Indian Kanoon - Search engine for Indian Law

appellant as a mutual association created exclusively for the benefit of its members.

2. The Learned CIT(A) failed to appreciate the fact that the basic conditions of the concept of mutuality are not satisfied, hence the same is not applicable to the appellant.

3. The concept of mutuality should not be applied and the appellant requires to be considered as a charitable trust, eligible for benefits 11 of the Income Tax Act, 1961, IL CONFIRMATION OF ADDITION OF ANNUAL MEET COLLECTION OF RS. 6,60,000 RECEIVED FROM NON- MEMBERS AS TAXABLE INCOME 1, The Learned C1T(A) has erred in considering the gross annual meet collection (donation) received from non members of Rs. 6,60,000/- as taxable on mutuality concept basis out of total collection of Annual Meet Collection of Rs. 30,00,0000/-,

Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details. The A.O on verification of the information submitted in the course of the proceedings has dealt on the objects of the trust and has issued a show cause notice on the assessee to explain why the concept of mutuality should not be applied in the case of the assessee as it is based on the mutual cooperation of members. The assessee has filed the submissions on 5-3-2014 and explained that the concept of mutuality is not applicable in the case of non profitable organizations u/s 25 of the Companies Act and the assessee was granted All Inida Liquid Bulk Importers & Exporters Association, Mumbai.

- 10 -

the object of promoting, safeguarding and securing the interest of importers, exporters and service providers at the micro and macro level.

During the course of assessment proceedings, the AO asked the assessee to explain as to why the doctrine of mutuality should not be applied as the assessee's activity is based on mutual cooperation. In response the assessee stated that mutuality concept is not applicable as it is a non-profit organization u/s 25 of the Companies Act and also registered u/s 1 2AA of the Act. The assessee also stated that the test of mutuality required that the contributors to the common fund and participators in the surplus are identical. The A.O has considered and common fund. If this requirement is satisfied, the particular form which the association takes is immaterial. In other words if all the participators to be common fund are also contributors and their identity is established then the test of mutuality is satisfied. It is immaterial whether the surplus is paid back to the members in cash or put to reserve with the Company for its development and for providing benefits to its members. The surplus receipts of members over its expenses have been sought to be exempted from Income Tax on the principle of Mutuality. This principle is based on the premise that no man can make profit out of himself, but this principle cannot have any application in respect of the surplus received from non-members. Keeping in view the principle of mutuality, the surplus accruing to members from the subscription charges received from its members cannot be said to be income within the meaning of the Act. But, if such receipts are from sources other than members then no exemption can be claimed in r e s p ec t of such receipts on the plea of mutuality. The AO relied on the famous case of Cricket club of India, Bombay where CCI has been conducting world class matches. test matches and Ranji Trophy Matches and other similar tournaments from generations. The CC! is also registered u/s 25 of the Companies Act and it was al so claiming exemption u/s 11 and 12 of the Act. In this case, it has been held by the Honble Supreme Court that it is mutual organization. In the case of All Inida Liquid Bulk Importers & Exporters Association, Mumbai.

In respect of the other grounds of appeal, the CIT(A) has granted partial relief and partly allowed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon'ble Tribunal.

6. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the A.O. denying the exemption U/sec 11 of the Act and taxing the annual meet collections from non members and interest income as taxable applying the concept of mutuality association. The CIT(A) has not considered the facts on non applicability of concept of mutuality and the charitable activities of the All Inida Liquid Bulk Importers & Exporters Association, Mumbai.