PRESIDENT SIDDGRTHA SPORTS CLUB,MYSORE V. INCOME TAX OFFICER, WARD-2(4), MYSORE

ITA 2355/BANG/2025

AI Insights

The case involves M/s. President Siddgrtha Sports Club, a society registered under the Societies Registration Act, which appealed against the assessment orders for the years 2013-14 to 2016-17. The Income Tax Officer had assessed substantial income to the club, treating it as a partnership firm due to an incorrect PAN application, and denied the benefit of mutuality. The club argued that it is a mutual concern, receiving income only from its members, and thus not chargeable to tax under the principle of mutuality. The Income Tax Appellate Tribunal (ITAT) in Bangalore considered the submissions and the legal principles surrounding mutuality and directed a reassessment.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848984 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Bangalore
• Assessment Year: 2016-2017
• Appeal Filed On: 22-10-2025
• Other Referred Cases: Secundrabad Club etc. vs. Commissioner of Income-tax [2023] 153 taxmann.com 441 (SC)/ [2023] 295 Taxman 123 (SC)/ [2023] 457 ITR 263 (SC) [17-08-2023]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S
• Assessee Lawyers: V NARENDRA SHARMA
• Section: 147; 148; 56

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA Nos. 2352-2355/Bang/2025 Assessment Years: 2013-14, 2014-15, 2015-16 & 2016-17 M/s. President Siddgrtha Sports Club, Sanmarga, 2nd Stage, Siddarthanagar, Mysore – 570 011. PAN: AAJFP6721A Vs. The Income Tax Officer, Ward-2(4), Mysore. APPELLANT RESPONDENT Assessee by : Shri V Narendra Sharma, Advocate Revenue by : Shri Subramanian S – JCIT Date of Hearing : 16-02-2026 Date of Pronouncement : 23-03-2026 ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. These are the four appeals filed by the appellant assessee society against the appellate orders for assessment year 2013 – 14 to assessment year 2016 – 17 wherein the appeal filed by the assessee against the reassessment order before the National faceless appeal Centre Delhi (the learned CIT – A) are dismissed. Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 2 of 8 2. We first state the facts for assessment year 2013 – 14. The assessee is a non-filer. The learned assessing officer found that despite having the substantial income in the hands of the assessee, the assessee is not filing in the return of income and therefore the proceedings were initiated under section 147 of the income tax act after recording the reasons and obtaining the necessary approval under section 151 of the act. Notice under section 148 of the act was issued on 27th of March 2021. The assessee responded by filing the return of income on 5 May 2021 to a total income of ₹ 36,200. Thereafter the assessment proceedings continued. The learned assessing officer noted that there is a disharmony in the name of the assessee which is mentioned in the income tax return whereas the name mentioned in the deed of the society. The AO is stated that it is incomprehensible. The learned assessing officer further asked the details of various transactions, list of members, the interest received and paid, the loans and advances given, the assessee stated that it has not given any loans and advances, it has not received any interest and not made any real interest to anybody. The only interest that is received by the assessee is from banks. The assessee also stated that it is a mutual concern. The learned assessing officer did not accept the contention of the assessee and denied the benefit of mutuality. Partly so because of the reason that assessee could not furnish the complete details and further there is a mistake in obtaining the permanent account No. of the assessee also. The assessee is stated to be a club registered under the societies registration act but the permanent account No. obtained by it shows that it is a partnership firm. According to the AO the status of the assessee is association of people but according to the permanent account No. it is firm. He further investigated the objects Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 3 of 8 of this assessee society. On the nature of receipt of the assessee, he noted that that there is payment to contractors, there is a case deposit in savings bank account, purchase of alcohol. The assessee has not furnished the details. Looking at the objects of the assessee, the learned assessing officer noted that activity as to the consumption of liquor finds place in the object of the society though it contributes to 71% of the activity of the club and such an activity of consumption of liquor cannot be stated to be in order. Accordingly, he found that a sum of ₹ 10,775,615 being unsubstantiated receipt of ₹ 90,000, cash deposit of ₹ 1,06,85,615 was treated as unexplained income under section 69A of the act. Further the interest income of ₹ 36,204/– was charged to tax under section 56 of the act. Accordingly, the total assessed income of ₹ 10,811,890 was assessed by an assessment order dated 29 March 2022. 3. Aggrieved with the same the assessee preferred an appeal before the learned CIT – A the assessee submitted that assessee is not a partnership firm but is a mutual concern. It receives income from only its members and therefore its income is not chargeable to tax under section 4 of the act. It was further stated that the sum of ₹ 90,000 is the incentive received for having purchased the liquor from United spirits Ltd. Further ₹ 10,775,615 which are added under section 60 9A of the act is income of the assessee from its member. Assessee also explained that assessee is a club registered under the societies registration act and objects are to provide facilities for indoor games, outdoor games and other recreational activities for the members of the club. No nonmember is allowed to participate and enjoy the benefit of the services provided by the club. Thus, the income of the assessee is not chargeable to tax. Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 4 of 8 4. The learned CIT – A did not accept the explanation of the assessee stating that the permanent account No. was obtained by the assessee as a partnership firm, further there is no submission before the learned assessing officer and accordingly he dismissed the appeal of the assessee. 5. Similarly for assessment year 2014 – 15 on the identical facts and circumstances of the income of the assessee was assessed at ₹ 12,827,881, for assessment year 2015 – 16 the income of the assessee was assessed at ₹ 16,938,336, for assessment year 2016 – 17 at ₹ 20,292,409. The appeals filed against the assessment order for these years also met with the same fate. 6. Thus, assessee is in appeal before us for all these 4 years. 7. The learned authorized representative Shri V Narendra Sharma, advocate vehemently submitted that the assessee is a society and the members, income of the same is received from its member only. Therefore, according to the mutuality principle, the income of the assessee is not chargeable to tax. It was further stated that assessee has stated before the learned that lower authorities there is no nonmember which are represented and given any benefit either for the facilities of the assessee society or in the contribution. He further referred to the principal of mutuality and submitted that except the bank interest, all other receipts are received from the members only. He further stated that as the assessee club is also purchasing liquor, the discount is given by the supplier of the liquor which is reduced from the cost of the record and therefore same is in the form of discount and cannot be the income of the assessee independently. He further explained that the object of the assessee society clearly shows that it's a member’s club, with respect to the permanent account No. He submits that merely because the Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 5 of 8 permanent account No. is obtained wrongly under ill-advised application, the status of the assessee cannot become of a partnership firm. He therefore submitted that that the assessment order and the order of the learned CIT – A are not sustainable. 8. The learned departmental representative Shri Subramaniam as the joint Commissioner of income tax vehemently submitted that in the application for permanent account No. the assessee has stated the status of a partnership firm and therefore now it cannot claim the status of a mutual concern. Further he submitted that assessee did not file any return of income despite having the income from bank interest. He further stated that the bank interest cannot be considered as received from the members as it is received from the bank and which is definitely chargeable to tax under section 56 of the act. 9. In the rejoinder the learned authorized representative reiterated the facts and submitted that no doubt the bank interest is not received from the members but it is part of the incidental income of the assessee and at the most it can be charged to tax as an individual but the other income cannot be charged to tax because of mutual concern who is receiving income from itself cannot be taxed. 10. We have carefully considered the rival contention and perused the orders of the learned lower authorities. The facts clearly show that assessee is a member’s club. It is registered under the societies registration Act 1860. The object of the assessee society also shows that it is a member is assessee society. The contributor and the beneficiaries are only the members. It is stated by the assessee before all the lower authorities that there is no nonmember which is getting the benefit of the assessee. Thus, it is true that assessee cannot on income from itself. The principle of mutuality is rooted in Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 6 of 8 common sense. A person cannot make a profit from herself. This implies that a person cannot earn profit from an association that he shares a common identity with. The essence of the principle lies in the commonality of the contributors and the participants who are also beneficiaries. There must be a complete identity between the contributors and the participants. Therefore, it follows, that any surplus in the common fund shall not constitute income but will only be an increase in the common fund meant to meet sudden eventualities. income to be taxable, its source must be external to the Assessee. It was held by the Honourable supreme court that if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference. Reference was also made to Section 2(24)(vii) of the Act which defines taxable income. The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit for himself. Therefore, amount received from oneself cannot be regarded as income and be held to be taxable. It was observed that income of a cooperative society from business is taxable under section 2(24)(vii) and will stand excluded from the principle of mutuality. It was concluded that the doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs even after the 46th Amendment introducing Article 366(29-A) into the Constitution of India and that sub-clause (f) of the said Article has no application to member's clubs in the context of the Finance Act, 1994 which, inter alia, deals with tax on services. Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 7 of 8 Honourable supreme court also held that the principle of mutuality envisages: (i) Complete identity between the contributors and participators; (ii) Action of the participators and contributors must be in furtherance of the mandate of the associations or the Clubs. The mandate of the Club is a question of fact which has to be determined from the Memorandum or Articles of Associations, Rules of Membership, Rules of the Organisation, etc., which must be construed broadly. (iii) There must be no scope for profiteering by the contributors from a fund made by them which could only be expended or returned to themselves. 11. Over and above the honourable Supreme Court also held that the bank interest received by the assessee cannot be said to be a mutual receipt and is not chargeable to tax. Thus, the bank interest received by the assessee is chargeable to tax independently however the income received from the member if it satisfies the principle of the mutuality, it cannot be charged to income tax. 12. We direct the assessee to get its PAN corrected immediately. 13. As the learned lower authorities have refused to grant the benefit of the principle of mutuality to the assessee in absence of proper details, we restore all these four appeals back to the file of the learned assessing officer with a direction to the assessee to substantiate that the income of the assessee and the contributory is to the fund are only members and further the amount received from members is not chargeable to tax. The learned assessing officer may examine the claim in view of this settled principle is by the honourable Supreme Court and decide the issue afresh after giving the assessee an opportunity of hearing. 14. However, so far as the income received from the banks is concerned, such interest income is chargeable to tax in view of the decision of the honourable Supreme Court in Secundrabad Club etc. Printed from counselvise.com ITA Nos. 2352-2355/Bang/2025 Page 8 of 8 vs. Commissioner of Income-tax [2023] 153 taxmann.com 441 (SC)/ [2023] 295 Taxman 123 (SC)/ [2023] 457 ITR 263 (SC) [17-08- 2023]. The learned assessing officer is to that extent is correct. 15. Thus, all these four appeals are restored back to the file of the learned assessing officer as indicated above. 16. Accordingly, all these four appeals are allowed for statistical purposes. Order pronounced in the open court on 23rd March, 2026. Sd/- (KESHAV DUBEY) Sd/- (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 23rd March, 2026. *TNTS* Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order Assistant Registrar, ITAT, Bangalore Printed from counselvise.com "