“doctrine of mutuality”

Judicial DoctrinesMutualityMutuality75 judgments

The decision most relied on for doctrine of mutuality is Bangalore Club v. CIT (350 ITR 509), cited in 247 judgments on BharatTax.

Leading authorities on doctrine of mutuality

Bangalore Club v. CIT

350 ITR 509 · 2013 · Supreme Court

247

citing judgments

The Supreme Court affirmed the doctrine of mutuality, holding that contributions received from and returned to members for a common purpose do not constitute taxable profits. However, income from transactions with non-members or interest earned from investments in external entities (like cooperative banks) may break the mutuality chain and be taxable under Section 56, falling outside the scope of Section 80P deductions.

CIT v. Bankipur Club Ltd.

226 ITR 97 · 1997 · Supreme Court

125

citing judgments

The doctrine of mutuality applies only when there is complete identity between the contributors to a common fund and the participants in its surplus. Income received from non-members or distinct classes of members who do not share this identity is not covered by mutuality and is taxable.

Chelmsford Club v. CIT

243 ITR 89 · 2000 · Supreme Court

100

citing judgments

Income arising from mutual activities carried out by clubs or associations solely among their members is not assessable for income tax, as it does not constitute income from a trade or business due to the principle of mutuality.

CIT v. Ace Multi Axes Systems Ltd.

88 Taxmann.com 69 · 2017 · Supreme Court

citing judgments

Each assessment year constitutes a separate unit of assessment under the Income-tax Act, and findings or decisions for one assessment year do not operate as res judicata for subsequent assessment years.

CIT v. Royal Western India Turf Club Ltd.

24 ITR 551 · 1953 · Supreme Court

citing judgments

A mutual concern may be held to carry on a business or trade with its members, even if the surplus from such trade is not considered income or profit. The court adopted a stricter approach in applying the principle of mutuality, emphasizing the identity of contributors and recipients.

Sind Co-operative Housing Society v. ITO

317 ITR 47 · 2009 · High Court

citing judgments

The doctrine of mutuality applies to co-operative societies, preventing income derived from members from being taxed as income from other sources. The court affirmed that the principle of mutuality, as accepted by the jurisdictional High Court, should be followed.

CIT v. Common Effluent Treatment Plant (Thane Belapur) Association

328 ITR 362 · 2010 · High Court

citing judgments

Interest earned by an association from surplus funds deposited with non-members is taxable and does not fall under the principle of mutuality.

CIT v. Delhi Gymkhana Club Limited

339 ITR 525 · 2011 · Reported

citing judgments

The doctrine of mutuality is applicable to interest earned on fixed deposits, provided the interest is used for the maintenance and welfare of members. However, some later judgments have dissented from this view, holding that such interest is taxable.

Judgments citing doctrine of mutuality

Prathamik Krushi Pattin Sahakari Sangh Niyamit, Bedkihal vs. Income Tax Officer, Ward - 1, Nipani

ITA 24/PAN/2023[2017-18]Status: DisposedITAT Panaji06 Oct 2023AY 2017-18

Bench: Hon’Ble Shri Satbeer Singh Godara & Shri G. D. Padmahshali(Through Virtual Hearing From Pune) Asstt Sr

Section 250Section 253(1)Section 80P(2)

deal with taxability of profits/gains of the business 12.1 The appellant is a credit co-operative society and admittedly is governed by the doctrine of mutuality. This doctrine of mutuality refers to the principle that one cannot engage into a business with self. If the identity of contributor and participator ... exclusion of participative member or non-member (general public) the very existence of mutuality is endangered, but does not fail in wholesome because doctrine of mutuality is transaction based. This proposition stands fortified in a recent judgement of Hon’ble Supreme Court in ‘Secundrabad Club Etc. Vs CIT’ reported

Shri Gopalkrishna Co-Operative Society Limited, Bhatkal vs. Income Tax Officer, Ward - 1, Karwar

ITA 23/PAN/2023[2018-19]Status: DisposedITAT Panaji06 Oct 2023AY 2018-19

Bench: Hon’Ble Shri Satbeer Singh Godara & Shri G. D. Padmahshali(Through Virtual Hearing From Pune) Asstt Sr

Section 250Section 253(1)Section 80P(2)

Shri Gopalkrishna Co-Operative Society Limited, Bhatkal vs. Income Tax Officer, Ward - 1, Karwar

ITA 22/PAN/2023[2017-18]Status: DisposedITAT Panaji06 Oct 2023AY 2017-18

Bench: Hon’Ble Shri Satbeer Singh Godara & Shri G. D. Padmahshali(Through Virtual Hearing From Pune) Asstt Sr

Section 250Section 253(1)Section 80P(2)

The Marcel Urban Co-Operative Credit Society Limited, Marcel vs. Income Tax Officer, Ward - 2(3), Panaji

ITA 2/PAN/2023[2013-14]Status: DisposedITAT Panaji06 Oct 2023AY 2013-14

Bench: Hon’Ble Shri Satbeer Singh Godara & Shri G. D. Padmahshali(Through Virtual Hearing From Pune) Asstt Sr

Section 250Section 253(1)Section 80P(2)

The Press Club of Odisha, Bhubaneswar vs. ITO (Exemption) Ward, Bhubaneswar

In the result, appeal of the assessee stands partly allowed for statistical purposes

ITA 179/CTK/2022[2014-15]Status: HeardITAT Cuttack23 Aug 2023AY 2014-15

Bench: Before S/Shri George Mathan, Judicial & And Rajesh Kumarassessment Year : 2014-15 The Press Club Of Odisha, The Press Club Of Odisha, Vs. Income Income Tax Tax Officer Officer Qr. No.Vii Ds1/1, Master Qr. No.Vii Ds1/1, Master (Exemptions), (Exemptions), Ward, Ward, Canteen Canteen Square, Square, Unit Unit-Iii, Bhubaneswar. Bhubaneswar. Bhubaneswar. Bhubaneswar. Pan/Gir No. Pan/Gir No.Aactt 3137 H (Appellant (Appellant) .. ( Respondent Respondent) Assessee By : Shri D.Parida, Ca D.Parida, Ca Revenue By : Shri S.C.Mohanty, Sr Dr : Shri S.C.Mohanty, Sr Dr Date Of Hearing : 23/08 8/2023 Date Of Pronouncement : 23/0 /08/2023 O R D E R Per Bench This Is An Appeal Filed By The Assessee Aga This Is An Appeal Filed By The Assessee Against The Order Of The Ld Inst The Order Of The Ld Cit(A), Cit(A), Nfac, Nfac, Delhi, Delhi, Dated 23.10.2022 In Appeal No. Itba/Nfac/S/250/2022 Itba/Nfac/S/250/2022-23/1046453146(1) For The Assessment Year For The Assessment Year 2014- 15. 2. Shri D.Parida, Ca Appeared For The Assessee & Shri S.C.Mohanty, Ld Shri D.Parida, Ca Appeared For The Assessee & Shri S.C.Mohanty, Ld Shri D.Parida, Ca Appeared For The Assessee & Shri S.C.Mohanty, Ld Sr Dr Appeared For The Revenue. Sr Dr Appeared For The Revenue.

For Appellant: Shri D.Parida, CAFor Respondent: Shri S.C.Mohanty, Sr DR

Section 143(1)Section 154

without adjudicating the fact that the corpus fund contributed by the club members of Rs.56,10,000/- is exempted from tax on the doctrine of mutuality. It was the submission that the ld CIT(A) has passed the order exparte without giving reasonable opportunity of hearing to the assessee, which

Gayatri Commercial Premises Co-Op Society Ltd, Mumbai vs. CPC/ITO.22(1)(4), Mumbai

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 114/MUM/2023[2019-20]Status: DisposedITAT Mumbai31 May 2023AY 2019-20

Bench: Shri Aby T. Varkey, Jm & Shri Amarjit Singh, Am आयकर अपील सं/ I.T.A. No.114/Mum/2023 (निर्धारण वर्ा / Assessment Years: 2019-20) Gayatri Commercial Premises बिधम/ Cpc/Ito, 22 (1)(4) Co-Op, Society Ltd. 3Rd Floor, Piramal Chambers Vs. Unit No. 102/103, Behind Lalbaugh Mumbai- 400034 Mittal Ind. Estate Andheri Kurla Andheri (East) Mumbai- 400059 स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aaaag5064D (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri. N.R. Agarwal Revenue By: Shri. Krishna Kumar, (Sr. Ar) सुनवाई की तारीख / Date Of Hearing: 15/03/2023 घोषणा की तारीख /Date Of Pronouncement: 31/05/2023 आदेश/Order Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Cit(A)/Nfac Dated 13-12-2022 For Ay 2019-20 Confirming The Addition Of Rs. 93,20,286/-. 2. The Assessee Society Has Raised The Following Grounds Of Appeal Reads As Under: - “1. The Ld. Cit(A) Erred In Confirming The Addition Of Rs.93,20,286/- As A Business Income In Order Passed U/S 143(1) & 154 Of The Act By Cpc. 2. The Ld. Cit(A) Erred In Not Granting Deduction Under Mutuality Principal.” 3. The Regarding Ground No. 1, The Ld. Cit(A) Has Dismissed The Ground Of Appeal Of The Assessee By Observing As Under: - “The Ld. Cit(A) Has Rejected The Assessees’S The Ground Of Appeal By Observing At Para No. 7 Of The Impugned Order As Under:-

For Appellant: Shri. N.R. AgarwalFor Respondent: Shri. Krishna Kumar, (Sr. AR)

Section 143(1)

Tribunal were justified in coming to the conclusion that the surplus so generated falls within the purview of the doctrine of mutuality and was not exigible to tax’. 7. The Ld. AR also drew our attention to page no. 23 to 90 of appeal set and especially to page

Rashi Cooperative Group Housing Seciety Ltd., Delhi vs. ITO Ward-43(5), New Delhi

In the result, the appeal filed by the assessee is allowed on alternative prayer

ITA 8227/DEL/2019[2011-12]Status: DisposedITAT Delhi28 Feb 2023AY 2011-12

Bench: Shri C.M. Gargassessment Year: 2011-12 Rashi Cooperative Group Housing Vs. Ito, Society Ltd., Ward-43(5), Plot No.3, Sector 7, New Delhi. Dwarka, Delhi – 110 075. Pan: Aaajr0561R (Appellant) (Respondent) Assessee By : Shri Vinay Bahl, Advocate Revenue By : Shri Om Prakash, Sr. Dr Date Of Hearing : 12.12.2022 Date Of Pronouncement : .02.2023 Order This Appeal Filed By The Assessee Is Directed Against The Order Of The Cit(A)-15, Delhi, Relating To Assessment Year 2011-12. 2. The Assessee Has Raised The Following Grounds Of Appeal:- “1. That Both The Orders Passed By The Ld. Cit(Appeal-15), New Delhi & The Assessment Order Passed By The Ld. Assessing Officer, 1To, Ward 43(5), New Delhi Are Bad In Law, Suffer From Serious Defects & Are Against The Facts Of The Case. 2. That The Ld. Clt(Appeals-15), New Delhi Was Wrong To Confirm The Addition Of Rs.2,78,950/- Made By The Ld. Assessing Officer. 3. That The Ld. Cit(Appeals-15), New Delhi Was Wrong To Direct The Assessing Officer To Reopen The Cases Of Past Years U/S.150(1) Of The Act. 4. That A Detailed Statement Of Facts Shall Be Filed At The Time Of Hearing. 5. That The Appellant Craves To Add, Amend, Alter, Withdraw Or Rectify Any Ground(S) Of Appeal With The Permission Of The H'Ble Court.”

For Appellant: Shri Vinay Bahl, AdvocateFor Respondent: Shri Om Prakash, Sr. DR

Section 147Section 150(1)

case in The New India Co-operative Housing Society (supra). Such receipts will not be exigible to tax so long as the doctrine of mutuality stood satisfied by commonality of identity between the contributors and the participants, and the contribution by the members was utilised for the common benefit

Yum! Restaurants Marketing Pvt. Ltd., Haryana vs. ITO, Ward- 27(4), New Delhi

In the result, appeal of the assessee is allowed for statistical purposes

ITA 3945/DEL/2019[2015-16]Status: DisposedITAT Delhi09 Feb 2023AY 2015-16

Bench: Shri Challa Nagendra Prasad & Shri Pradip Kumar Kediaआ.अ.सं/.I.T.A No.3945/Del/2019 िनधा"रणवष"/Assessment Year: 2015-16 बनाम Yum Restaurants Marketing Ito Vs. Pvt. Ltd. Ward-27(4), 12Th Floor, Tower-D, New Delhi. Global Business Park, M.G. Road, Gurgaon, Haryana. Pan No. Aaacy1884D अपीलाथ" Appellant ""यथ"/Respondent

appeal.” 4. Before us, at the outset, Learned A.R. submitted that though assessee has raised various grounds, but, the grounds of applicability of Doctrine of Mutuality and without prejudice, diversion by overriding title stands rejected in assessee’s own case by the Hon’ble Supreme Court vide order reported

The Bbr & Rdcc Employess Co-Operative Society Limited, Banghalore vs. Income Tax Officer, Ward-5(2)(4), Bangalore

ITA 989/BANG/2022[2015-16]Status: DisposedITAT Bangalore28 Dec 2022AY 2015-16

Bench: Shri Chandra Poojariassessment Year: 2015-16

For Appellant: Shri Girish T.L., A.RFor Respondent: Shri Ganesh R. Gale, Standing Counsel for Department

Section 143(3)Section 80(2)(a)Section 80PSection 80P(2)(a)Section 80P(4)

purview of the Act, except those mentioned in clause (vii) of that section. The three conditions, the existence of which establishes the doctrine of mutuality are: a. The identity of the contributors to the fund and the recipients from the fund. b. The treatment of the company, though incorporated

ITO 7(3)(4), Mumbai vs. Prabhadevi Properties & Trading Company Ltd., Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 5873/MUM/2016[2012-13]Status: DisposedITAT Mumbai08 Aug 2022AY 2012-13

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Bleincome Tax Officer – 7(3)(4) V. M/S. Prabhadevi Properties & Trading Company Ltd., Cgo Building, 8Th Floor, Room No. 805 “The Peregrine” 400 Pratishtha Bhavan, M.K. Road Veer Savarkar Marg Mumbai - 400020 Mumbai - 400025 Pan: Aaacp4718R (Appellant) (Respondent) Assessee By : Shri Madhur Agarwal & Shri Atul Suraiya Department By : Shri Jagdish Jangid

For Appellant: Shri Madhur Agarwal &For Respondent: Shri Jagdish Jangid

Section 143(1)Section 143(2)Section 68

claim that the resultant surplus shall not be chargeable to tax on 9 Prabhadevi Properties & Trading Company Ltd., account of applicability of the doctrine of mutuality. I am unable to countenance this addition, which appears to lack any reasoning. The addition of 27,56,987/- is hence deleted. Ground ... disallowance would have no bearing on the ultimate assessed income which has to be 'nil' in view of the applicability of the doctrine of mutuality. Curiously, the AO has objected to the suo motu disallowance of 0.05 lakh made by the appellant under section 14A of the Act, questioning

M/S Federation of Freight Forwarders Associations in India, Mumbai vs. ITO 1(3), Mumbai

In the result, ground no.1 of the assessee is allowed and additions amounting to Rs

ITA 710/MUM/2020[2014-15]Status: DisposedITAT Mumbai07 Jul 2022AY 2014-15

Bench: Shri Pavan Kumar Gadale & Shri Gagan Goyalm/S Federation Of Freight Forwarders Associations, 311/313, Mahinder Chambers, W.T. Patil Marg, Opp. Dukes Factory, Chembur, Mumbai-400071 Pan: Aaatf0039J ...... Appellant Vs. Ito (Exemption)-1(3), Piramal Chambers 4Th Floor, Dr. S.S. Road, Parel, Mumbai-400012. ..... Respondent Appellant By : Sh. Nitesh Joshi Respondent By : Sh. Indira Adakil, Cit-Dr Date Of Hearing : 13/04/2022 Date Of Pronouncement : 07/07/2022 Order Per Gagan Goyal, A.M:

For Appellant: Sh. Nitesh JoshiFor Respondent: Sh. Indira Adakil, CIT-DR

Section 11Section 11(5)Section 12ASection 142(1)Section 2Section 2(15)

heed to the CBDT's Circular (supra) as well as the facts mentioned hereunder: 4.3.1 As far as the interest income is concerned, doctrine of mutuality should not be applied in the case of the assessee as the assessee's activity is based on mutual cooperation. The assessee reiterated ... section 12A. It is substantially on record that assessee always claimed and availed benefit under section 12A. 10. Benefit of section 12A and doctrine of mutual concern are mutually contrast to each other. Any assessee cannot have both the status i.e. covered under section 12A and entity as a mutual

Happy Home Co-Operative Housing Society Ltd., Mumbai vs. ITO 25 (2)(4), Mumbai

In the result, appeals of the assessee are allowed

ITA 5250/MUM/2018[2011-12]Status: DisposedITAT Mumbai07 Jul 2022AY 2011-12

Bench: Shri Pavan Kumar Gadale & Shri Gagan Goyal

For Appellant: Sh. Piyush ChaturvediFor Respondent: Sh. Indira Adakil, CIT-DR

Section 143(2)Section 143(3)Section 148

society about the identity of the contributor and beneficiaries, any dealing with any third party and angle of commerciality is involved. 17. The doctrine of mutuality, based on common law principle, is premised on the theory that a person cannot make a profit from himself and amount received from oneself ... sufficient classification exists. Membership forming a class, the identity of the individual member not being relevant. induction into membership automatically attracts the doctrine of mutuality. If a Society has surplus FSI available, it is entitled to utilise the same by making fresh construction in accordance with law. Naturally such additional

M/S Mico Karmikara Balagada Vasathi Sahakara Sangha, Bangalore vs. The Income Tax Officer Ward-7(2)(5), Bangalore

In the result, the appeal by the assessee is partly allowed

ITA 2724/BANG/2017[2014-15]Status: DisposedITAT Bangalore21 Feb 2022AY 2014-15

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year : 2014-15

For Appellant: Shri V. Srinivasan, AdvocateFor Respondent: Shri Priyadarshi Mishra, Addl. CIT(DR)(ITAT)

taint of commerciality, fatal to the principle of mutuality. 32. We may add that the assessee is already availing the benefit of the doctrine of mutuality in respect of the surplus amount received as contributions or price for some of the facilities availed by its members, before it is deposited ... Emphasis supplied) 33. In our opinion, unlike the aforesaid surplus amount itself, which is exempt from tax under the doctrine of mutuality, the amount of interest earned by the assessee from the afore-noted Page 7 of 8 four banks will not fall within the ambit of the mutuality principle

All India Liquid Bulk Impoerters & Exporters Asssociation, Mumbai vs. ADIT(E)-II(2), Mumbai

In the result, the appeal filed by the assessee is allowed

ITA 1604/MUM/2020[2011-12]Status: DisposedITAT Mumbai03 Feb 2022AY 2011-12

Bench: Shri Om Prakash Kant & Shri Pavan Kumar Gadaleall India Liquid Bulk Vs. Adit(E)-Ii(2) Importers & Exporters Piramal Chambers, Association Lalbaug, Parel, 501- Mulratna, Mumbai – 400012. 334- Katha Bazar, Masjid, Mumbai – 400009. "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aagca5018F Appellant .. Respondent Appellant By : Mr.Paresh Shaparia.C.A. Ar Respondent By : Mr.Kailash Mangal.Sr.Dr Date Of Hearing 08.02.2022 Date Of Pronouncement 14.02.2022 आदेश / O R D E R Per Pavan Kumar Gadale Jm: The Assessee Has Filed The Appeal Against The Order Of The Cit(A)-3, Mumbai Passed U/S 143(3) & 250 Of The Income Tax Act, 1961.The Assessee Has Raised The Fallowing Grounds Of Appeal: I. Confirmation Of Treatment Of The Non-Profit Organisation As A Mutual Concern & Denying Exemption U/S 11: 1. The Learned C1.T(A) Erred In Confirming Treatment Of The All Inida Liquid Bulk Importers & Exporters Association, Mumbai. Appellant As A Mutual Association Created Exclusively For The Benefit Of Its Members. 2. The Learned Cit(A) Failed To Appreciate The Fact That The Basic Conditions Of The Concept Of Mutuality Are Not Satisfied, Hence The Same Is Not Applicable To The Appellant.

For Appellant: Mr.Paresh Shaparia.C.A. ARFor Respondent: Mr.Kailash Mangal.Sr.DR

Section 11Section 12ASection 143(2)Section 143(3)Section 25

micro and macro level. During the course of assessment proceedings, the AO asked the assessee to explain as to why the doctrine of mutuality should not be applied as the assessee's activity is based on mutual cooperation. In response the assessee stated that mutuality concept is not applicable

Laxmi Finance & Leasing Companies Commercial Premises Cooperative Society Ltd, Mumbai vs. Asst CIT 14(1), Mumbai

In the result, both the appeals filed by the assessee are partly allowed

ITA 4521/MUM/2015[2011-12]Status: DisposedITAT Mumbai28 Jan 2022AY 2011-12

Bench: Shri S Rifaur Rahman & Shri Pavan Kumar Gadalem/S. Laxmi Finance & Vs. Acit – 14(1) Leasing Companies, Earnest House, Commercial Premiss Nariman Point, Co-Op Society Ltd., Mumbai – 400 021. Laxmi Towers, Plot No. C-25, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. Pan/Gir No. : Aaajl0006F Appellant .. Respondent M/S. Laxmi Finance & Vs. Acit – 18(2) Leasing Companies, Earnest House, Commercial Premiss Nariman Point, Co-Op Socitey Ltd., Mumbai – 400 021. Laxmi Towers, Plot No. C-25, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. Pan/Gir No. : Aaajl0006F Appellant .. Respondent

For Appellant: Shri. P.J. Pardiwalla, Sr. AdvFor Respondent: Shri. Mehul Jain, DR

Section 143(1)Section 143(2)Section 143(3)Section 234B

taxable while upholding taxability of the receipt beyond the limit specified in the Government Notification. On appeal to the Supreme Court” HELD: “The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance ... sufficient classification exists. Membership forming a class, the identity of the individual member not being relevant, induction into membership automatically attracts the doctrine of mutuality. If a society has surplus FSI available, it is entitled to utilise the same by making fresh construction in accordance with law. Naturally such additional