assessee was
\n           that the doctrine of mutuality applied and, therefore, the <\/p>\n
           income earned by the assessee from the rooms let out to its
\n           members   could   not   be   subjected   to   tax.     No   appeal   had <\/p>\n
           been filed against the said decision and the matters stood
\n           concluded as far as the assessee was concerned.  This being
\n           so, no useful purpose would be served in proceeding with
\n           the   appeals   on   the   other  questions   when  the   respondent <\/p>\n
           cannot be taxed because of the principle of mutuality.\n<\/p><\/blockquote>\n
           2.      The appeals were accordingly dismissed.”\n<\/p><\/blockquote>\n
    21.            Now, from the judgment of the Supreme Court it is evident <\/p>\n
    that   the   High   Court   had   held,   in   other   cases   relating   to   the   same <\/p>\n
    assessee,   that   the   doctrine   of   mutuality   applied   and,   therefore,   the <\/p>\n
    income earned by the assessee from the rooms let out to its members <\/p>\n
    could not be subjected to tax.  The Supreme Court noted that no appeal <\/p>\n
    had been filed against that decision and the issue stood concluded in so
\n    11 (2004) 140 Taxman 378 (SC)<\/p>\n
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\n                                                 20<\/span><\/p>\n
    far   as   the   assessee   was   concerned.     It   is   in   this   backdrop   that   the <\/p>\n
    Supreme   Court   observed   that   no   useful   purpose   would   be   served   in <\/p>\n
    proceeding with the appeals on the other questions, when the assessee <\/p>\n
    could not be taxed because of the principle of mutuality.  Hence, from <\/p>\n
    the judgment of the Supreme Court it is clear that the question as to <\/p>\n
    whether interest earned on fixed deposits made by an assessee out of <\/p>\n
    surplus   funds   would   or   would   not   fall   within   the   purview   of   the <\/p>\n
    principle of mutuality has not been adjudicated upon.  The judgment of <\/p>\n
    the Supreme Court must be construed as it stands.  The observation of <\/p>\n
    the   Supreme   Court   was   that   no   useful   purpose   would   be   served   in <\/p>\n
    proceeding with the appeals on the other questions.  That was because <\/p>\n
    as between the assessee and the Revenue in that case, the finding of the <\/p>\n
    High Court that the doctrine of mutuality applied to the income earned <\/p>\n
    by the assessee from letting out of the rooms to the members of the <\/p>\n
    assessee had not been challenged in appeal.\n<\/p>\n
    22.              On   behalf   of   the   assessee,   Counsel   relied   upon   the <\/p>\n
    Commentary   on   Income-tax   by   Sampath   Iyengar12  where,   after <\/p>\n
    adverting to the judgment of the Supreme Court in Cawnpore Club, the <\/p>\n
    author   has   concluded   that,   “the   issue   can   now   be   treated   as   finally <\/p>\n
    resolved in favour of taxpayer”.  Reliance was also sought to be placed <\/p>\n
    on   a   judgment   of   the   Hyderabad   Bench   of   the   Tribunal   in  Fateh  <\/p>\n
    12 (10th Editiion Volume 8 Page 111)<\/p>\n
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\n                                                21<\/span><\/p>\n
    Maidan Club Vs. Asstt. Commissioner of Income Tax13.  The judgment <\/p>\n
    of the Tribunal was sought to be relied upon since it contains an extract <\/p>\n
    of the questions which were referred to the High Court at Allahabad <\/p>\n
    from whose decision the judgment of the Supreme Court in Cawnpore <\/p>\n
    Club  emanated.   Counsel submitted that two questions were referred <\/p>\n
    for the decision of the High Court;  the first being the exigibility to tax <\/p>\n
    of   the   income   of   the   club   from   letting   out   of   rooms   vis-a-vis   the <\/p>\n
    principles of mutuality and the second as to whether interest earned on <\/p>\n
    fixed deposits and dividend was exempt on the principles of mutuality.\n<\/p>\n
    The submission which was urged was that since both the issues were <\/p>\n
    dealt with in the judgment of the High Court, they arose in the appeal <\/p>\n
    before   the   Supreme   Court   and   the   judgment   of   the   Supreme   Court <\/p>\n
    must, therefore, be regarded as concluding the question as to whether <\/p>\n
    interest on fixed deposits would be within the fold of the principle of <\/p>\n
    mutuality.\n<\/p>\n
    23.             We are of the view that as a High Court, it is our bounden <\/p>\n
    duty to read the judgment of the Supreme Court as it stands and not <\/p>\n
    with   reference   to   the   underlying   decision   of   the   High   Court   of <\/p>\n
    Allahabad, which has been quoted in the decision of the Income Tax <\/p>\n
    Appellate   Tribunal.     The   judgment   of   the   Supreme   Court   makes   it <\/p>\n
    abundantly clear that since there was no challenge by the Revenue to <\/p>\n
    13 (2003) 81 TTJ (Hyd) 831<\/p>\n
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\n                                                 22<\/span><\/p>\n
    the finding on the principle of mutuality qua the income earned from <\/p>\n
    letting out of the rooms to the members of the club, the Supreme Court <\/p>\n
    was of the view that no useful purpose would be served in pursuing the <\/p>\n
    other   questions.   The   other   questions   have,   therefore,   not   been <\/p>\n
    adjudicated by the Supreme Court.\n<\/p>\n
    24.            A   decision   of   the   Supreme   Court   becomes   a   precedent <\/p>\n
    under Article 141 of the Constitution, when a question is directly raised <\/p>\n
    and   considered.     The   decision   becomes   a   law   declared   where   the <\/p>\n
    question   is   actually   adjudicated  upon   (Tika  Ram  Vs.State  of  U.P.)14 <\/p>\n
    The decision in Cawnpore Club does not actually decide upon the issue <\/p>\n
    as   regards   the   exigibility   to   tax   of   the   interest   received   on   surplus <\/p>\n
    income invested in fixed deposits.\n<\/p>\n
    25.            In order to fulfill the requirement of mutuality, a mutual <\/p>\n
    association has to establish, as an essential  requirement, the  identity <\/p>\n
    between participators and contributors to the fund.  However, the fact <\/p>\n
    that   an   Association   satisfies   the   norm   of   mutuality   in   respect   of   the <\/p>\n
    receipts of contributions from its members does not necessarily lead to <\/p>\n
    the conclusion that every activity of the Association satisfies the test of <\/p>\n
    mutuality.     An   Association   may   engage   in   activities   which   can   be <\/p>\n
    described as mutual and in other activities which are not mutual.  The <\/p>\n
    14 (2009) 12 SCALE 349<\/p>\n
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\n                                                  23<\/span><\/p>\n
    Gujarat   High   Court   recognized   this   in   its   decision   in  Sports   Club   of <\/p>\n
    Gujarat (supra).  Adverting to the decision in Commissioner of Income <\/p>\n
    Tax V\/s. Madras Race Club, the Court noted that the application of the <\/p>\n
    principle of mutuality is not destroyed by the presence of transactions <\/p>\n
    which   are   non-mutual   in   character.     However,   in   such   a   case,   the <\/p>\n
    principle of mutuality has to be confined to transactions with members <\/p>\n
    possessing the essential character of mutuality.   The two activities can <\/p>\n
    in   appropriate   cases   be   separated   and   the   profits   derived   from <\/p>\n
    transactions which do not fulfill the requirements of mutuality can be <\/p>\n
    brought to tax.\n<\/p>\n
    26.             The assessee in the present case utilizes its surplus funds <\/p>\n
    for   investment   in   fixed   deposits   with   Banks.     The   interest   that   is <\/p>\n
    generated   on   the   investment   of   such   funds   is   not   income   which   is <\/p>\n
    received from the members of the assessee but from third parties such <\/p>\n
    as the banks with whom the funds are invested.  Section 35(1) of the <\/p>\n
    Bombay Public Trust Act, 1950 provides that where the trust property <\/p>\n
    consists of money and which cannot be applied immediately or at an <\/p>\n
    early   date   to   the   purposes   of   the   public   trust,   the   trustees   shall   be <\/p>\n
    bound to deposit the money, notwithstanding anything contained in the <\/p>\n
    instrument of the trust in a Scheduled Bank, in a Postal Savings Bank or <\/p>\n
    in a Cooperative Bank approved by the State Government or to invest in <\/p>\n
    public securities.  What sub-section (1) of Section 35 mandates is that <\/p>\n
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\n                                              24<\/span><\/p>\n
    moneys which are not required to be utilized immediately or at an early <\/p>\n
    date for the purpose of the trust should be deposited in one of the forms <\/p>\n
    which the Legislature has considered to be safe to protect the Trust.\n<\/p>\n
    Section 35(1) in any case does not contain a mandate that moneys will <\/p>\n
    have to be invested in a fixed deposit.   Where moneys are invested in <\/p>\n
    fixed deposits of Banks, the interest that is received on a deposit does <\/p>\n
    not   possess   the   same   character   of   mutuality   as   the   surplus   funds <\/p>\n
    derived by the  assessee from  the  contributions  of  its  members.   The <\/p>\n
    principle   of   mutuality   applies   to   surplus   funds   generated   from   the <\/p>\n
    contribution of members for the reason that the funds are contributed <\/p>\n
    by the  members  of  the Society and there  is  an identity between  the <\/p>\n
    contributors and the participators in the fund.   The decision to invest <\/p>\n
    the   funds   of   the   Association   in   Bank   fixed   deposits   is   a   prudent <\/p>\n
    commercial decision motivated by the desire to earn interest that would <\/p>\n
    not be available on moneys maintained in ordinary, current or savings <\/p>\n
    accounts.   Such interest does not fulfill the requirement of mutuality.\n<\/p>\n
    While investing the funds with a Bank or a Financial Institution, the <\/p>\n
    assessee assumes the character of a customer of the bank or institution <\/p>\n
    and the relationship that is engendered is that between a banker and its <\/p>\n
    customer.  The fact that the funds which are invested have their source <\/p>\n
    in the contribution by the members of the assessee cannot be dispositive <\/p>\n
    of the nature of the receipt obtained by the assessee on account of the <\/p>\n
    interest payments on the deposits made.  In determining the exigibility <\/p>\n
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\n                                              25<\/span><\/p>\n
    to tax of receipts on account of interest, it is the character of the receipt <\/p>\n
    as interest that must play a determinative role.  A payment on account <\/p>\n
    of interest by the bank or a party with whom the deposit is placed is an <\/p>\n
    arms length transaction with a third party.   The recompense   which is <\/p>\n
    received by the assessee by and as a result of the transaction does not <\/p>\n
    fulfill  the  condition  of  mutuality  to which  the   contributions  received <\/p>\n
    from the members of the assessee are subject.\n<\/p>\n
    27.<\/p>\n
                  We have adverted to several decisions of the High Courts <\/p>\n
    which have considered the issue which has fallen for determination in <\/p>\n
    these proceedings.  Some of these decisions may undoubtedly possess a <\/p>\n
    factual background on which there may not be complete identity with <\/p>\n
    the facts of another case.  The quest for complete identity is an illusion.\n<\/p>\n
    The Court must be guided by the basic underlying principle which will <\/p>\n
    guide the determination  of the case.   We are in agreement with the <\/p>\n
    principle   that   is   enunciated   by   the   Karnataka   High   Court   in  I.T.I.\n<\/p>\n
    Employees  that   the   principle   of   mutuality   would   cover   the   surplus <\/p>\n
    which accrues to a mutual association out of the contribution received <\/p>\n
    by it from its members.   The principle would have no application in <\/p>\n
    case of surplus received from non-members.  In a similar way, a deposit <\/p>\n
    made with a bank for earning interest by way of income will not fulfill <\/p>\n
    the requirement of mutuality.  As the Karnataka High Court observed in <\/p>\n
    its subsequent decision in the Bangalore Club, such a deposit implicates <\/p>\n
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\n                                               26<\/span><\/p>\n
    a relationship between a banker and a customer, to which the principle <\/p>\n
    of mutuality would not apply.   The Madras High Court in the  Madras <\/p>\n
    Gymkhana Club emphasized the distinction between those activities of <\/p>\n
    a   mutual   association   which   fulfill   the   norm   of   mutuality   and   those <\/p>\n
    which do not.  The mere fact that an Association exists for the mutual <\/p>\n
    interest of its members would not result in the conclusion that all its <\/p>\n
    activities,   including   those   which   involve   financial   transactions   of   the <\/p>\n
    deposit of surplus funds for earning interest, also partake of the same <\/p>\n
    character and nature.   The judgment of the Madras High Court, has <\/p>\n
    considered   all   the   three   judgments   of   the   Karnataka   High   Court <\/p>\n
    including the judgment in Canara Bank which struck a divergent note.\n<\/p>\n
    Having   given   our   careful   consideration   to   the   judgment   of   the <\/p>\n
    Karnataka   High   Court   in  Canara   Bank,   we   must   express   our <\/p>\n
    reservations.     The   Madras   High   Court   in  Madras   Gymkhana   Club <\/p>\n
    confined the decision in Canara Bank to the special facts as they appear <\/p>\n
    in that case.  The Karnataka High Court, while dealing with the issue in <\/p>\n
    the Canara Bank  placed a great deal of emphasis on the source of funds <\/p>\n
    of the assessee.  The High Court clarified that it was making it clear that <\/p>\n
    its conclusion ‘is based on the source of funds of the assessee during the <\/p>\n
    two relevant years’.  With respect, it must be pointed out that the mere <\/p>\n
    fact that the funds which are invested in a fixed deposit with the bank <\/p>\n
    are   funds   which   originated   from   the   contributions   made   by   the <\/p>\n
    members of the assessee cannot conclude the question as regards the <\/p>\n
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\n                                               27<\/span><\/p>\n
    taxability   of   the   receipts   on   account   of   interest   obtained   from   the <\/p>\n
    investment of these funds.  These receipts must partake of the character <\/p>\n
    of income from other sources and would be exigible to tax.\n<\/p>\n
    28.             At this stage, it would be necessary for the Court to advert <\/p>\n
    to a recent judgment of the Supreme Court Totgar’s Cooperative Sale  <\/p>\n
    Society   Limited   V\/s.   Income-Tax   Officer15.     In   that   case,   the   issue <\/p>\n
    before the Supreme Court related to the deduction under Section 80P.\n<\/p>\n
    The   Supreme   Court   dealt   with   interest   which   had   accrued   on   funds <\/p>\n
    which   were   not   required   immediately   by   the   assessee   which   was   a <\/p>\n
    cooperative credit society, for the purposes of its business and which <\/p>\n
    came to be invested in specified securities as investment.  The assessee <\/p>\n
    had contended before the Supreme Court that under the provisions of <\/p>\n
    the Karnataka Cooperative Societies Act, 1959,   a statutory obligation <\/p>\n
    was imposed on cooperative credit societies to invest their surplus funds <\/p>\n
    in   specified   securities   and   the   submission   was   that   in   view   of   the <\/p>\n
    statutory   obligation,   income   derived   from   short-term   deposits   and <\/p>\n
    securities   must   be   considered   as   income   derived   from   business <\/p>\n
    activities.   The assessee marketed the produce of its members whose <\/p>\n
    sale proceeds were at times retained by the assessee and the Court was <\/p>\n
    concerned with the tax treatment of that amount.  The Supreme Court <\/p>\n
    held that such interest income would fall within the category of income <\/p>\n
    from other sources and that it was correctly held to be taxable under
\n    15 (2010) 322 ITR 283 (SC)<\/p>\n
                                                         ::: Downloaded on – 09\/06\/2013 16:01:30 :::<\/span>
\n                                             28<\/span><\/p>\n
    Section 56 by the Assessing Officer.  In adverting to the judgment in the <\/p>\n
    case   of  Totgar’s   Cooperative   Sale   Society,   we   must   note   that   the <\/p>\n
    principle of mutuality as such did not arise for consideration before the <\/p>\n
    Supreme   Court   in   that   case.     The   submission   that   funds   not <\/p>\n
    immediately required for business were invested in specified securities \/ <\/p>\n
    deposits  under a    statutory obligation  and the  receipt  on  account of <\/p>\n
    interest would not constitute income from other sources was a specific <\/p>\n
    issue which was raised before the Supreme Court.  The Supreme Court <\/p>\n
    held that such interest would fall  for  taxation  as  income  from  other <\/p>\n
    sources.\n<\/p>\n
    29.            A   Division   Bench   of   this   Court   in  Sind   Co-operative  <\/p>\n
    Society   V\/s.   Income-Tax   Officer16  considered   whether   transfer   fees <\/p>\n
    received by a Cooperative Housing Society from an incoming member <\/p>\n
    were not liable to tax on the ground of mutuality.   The transfer fees <\/p>\n
    were to be paid by an Applicant for membership.  The Court noted that <\/p>\n
    the transfer fees could be appropriated only if the transferee is admitted <\/p>\n
    to membership.   In this context, the Division Bench observed that the <\/p>\n
    fact that the proposed transferee may make the payment in advance <\/p>\n
    was by itself not relevant since the amount could be appropriated only <\/p>\n
    on the transferee being admitted as a member of the Society.   If the <\/p>\n
    member   was   not   admitted,   the   transfer   fee   was   refundable.     The <\/p>\n
    transfer   fee   was   regarded   as   having   no   element   of   trading   or
\n    16 (2009) 317 ITR 47 (Bom)<\/p>\n
                                                      ::: Downloaded on – 09\/06\/2013 16:01:30 :::<\/span>
\n                                                29<\/span><\/p>\n
    commerciality   and   met   the   requirements   of   mutuality.     In  Sind <\/p>\n
    Cooperative   Housing   Society,   the   issue   which   fell   for   consideration <\/p>\n
    before the Division Bench was, therefore, distinct and is not the same as <\/p>\n
    what has fallen for consideration in the second limb of the questions <\/p>\n
    raised in this appeal by the Revenue.\n<\/p>\n
                   For   all   these   reasons,   the   second   question   of   law   as <\/p>\n
    formulated would have to be answered in favour of the Revenue and <\/p>\n
    against the assessee.\n<\/p>\n
    30.            In so far as the taxability of other deposits and interest on <\/p>\n
    income-tax refunds is concerned, we find from a reading of the order of <\/p>\n
    the   Tribunal   that   this   issue   has   not   been   specifically   dealt   with   or <\/p>\n
    considered.  Hence, we are of the view that it would be fair to permit <\/p>\n
    the parties to urge all appropriate submissions before the Tribunal.  We, <\/p>\n
    accordingly restore the question of the taxability of other deposits and <\/p>\n
    income-tax refunds for decision by the Tribunal afresh.\n<\/p>\n
    31.            For   all   the   aforesaid   reasons,   the   appeal   is   disposed   of.\n<\/p>\n
    There shall be no order as to costs.\n<\/p>\n
                   (J.P. Devadhar, J.)                    (Dr.D.Y. Chandrachud, J.)\n\n\n\n\n                                                          ::: Downloaded on - 09\/06\/2013 16:01:30 :::<\/span>\n <\/pre>\n","protected":false},"excerpt":{"rendered":"
Bombay High Court The Commissioner Of Income Tax vs Facility on 17 June, 2010 Bench: Dr. D.Y. Chandrachud, J.P. Devadhar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2060 OF 2009 The Commissioner of Income Tax, City – 10, Aayakar Bhavan, 4th Floor, M.K. Marg, Mumbai – […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[11,8],"tags":[],"class_list":["post-135607","post","type-post","status-publish","format-standard","hentry","category-bombay-high-court","category-high-court"],"yoast_head":"\nThe Commissioner Of Income Tax vs Facility on 17 June, 2010 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-facility-on-17-june-2010\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Commissioner Of Income Tax vs Facility on 17 June, 2010 - 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