Law:

Section:

Section 4 of the Income-tax Act, 1961 - Mutual Concern - Assessment years 1976-77 to 1980-81 - Whether where assessee-organisation was an AOP formed to promote and protect interest of its members and its Rules and Regulations provided that upon dissolution, surplus of subscription amount and other contributions should be distributed amongst members of organisation on basis of their contribution and there was no finding that organisation was catering to need of any outsider, income of assessee would be exempt from tax on ground of mutuality - Held, yes FACTS The assessee-organisation was an AOP registered under the Trade Unions Act, 1926 and its membership was confined to persons whose undertakings in business, trade, industry and agriculture formed part of or were connected with 'JK' group of undertakings or who were trustees under a trust made by any member or members thereof. The main object of the organisation was to regulate the relations between members and their employees and between members and members, and its members were to pay to the assessee, annual subscriptions and further contributions. The assessee took the plea that its income could not be assessed under the Act on the ground of mutuality. The Commissioner (Appeals) did not accept the plea. However, the Tribunal, after considering the rules and regulations of organisation, upheld the claim of the assessee. On reference : HELD Applying the principle laid down by the Apex Court in the case of CIT v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551 and followed in the case of Chelmsford Club v. CIT [2000] 243 ITR 89 / 109 Taxman 215 to the facts of the instant case, it was found that the organisation had been formed to promote and protect the interest of its members and it also provided that upon dissolution, the surplus should be distributed amongst the members of the organisation on the basis of their contribution. There was no finding that the assessee-organisation was catering to the need of any outsider. [Para 14] Therefore, the Tribunal was justified in holding that the income of the assessee was exempt from tax on the ground of mutuality and that the income of the assessee was not…

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