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Cawnpore Club Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 5 of 1977
Judge
Reported in[1990]183ITR620(All)
ActsIndian Companies Act, 1913; Income Tax Act, 1961 - Sections 56
AppellantCawnpore Club Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateM. Katju, Adv.
Excerpt:
- - the reference was made by it of the aforesaid questions for the opinion of this court both at the instance of the commissioner of income-tax as well as the assessee......as income from other sources (2) if the answer to question no. 1 is in the negative, was this income, income from property as claimed by the department or business income as claimed by the assessee (3) whether, on the facts and in the circumstances of the case, the tribunal was correct in rejecting the assessee's claim that its income was exempt from tax on the principle of mutuality ?' 2. the necessary facts are these. the assessee which is a company registered under the indian companies act, 1913, is running a club at kanpur for the benefit of its members. out of the fifteen, rooms in the club, somewere used by some of its members on payment of rs. 250 per month per room. the claim of the assessee was that the amount received by it was income from business and was exempt from tax.....
Judgment:

V.K. Mehrotra, J.

1. The following questions of law have beenreferred for the opinion of this court by the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad:

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the income of the assessee was liable to be assessed as income from other sources

(2) If the answer to question No. 1 is in the negative, was this income, income from property as claimed by the Department or business income as claimed by the assessee

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in rejecting the assessee's claim that its income was exempt from tax on the principle of mutuality ?'

2. The necessary facts are these. The assessee which is a company registered under the Indian Companies Act, 1913, is running a club at Kanpur for the benefit of its members. Out of the fifteen, rooms in the club, somewere used by some of its members on payment of Rs. 250 per month per room. The claim of the assessee was that the amount received by it was income from business and was exempt from tax on the principle of mutuality ; alternatively, that it was income from other sources under Section 56 of the Income-tax Act, 1961, and that even, as such, it was exempt from tax on the principle of mutuality. The Commissioner, on the other hand, claimed that it was income from house property and, as such, liable to tax. The present reference relates to the assessment year 1972-73.

3. The Tribunal took the view that the income of the assessee was one from other sources and further, that it was not exempt from tax on the principle of mutuality as claimed by the assessee. The reference was made by it of the aforesaid questions for the opinion of this court both at the instance of the Commissioner of Income-tax as well as the assessee.

4. An identical claim had been made by the assessee and the Commissioner in respect of the income of the assessee for the assessment year 1971-72. There too, questions identical to those referred by the Tribunal in the instant case were referred by it to this court. Those questions were answered by this court in Income-tax Reference No. 988 of 1976 (CIT v. Cawnpore Club Ltd. : [1984]146ITR181(All) ) on January 28, 1983. The view taken was that the income of the assessee was one from other sources under Section 56 of the Act and that it was not liable to tax on the principle of mutuality.

5. For the reasons contained in the decision aforesaid, we answer the first question in the affirmative, in favour of the assessee and the third question in the negative, also in favour of the assessee. In view of these answers, it is not necessary to record any answer in regard to question No. 2.

6. With these answers, the matter shall go back to the Tribunal with a copy of our judgment, to enable it to pass necessary orders to dispose of the case in conformity with our judgment in terms of Section 260 of the Act.

7. The parties shall, however, bear their own costs.


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