Ritika Kanwar, B.Com. L.L.B. (H), Institute of Law, Nirma University
ABSTRACT
The principle of mutuality is widely accepted in direct tax regime. The said doctrine of mutuality is established on the notion that no one can generate income out of himself and no person can trade with himself. There can be no income accrued when a common group of individuals participate and contributes to a common fund with the intention of spending the amount generated for common good or objective that would be for the welfare of all the contributors. Therefore, a cluster of persons, i.e., members of a club or organisation or an association, contributing of a fund having element of commonality with respect to purpose and control, any surplus associated with such kind of mutual activity would not be deemed to be an income, and thereby, would be exempted from tax.
In the State of West Bengal v. Calcutta Club Limited on October, 03, 2019 (hereinafter referred to as ‘2019 Case’), the apex court extended the applicability of doctrine of mutuality to indirect tax regime. The Supreme Court of India (SCI) upheld the said principle with respect to Sales and Service Tax. This doctrine has been initially propounded in context of indirect taxation in the case of CTO v. Young Men’s Indian Association1 (hereinafter referred to as ‘1970 Case’). The author, in the said brief, will analyse the impact of said principle on GST regime using the said SCI case along with the few others.
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