Law:

Section:

Section 4 of the Income-tax Act, 1961 - Mutual concerns - Assessability of - Assessee-corporation consisted of 19 members and it was provided in partnership deed that each member would contribute Rs. 25 per month and if any member was in need, loan would be provided to him by assessee - Whether in view of fact that no loan was given to any outsider, interest received by assessee was to be exempted from tax as it was a mutual benefit association, though described as firm in partnership deed - Held, yes Facts A deed of partnership was executed on 15-4-1976 among the 19 partners of the assessee-corporation. The provisions of the deed of partnership showed that each partner contributed Rs. 25 per month to the partnership firm. The contributions so made by the partners were accumulated and lent to such partners as might be in need of the same. In the assessment year 1977-78 it declared certain interest income which included interest received on outstandings due from a former partner and also on moneys deposited in the savings account with a bank. No interest had been received from any person other than above. The assessee set up a claim that it was a mutual benefit association or society and its income was derived wholly from members, and consequently the principle of mutuality was applicable and the income could not be taxed. The ITO rejected the claim. On appeal, the AAC, however, accepted the assessee's claim. On further appeal by the revenue, the Tribunal also upheld the AAC's order. On reference: Held Looking into the provisions of the partnership deed, it was clear that the description by the assessee of itself as a 'partnership' was a mis-description. It looked as if the deed of partnership was a memorandum of association in truth and reality. The mere fact that the firm was described as a partnership firm need not necessarily be considered as decisive to determine the character of the assessee. The provisions relating to the grant of loans to members, etc., in the deed would indicate that in reality the deed of partnership was only a memorandum of association containing the terms and conditions governing the conduct of business of the assessee consisting of…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492