PARIPOORNAN, J. - (1.) SPECIAL leave granted in S.L.P. (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. For convenience sake, the 23 cases including seven appeals which are de-linked can be classified into 5 groups. Group-A:C.A. Nos. 854-858/96 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. 3382/97 (arising out of S.L.P. (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. 3383/97 (arising out of S.L.P. (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 Income-tax, Kanpur v. Cawnpore Club Ltd. As stated 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.
(3.) WE hard 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. 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' Club - 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 or 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".;