Income Tax--Interest Earned on FD

Applicability of Mutuality Principle Vis-a-Vis Interest Earned on Fixed Deposit by a Club

CA. Nisha Bhandari

The present write-up deals with the issue of applicability of principle of mutuality in case of interest earned by a club from fixed deposit made in a bank. Recently the Supreme Court in the case of Secundarabad Club Etc. v. CIT decided the impugned issue. The learned author highlights the outcome of the said decision.

1. Exemption when can be claimed on account of mutuality principle

A mutual concern, in order to claim exemption must satisfy the following three conditions which were specified by the Privy Council in English & Scottish Joint Co-operative Wholesale Society Ltd. v. Commissioner of Agricultural Income Tax (1948) 16 ITR 270 (PC):

(i) the complete identity of contributors and recipients;