“mutuality principle”

Judicial DoctrinesMutualityMutuality54 judgments

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

Leading authorities on mutuality principle

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.

Barendra Prasad Ray v. ITO

129 ITR 295 · 1981 · Supreme Court

citing judgments

When determining if an activity serves charitable purposes for tax exemption, the primary consideration is whether its predominant object is to make a profit or to carry out charitable activities.

Surendranagar District Co-op. Milk Producers Union Ltd. v. Deputy Ld. CIT(A)

111 Taxmann.com 69 · 2019 · ITAT

citing judgments

The Assessing Officer (AO) must provide a deduction to the assessee respondent. This deduction relates to cooperative society income, as the CIT(A) has relied on case laws supporting such deductions.

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.

Judgments citing mutuality principle

Moorthedarara Seva Sahakari Sangha Niyamitha, Dakshina Kannada vs. Income Tax Officer, Ward-1, Puttur

In the result, we set aside the findings of the Ld

ITA 2275/BANG/2024[2015-16]Status: DisposedITAT Bangalore30 Apr 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Soundararajan K.

For Appellant: Shri Srikrishna Kantila, CA

Section 143(2)Section 250Section 80PSection 80P(2)(a)Section 80P(2)(d)

appeal before this Tribunal. 6. At the time of hearing, the Ld.AR submitted that both the authorities had failed to consider that the mutuality principle is no longer a good reason Page 4 of 6 ITA Nos. 2275 to 2278/Bang/2024 after the judgment of the Hon’ble Supreme Court

Shri Veershaiv Co. Op. Bank Ltd., Kolhapur vs. ACIT, Circle 2, Kolhapur

In the result, the appeal in ITA No

ITA 175/PUN/2025[2017-18]Status: DisposedITAT Pune09 Apr 2025AY 2017-18

Bench: Dr.Manish Borad & Shri Vinay Bhamoreआयकर अपील सं. / Ita No.175/Pun/2025 Assessment Year : 2017-18

For Appellant: Shri Pramod S. ShingteFor Respondent: Shri A.D. Kulkarni

Section 143(3)Section 250

decision had not application to issue on hand, inasmuch as, the issue in the present appeal does not involve the exemption of income on mutuality principle. Therefore, we are of the considered opinion that the income received by the appellant society in the form of subscription or admission fee does

Advertising Standards Council of India, Mumbai vs. Commissioner of Income Tax (Exempion), Mumbai

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

ITA 6703/MUM/2024[2018-19]Status: DisposedITAT Mumbai24 Feb 2025AY 2018-19

Bench: Shri B.R. Baskaran & Shri Anikesh Banerjeeassessment Year : 2018-19 Advertising Standards Council Cit (Exemptions), Of India, 6Th Floor, A/402, Aurus Chambers, Vs. Cumballa Hill Mtnl Te Building, S.S. Amrutwar Marg, Pedder Road, Worli, S.O., Dr. Gopalrao Deshmukh Marg, Mumbai Cumballa Hill, Pan : Aaaca7314C Mumbai (Appellant) (Respondent) For Assessee : Shri Ajay Singh & Ms. Nidhi Goradia For Revenue : Dr. K.R. Subhash, Cit-Dr

For Appellant: Shri Ajay Singh &For Respondent: Dr. K.R. Subhash, CIT-DR

Section 1Section 11Section 11(1)(a)Section 12ASection 2(15)Section 263

However, the AO agreed that the assessee should be considered as a “mutual association”. Accordingly, the AO excluded the receipts and expenses covered by mutuality principles. He brought to tax remaining amount without granting exemption u/s 11 of the Act. The amount brought to tax by the AO were Interest ... categorically held that the assessee is not eligible for exemption u/s 11 of the Act, but excluded the receipts/expenditure which is covered by the mutuality principle. Thus, the reasoning given by the Ld CIT(E) for revising the assessment order, in our view, does not exist as per the discussions

The Jyoti Co-Operative Non Agricultural Thrift & Credit Society Ltd., Sirmour vs. ITO, Ward, Nahan

In the result, the assessee is not eligible for deduction on interest on deposits placed with scheduled commercial banks under section 80(P)(2)(a)(i) of the Act and the appeal of the assessee is di...

ITA 162/CHANDI/2023[2013-14]Status: DisposedITAT Chandigarh12 Feb 2025AY 2013-14

Bench: SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं . / ITA No.160, 161 & 162/ Chd/2023 निर्धारण वर्ष / Assessment Year : 2017-18, 2012-13 & 2013-14 The Jyoti Co-operative Non Agricultural Thrift & Credit Society Ltd. Sirmour, Solan, HP-173025 स्थायी लेखा सं. / PAN NO: AAABT1453G अपीलार्थी/Appellant बनाम The ITO H.P Ward-Nahan, Sirmour प्रत्यर्थी/Respondent निर्धारिती की ओर से/Assessee by : Shri Vishal Mohan, Sr. Advocate with Shri Parveen Sharma, Advocate राजस्व की ओर से / Revenue by : Dr. Ranjeet K

For Appellant: Shri Vishal Mohan, Sr. Advocate with Shri Parveen Sharma, AdvocateFor Respondent: Dr. Ranjeet Kaur, Sr. DR

Section 142(1)Section 80Section 80P(2)Section 80P(2)(a)

mutuality, the amount of interest earned by the assessee (Bangalore Club) from the member banks will not fall within the ambit of the mutuality principle and will therefore, be exigible to Income- Tax in the hands of the assessee-club". In that case, the surplus funds in the hands

The Jyoti Co-Operative Non Agricultural Thrift & Credit Society Ltd., Sirmour vs. ITO, Ward, Nahan

ITA 161/CHANDI/2023[2012-13]Status: DisposedITAT Chandigarh12 Feb 2025AY 2012-13

Bench: SHRI. VIKRAM SINGH YADAV (Accountant Member)

For Appellant: Shri Vishal Mohan, Sr. Advocate with Shri Parveen Sharma, AdvocateFor Respondent: Dr. Ranjeet Kaur, Sr. DR

Section 142(1)Section 80Section 80P(2)Section 80P(2)(a)

The Jyoti Co-Operative Non Agricultural Thrift & Credit Society Ltd., Sirmour vs. ITO, Ward, Nahan

ITA 160/CHANDI/2023[2017-18]Status: DisposedITAT Chandigarh12 Feb 2025AY 2017-18

For Appellant: Shri Vishal Mohan, Sr. Advocate with Shri Parveen Sharma, AdvocateFor Respondent: Dr. Ranjeet Kaur, Sr. DR

Section 142(1)Section 80Section 80P(2)Section 80P(2)(a)

Industries Association of Chandigarh, Chandigarh vs. Income Tax Officer, Ward, Chandigarh

In the result, appeal of the assessee is allowed

ITA 760/CHANDI/2024[2010-11]Status: DisposedITAT Chandigarh22 Jan 2025AY 2010-11

Bench: SHRI. VIKRAM SINGH YADAV (Accountant Member), SHRI. PARESH M. JOSHI (Judicial Member)

For Appellant: Shri Vineet Krishan, AdvocateFor Respondent: Shri Vivek Vardhan, JCIT, Sr. DR

Section 11Section 143(3)Section 250Section 253

distinguished. (iii) The Supreme Court also in Bangalore Club Vs- 350 ITR 509 affirmed that interest on FDR is not covered by ambit of mutuality principle & will therefore be liable to tax. It was held “ It was observed that till the stage of generation of surplus funds, the setup resembled ... under the doctrine of mutuality, the amount of interest earned by the assessee from banks would not fall within the ambit of the mutuality principle and will therefore, be eligible to Income-Tax in the hands of the assessee- club. (Para 33)” (iv) interest debited in income and expenditure account

Khammam Finance Corporation, Khammam vs. Income Tax Officer, Ward-1, Khammam

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

ITA 855/HYD/2024[2016-17]Status: DisposedITAT Hyderabad12 Nov 2024AY 2016-17

Bench: Shri Manjunatha G. & Shri K.Narasimha Chary

For Appellant: Shri Y.V.Bhanu Narayan Rao, ARFor Respondent: Shri Karthik Manickam, DR

Section 144Section 144BSection 147Section 148Section 249(4)(b)Section 69A

surplus generated from the main object is for mutual benefit of the society members and hence not liable to tax on the concept of Mutuality Principle and there is no lending activity to outsiders, and, therefore, no return of income was filed for AY 2016-17. 5. As things thus ... Surplus generated from the main object is for mutual benefit of the society members and hence not liable to tax on the concept of Mutuality Principle and there is no lending activity to outsiders, and that is the reason why no return of income was filed

The Institute of Indian Foundrymen, Kolkata vs. I.T.O., Ward - 1(3), Kolkata

In the result, the appeal of the assessee is allowed

ITA 1123/KOL/2024[2018-2019]Status: DisposedITAT Kolkata15 Oct 2024AY 2018-2019

Bench: Shri Rajesh Kumar, Am & Shri Pradip Kumar Choubey, Jm]

Section 11Section 143(3)Section 2(15)Section 263

course of such business specific services must be rendered for its members. The concept behind s.28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific

The Salestax Employees Co.Op. Credit Society Limited, Ahmedabad vs. The ACIT, Circle-1(3), Ahmedabad

In the result, appeal of the assessee in ITA no

ITA 612/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad30 Jul 2024AY 2017-18

Bench: Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad , Which Has Arisen From The Appellate Order Dated 16-10-2023 In Din

For Appellant: Shri Pradeep G Tulsian, ARFor Respondent: Shri Sanjay Jain, Sr. D.R

Section 143(3)Section 154Section 250Section 253(3)

saving bank interest received from axis bank. According to CIT(A) the twin test of income attributable to activity and mutuality principle has to be applied. While the first limb is satisfied, interest accrued attributable/incident to the specified activity, the second limb is not fulfilled. The Axis bank

Sohamnagar Co-Operative Housing Society Ltd. Vibhag II, Ahmedabad vs. The Income Tax Officer, Ward-3(3)(6), Ahmedabad

In the result appeal filed by the assessee in ITA No

ITA 177/AHD/2023[2017-18]Status: DisposedITAT Ahmedabad30 Jul 2024AY 2017-18

Bench: Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad , Which Has Arisen From The Appellate Order Dated 17-01-2023 In Din & Order No. Itba/Nfac/S/250/2022-23/1048850676(1)

For Appellant: Shri Mohit Balani, A.RFor Respondent: Smt. Trupti Patel, Sr. D.R

Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 234Section 250Section 37Section 56Section 57

fulfill the condition of mutuality , and hence interest income earned by the assessee from the banks will not fall within the ambit of the mutuality principles and would therefore , be chargeable to tax in the hands of the assessee. The A.O. also relied upon decision of Hon’ble Supreme Court

Abhay Shaligram Patil, Mumbai vs. Income Tax Officer - 23(1)(1), Mumbai

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

ITA 995/MUM/2024[2012-13]Status: DisposedITAT Mumbai26 Jul 2024AY 2012-13

Bench: Shri Amit Shukla & Shri Ratnesh Nandan Sahayassessment Year: 2012-13 Abhay Shaligram Patil Income Tax Officer- B-8/60, 23(1)(1), 1St Floor, M I G Colony, Vs. Kalanagar, Room No. 106, Bandra (East), Matru Mandir, Mumbai- 400051. Grant Mandir, Pan: Abppp1649G Mumbai- 400007. (Appellant) (Respondent) Present For : Assessee By : Shri Yogesh Thar A/W. Shri Deep Chauchan, A.R. Revenue By : Shri R. R. Makwana- Sr. D.R.

For Appellant: Shri Yogesh Thar a/w. Shri Deep Chauchan, A.RFor Respondent: Shri R. R. Makwana- SR. D.R

Section 143(2)Section 143(3)Section 147Section 148Section 234ASection 250Section 45Section 54Section 56

doctrine of mutuality, the amount of interest earned by the assessee from the afore noted four banks will not fall within the ambit of mutuality principle and will therefore, be exigible to income tax in the hands. 6.4. Hence, the activity of entering into an agreement for re- development

Andhra Pradesh Advocates Welfare Fund, Hyderabad vs. Income Tax Officer, Ward-8(2), Hyderabad

In the result, all the three appeals of the assessee are dismissed

ITA 664/HYD/2023[2018-19]Status: DisposedITAT Hyderabad24 Jul 2024AY 2018-19

Bench: SHRI K.NARASIMHA CHARY (Judicial Member), SHRI MADHUSUDAN SAWDIA (Accountant Member)

For Appellant: Shri P.R. Suresh, C.AFor Respondent: Shri Kumar Pranav, CIT(DR) &

Section 23Section 3

control over the surplus, which can be disposed of or transferred to a similar association upon winding up. This ensures the application of the mutuality principle, exempting such funds from tax. 5. Assessee further contended that Welfare Fund is contributed entirely by advocate subscriptions, fulfills the mutuality principle. According ... same advocates contributing through fees also acquire the stamps. The funds collected are deposited in banks, with interest used for advocate welfare. The mutuality principle applies to these transactions, exempting the surplus from income tax as it constitutes advocates' contributions. 7. It was the further contention of the assessee before

Andhra Pradesh Advocates Welfare Fund, Hyderabad vs. Income Tax Officer, Ward 8(2), Hyderabad

In the result, all the three appeals of the assessee are dismissed

ITA 663/HYD/2023[2017-18]Status: DisposedITAT Hyderabad24 Jul 2024AY 2017-18

Bench: SHRI K.NARASIMHA CHARY (Judicial Member), SHRI MADHUSUDAN SAWDIA (Accountant Member)

For Appellant: Shri P.R. Suresh, C.AFor Respondent: Shri Kumar Pranav, CIT(DR) &

Section 23Section 3

Andhra Pradesh Advocates Welfare Fund, Hyderabad vs. Income Tax Officer, Ward 8(2), Hyderabad

In the result, all the three appeals of the assessee are dismissed

ITA 662/HYD/2023[2016-17]Status: DisposedITAT Hyderabad24 Jul 2024AY 2016-17

Bench: SHRI K.NARASIMHA CHARY (Judicial Member), SHRI MADHUSUDAN SAWDIA (Accountant Member)

For Appellant: Shri P.R. Suresh, C.AFor Respondent: Shri Kumar Pranav, CIT(DR) &

Section 23Section 3

The Institute of Indian Foundrymen, Kolkata vs. ITO, Ward 1(3), Exemption, Kolkata

In the result, the appeal of the assessee is allowed

ITA 499/KOL/2024[2018-19]Status: DisposedITAT Kolkata28 Jun 2024AY 2018-19

Bench: Shri Rajesh Kumar & Shri Pradip Kumar Choubey]

Section 11Section 12ASection 2(15)

Murude Sahakari Patsanstha Maryadit, Mumbai vs. Income Tax Officer, Ward-22(2)(1), Mumbai

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

ITA 1605/MUM/2024[2016-17]Status: DisposedITAT Mumbai21 Jun 2024AY 2016-17

Bench: Shri Om Prakash Kant () & Shri Sandeep Singh Karhail () Assessment Year: 2016-17

For Appellant: Mr. Dharan GandhiFor Respondent: Ms. Usha Gaikwad, Sr. DR

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

member banks will from the member banks will not fall within the ambit of the mutuality not fall within the ambit of the mutuality principle and will therefore be eligible to Income principle and will therefore be eligible to Income-tax in the hands of the tax in the hands

The Institute of India Foundrymen, Kolkata vs. ITO, Ward-1(3), Exempt, Kolkata.

In the result, the appeals of the assessee are allowed

ITA 1230/KOL/2023[2017-18]Status: HeardITAT Kolkata12 Apr 2024AY 2017-18

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 11Section 12ASection 2(15)

The Institute of Indian Foundrymen., Kolkata vs. ITO, Ward-1(3), Exempt, Kolkata.

In the result, the appeals of the assessee are allowed

ITA 1229/KOL/2023[2016-17]Status: HeardITAT Kolkata12 Apr 2024AY 2016-17

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 11Section 12ASection 2(15)

The Institute of Indian Foundrymen, Kolkata vs. ITO, Ward- 1(3), Exempt, Kolkata.

In the result, the appeals of the assessee are allowed

ITA 1228/KOL/2023[2015-16]Status: HeardITAT Kolkata12 Apr 2024AY 2015-16

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 11Section 12ASection 2(15)