M/s. The Gujarat Institute of Housing and Estate Developers, Ahmedabad V. The Dy.DIT, Exemption, Ahmedabad

ITA 1053/AHD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9912 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Reopening of assessment; Deemed to accrue or arise in india; Question of law
• Section: 143(3); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.1051 TO 1056/AHD/2015 / ASSTT. YEAR: 2006-07 TO 2011-12 THE GUJARAT INSTITUTE OF HOUSING AND ESTATE DEVELOPERS GIHED BHAVAN SITE OFFICE GIHED LANE NR. MAPLE COUNTY B/H. ORNET PARK PAKWAN-SINDHU BHAVAN ROAD SHILAJ, AHMEDABAD. PAN : AAATT 4761 F VS. DDIT, EXEMPTION AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI S.N. SOPARKAR REVENUE BY : SHRI PRASOON KABRA, SR.DR / DATE OF HEARING : 24/11/2016 / DATE OF PRONOUNCEMENT: 25/11/2016 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT SIX APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST SEPARATE ORDERS OF EVEN DATED I.E. 2.2.2015 PASSED BY THE LD.CIT(A) ON THE RESPECTIVE APPEALS OF THE ASSESSEE FOR THE ASSTT.YE ARS 2006-07 TO 2011-12. 2. THERE ARE COMMON QUESTION OF LAW AND FACTS INVOL VED IN THESE APPEALS. THEREFORE, WE HAVE HEARD THEM TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OF THEM BY THIS COMMON ORDER. THE FIRST COMMON ISSUE IS INVOLVED IN THE ASSTT.YEARS 2006-09 TO 2009-10, WHEREBY, THE ASSESS EE HAS CHALLENGED ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 2 REOPENING OF THE ASSESSMENT. IT IS PERTINENT TO OB SERVE THAT IN THOSE ASSESSMENT YEARS, THE LD.AO HAS PASSED ASSESSMENT O RDER ON 27.3.2014 UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 19 61. HOWEVER, DURING THE COURSE OF HEARING, THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL, AND THEREFORE, THIS GROUND IN ALL FOUR YEAR S IS REJECTED. 3. NEXT COMMON ISSUE WHICH IS INVOLVED IN ALL THESE YEARS IS WHETHER THE ASSESSEE IS ENTITLED TO COMPUTE ITS INCOME ON PRINC IPLE OF MUTUALITY OR NOT. THE FACTS ON VITAL POINTS ARE COMMON IN ALL THESE A SSESSMENT YEARS. THE LD.REPRESENTATIVES HAVE ADDRESSED THEIR ARGUMENTS I N THE ASSESSMENT YEAR 2006-07. THEREFORE, FOR THE FACILITY OF REFERENCE WE ARE MAINLY TAKING UP THE FACTS FROM THE ASSSTT.YEAR 2006-07, AND IF WE FIND ANY CHANGES, THEN WE WILL MAKE A REFERENCE TO THOSE FACTS IN PARTICULAR ASSES SMENT YEAR. 4. BRIEF FACTS OF THE CASE ARE THAT GUJARAT INSTITU TE OF HOUSING & ESTATE DEVELOPERS (GIHED) WAS ESTABLISHED IN 1980 UNDER NON-TRADING CORPORATION ACT OF GOVERNMENT OF GUJARAT. THIS NTC ACT WAS REPEALED, THEREFORE, ON 1-9-2007, GIHED WAS REGISTERED AS NON -PROFIT ORGANIZATION AS PER SECTION 25 OF THE COMPANIES ACT, 1956. THUS, T HE ASSESSEE IS A SECTION 25 COMPANY. THE AO HAS PASSED A REGULAR ASSESSMENT IN THE ASSTT.YEAR 2010-11 UNDER SECTION 143(3) ON 28.3.2013, THERE HE FORMED AN OPINION THAT INCOME OF THE ASSESSEE IS TAXABLE, AND ACCORDINGLY RECORDED R EASONS FOR REOPENING OF ASSESSMENT IN ASSTT.YEAR 2006-07 TO 2009-10. A NOT ICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 28.3.2013 IN THE ASSTT.YEAR 2 006-07. THE ASSESSEE HAS RAISED OBJECTIONS ON THE NOTICE, AND ULTIMATELY FIL ED ITS RETURN FOR THE ASSTT.YEAR 2006-07 ON 7.3.2014 DECLARING TOTAL INCO ME OF RS.7,47,319/-. IT HAD PAID TAXES ACCORDINGLY. THE LD.AO HAD ISSUED N OTICE UNDER SECTION 143(2) OF THE ACT AND ULTIMATELY PASSED ASSESSMENT ORDER O N 27.3.2014. HE ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 3 DETERMINED TAXABLE INCOME OF THE ASSESSEE AT RS.17, 02,700/-. THE CASE OF THE ASSESSEE IS THAT ITS INCOME IS EXEMPT FROM TAXATION ON THE PRINCIPLE OF MUTUALITY. THIS CLAIM OF THE ASSESSEE HAS BEEN REJ ECTED. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. BEFORE EMBARKING UPON AN INQUIRY ON THE FACTS OF THE PRESENT CASE, IN ORDER TO FIND OUT WHETHER PRINCIPL E OF MUTUALITY IS AVAILABLE TO THE ASSESSEE OR NOT, FOR COMPUTING ITS INCOME, WE T HINK IT APPROPRIATE TO BEAR IN MIND BASIC INGREDIENTS PROPOUNDED IN VARIOUS DEC ISIONS FOR INFERRING AVAILABILITY OF PRINCIPLE OF MUTUALITY. THE LD.COU NSEL FOR THE ASSESSEE HAS SEGREGATED HIS PROPOSITION IN TWO COMPARTMENTS. IN THE FIRST COMPARTMENTS, HE HAS REFERRED TO THE JUDGMENTS WHERE AVAILABILITY OF PRINCIPLE OF MUTUALITY WAS EXAMINED BY THE HONBLE COURT IN THE CASES OF C LUBS, AND IN THE SECOND COMPARTMENTS, HE HAS MADE REFERENCE TO THE DECISION S IN THE CASE OF TRADE ASSOCIATIONS. HE ALSO RELIED UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AIR CARGO AGENTS ASSOC IATION OF INDIA IN ORDER TO CANVAS HIS ARGUMENT THAT IF A PART OF INCOME WAS NOT COVERED BY THE PRINCIPLE OF MUTUALITY, THEN THAT PART WOULD BE TAX ABLE. HE PLACED ON RECORD COPIES OF THESE DECISIONS. OTHER DECISIONS RELIED UPON BY THE LDC.OUNSEL FOR THE ASSESSEE ARE AS UNDER: I) CIT VS. BANKIPUR CLUB LTD., 226 ITR 97 (SC); II) CHEMFORD CLUB VS. CIT, 243 ITR 89 (SC); III) PRABHUKUNJ CO-OP. HSG. SOCIETY LTD., 59 TAXMANN.COM 104 IV) JUNGADH GHYKHANA VS.ITO, 56 TAXMANN.COM 281 (GUJ) V) BELVEDERE ESTATE TENANTS ASSOCIATION VS. ITO, 139 I TD 675 VI) CIT VS. COCHIN OIL MERCHANTS ASSOCIATION, 168 ITR 240 (KER) ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 4 VII) CIT VS. WEST GODAVARI DIST. RICE MILLERS ASSOCIATIO N, 150 ITR 394 (ANDHRA PRADESH); VIII) CIT VS. INDIAN PAPER MILLS ASSOCIATION, 209 ITR 28 (CAL.) 6. ON THE OTHER HAND, THE LD.DR RELIED UPON THE DEC ISIONS REFERRED TO BY THE LD.CIT(A) ON PAGE NO.21 OF THE IMPUGNED ORDER. 7. FIRST JUDGMENT REFERRED TO BY THE LD.COUNSEL FOR THE ASSESSEE IS THAT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. BA NKIPUR CLUB LTD., HAS DECIDED A BATCH OF 16 APPEALS WHICH HAVE BEEN CATEG ORIZED IN DIFFERENT GROUPS I.E. A TO D. THESE CLUBS WERE REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 AS NON-PROFIT COMPANIES. THEY HAVE CLAIMED EXEMPTION ON THEIR SURPLUS RECEIPTS ON THE GROUN D THAT THEY ARE CLUBS A SPECIES OF MUTUAL UNDERTAKING AND DID NOT CARRY ON ANY TRADE OR BUSINESS. THEY DID NOT EARN ANY PROFIT. THE INCOME RECEIVED BY THE CLUBS BY EXTENDING FACILITIES TO NON-MEMBERS WAS NOT IN ISSUE IN THIS BATCH OF 16 APPEALS BEFORE THE HONBLE SUPREME COURT. THE STAND OF THE REVENU E BEFORE THE HONBLE COURT WAS THAT EVEN SURPLUS RECEIPTS OF THE CLUBS B Y OFFERING FACILITIES TO ITS MEMBERS IS AN INCOME AND SO TAXABLE. IN THIS BACKG ROUND THE HONBLE SUPREME COURT HAS TAKEN NOTE OF PRINCIPLE OF MUTUAL ITY, AND IN THIS CONNECTION MADE REFERENCE TO COMMENTARY IN HALSBURY LAWS OF ENGLAND, 4 TH EDN., SIMONS TAXES, VOL. B, THIRD EDN. AS WELL AS THE LAW AND PRACTICE OF INCOME TAX, 8 TH EDN., VOL., 1, 1990 BY KANGA & PALKHIVALA. THE HO NBLE COURT HAS NOTED THE CONCEPT OF MUTUALITY EXPLAINED IN THESE COMMENTARIES EXTENSIVELY. IT IS PERTINENT TO TAKE NOTE FINDING OF THE HONBLE SUPREME COURT IN THIS CONNECTION. IT READS AS UNDER: ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 5 7. IN HALSBURY LAWS OF ENGLAND, 4TH EDITION REISSUE VOLUME 23 PARAS 161 AND 162 (PAGES 130 AND 132), THE RELEVANT LAW I S STATED THUS: 'WHERE A NUMBER OF PERSONS COMBINE TOGETHER AND CON TRIBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE OR OBJECT AND WILL IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLUS RETURNED TO THOSE PERSONS CA NNOT BE REGARDED IN ANY SENSE AS PROFIT. THERE MUST BE COMP LETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATORS. IF THESE REQUIREMENTS ARE FULFILLED, IT IS IMMATERIAL WHAT P ARTICULAR FORM THE ASSOCIATION TAKES. TRADING BETWEEN PERSONS ASSO CIATING TOGETHER IN THIS WAY DOES NOT GIVE RISE TO PROFITS WHICH ARE CHARGEABLE TO TAX. WHERE THE TRADE OR ACTIVITY IS MUTUAL, THE FACT THA T, AS REGARDS CERTAIN ACTIVITIES, CERTAIN MEMBERS ONLY OF THE ASS OCIATION TAKE ADVANTAGE OF THE FACILITIES WHICH IT OFFERS DOES NO T AFFECT THE MUTUALITY OF THE ENTERPRISE. **** MEMBERS CLUBS ARE AN EXAMPLE OF A MUTUAL UNDERTAKIN G, BUT, WHERE A CLUB EXTENDS FACILITIES TO NON-MEMBERS, TO THAT EXTENT THE ELEMENT OF MUTUALITY IS WANTING............. '(EMPH ASIS SUPPLIED) SIMON'S TAXES VOL.B 3RD EDITION, PARAGRAPHS B 1.218 AND B1.222 (PAGES 159 AND 167), FORMULATE THE LAW ON THE POINT , THUS: '........ IT IS SETTLED LAW THAT IF THE PERSONS CAR RYING ON A TRADE DO SO IN SUCH A WAY THAT THEY AND THE CUSTOMERS ARE TH E SAME PERSONS, NO PROFITS OR GAINS ARE YIELDED BY THE TRA DE FOR TAX PURPOSES AND THEREFORE NO ASSESSMENT IN RESPECT OF THE TRADE CAN BE MADE. ANY SURPLUS RESULTING FROM THIS FORM OF TR ADING REPRESENTS ONLY THE EXTENT TO WHICH THE CONTRIBUTIO N OF THE PARTICIPATORS HAVE PROVED TO BE IN EXCESS OF REQUIR EMENTS. SUCH A SURPLUS IS REGARDED AS THEIR OWN MONEY AND RETURNAB LE TO THEM. IN ORDER THAT THIS EXEMPTING ELEMENT OF MUTUALITY S HOULD EXIST IT IS ESSENTIAL THAT THE PROFITS SHOULD BE CAPABLE OF COMING BACK AT SOME TIME AND IN SOME FORM TO THE PERSONS TO WHOM T HE GOODS WERE SOLD OR THE SERVICES RENDERED. ............... ........' ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 6 IT HAS BEEN HELD THAT A COMPANY CONDUCTING A MEMBER S' (AND NOT A PROPRIETARY) CLUB, THE MEMBERS OF THE COMPANY AND OF THE CLUB BEING IDENTICAL, WAS NOT CARRYING ON A TRADE OR BUS INESS OR UNDERTAKING OF A SIMILAR CHARACTER FOR PURPOSES OF THE FORMER CORPORATION PROFITS TAX. A MEMBERS' CLUB IS ASSESSABLE, HOWEVER, IN RESPECT OF PROFITS DERIVED FROM AFFORDING ITS FACILITIES TO NON-MEMBER S. THUS, IN CARLISLE AND SILLOTH GOLF CLUB V. SMITH [1913(3) K. B. 75], WHERE MEMBERS' GOLF CLUB ADMITTED NON MEMBERS TO PLAY ON PAYMENT OF GREEN FEES IT WAS HELD THAT IT WAS CARRYING ON A BU SINESS WHICH COULD BE ISOLATED AND DEFINED AND THE PROFIT OF WHI CH WAS ASSESSABLE TO INCOME TAX. BUT THERE IS NO LIABILITY IN RESPECT OF PROFITS MADE FROM MEMBERS WHO AVAIL THEMSELVES OF T HE FACILITIES PROVIDED FOR MEMBERS.' (EMPHASIS SUPPLIED) THE SAID PRINCIPLE WHICH HAS BEEN LAID DOWN IN THE LEADING DECISIONS AND EMPHASISED IN THE LEADING ENGLISH TEX T BOOKS MENTIONED ABOVE, HAS BEEN EXPLAINED WITH REFERENCE TO INDIAN DECISION IN 'THE LAW AND PRACTICE OF INCOME TAX' (8 TH EDITION VOL. 1, 1990) BY KANGA & PALKHIVALA AT PAGE 113, TH US:- '...... THE CONTRIBUTORS TO THE COMMON FUND AND THE PARTICIPATORS IN THE SURPLUS MUST BE AN IDENTICAL BODY. THAT DOES NOT MEAN THAT EACH MEMBER SHOULD CONTRIBUTE TO THE COMMON FUND OR THAT EACH MEMBER SHOULD PARTICIPATE IN THE SURPLUS OR GET BAC K FROM THE SURPLUS PRECISELY WHAT HE HAS PAID. THE MADRAS. AND HRA PRADESH AND KERALA HIGH COURTS HAVE HELD THAT THE T EST OF MUTUALITY DOES NOT REQUIRE THAT THE CONTRIBUTORS TO THE COMMON FUND SHOULD WILLY-NILLY DISTRIBUTE THE SURPLUS AMON GST THEMSELVES: IT IS ENOUGH IF THEY HAVE A RIGHT OF DI SPOSAL OVER THIS SURPLUS, AND IN EXERCISE OF THAT RIGHT THEY MAY AGR EE THAT ON WINDING UP THE SURPLUS WILL BE TRANSFERRED TO A SIM ILAR ASSOCIATION OR USED FOR SOME CHARITABLE OBJECTS ' 8. THE CRUCIAL ISSUE THAT ARISES FOR CONSIDERATION IN CASES WHERE IT IS CLAIMED THAT ON THE BASIS OF THE PRINCIPLE OF MUTUALITY, THE RECEIPTS BY THE 'SOCIETY' OR 'CLUB' IS EXEMPT FROM TAXATION, HAS BEEN SUCCINCTLY STATED BY THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL IN FLETCHER V. INCOME TAX COMMISSIONER [197 1 (3) AJI ER 1185 AT PAGE 1189], THUS: ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 7 '... ... ... IS THE ACTIVITY, ON THE ONE HAND, A TR ADES OR AN ADVENTURE IN THE NATURE OF TRADE PRODUCING A PROFIT, OR IS IT , ON THE OTHER, A MUTUAL ARRANGEMENT WHICH, AT MOST, GIVES RISE TO A SURPLUS?' 8. ON THE STRENGTH OF THE ABOVE TEXT BOOKS AND VARI OUS JUDGMENTS, THE HONBLE COURT HAS OBSERVED THAT IN SUBSTANCE, THE A RRANGEMENT OR RELATIONSHIP BETWEEN THE CLUB AND ITS MEMBERS SHOULD BE OF A NON -TRADING CHARACTER. 9. THE NEXT DECISION REFERRED TO BY THE LD.COUNSEL FOR THE ASSESSEE IS ALSO OF HONBLE SUPREME COURT IN THE CASE OF CHEMSFORD C LUB(SUPRA). IN THIS CASE, THE ASSESSEE PROVIDES RECREATIONAL AND REFRES HMENT FACILITIES EXCLUSIVELY TO ITS MEMBERS AND THEIR GUESTS. THESE FACILITIES ARE NOT FOR NON-MEMBERS. THE CLUB WAS BEING RUN ON NO-PROFIT NO-LOSS BASIS . THE SURPLUS, IF ANY IS USED FOR MAINTENANCE AND DEVELOPMENT OF THE CLUB. THE CLUB HOUSE WAS OWNED BY THE ASSESSEE-CLUB AND WAS HAVING USED FOR PROVIDING FACILITIES. THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS WHETHER HOUSE PROPERTY INCOME DERIVED BY THE CLUB ON THE PROPERTY ITSELF WOULD AL SO ENJOY THE BENEFIT OF MUTUALITY OR NOT. THE HONBLE SUPREME COURT HAS OB SERVED THAT BUSINESS OF ASSESSEES CLUB IS BEING COVERED BY PRINCIPLE OF MU TUALITY, AND IF THAT BE SO, THEN OUT OF DEEMED INCOME FROM ITS PROPERTY WOULD B E COVERED BY SAID PRINCIPLE OF MUTUALITY. THE NEXT CASE IS OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF JUNAGADH GYMKHANA(SUPRA). IN THIS CASE, ISSUE BEFO RE THE HONBLE HIGH COURT WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN LAW IN UPHOLDING THE ACTION OF THE AO OF TAXING CARD GUEST INCOME AND GENERAL G UEST FEE WHICH ARE CHARGES PAID BY THE MEMBERS OF THE ASSESSEE. THE H ONBLE COURT HAS ULTIMATELY HELD THAT JUST BECAUSE TRANSACTIONS WHIC H ARE NON-MUTUAL IN CHARACTER, WOULD NOT DESTROY PRINCIPLE OF MUTUALITY . THE HONBLE COURT HAS ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 8 CONSIDERED THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF BANGALORE CLUB VS. CIT AND UPHELD CONTENTIONS OF TH E ASSESSEE THAT CONCEPT OF MUTUALITY WILL BE APPLICABLE TO IT. IT IS IMPER ATIVE UPON US TO TAKE NOTE OF THE FINDING RECORDED BY THE HONBLE COURT IN THIS C ASE. IT READS AS UNDER: 7. HERE, IT WOULD NOT BE OUT OF PLACE TO MENTION T HAT THERE IS NOT A FINDING OF FACT THAT THE CLUB RECEIVES ANY AMOUNT F ROM NON-MEMBERS, ALL THAT THE TRIBUNAL HAS HELD IS THAT THE OFFICER HAS BROUGHT THE INCOME FROM THE COSTS, WHICH IS TO BE PAID BY THE MEMBERS ON BEHALF OF THE GUESTS. THIS ITSELF GOES CONTRARY TO THE FACTS AND THE DECISION OF THE APEX COURT IN BANGALORE CLUB VS. COMMISSIONER OF INCOME TAX & ANR., 350 ITR 509(SC), ON WHICH RELIA NCE HAS BEEN PLACED BY MR. DESAI. IN THE SAID CASE, THE APEX COU RT OBSERVED THAT THE FIRST CONDITION TO INVOKE THE PRINCIPLE OF MUTUALIT Y REQUIRES THAT THERE MUST BE A COMPLETE IDENTITY BETWEEN THE CONTRIBUTOR S AND THE PARTICIPATORS. HOWEVER, IN THE VERY JUDGMENT, THE A PEX COURT SPELT OUT THAT CAUTION TO BE EXERCISED WHILE LOOKING TO THE M UTUALITY OR THE COMMERCIAL ACTIVITY AND IT IS A DIFFICULT QUESTION OF FACT. IN THIS CASE, FACTS, WHICH IS TO BE SEEN FROM FACTUAL MATRIX, SHO WS THAT NEITHER THE ITAT NOR CIT COME TO THE CONCLUSION AS TO WHO CONTR IBUTED TO THE FUNDS AS NON-MEMBERS. JUST BECAUSE THE NONMEMBERS ARE BRO UGHT TO THE CLUB, IT WOULD NOT COME OUT OF THE MUTUALITY ASPECT. THE DECISION OF THIS COURT IN SPORTS CLUB OF GUJARAT LTD. VS. CIT, 171 ITR 504, 512 (GUJ.), WHICH IS SOUGHT TO BE RELIED UPON BY TH E AUTHORITIES BELOW AND MR. DESAI, THIS COURT HELD THAT THE ASSESSEES INCOME FROM INTEREST WAS NOT FROM A MUTUAL ACTIVITY AND AS SUCH IT WAS E XIGIBLE TO TAX, AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO THE BEN EFIT UNDER SECTION 44A AND THAT THE ENTIRE EXPENDITURE INCURRED IN ALL ACT IVITIES WAS NOT DEDUCTIBLE FROM THE ASSESSEES TAXABLE INCOME. IN T HE SAID CASE, THIS COURT FURTHER HELD THAT THE CONTRIBUTORS TO THE COM MON FUND ARE ENTITLED TO PARTICIPATE IN THE SURPLUS, THEREBY CREATING AN IDENTITY BETWEEN THE PARTICIPANTS AND THE CONTRIBUTORS. JUST BECAUSE THE TRANSACTIONS, WHICH ARE NON-MUTUAL IN CHARACTER, WOULD NOT DESTROY THE PRINCIPLE OF MUTUALITY. THUS, THE DECISION IN THE CASE OF BANGA LORE CLUB(SUPRA) WOULD NOT APPLY TO THE FACTS OF THE CA SE ON HAND, SINCE, IN THAT CASE THE ASSESSEE-CLUB HAD RECEIVED INCOME FROM INTEREST ON SURPLUS FUNDS KEPT IN MEMBER BANKS. HENCE, THESE AP PEALS DESERVE TO BE ALLOWED. 8. IN THE RESULT, ALL THE APPEALS ARE A LLOWED AND THE QUESTION POSED BEFORE US IS ANSWERED IN AFFIRMATIVE AND IN FAVOUR OF THE ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 9 APPELLANT-ASSESSEE AND AGAINST THE RESPONDENT REVEN UE. NO ORDER AS TO COSTS. 10. OTHER JUDGMENT REFERRED TO BY THE LD.COUNSEL FO R THE ASSESSEE IN THE CASE OF COCHIN OIL MERCHANTS ASSOCIATION, WEST GODAVAR I DIST. RICE MILLERS ASSOCIATION AND M/S.AIR CARGO AGENTS ASSOCIATION AR E CONCERNED, WE DO NOT DEEM IT NECESSARY TO RECAPITULATE AND RECITE ALL TH ESE DECISIONS ON THIS LEGAL ASPECTS, BUT SUFFICE TO SAY THAT CORE OF THESE DECI SIONS OF THE HONBLE HIGH COURTS IS TO THE EFFECT THAT EVEN IN THE CASE OF AS SESSEES, WHO ARE TRADE ASSOCIATIONS, IF THE INGREDIENTS OF MUTUALITY ARE A VAILABLE, THEN THE CONCEPT OF MUTUALITY WILL BE APPLICABLE IN SUCH CASES ALSO. I T HAS ALSO BEEN PROPOUNDED THAT IF SEGMENTAL TRANSACTIONS ARE NON-MUTUAL IN CH ARACTER THAT WOULD NOT DESTROY THE PRINCIPLE OF MUTUALITY. IN THIS CONNEC TION, WE HAVE TAKEN NOTE OF THE FINDING OF THE HONBLE GUJARAT HIGH COURT IN TH E CASE OF JUNAGADH GYMKHANA. WE WOULD LIKE TO TAKE NOTE OF FINDING OF THE BOMBAY HIGH COURT IN THE CASE OF AIR CARGO AGENTS ASSOCIATION. THE F INDINGS OF THE HONBLE HIGH COURT READ AS UNDER: 7. WE FIND THAT THE CONTRIBUTIONS MADE BY THE MEMBERS TO THE RESPONDENT -ASSESSEE CANNOT BE A SUBJECT MATTER OF TAX MERELY BECAUSE THE PART OF ITS EXCESS OF INCOME OVER EXPENDITURE I S INVESTED IN MUTUAL FUNDS. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE DIVIDEND RECEIVED FROM MUTUAL FUNDS HAVE NOT BEEN OFFERED TO TAX BY T HE RESPONDENT- ASSESSEE. THE CONCEPT OF MUTUAL CONCERNS NOT BEING SUBJECT TO TAX IS BASED ON THE PRINCIPLE OF NO MAN CAN PROFIT OUT OF ITSELF. THEREFORE THE TEST TO BE SATISFIED BEFORE AN ASSOCIATION CAN BE C LASSIFIED AS A MUTUAL CONCERN ARE COMPLETE IDENTITY BETWEEN THE MEMBERS I .E. CONTRIBUTORS AND THE PARTICIPANTS, THE ACTION OF THE MUTUAL CONC ERN MUST BE IN FURTHERANCE OF ITS OBJECTIVES AND THERE MUST BE NO SCOPE OF PROFITEERING BY THE CONTRIBUTORS FROM A FUND. THESE TESTS HAVE IN FACT BEEN REITERATED IN BANGALORE CLUB CASE (SUPRA). HOWE VER, THE FACTS THEREIN ARE COMPLETELY DISTINGUISHABLE. AMONGST THE MEMBERS OF THE BANGALORE CLUB WERE CERTAIN BANKS. THE BANGALORE CL UB HAVE INVESTED ITS EXCESS FUNDS IN MEMBER BANKS AS WELL AS NON MEM BER BANKS IN FORM ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 10 OF FIXED DEPOSITS ATM EARNED INTEREST THEREON. THE ASSESSEE THEREON PAID TAX ON THE INTEREST EARNED ON FIXED DEPOSIT WI TH NON MEMBER BANKS. HOWEVER, SO FAR AS INTEREST, EARNED FROM MEM BER BANKS WAS CONCERNED, THE ASSESSEE THEREIN SOUGHT TO APPLY THE DOCTRINE OF MUTUALITY TO CONTEND THAT THE INTEREST ON THE FIXED DEPOSIT RECEIVED FROM THE MEMBER BANKS WOULD NOT BE ASSESSABLE TO TAX AS THE DEALING WAS WITH MEMBERS, ONLY, THE APEX COURT HELD THAT NO SOONER ANY AMOUNT IS INVESTED BY AN ASSOCIATION CLAIMING TO BE MUTUAL CONCERN IN A FIXED DEPOSIT WITH THE BANKS THE COMPLETE IDENTITY BETW EEN THE CONTRIBUTORS AND THE PARTICIPANTS IN THE FUND ON THE AMOUNTS INV ESTED IN MEMBER BANKS IS RUPTURED. IT HELD THAT TILL THE SURPLUS FU NDS WERE GENERATED AND WAS USED ONLY AMONGST THE MEMBERS/CONTRIBUTORS, THE COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPANTS CONTINUED. HO WEVER THE MOMENT ' THE FUNDS ARE INVESTED IN FIXED DEPOSITS WITH THE BANKS AND THE FUNDS ARE USED FOR ADVANCING LOANS ETC. BY THE BANK TO IT S CUSTOMERS, THE IDENTITY OF PARTICIPANTS AND CONTRIBUTORS IS SAPPED . THUS THE INTEREST EARNED ON FIXED DEPOSITS IS TO BE BROUGHT TO TAX. H OWEVER, IT IS TO BE NOTED THAT IT DID NOT RESULT IN THE BANGALORE CLUB BEING TAXED ON ALL CONTRIBUTIONS OF ITS MEMBERS. THE CASE OF THE REVEN UE HERE IS THAT HAVING INVESTED EXCESS AMOUNTS IN MUTUAL FUNDS THE CONCEPT OF MUTUALITY WOULD NOT EXTEND TO THE CONTRIBUTION MADE BY THE MEMBERS OF THE ASSOCIATION EVEN THOUGH THE CONTRIBUTIONS ARE U SED TO ACHIEVE THE OBJECTIVES OF THE ASSOCIATION. IN FACT AS POINTED OUT ABOVE THE APEX COURT IN BANGALORE CLUB (SUPRA) DID NOT HOLD SO BUT ONLY BROUGHT TO TAX THE INTEREST EARNED ON FIXED DEPOSIT WITH MEMBE R BANKS. IN THIS CASE IT IS NOT DISPUTED THAT THE INCOME EARNED ON ACCOUN T OF INVESTMENTS MADE IN MUTUAL FUNDS HAS BEEN OFFERED TO TAX. THE R ESPONDENT HAS IN EFFECT FOLLOWED THE DECISION OF THE APEX COURT IN B ANGALORE CLUB (SUPRA). HOWEVER AS HELD IN BANGALORE CLUB (SUPRA), IT CANNOT RESULT IN THE RESPONDENT BEING CHARGED TO TAX ON THE CONTRIBU TION RECEIVED FROM ITS MEMBERS. IN FACT: THE DECISION OF THIS COURT IN COMMON EFFLUENT (SUPRA) CONCLUDES THE ISSUE IN FAVOUR OF THE RESPON DENT - ASSESSEE. 8. ACCORDINGLY THE QUESTION AS FRAMED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 11. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE F ACTS OF THE PRESENT CASE. THERE IS NO CHANGE IN THE OBJECTS OF THE ASSESSEE W HEN IT WAS INCORPORATED IN 1980 AS NON-TRADING CORPORATION UNDER NON TRADING C ORPORATION ACT AS WELL ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 11 AS WHEN IT WAS REGISTERED AS NON-PROFIT COMPANY AS PER SECTION 25 OF THE COMPANIES ACT. THE OBJECTS ARE CONTAINED IN CLAUSE NO.3 OF THE MEMORANDUM OF ASSOCIATION. WE DEEM IT APPROPRIATE TO TAKE NOT E OF CLAUSE NOS.3 TO 5 OF ITS MEMORANDUM OF ASSOCIATION, BECAUSE CLAUSE-5 OF MEMO RANDUM OF ASSOCIATION CONTEMPLATES THAT ITS INCOME AND PROPERTY WHENEVER DERIVED SHALL BE APPLIED SOLELY FOR PURPOSE OF ITS OBJECTS AS SET FORTH IN T HIS MEMORANDUM AND NO PORTION OF INCOME OR PROPERTY SHALL BE PAID OR TRAN SFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDEND, BONUS OR OTHERWISE OR BY WAY OF PROFIT TO A PERSON WHO AT ANY TIME OR HAVE BEEN MEMBER OF THIS INSTITUTION. THESE OBJECTS READ AS UNDER: 3. THE OBJECTS FOR WHICH THE INSTITUTION IS ESTABLI SHED ARE AS UNDER:- (A) TO COLLABORATE WITH THE DEPARTMENTS OF GOVERNME NTS, LOCAL AUTHORITIES AND SUCH OTHER INSTITUTIONS IN THE MATT ERS CONCERNING AND RELATED TO THE PROFESSION OF ENGINEERS, HOUSING AND ESTATE DEVELOPERS, CONTRACTORS, ETC. WITH A VIEW TO TAKE A CTIVE INTEREST IN THE WELFARE OF THE COMMUNITY. (B) TO MANAGE, DEVELOP, ORGANIZE, EXECUTE, MAINTAIN AND CARRY ON ALL SUCH ACTIVITIES EITHER FOR RESEARCH OR DEVEL OPMENT IN SOLVING HOUSING PROBLEMS IN THE STATE OF GUJARAT. (C) TO REMOVE THE DIFFICULTIES IN THE CONSTRUCTION OF HOUSING. (D) TO LOOK AFTER THE PROGRESS OF ALL THE MEMBERS I N THE PROFESSION OF CONSTRUCTION. (E) TO FOSTER GOODWILL AMONGST THE MEMBERS BY ARRAN GING MEETINGS AND DISCUSSIONS PERIODICALLY ETC. OF COMMO N INTEREST. (F) TO PROTECT THE INTEREST AND RIGHTS OF MEMBERS A ND FOR THE PURPOSE OF THE SAID ASSOCIATION TO MAKE CORRESPONDE NCE, PRESENTING APPLICATIONS TO SUCH OFFICERS OR OFFICES AS MAY BE NECESSARY AND MAKE REPRESENTATIONS. (G) TO BRING THE MEMBERS IN CONTACT WITH EACH OTHER IN ORDER TO SOLVE THE PROBLEM OF ANY MEMBERS. (H) TO STUDY THE ORDERS, RESOLUTIONS, RULES, REGULA TIONS AND POLICY ETC. FRAMED BY THE GOVERNMENT, LOCAL BODIES, LOCAL AUTHORITY, REGARDING THE NEEDFUL ACTS IN THE INTERE ST OF MEMBERS. ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 12 (I) TO COMPRISE OR TO SOLVE ANY PROBLEM BY INTERFER ING IN CASE OF ANY DISPUTE BETWEEN/OR AMONGST THE MEMBERS OR WITH OTHERS ON THE RE QUEST OF THE MEMBERS OF THE ASSOCIATION. (J) TO COLLECT AND ACCEPT CONTRIBUTIONS FROM MEMBER S AS AND WHEN REQUIRED AND DETERMINED BY THE ASSOCIATION AND TO MAKE AND CREATE THEREFROM A FUND FOR OFFICE MAINTENANCE, SALARY TO EMPLOYEES, PROVIDE ESSENTIAL SERVICE TO THE MEMBERS , AND RAISE A SINKING FUND FOR EMERGENCY AND/OR CONTINGENCY EXPEN SE. (K) TO CARRY ON ACTIVITY FOR THE PURPOSE OF THE EDU CATION, MEDICAL RELIEF TO POOR AND NEEDY, TO HELP IN NATURAL CALAMI TIES AND FOR SUCH OTHER OBJECTS FOR ATTAINING UPLIFT OF GENERAL PUBLIC AND FOR THOSE PURPOSE TO START AND MAINTAIN RECREATION, CUL TURAL, EDUCATIONAL AND MEDICAL CENTERS. (L) TO DO ALL SUCH OTHER LAWFUL THINGS AS ARE INCID ENTAL OR CONCLUSIVE TO THE ABOVE SUBJECTS. PROVIDED THAT THE INSTITUTION SHALL NOT SUPPORT WI TH ITS FUND OR ENDEAVOR TO IMPOSE ON OR PROCURE TO BE OBSERVED BY ITS MEMBERS OR OTHERWISE ANY REGULATION S OR RESTRICTIONS WHICH IF AN OBJECT OF THE INSTITUTION WOULD MAKE IT A TRADE UNION. 4. THE ACTIVITY OF THE INSTITUTION SHALL BE CONFIN ED TO THE STATE OF GUJARAT ONLY. 5. (I) THE INCOME AND PROPERTY WHENEVER DERIVED, SH ALL BE APPLIED SOLELY FOR THE PROMOTION OF ITS OBJECTS AS SET FORTH IN THIS MEMORANDUM. (II) NO PORTION OF INCOME AND PROPERTY AFORESAID SH ALL BE PAID OR TRANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIV IDEND, BONUS OR OTHERWISE BY WAY OF PROFIT TO PERSONS WHO AT ANY TIME ARE/OR HAVE BEEN MEMBER OF THE INSTITUTION OR TO ANY ONE OR MORE OF THEM OR TO ANY PERSON CLAIMING THROU GH ANY ONE OR MORE OF THEM. 12. THE LD.CIT(A) WHILE CONCURRING WITH THE AO HAS BASICALLY ASSIGNED THREE REASONS, VIZ. (A) OBJECT OF THE COMPANY TRUST DOES NOT SPELL OUT THAT PRINCIPLE OF MUTUALITY WILL BE APPLICABLE, (B) INCO ME OF THE TRUST IS BEING MAINLY DERIVED FROM PROPERTIES SHOW IN INDIA OR ABR OAD, AND (C) THE ASSESSEE HAS ARRANGED CRICKET TOURNAMENTS. IT IS VERY POPUL AR GAME AND HAVING HUGE ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 13 MARKETING POTENTIAL. APART FROM THIS THREE REASONS , THE LD.CIT(A) HAS MADE REFERENCE TO THE DECISIONS OF THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS. KUMBAKONAM MUTUAL BENEFIT FUND LTD., 53 ITR 241 (SC), YUM RESTAURANTS (MARKETING) P. LTD. VS. CIT, 180 TAXMAN 7 (DEL), CIT VS. ROYAL WESTERN INDIA TURF CLUB LTD., 24 ITR 551 (SC) IN ORDER TO BRING POINT AT HOME THAT IF IDENTITY BETWEEN CONTRIBUTORS AND P ARTICIPATORS IS NOT PROVED THEN BENEFIT OF MUTUALITY WAS NOT AVAILABLE. ACCOR DING TO THE LD.CIT(A), IN ORDER TO CLAIM PRINCIPLE OF MUTUALITY, TRUST OR SOC IETY SHOULD FULFILL ESSENTIAL ELEMENTS VIZ. (A) IT IS AN ASSOCIATION OF PEOPLE CA LLED MEMBERS, THERE IS COMMON CAUSE. EVERY MEMBER MAKES ITS CONTRIBUTION AND THE AIM OF THE ACTIVITY IS NOT TO EARN PROFIT OR GAIN. WHEN THE L D.CIT(A) HAS APPLIED THIS PRINCIPLES ON FACTS OF THE PRESENT CASE, THEN ARRIV ED AT A CONCLUSION THAT THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF MUTUALI TY. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, AND THE PROPOSITION PR OPOUNDED IN VARIOUS CASE LAWS, IT EMERGES OUT THAT IN ORDER TO CLAIM BENEFIT OF MUTUALITY BASICALLY AN ASSESSEE HAS TO FULFILL THREE INGREDIENTS. FIRST I NGREDIENT IS THAT THERE SHOULD BE COMPLETE IDENTITY BETWEEN CLASSES OF CONTRIBUTORS A ND PARTICIPATORS. THERE SHOULD BE A COMMON CAUSE FOR THE MEMBERS OF THE ASS OCIATION, AND THE THIRD CONDITION IS THAT AIM OF THE ACTIVITY IS NOT TO EAR N PROFIT OR LOSS. THEN, HOW THIS ASPECT HAS BEEN DISPUTED IN THE PRESENT CASE ? AT PAGE NO.27 OF THE PAPER BOOK, THE ASSESSEE HAS COMPILED DETAILS OF ITS RECE IPTS AND EXPENDITURE PERTAINING TO THE ASSTT.YEAR 2006-07. SUCH DETAILS READ AS UNDER: PARTICULARS MEMBER NON- MEMBER TOTAL EXPENSES FOR EVENT PROFIT/LOSS FROM EVENT % PROFIT/LOSS INCOME FROM NON- MEMBER GIHED FIESTA 120900 107100 228000 387377 -159377 -69.90 -74865 PROPERTY SHOW 3857150 1520000 5107150 3626607 1480543 28.99 44064 2 3708050 1627100 5335150 4013984 1321166 365777 ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 14 AMOUNT RS. AMOUNT RS. INTEREST INCOME 378280 MISC. INCOME 2750 KASAR 504 INCOME FROM NON MEMBERS 365777 747311 SAY 747320 13. ACCORDING TO THE REVENUE, THE ASSESSEE WAS WORK ING FOR PROFIT BECAUSE IT HAS HELD FESTA AND ALSO CRICKET MATCHES. THE LD.COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED THAT IN FESTA THE ASSESSEE HAS RECEIVED CONTRIBUTION FROM THE MEMBERS AS WELL AS NON-MEMBERS. THESE EVENTS ARE O RGANIZED FOR THE OBJECTS OF THE ASSESSEE, BECAUSE, ITS MEMBERS WOULD GET INT ERACTION AND BENEFIT OF COMMERCIAL EXPOSURE. THE MEMBERS WOULD BE APPRAISE D WITH LATEST TECHNOLOGY IN CONSTRUCTION ACTIVITIES. NON-MEMBERS CONTRIBUTION IS OF THOSE ENTITIES WHO WANT TO PARTICIPATE IN THIS ORGANIZATI ON VIZ. (A) BANK WANTS TO ERECT ITS STALL IN A PROPERTY SHOW SO THAT PUBLIC C OULD BE APPRAISED FOR AVAILING LOANS ON THE PROJECTS OF THE MEMBERS. THE ASSESSEE HAS BEEN OFFERING TAXES ON NON-MEMBER CONTRIBUTION. IT IS NOT CLAIMING BENEFI T OF MUTUALITY OF NON- MEMBER RECEIPTS. IT HAS BEEN BROUGHT TO OUR NOTICE THAT THE CONTRIBUTIONS ARE IDENTIFIABLE. SIMILARLY, PARTICIPANTS ARE IDENTIFI ABLE. ON THE STRENGTH OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF JUNAGADH GYMKHANA (SUPRA) AS WELL AS ON THE STRENGTH OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF AIR CARGO AGENTS ASSOCIATION OF INDIA, IT WAS DEMONSTRA TED BEFORE US THAT IF A SMALL PART OF THE RECEIPTS ARE WITH RESPECT TO TRAN SACTIONS WHICH ARE NON- MUTUAL IN CHARACTER WOULD NOT DESTROY THE PRINCIPLE OF MUTUALITY. THE ASSESSEE HAS POINTED OUT THAT IT HAS ALREADY SEGREG ATED RECEIPTS WHICH ARE NON- MUTUAL AND HAS PAID TAXES. THE NEXT OBJECTIONS OF THE REVENUE IS THAT IN THE OBJECT CLAUSE NOWHERE IT HAS BEEN PROVIDED TO ORGAN IZE PROPERTY SHOW, FESTA OR CRICKET MATCHES. IT IS PERTINENT TO OBSERVE THA T THESE ARE PERIPHERAL AND ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 15 ANCILLARY ACTIVITIES TO FULFILL MAIN OBJECTS I.E. T O MANAGE, TO DEVELOP, ORGANIZE, EXECUTE, MAINTAIN AND CARRY ON ACTIVITIES EITHER FO R RESEARCH OR DEVELOPMENT IN SOLVING HOUSING PROBLEMS AND LOOK AFTER PROGRESS OF ALL MEMBERS IN THE PROFESSION OF CONSTRUCTION. IF THE OBJECTS OF THE ASSESSEE ARE LOOKED INTO CUMULATIVELY, THEN IT WOULD SPELL OUT THAT IN ORDER TO APPRAISE MEMBERS ABOUT THE LATEST TECHNOLOGY IN CONSTRUCTION ACTIVITIES, M ARKET TREND, IT WOULD NOT BE FUTILE TO ORGANIZE PROPERTY SHOW. AS FAR AS CRICKE T MATCH IS CONCERNED, IT WAS NOT ORGANIZED ON COMMERCIAL BASIS, RATHER PARTICIPA TORS ARE MAINLY FROM AMONG THE MEMBERS. IT IS RECREATIONAL ACTIVITIES. THE LD.COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT TOTAL RECEIPTS FROM T HESE MATCHES HAVE NOT CROSSED ONE AND HALF -LAKHS OF RUPEES. THEREFORE, THIS IS MINOR CONTRIBUTION FROM NON-MEMBERS WHICH HAS BEEN OFFERED FOR TAXATIO N, WOULD NOT DESTROY THE PRINCIPLE OF MUTUALITY. WE FIND THAT THE LD.CIT(A) HAS MADE REFERENCE TO THE VARIOUS CASE LAWS, BUT NOT EXAMINED ANALYTICALLY TH E FACTS OF THE ASSESSEES CASE. SHE SIMPLY CONCURRED WITH THE PROPOSITION LA ID DOWN IN THOSE CASES LAWS, BUT HAS NOT SPELL OUT HOW THESE PROPOSITIONS ARE APPLICABLE ON THE FACTS OF THE PRESENT CASE. IT IS PERTINENT TO OBSERVE TH AT FACTS OF ALL OTHER YEARS ARE IDENTICAL. THEREFORE, IN VIEW OF OUR DISCUSSION, W E ALLOW ALL THE APPEALS OF THE ASSESSEE FOR STATISTICAL PURPOSE. WE DIRECT THE AO TO GIVE BENEFIT OF MUTUALITY TO THE ASSESSEE WHILE DETERMINING THE TAXABLE INCOM E. THE INCOME FROM NON- MEMBERS WOULD NOT BE GIVEN BENEFIT OF MUTUALITY. A S FAR AS ALLOCATION OF EXPENDITURE FOR EARNING INCOME FROM MEMBERS AND NON -MEMBERS IS CONCERNED, THE AO SHALL REEXAMINE THIS ISSUE AND AL LOCATE THE EXPENDITURE PROPORTIONATELY IN THE RATIO OF RECEIPTS, I.E. THE LD.AO SHALL WORK OUT THE TOTAL RECEIPTS AND TOTAL EXPENDITURE, AND THEREAFTER PROP ORTIONATELY ALLOCATE IN THE SAME PERCENTAGE IN WHICH RECEIPTS ARE THERE FROM TH E MEMBERS AND NON- MEMBERS. NEEDLESS TO SAY, THE AO SHALL PROVIDE DUE OPPORTUNITY OF HEARING ITA NO.1051/AHD/2015 (6 APPEALS) GUJARAT INSTITUTE OF HSG. & ESTATE DEVELOPERS VS. D IT (EXEMPTION) 16 TO THE ASSESSEE WHILE ALLOCATING EXPENDITURE AND DE TERMINE THE RECEIPTS FROM THE MEMBERS AND NON-MEMBERS. HE WILL GIVE BENEFIT OF MUTUALITY ON THE RECEIPTS FROM THE MEMBERS AND TAXES THE SURPLUS INC OME FROM NON-MEMBERS. WITH THE ABOVE DIRECTIONS, ALL THE APPEALS ARE ALLO WED. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER