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PETITIONER: COMMISSIONER OF INCOME-TAX, BIER

       Vs.

RESPONDENT: M/S. BANKIPUR CLUB LTD.

DATE OF JUDGMENT:       08/05/1997

BENCH: K. S. PARIPOORNAN, S. SAGHIR AHMAD

ACT:

HEADNOTE:

JUDGMENT:                             WITH CA NOS.  505/92, *  SLP(C) 22644/94, CA 3974/92, 4777-78/89, 4534/91,  1635/94,   1648-1649/94,   2380-82/94-   SLP   (C) 2811/94, CA 8046/95, 1773/92, 4303/95, 3840/96 AND 10194/95. * CA 3382/97 ** CA 3383/97 Present:             Hon’ble Mr. Justice K.S. Paripoornan             Hon’ble Mr. Justice S. Saghir Ahmad J. Ramamurthy,  Harish N. Salve, Sr. Advs, S. Rajappa, Dhruv Mehta,  B. Krishna   Prasad,   P. Parmeswaran,   D.S. Mehra, U. Rana,   Rajiv    Tyagi,   Sudhanshu   Tripathi,   M.J.S. Rupal, P. Mukherjee, Sanjoy Kumar Ghosh, (Manoj Swarup) Adv. for M/s. Manoj  Swarup & Co., S.K. Aggrawal, Vinay Vaish and Amarendra  Sharan,   Advs.  with  therm  for  the  appearing parties.                       J U D G M E N T The following Judgment of the Court was delivered. PARIPOORNAN, J.      Special leave  granted in  SLP (C)  Nos.  22644/94  and 2811/94. 2.   This batch of 23 cases was posted together. That was so done on  the basis  that the same and identical point arises for consideration  in all  of them. On further verification, it turned  out that  in 7 appeals, the point that arises for consideration is  little different.  On the question arising in   those appeals  no arguments were advanced. So, the said seven appeals are de-linked, to be posted later for hearing. 3.   For convenience  sake, the  23  cases  including  seven appeals which are de-linked can be classified into 5 groups. Group-A: C.A.  Nos. 854-858/86  Commissioner of Income-tax * Bihar v.  M/s. Bankipur Club Ltd. Group-B: C.A. Nos.  505/92 and 3974/92 - Commissioner of Income-tax. Bihar-II v. Ranchi Club Ltd.,  Group-C: C.A.  No. 5382./97  (arising out of SLP (C) No.22644/94  and  C.A.  No.10194/95  -  Commissioner  of Income tax  Bombay v.  Cricket Club  of India; Group-D: C.A. Nos. 1635/94  * 1648-49/94, 2380-82/94 and C.A. No.  3583/97 (arising out  of SLP  (C) No.  2811/94)  -  Commissioner  of Income tax  Jalandhar  v.  Northern  India  Motion  Pictures Association,  Group-E:   C.A.  Nos.   4777-78/89,   4534/91, 8046/95, 1773 (NT)/92, 4303/95 and 3840/96 - Commissioner of

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Income tax, Kanpur v. Cawnpore Club Ltd. 4.   As state earlier, the appeals coming within Group - E - CIT, kanpur  V. Cawnpore  Club Ltd.  (seven appeals) are de- linked and  they will  be posted  separately to  be heard on merits. We  shall indicate  the reason  for  this  a  little later. 5.   We heard counsel. The following vital aspects should be borne in  mind in  adjudicating the question that arises for consideration in this batch of 16 appeals (covered by Groups A to  D). The  Revenue is  the appellant in all the appeals. The respondents  in all  the appeals  are "Members’  Clubs". They are  also called  "social action  groups". They are all companies, registered under Section 25 of the Companies Act, 1956 - "non-profit companies". The respondents are assessees to income  tax. They  claimed exemption  on  their  "surplus receipts" on the ground that they are "clubs" - a species of mutual undertaking,  and do  not  carry  on  any  "trade  or business". They  do not earn any profit. The income received by the  clubs by  extending facilities to non-members is not in issue  in this  batch of  appeals. According  to Revenue, even  the   surplus  receipts  of  the  clubs  by  affording facilities to its members, is "income" and so, taxable. That is the  sole   question arising  for consideration  in  this batch of appeals. 6.   Under the  Income-tax Act  (hereinafter referred  to as ’the Act’)  what is  taxed is, the "income, profits or gains earned   or "arising", "accruing’ to a person". The question is whether   in  the case  of Members’  Clubs - a species of mutual undertaking  - in  rendering various  services to its members   which result in a surplus, the club can be said to "have earned   income  ar profits"  In order  to answer  the question, it  is   necessary to have a background of the law relating to  "Mutual  trading" or "Mutual undertaking" and a "Members’ Club". 7.   In Halsbury Laws of England, 4th Edition Reissue Volume 23 paras  161 and  162 (pages 130 and 132), the relevant law is stated thus:           "Where  a  number  of  persons      combine together  and contribute 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 cannot  be regarded  in any      sense  as  profit.  There  must  be      complete   identity   between   the      contributors and the participators.      If    these     requirements    are      fulfilled, it  is  immaterial  what      particular   form  the  association      takes.  Trading   between   persons      associating together  in   this way      does not give rise to profits which      are chargeable to tax.           Where the trade or activity is      mutual, the  fact that,  as regards      certain       activities,   certain      members only  of the    association      take advantage  of the   facilities      which it  offers  does  not  affect      the mutuality of the enterprise.      xxx                             xxx      xxs           Members clubs  are an  example

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    of  a    mutual  undertaking,  but,      where a club  extends facilities to      non-members, to  that   extent  the      element     of     mutuality     is      wanting.............  "              (Emphasis 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  carrying on a trade do      so in  such a way that they and the      customers are  the same persons, no      profits or gains are yielded by the      trade   for    tax   purposes   and      therefore no  assessment in respect      of  the  trade  can  be  made.  Any      surplus resulting  from this   form      of  trading   represents  only  the      extent to  which  the  contribution      of the participators have proved to      be in  excess of requirements. Such      a surplus  is regarded as their own      money and   returnable  to them. In      order that  this exempting  element      of mutuality  should  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 the goods were sold      or    the     services    rendered.      ......................."      "lt has  been held  that a  company      conducting a  members’ (and  not  a      proprietary) club,  the members  of      the company  and of  the club being      identical, was  not carrying  on  a      trade or  business 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-members. 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 business which could      be isolated  and  defined  and  the      profit of  which was  assessable to      income  tax.   But  there   is   no      liability  in  respect  of  profits      made   from   members   who   avail      themselves   of    the   facilities      provided for members."              (emphasis supplied)      In British Tax Encyclopedia (I) 1962 edition (edited by G.S.A. Wheatcroft)  at pages  1200 and  1201,  dealing  with "Mutual trading operations", the law is stated, thus:-           "In several  early cases there      were dicta to the effect that a man      could not  make a profit be trading

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    with himself  this  developed  into      the proposition  that when  persons      contribute  to  a  common  fund  in      pursuance of  a  scheme  for  their      mutual benefit,  having no dealings      or relations with any outside body,      they cannot  be said to have made a      profit when  they  find  they  have      overcharged  themselves   and  that      some portion to their contributions      incorporate   themselves   into   a      separate entity  to carry  out  the      mutual  scheme   and  the   surplus      contributions are  put  to  reserve      and not  immediately returned.  For      this  doctrine   to  apply   it  is      essential that all the contributors      to the  common fund are entitled to      participate in the surplus and that      all  the   participators   in   the      surplus are  contributors  so  that      there is  complete identity between      contributors   and   participators.      This means  identity as a classs so      that at  any given  moment of  time      the persons  who  are  contributing      are  identical   with  the  persons      entitled to  participate;  it  does      not matter  that the          class      may be  diminished by persons going      out of  the scheme  or increased by      other coming in. .. ... ... ... ...           The    doctrine     now    has      application in  three areas. First,      it  applies   to  mutual  insurance      companies; secondly,  it applies to      certain municipal undertakings and,      thirdly,  to  members’  clubs,  and      mutual   associations    generally,      whether       incorporated       or      unincorporated,  except  registered      industrial and provident societies.      ... ... ... ..."              (emphasis supplied)      It should  be noticed  that  in  the  case  of  "mutual society or  concern" (including  a "Members’  club"),  there must be  complete identity between the class of contributors and the class of participators. The particular label or form by  which   the  mutual  association  is  known,  is  of  no consequence. The  said principle which has been laid down in the leading  decisions and emphasised in the leading English text  books   mentioned  above,   has  been  explained  with reference to  Indian decision  in "The  Law and  Practice of Income Tax" (8th edition vol. 1, 1990) by Kanga & Palkhivala at page 113, thus:-           "......  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 back from the      surplus precisely what he has paid.      The  Madras.   Andhra  Pradesh  and

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    Kerala High  Courts have  held that      the  test  of  mutuality  does  not      require that  the  contributors  to      the common  fund should willy-nilly      distribute  the   surplus   amongst      themselves: it  is enough  if  they      have a  right of disposal over this      surplus, and  in exercise  of  that      right  they   may  agree   that  on      winding  up  the  surplus  will  be      transferred    to     a     similar      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 [1971 (3) AJI ER 1185 at page 1189], thus:      "... ... ... Is the activity, on      the one  hand, a trades 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?"      In substance,  the arrangement  or relationship between the  club  and  its  members  should  be  of  a  non-trading character. 9.   In C.A. Nos. 854-858184 (Group-A), the assessee is M/s. Bankipur Club  Ltd.. The  appeals are  preferred against the common judgment  of the  Patna High  Court rendered  in T.C. No.46-50/70 dated  14.10.1980 reported  as  Commissioner  of Income-tax, Bihar  v Bankipur  Club Ltd.  (129 ITR 787). The questions referred to the High Court are the following:      "(i) Whether,  on the  facts and in      the circumstances  of the  case the      profits arising from the sales made      to the  regular members of the club      is entitled  to  exemption  on  the      doctrine of mutuality.      (ii) Whether,  on the  facts and in      the circumstances  of the  case the      directions given  by  the  Tribunal      are valid in law?"      The assessment  years involved  are 1960-61 to 1964-65. The assessee  club filed  "nil" returns.  The  assessee  had income  from  house  property  and  also  from  business  or professica. The  receipt under  the head  "sale of drinks at the Bar" was alone disputed in all the aforesaid five years. The Income  Tax Officer  held that  the profit  on the  sale proceeds of  the drinks by the club in income and so, liable to be taxed. It is seen that the main object of the club, as per the  memorandum of  association, is  to  afford  to  its members all  the usual  privileges, advantages, conveniences and accommodation  of a  club. Clause 5 of the memorandum of association makes  a provision  that upon  a  winding-up  or dissolution of  the company  if there  remains any  property left after the satisfaction of all debts and liabilities the same shall be paid to and distributed amongst the members of the company  in equal  shares.  Article  6  of  Articles  of Association reads thus:      "Only permanent  members  shall  be      deemed to be members of the club."

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    Article 15  speaks of  temporary  members  who  may  be elected for non exceeding three months in any calendar year. To become  a temporary  member the  person would be a person not permanently residing at Patna or within ten miles of it. No   entrance fee  is payable by them, but they are to pay a fixed monthly  subscription. Under  Article 5,  the Governor and the   Chief  Minister of the State may be invited by the committee to become honorary members of the club. Article 17 is a  provision for giving to the temporary and the honorary members all  the privileges  of the  club, subject  to  such restrictions and  regulations as  may be  prescribed by  the rules or  bye-laws of the club. They have, however, no right to vote  at a  meeting or  be elected on committees or bring any guest.  The assessments  were upheld  by  the  Appellate tribunal  accepted   the  plea  of  the  assessee  that  the principle of  mutuality would apply in regard to the sale of drinks at  the bar.  It was  held that  as regards  sales to regular members the profit arising from sales to them is not liable to  be taxed  under the  principle of  mutuality. The High Court  adverted to  the fact  that nobody is allowed to enjoy the  privileges of the club other than its members and the bar  in question  where drinks  are sold  is open to its members, both  permanent as  well as  temporary, and that no outsider can purchase any drink from the said club. The High Court took  the  view  that  while  selling  drinks  to  its members, it  is not done with motive of profit earning which can  be said to be tainted with "commerciality". The members pay the monthly subscription and in addition, they enjoy the benefit of  this privilege  of supply  of drinks  to them on additional payment  and so there is no profit earning motive so    far  as  this  transaction  is  concerned.  The  Court concluded that  the profits arising from the sales of drinks at the bar to the regular members of the club is entitled to exemption on the  doctrine of "mutuality". 10.  In C.A  No. 505/92  and C.A  No. 3974/92 (Group-B), the assessee is  Ranchi Club  Ltd.  The  main  decision  is  one rendered in  T.C. 54/80,  subject matter of C.A. 505/92. The judgment is  dated 24.9.1991 and is reported in Commissioner of Income-tax  v. Ranchi  Club Ltd.  [196 ITR 137 (FB)]. The questions referred to the High Court are as follows:      "(1) Whether  on the  facts and  in      the circumstances  of the case. the      Tribunal has  rightly held that the      assessee-club is a mutual concern?      (ii) Whether,  on the  facts and in      the circumstances  of the case, the      Tribunal has  rightly held that the      income derived   by  the  assessee-      club from its house property let to      its members and their guests is not      chargeable to tax?      (iii) Whether,  on the facts and in      the circumstances  of the case, the      Tribunal has  rightly held that the      income derived by the assessee-club      from sale  of liquor,  etc, to  its      members and  their  guests  is  not      taxable in its hands"      In these  cases, the assessee was a company formed with the  main  object  of  providing  a  club  house  and  other conveniences for  the use  of its members and their friends. The memorandum  of association provided for contribution has the members  to the  common  fund  of  the  club,  guarantee towards   debts and  liabilities, and upon winding up, their participation   in the  surplus. Apart  from the  concept of

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"member" envisaged  a in  the memorandum, it had created one more class  described as  temporary members.  The  temporary members were  not deemed   to be members. For the assessment year 1977-78.  the assessee had filed its return showing its income under  the head  property"  representing  the  income arising out  of gross  rent and reservation charges received by it  from persons  other than members. But, the Income-tax officer, while  assessing the  income, also  the  Income-tax Officer, while  assessing  the  income,  also  included  the amount received  by the  assessee even  from its  members on account of  rent from  the club property and the receipts on sale of  liquor, etc,  to its  members and their guests. The decision rendered  by the  High Court  as summarised  in the head-note (196 ITR 137 at page 139) is as follows:-           "..   .. that  merely  because      the assessee  company  had  entered      into transactions  with non-members      and   earned    profits   out    of      transactions held  with  them,  its      right to  claim  exemption  on  the      principle of  mutuality in  respect      transactions held  by it  with  its      members was  not lost. The assessee      was a  mutual concern.  The  income      derived  by   it  from   its  house      property let  to  its  members  and      their guests  and from  the sale of      liquor etc..  to  its  members  and      their guests was not taxable in its      hands."              (emphasis supplied) 11.  C.A. No.  10194/95 and C.A. No...../97 (arising, out of SLP (C)  22644/94) relate  to the assessee, the Cricket Club of India. The proceedings relate to Assessment years 1977-78 and 1978-79.  Amongst others,  the Cricket Club of India was in receipt of income from property owned by it - chambers in the building  of the  assessee let  out to  members,  annual value  of  the  club  house  and  annual  value  of  Patiala Pavilion. The above facilities were provided only to members of the association and that too temporary accommodation. The arrangement was  essentially for the benefit of the members. Following the   decision rendered by the Appellate Tribunals Bombay Bench,  for the  assessment years 1974-75 and 1976-77 rendered in  ITA Nos.  1730 and  1913 (Bombay)  of 1980  the appellate tribunal  held that  no portion of the Club House. Patiala Pavillion  etc. is  let out   to  strangers and that these portions  are let out only to the members and so, even if an  income had  actually accrued  due from the members on the above  counts, it  will not be taxable on the principles of mutuality.  In the application filed under Section 256(2) of the Act, the High Court declined to refer the question of law posed  by the  Revenue,  to  the  effect,  "whether  the appellate tribunal  was justified in law in holding that the income from  the property held by the assessee could  not be brought to charge under the provisions of Sections 22  to 26 of the  Act?" The  decision was  followed for the assessment year 1978-79 - C.A. 10194/95 and the High Court  declined to refer any  question of  law for  this year  as well. In fact both the  years. the  decision of  the appellate tribunal to the effect  that the  income  received  from  the  aforesaid counts is  exempt under  the principle of mutuality, was not doubted  by  the  High  Court?  holding  that  no  referable question of law arose by its decision. 12.We now  come to Group-D In C.A. Nos. 1635/94. 1648-49/94, 2380-82/94 and  C A  3383/97 @ SLP 2811/94) come within this

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group. The  assessee in  this case is Northern India  Motion Pictures Association.  The details  with regard to the above appeals are as follows: ------------------------------------------------------------ S. NO.      NO.         ASSESSMENT             REMARKS                          YEARS ------------------------------------------------------------ 1.     CA No.1635 of     1987-88            Appln. U/S        1994                                 256(2) rejected ------------------------------------------------------------ 2.     CA Nos. 1648-     1982-83 & 1985-    do        49 of 1994        86 ------------------------------------------------------------ 3.     CA Nos. 2380-     1974-75 to 1976-   Reference        82 of 1994        77                 answered in                                             favour of                                             assessee ------------------------------------------------------------ 4.     SLP (C) No. 2811  1989-90            Appln. U/S.        of 1994                              256(2) rejected ------------------------------------------------------------      The assessee  is  an  association  consisting  of  Film Distributors and  Exhibitors incorporated as a company under Section 25  of the  Companies Act?  1956 (Section  26 of the Companies Act,  1913) in  the year  1949 The  income of  the Association consists  of  (i)  admission  fees,  readmission fees, periodical  subscriptions from the members, etc. under the head  "others" and (ii) service charges from the members for rendering  specific services  to the  members under  the head "Service  to the  members". The  income under  the head "Service to  the members"  was always  offered for  tax  and assessed to  tax under  Section 28(iii) of the Act and there is no  dispute about  the   same. The  income under the head "others" was  claimed to  be not taxable on the principle of mutuality. The claim of the assessee for exemption from levy of tax,  on the  ground of "mutuality" was denied in view of clause 7  of the  Memorandum of Association of the Assessee. which was to the following effect:-           "If upon  the  winding  up  or      dissolution  of   the   Association      there     remains     after     the      satisfaction of  all its  debts and      liabilities any property whatsoever      the same  shall not  be paid  to or      distributed amongst  the members of      the Association  but shall be given      or  transferred   to   such   other      institution or  institutions having      objects similar  to the  objects of      the Association to be determined by      the members  of the  Association at      or before  the time  of dissolution      or in  default thereof by the Prime      Minister of East Punjab, and if and      so far as effect cannot be given to      the  aforesaid  provision  then  to      some charitable object."              (emphasis supplied)      In an  earlier assessment  year, 1977-78  an  identical question relating to the same assessee arose before the High Court of  Punjab &  Haryana in  ITR No.  69/81. The decision thereon dated  27.4.1989  is  reported  in  Commissioner  of Income-tax v.  Northern India  Motion  Pictures  Association [180 ITR  160]. The following questions were referred to the High Court:-

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    "(1) Whether, on  the facts  and in      the circumstances  of the case. the      principle   of       mutuality   is      applicable   to    the   assessee’s      receipts under the head ’Others’?      (2)  Whether, on  the facts  and in      the circumstances  of the case, the      Tribunal was  right in holding that      the  receipts     under   the  head      ’Others’ were neither income liable      to  be   taxed   under   the   head      ’Business’  nor   under  the   head      ’Other sources?      The facts in the said case and the decision by the High Court are  neatly summarised in the head note of the reports at pages 160-161:-           "The,    assessee    was    an      association and  its  members  were      film distributors  and exhibitor’s.      The   association   protected   the      rights of,  its members  in  return      for admission  fees and  periodical      subscription  and   also   rendered      specific  services  in  return  for      separate  charges.  The  Income-tax      Officer  wanted   to  subject   the      assessee  to   tax  on  the  income      derived  from  the  admission  fee,      periodical  a   subscriptions   and      specific service  charges  received      from  the   members.  The  assessee      pleaded  that   the  receipts  were      exempt  from  tax  on  the  general      principle of mutuality. The Income-      tax Officer did  not agree with the      plea on  the grounds that in clause      7 of  the memorandum of association      it was  provided that upon  winding      up   or    dissolution    of    the      association,     the      remaining      property, after the satisfaction of      its debts  and  liabilities,  shall      not be  paid or distributed amongst      the members  but shall  be given or      transferred    to     such    other      institution or  institutions having      similar objects  to be   determined      by the  members at  or  before  the      time of  dissolution, or in default      thereof by  the Prime  Minister  of      the East   Punjab and if this could      not  be   done,   then,   to   some      charitable object  and hence    the      amount was  not to  go back  to the      members. The  Tribunal however held      that the income of the assessee was      not taxable. On a reference:           Held, that the contributors by      incorporating  clause   7  did  not      deprive   themselves of the control      on the  disposal  of  the  surplus.      Ultimately,  they  could  agree  to      divide the surplus among themselves      or to  contribute the  amount to  a      similar   association   or   to   a

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    charitable trust.  The assessee was      a mutual  benefit  association  and      its income was not taxable."      The said  judgment was  followed  subsequently  in  all matters   arising under  Sections 256(1)  and 256(2)  of the Act. So,  for the  assessment years which are subject matter of cases  falling   under Group-D  stated herein  above, the above decision  reported it 180 ITR 160 was followed and the income received  by the  assessee under  the head "Others" - admission fees readmission fee. periodical subscription from the members  etc. were  held to  be exempt or non-taxable on the principle of mutuality. 13.  The above  four sets  of cases falling in Groups A to D shall alone  be covered  by this  Judgment. With regard to 7 cases/appeals falling  in Group-E  the Assessee  is Cawnpore Club Ltd.  It is  seen that the income that was sought to be assessed in  the case  of assessee,  was  one  derived  from property let  out and  also Interest  received from  F.D.R., N.S.C. etc. In these cases the Court held that income should be assessed  as one  from other sources" and not income from property. It  does not  appeal that the larger plea that the income is  totally exempt on the principle of mutuality, was decided in  favour of  the assessee  in the appeals filed by the Revenue  the only  question that  may probably  arise is whether income  received  from  the  property  let  out  and interest by way  of F.D.R’s.,  N.S.C. etc. can be brought to tax under  the head; income from property".  Since the issue raised in  this batch  of seven  cases, is not similar to or same as  the one  involved in  the other cases  coming under Groups A  to D.  we do not propose to deal either a with the facts or  the decisions  rendered be the authorities in this batch of  cases (Group-E).  All that  we propose to do is to delink the  cases coming under Group-E and direct them to be posted  separately   for  hearing  and  disposal  before  an appropriate Bench. 14.  Now we  turn to  the main  question  canvassed  be  the Revenue in  the appeals  coming under Groups A to D, namely, whether  the   assessees,  mutual  clubs.  are  entitled  to exemption   for the  receipts or  surplus arising  from  the sales of  drinks   refreshments etc.  or amounts received be way of  rent for  letting   out  the  buildings  or  amounts received by  way of  admission fees periodical subscriptions and receipts  of similar  nature, from  its members?  In all these cases.  the appellate  tribunal as also the High Court have found  that the  amount received  by the clubs were for supply of  drinks? refreshments  or other  goods as also the letting out  of building for rent or the amounts received be way of admission fees. periodical subscription etc. from the members of  the clubs were only for/towards charges  for the privileges,  conveniences  and  amenities  provided  to  the members, which  they were  entitled to  as per the rules and regulations of  the respective Clubs. It has also been found that different  clubs realised  various sums  on  the  above counts only  to afford  to its members the usual privileges, advantages, conveniences  and accommodation. In other words, the services offered on the above counts were not done. with any profit  motive and  were not tainted with commerciality. The facilities  were offered only as a matter of convenience for the  use of  the members.  (and their  friends, if  any, availing of the facilities occasionally)      In the  light of  the above  findings,  it  necessarily follows  that   the  receipts  for  the  various  facilities extended by the clubs to its members, as stated herein above as  part   of   the   usual   privileges,   advantages   and conveniences; attached to the members of the club, cannot be

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said to  be "a  trading activity."  The surplus  - excess of receipts over  the expenditure  -  as  a  result  of  mutual arrangement, cannot be said to be income" for the purpose of the Act. 15.  Our attention was invited to a few decisions which have dealt with  the subject  matter in issue herein. The list of the various English decisions has been succinctly summarised in the  textbooks which  we have  adverted to  herein  above (Halsbury’s  Laws  of  England,  Simon’s  Taxes,  Wheatcroft etc.). Particular  stress was  laid on  the decisions of the Supreme Court  in Commissioner of Income-tax. Bombay City v. The Royal  Western India  Turf Club  Limited [24  ITR  551], Commissioner of  Income-tax.  Madras  v.  Kumbakonam  Mutual Benefit Fund  Ltd [53  1TR 241], Fletcher (on his own behalf and on  behalf of  Trustees and  Committee of  Doctor’s Cave Bathing Club) v. lncome Tas Commissioner [1971 (3) All ER (PC) 1185]. We do not think it necessary to deal at length with the  above decisions  except  to  state  the  principle discernible from  them. We understand these decisions to lay down the  broad proposition  - that  if the  object  of  the assessee company  claiming  to  be  a  "mutual  concern"  or "club", is  to carry  on a  particular business and money is realised both from the members and from non-members, for the same consideration  by giving the same or similar facilities to all  alike in  respect of  the one  and the same business carried on  by it, the dealings as a whole disclose the same profit  earning   motive  and   are   alike   tainted   with commerciality. In  other words,  the activity  carried on by the assessee  in  such  cases,  claiming  to  be  a  "mutual concern" or  "Members’ club"  is a  trade or an adventure in the nature  of trade  and the transactions entered into with the members or non-members like a trade/business/transaction and the  resultant surplus  is certainly  profit  --  income liable, to  tax. We  should also state, that "at what point? does the  relationship of  mutuality end and that of trading begin" is  a difficult  and question.  A host of factors may have to be considered to arrive at a conclusion. "Whether or not the persons dealing with each  other, is a "mutual club" or carrying  on a  trading activity  or an  adventure in the nature of  trade".is largely a question of fact. [ Wilcock’s case -  9 Tax  Cases 111,  (132) C.A. (1925) (1) KB 30 at 44 and 45.]. 16.  In the  result, we  hold that  ht judgment  and  orders passed by  the High Courts covered by Groups A,B,C And D, as stated above,  do not  merit any interference. The reasoning and conclusion  of the  High Courts  in  the  judgments  and orders  impugned  are  in  accord  with  the  settled  legal principles as laid down by Courts. The 16 appeals covered by Groups A to D filed by the Revenue are, therefore, dismissed with costs,  including advocate’s  fees which we estimate at Rs. 5,000/- in each appeal.