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[2009] 184 Taxman 508 (Karnataka)/[2009] 308 ITR 202 (Karnataka)/[2009] 222 CTR 286 (Karnataka) [2009] 184 TAXMAN 508 (KAR.) HIGH COURT OF KARNATAKA Canara Bank Golden Jubilee Staff Welfare Fund* v. Deputy Commissioner of Income-tax K.L. MANJUNATH AND MRS. B.V. NAGARATHNA, JJ. ITA NOS. 409 AND 410 OF 2003â-  JULY 31, 2008 Section 4 of the Income-tax Act, 1961 - Mutual concern - Assessable as - Assessment years 1995-96 and 1996-97 - Whether crucial test of mutuality is that all contributors to common fund must be entitled to participate in surplus and all participators in surplus must be contributors to common fund; if this requirement is satisfied, particular form which association takes is immaterial - Held, yes - Assessee was a registered society established with object of promoting welfare among its members who contributed towards corpus fund - Welfare fund was utilized, inter alia, towards advance of loans to members on interest, which was major portion of its revenue - Surplus funds were invested in fixed deposits with bank and in shares - Assessee claimed exemption from tax on basis of principle of mutuality - Assessing Officer held that interest income on investment in fixed deposits and dividend income on shares were not governed by principle of mutuality and, hence, were liable to be taxed - Whether taking into consideration objects of assessee, its source of funds during relevant years and applicability of said funds for benefit of its members and keeping in mind that interest on investments and dividend earned on shares were only a portion of total income earned by investment of surplus fund which was wholly contributed by members of assessee during relevant assessment years, income earned by assessee by way of interest on investment and dividend on shares was governed by principle of mutuality and, therefore, was not taxable - Held, yes FACTS The assessee was a registered society comprising of the employees of the Canara Bank, established with the object of promoting welfare among the members who contributed towards the corpus fund. The welfare fund was utilized, inter alia, towards advance of loans to the members on interest, which was major…

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