Case: Commissioner Of Income-Tax, Bier Vs. M/S. Bankipur Club Ltd

assessee was a mutual benefit association and its income was not taxable." The said judgment was followed subsequently in all matters arising under Ss. 256(1) and 256(2) of the Act. So, for the assessment years which are subject-matter of cases falling under Group-D stated hereinabove, the above decision reported in (P&H) (supra) was followed and the income received by the assessee under the head "Others" - admission fees, readmission fee, periodical subscription from the members, etc, - were held to be exempt or non-taxable on the principle of mutuality. 13. The above four sets of cases falling in Groups A to D shall alone be covered by this judgment. With regard to 7 cases/appeals falling in Group-E the assessee is Cawnpore Club Ltd. It is seen that the income that was sought to be assessed in the case of assessee, was one derived from property let out and also interest received from F.D.R., N.S.C. etc. In these cases, the Court held that income should be assessed as one from "other sources" and not income from property. It does not appear that the larger plea that the income is totally exempt on the principle of mutuality, was decided in favour of the assessee. In the appeals filed by the Revenue, the only question that may probably arise is, whether income received from the property let out and interest by way of F.D.Rs., N.S.C. etc. can be brought to tax under the head "income from property". Since the issue raised in this batch of seven cases, is not similar to or same as the one involved in the other cases coming under Groups A to D, we do not propose to deal either with the facts or the decisions rendered by the authorities in this batch of cases (Group-E). All that we propose to do is to delink the cases coming under Group-E and direct them to be posted separately for hearing and disposal before an appropriate Bench. 14. Now we turn to the main question canvassed by the Revenue in the appeals coming under Groups A to D, namely, whether the assessee - mutual clubs - are entitled to exemption for the receipts or surplus arising from the sales of drinks, refreshments etc. or amounts received by way of rent for letting out the buildings or amounts received by way of admission fees, periodical subscriptions and receipts of similar nature, from its members ? In all these cases, the Tribunal as also the High Court have 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 the amounts received by way of admission fees, periodical subscription etc. from the members of the clubs were only for/towards 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 has also been found that different clubs realised various sums on the above counts only to afford to its members the usual privileges, advantages, conveniences and accommodation. In other words, the services offered on the above counts were not done, with any profit motive, and were not 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). In the light of the above findings, it necessarily follows that the receipts for the various facilities extended by the clubs to its members, as stated hereinabove, as part of the usual privileges, advantages and conveniences, attached to the membership of the club, cannot be said to be "a trading activity." The surplus - excess of receipts over the expenditure - as a result of mutual arrangement, cannot be said to be "income" for the purpose of the Act. 15. Our attention was invited to a few decisions which have dealt with the subject-matter in issue herein. The gist of the various English decisions has been succinctly summarised in the textbooks which we have adverted to hereinabove (Halsburys Laws of England, Simons Taxes, Wheatcroft etc.). Particular stress was laid on the decisions of the Supreme Court in CIT v. Royal Western India Turf Club Ltd. (SC), CIT v. Kumbakonam Mutual Benefit Fund Ltd. (SC), Fletcher (on his own behalf and on behalf of Trustees and Committee of Doctors Cave Bathing Club v. Income-tax Commissioner (supra). We do not think it necessary to deal at length with the above decisions except to state the principle discernible from them. We understand these decisions to lay down the broad proposition - that, if the object of the assessee-company claiming to be a "mutual concern" or "club", is to carry on a particular business and money is realised both from the members and from non-members, for the same consideration by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole disclose the same profit earning motive and are alike tainted with commerciality. In other words, the activity carried on by the assessee in such cases, claiming to be a "mutual concern" or "Members club" is a trade or an adventure in the nature of trade and the transactions entered into with the members or non-members alike is a trade/business/transaction and the resultant surplus is certainly profit - income liable to tax. We should also state, that "at what point, does the relationship of mutuality end and that of trading begin" is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. "Whether or not the persons dealing with each other, is a "mutual club" or carrying on a trading activity or an adventure in the nature of trade", is largely a question of fact [Wilcock v. Pinto & Co. 9 Tax(Cases) 111, 132 (CA) : 1925 1 (KB) 30 at 44 and 45].

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In the light of the above findings, it necessarily follows that the receipts for the various facilities extended by the clubs to its members, as stated hereinabove, as part of the usual privileges, advantages and conveniences, attached to the membership of the club, cannot be said to be "a trading activity." The surplusexcess of receipts over the expenditureas a result of mutual arrangement, cannot be said to be "income" for the purpose of the Act15. Our attention was invited to a few decisions which have dealt with ther in issue herein. The gist of the various English decisions has been succinctly summarised in the textbooks which we have adverted to hereinabove (Halsburys Laws of England, Simons Taxes, Wheatcroft etc.). Particular stress was laid on the decisions of the Supreme Court in CIT v. Royal Western India Turf Club Ltd. (SC), CIT v. Kumbakonam Mutual Benefit Fund Ltd. (SC), Fletcher (on his own behalf and on behalf of Trustees and Committee of Doctors Cave Bathing Club v.x Commissioner (supra). We do not think it necessary to deal at length with the above decisions except to state the principle discernible from them. We understand these decisions to lay down the broad propositionthat, if the object of they claiming to be a "mutual concern" or "club", is to carry on a particular business and money is realised both from the members and from, for the same consideration by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole disclose the same profit earning motive and are alike tainted with commerciality. In other words, the activity carried on by the assessee in such cases, claiming to be a "mutual concern" or "Members club" is a trade or an adventure in the nature of trade and the transactions entered into with the members ors alike is a trade/business/transaction and the resultant surplus is certainly profitincome liable to tax. We should also state, that "at what point, does the relationship of mutuality end and that of trading begin" is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. "Whether or not the persons dealing with each other, is a "mutual club" or carrying on a trading activity or an adventure in the nature of trade", is largely a question of fact[Wilcock v. Pinto & Co. 9 Tax(Cases) 111, 132 (CA) : 1925 1 (KB) 30 at 44 and 45].