Law:

Section:

Section 4 of the Income-tax Act, 1961 - Mutual concern - Assessable as - Assessment year 2003-04 - Whether only when object of an assessee claiming to be mutual concern or club is to carry on particular business or where income is generated from members and non-members through business carried on by it, it would be treated as tainted with commerciality - Held, yes - Whether simply because some incidental activity of assessee was revenue generating, that would not provide any justification to hold that it was tainted with 'commerciality' and reached a point where relationship of mutuality ended and that of trading began - Held, yes - Assessee-society was formed with main objective to improve performance of public enterprises - Membership of society was open to all public enterprises of Central/State Governments - During relevant assessment year, income generated by assessee, inter alia, included rental income from use of convention centre and other premises given to members and non-members and interest on fixed deposits with banks - Assessing Officer treated entire income as taxable income rejecting assessee's plea of being a mutual concern - On appeal, Tribunal held that assessee-society was a mutual concern so as to claim exemption on principle of mutuality and only rental income received by it from non-members was chargeable to tax - Whether, on facts, Tribunal had taken correct decision - Held, yes FACTS The assessee was a registered society formed at the behest of the Govern-ment of India to improve the performance of public enterprises and to improve their total role by conveying such information and advice to the community and the Government and to generally help public enterprises and other member organizations in their respective views. The membership of the society was open to all public enterprises of the Central/State Governments. In its return for the assessment year 2003-04, the assessee had claimed the entire income to be exempted from tax on the principle of mutuality. The income generated by the assessee in that year, inter alia, consisted of rental income for use of convention centre and other premises from non-members; license fee from a…

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