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Section 4 of the Income-tax Act, 1961 - Mutual concern - Assessment year 1989-90 - Assessee-club deposited surplus amount in banks, which were also members of assessee, as fixed deposits and earned interest on same - It claimed deduction of said interest on principle of mutuality - Whether principle of 'no man can trade with himself' is not available in respect of a nationalised bank holding a fixed deposit on behalf of its customer - Held, yes - Whether, therefore, Assessing Officer had rightly disallowed assessee's claim - Held, yes FACTS The assessee was a club registered under the Societies Registration Act and running on commercial lines. It had several members including banks. The assessee deposited a surplus amount in said four banks as a fixed deposit and earned interest on the same. For the assessment year 1989-90, the assessee claimed deduction on said earned interest on the principle of mutuality. Further, it was stated that four banks being members of a club constituted a common entity, and, therefore, tax could not be levied as it would amount to levying tax on oneself. The Assessing Officer, however, disallowed the claim. On appeal, the Commissioner (Appeals) allowed the claim of the assessee. On further appeal, the Tribunal upheld the order of the Commissioner (Appeals). On appeal : HELD The Division Bench of the Karnataka High Court in CIT v. I.T.I. Employees Death & Superannuation Relief Fund [1998] 234 ITR 308 / 101 Taxman 315 has made it very clear that income earned from outside agency on interest or securities from the bank would not be covered on the principles of mutuality for claiming exemption from tax. [Para 11] On the facts of instant case and in the light of the legal principles, it was clear that what have been done by the club was nothing but what could have been done by a customer of a bank. The principle of 'no man can trade with himself' is not available in respect of a nationalised bank holding a fixed deposit on behalf of its customer. In the instant case, relation-ship between the assessee and bank was one of a banker and a customer. [Para 12] In those circumstances, therefore, the order of the Commissioner (Appeals) and…

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