Law:

Section:

Section 28(iii) of the Income-tax Act, 1961 - [Corresponding to section 10(6) of the Indian Income-tax Act, 1922] - Business income - Trade/Professional association - Assessee-association, a mutual concern, run on no profit basis, used to publish a monthly magazine and accepting money from some of its members by way of advertisement charges - However, profit made therefrom was not distributed among them as advertisers - Whether there was absence of mutuality and this made income of assessee-association taxable as such - Held, yes - Whether since cost of production of journal portion had an intimate nexus with cost of production of advertisement portion, to say that income from advertisement could be earned with 35 per cent of total cost of production of journal was to say unrealistically - Held, yes - Whether, therefore, cost of production of journal portion of magazine was expenditure incurred for earning advertisement income and whole of said cost should be set off against advertisement income - Held, yes FACTS The assessee, an association of persons, was a mutual concern, run on no profit basis. It used to publish a monthly magazine and accept advertisements for publication in the magazine, from members as well as non-members. It also used to charge for publication of advertisements. It contended that the advertisement charges received from members, who had published advertisements in the magazine, were not taxable as income. In the alternative, the assessee Association contended that the entire cost of production of the magazine should, in any event, be deducted in computing the income from advertisement. The ITO did not accept the contention of the assessee-association that advertisement charges received from members, who had published advertisements in the magazine, were not taxable. He, therefore, included the advertisement charges, received from members as well as non-members, in computation of the total income of the assessee. The ITO did not also accept the claim of the assessee that the whole of the cost of production of the magazine should be set off against advertisement receipts. He merely allowed deduction in respect of such part of the total…

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