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February 2012

Principle of mutuality: Club: A.Y. 2003-04: Principle of mutuality applies to interest on fixed deposits, dividend, income from Government securities and profit on sale of investments.

By K. B. Bhujle, Advocate
Reading Time 1 mins
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[CIT v. Delhi Gymkhana Club Ltd., 339 ITR 525 (Del.)]

The assessee-club was granted exemption from paying income-tax on the income from its members on the basis of the principle of mutuality. On the same basis the assessee also claimed exemption in respect of income from fixed deposits, dividend, income from Government securities and profit on sale of investment. The Assessing Officer did not allow the claim. The Tribunal allowed the assessee’s claim and held that the principle of mutuality would apply even on these incomes.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“We are of the opinion that the aforesaid finding of the Tribunal is correct on facts and in law, which does not call for any interference.”

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