Mahima Sakhlecha, NMIMS, KPMSOL
ABSTRACT
The essence of the doctrine of mutuality is that the income derived through any mutual concern or organization usually does not fall under the ambit of profit and therefore, is not liable to be taxed. These transactions are non- tainted by commerciality and exist solely for the purpose of mutual benefit. If the aim of a mutual concern or organization is of the greater good and not for commercial gain, it attracts the doctrine of mutuality wherein the income derived from such transactions would be exempt from tax. This doctrine is only applicable on non-commercial activities wherein the benefit of all members as a whole is taken into consideration. IF any society, club or association participates in commercial activities, the doctrine of mutuality would cease to exist and the profits so earned would be liable for tax purposes. This paper discusses the case of ITO v. Venkatesh Premises Co- op Society Ltd in which the SC made some important observations on the applicability of the doctrine of mutuality and mentioned three tests which would prove existence of doctrine of mutuality in a particular case. This paper also talks about the reason for which income derived from surplus wherein the doctrine of mutuality applies, is not treated as being of a commercial nature, and is thereby exempt from taxability.
Keywords: Doctrine of Mutuality, Mutual Concern, Commerciality, Surplus, Taxability.
