Director Of Income Tax (Exemptions) vs All India Oriental Bank Of Commerce ...

1. This appeal by the Revenue under Section 260A of the IT Act, 1961, is directed against a common order passed by the Tribunal, New Delhi in ITA Nos. 8575/Del/1992, 1063/Del/1994, 1064/Del/1994, in respect of asst. yrs. 1989-90, 1990-91 & 1991-92. The following questions have been proposed in the appeal memo, stated to be substantial questions of law :

"A. Whether Tribunal was correct in excluding the interest income on deposits made out of contributions from members, deposits so made are not determined vis-a-vis member's contributions ?

B. Whether the principle of mutuality applies to the cases where interest earned on deposits made out of members contributions is not seggregable from the interest earned from non-members contributions/non-members contributions/donations ?

C. Whether ratio of Supreme Court of India judgment in Chelmsford Club v. CIT (2000) 243 ITR 89 (SC) applies to the cases where the income earned on deposits made out of members and non-members contributions/donations/subscriptions are not seggregable ?

D. Whether the order of Tribunal is perverse in law "on facts" ?"

2. As is evident from the format of the questions, the only issue raised by the Revenue is as to whether the interest income derived by the respondent/assessed on the contributions made by the members of the welfare society is to be taxed in the hands of the society or not. Since in our view, the issue raised by the Revenue is legal and is no more res integra, we deem it unnecessary to state the facts. Suffice it to note that while completing assessment on the respondent assessed, a co-operative society comprising of the employees of the bank, the AO had held that the interest income earned by the society on the contributions received from the members was not exempt on the principle of mutuality.

3. The issue with regard to the concept and principle of mutuality has been elaborately examined by the apex Court in Chelmsford Club v. CIT (2000) 243 ITR 89 (SC). Their Lordships have held that where a number of persons combine together contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus generated cannot in any sense be regarded as profits chargeable to tax. It has been observed that what is required to be seen is whether there is a complete identity between the contributors and participators. Once the identity of the contributor to the fund of the recipients of the funds; the treatment of the company, though incorporated as a mere entity for the convenience of the members, in other words as an instrument obtained to their mandate; and the impossibility that the contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves is established, the doctrine of mutuality is established.

4. It is not the Revenue's case that the afore-noted three conditions are not established in the instant case. As a matter of fact, before the Tribunal, the learned Departmental Representative had conceded that the controversy, sought to be raised again in this appeal, stands concluded against the Revenue in Chelmsford Club v. CIT (supra).

In this view of the matter, no question of law much less a substantial question of law survives for our consideration.

Accordingly, we decline to entertain the appeal. Dismissed.