Law:

Section:

Section 4 of the Income-tax Act, 1961 - Mutual concern - Assessable as - Assessee, a trade-association, was incorporated under section 26 of the Companies Act, 1956 -Its memorandum of association provided that on winding up or dissolution, surplus left over was to be transferred to some other institution having objects similar to its objects or to a charitable body or bodies to be determined by its members at or before time of dissolution and not to be distributed among its members - Whether neither fact of assessee being incorporated under the Companies Act nor provision dealing with surplus left over would nullify principles of mutuality and, therefore, receipts from members by way of subscription or otherwise, would not be income in hands of assessee on principles of mutuality - Held, yes Section 44A of the Income-tax Act, 1961 - Trade/professional association - Whether section 44A recognizes position that receipts from members by way of subscription or otherwise will not be income in hands of assessee-trade association - Held, yes Facts The assessee, a trade-association, was incorporated under section 26 of the Companies Act, 1956. There was a provision in the memorandum of association of the assessee that on winding up or dissolution, the surplus left over was to be transferred to some other institution having objects similar to its objects or to a charitable body or bodies to be determined by its members of the club at or before the time of dissolution and not to be distributed among its members. The assessee contended that the subscriptions received by it from its members were not assessable on the principles of mutuality. However, the ITO assessed the impugned subscription amount. On appeal, the Tribunal found that the assessee was a trade association being an association of oil merchants carrying on a particular trade. Its objects were generally for the promotion and protection of the interests of those engaged in coconut oil trade generally. It rendered specific service to its members and non-members for a fee. It thus held that the assessee was a mutual association. The Tribunal also held that section 44A recognizes the position that the receipts…

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