Principle of Mutuality applies to Club run by a Company: Gujarat HC deletes Addition of Life Membership and Entrance Fees [Read Order]

In CIT v. Karavati Club Ltd, the division bench of the Gujarat High Court, while deleting the addition in respect of life membership and entrance fees received by the assessee-Company, held that the principle of mutuality applies to a Club run by a Company.

Assessee is a limited company running a Club for its members. While completing assessment, the Assessing Officer made an addition in respect of life membership and entrance fees received by the assessee on the ground that mutuality was not applicable to the assessee-company.

Both the first appellate authority and the Tribunal held in favour of the assessee. Aggrieved by the Tribunal order, department approached the High Court.

A division bench comprising of Justice Akil Khureshi and Justice Biren Vaishnav noted that the matter had already been settled by the same Court in the assessees’ own case relating to different year wherein the Court decided the issue in assesses’ favour. The departmental appeal was, hence, dismissed.

Read the full text of the Order below.

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