Judgment :- 1. Common questions of law have been referred for the decision of this Court by the Income-tax Appellate Tribunal, in these five referred cases, at the instance of the Revenue. The respondent in these five cases is the same assessee. The assessee is a trade association of oil merchants. Its objects are the promotion and protection of those persons engaged in coconut oil generally. The assessment for the three years, 1974-75 to 1976-77, are re-assessments effected under S.143(3) read with S.147(b) of the Income Tax Act, 1961. The assessments for the years 1977-78 and 1978-79 are regular assessments. The respondent/ assessee received subscriptions of Rs.6,850/-, Rs.5,800/-, Rs.5,700/-, Rs.5,500/- and Rs.5,150/-for these years from its members. The question that was considered by the Appellate Tribunal and again raised for our consideration is regarding the assessability of the subscription paid by the members of the assessee-association to the assessee for the various years. The assessee claimed that the above subscriptions are not taxable since it is a mutual association. The Income Tax Officer negatived the said plea. In the appeals, the Appellate Assistant Commissioner held that the respondent-assessee is a mutual benefit assessee is a mutual benefit association, He took the view that the mere fact that the assessee is incorporated under S.26 of the Companies Act. will not destroy the principle of mutuality. Reliance was placed on the decision reported in CIT v. Madras Race Club (105 ITR 433). The Appellate Tribunal concurred with the said decision, and held that the subscriptions received by the assessee from its members cannot be considered to be income in the hands of the assessee. The Revenue filed petitions under S.256(1) of the Income Tax Act for referring certain questions of law which arose out of the common appellate order of the Tribunal, for first 4 years dated 26-12-1980. Accordingly, the Appellate Tribunal has referred the following five questions of law for the decision of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subscriptions received by the assessee from its members cannot be considered to be income in the hands of the assessee? (2) Whether, on the facts and in the circumstances of the case, the Tribunal has right in law in holding that the assessee was a "mutual association"? (2) Whether, on the facts and in the circumstances of the case, the Tribunal has right in law in holding that the assessee was a "mutual association"? (3) Whether, on the facts and in the circumstances of the case and on an interpretation of S.44A of the Income Tax Act, 1961 the Tribunal was correct in law in holding that "S.44 of Income Tax Act, 1961 recognise the position that the receipts from the members by way of subscription or otherwise, would not be income in the hands of the association"? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the receipts of a trade association from its members by way of subscription or otherwise are receipts that partake the character of mutual receipts and is not consideration of receipts "otherwise" unwarranted and wrong? (5) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law and on facts in holding that neither the incorporation under S.26 of the Companies Act nor Clause.5 of the memorandum of association of the assessee has destroyed the mutual character of the assessee? For the assessment year 1978-79, the Appellate Tribunal followed its earlier decision dated 26-12-1980. Thereafter, on motion by the Revenue, the Appellate Tribunal referred question Nos. 1, 3, 4 and 5, out of the above mentioned questions, for the decision of this Court in ITR No. 126 of 1983, relating to the assessment year 1978-79. 2. We heard counsel for the Revenue, Mr. N. R. K. Nair, as also counsel for the respondent/ assessee, Mr. Chacko George. The sole question raised before us was whether in law, the assessee could be considered to be a mutual association. Two aspects were stressed to show that the assessee cannot be a mutual association in law as claimed. They are: (1) The assessee is incorporated as a company under S.26 of the Companies Act. Chacko George. The sole question raised before us was whether in law, the assessee could be considered to be a mutual association. Two aspects were stressed to show that the assessee cannot be a mutual association in law as claimed. They are: (1) The assessee is incorporated as a company under S.26 of the Companies Act. (2) There is a provision in the Memorandum of Association of the company that on winding up or dissolution of the club, the surplus left over was to be transferred to some other institution having objects similar to the objects of the club or to a charitable body or bodies to be determined by the members of the club at or before the time of dissolution and not to be distributed among the members of the association. Counsel for the Revenue contended that these two salient aspects would show that the respondent/ assessee is not a mutual association, as claimed. Counsel for the respondent/ assessee submitted that the fact that the club is incorporated will not destroy its mutual character. It was further submitted that the provision in the articles of association that on winding up or dissolution of the club, the surplus left was to be transferred to some other institution having similar objects cannot mean that they were not participators in the surplus. It was only & fetter in the manner of disposal. They continue to have the disposal over the surplus. 3. On hearing the rival contentions of the parties, we are of opinion that the plea raised by the Revenue should fail. The matter is fully governed by the decision of the Madras High Court in CIT v. Madras Race Club (105 ITR 433). The two aspects stressed before us were also highlighted in the Madras decision Placing reliance on the decisions of the Supreme Court, the Judicial Committee of the Privy Council and the House of Lords, the learned judges, at page 446 of the Reports, concluded as follows: "Thus, incorporation of a limited company would not take away the claim for exemption. The two aspects stressed before us were also highlighted in the Madras decision Placing reliance on the decisions of the Supreme Court, the Judicial Committee of the Privy Council and the House of Lords, the learned judges, at page 446 of the Reports, concluded as follows: "Thus, incorporation of a limited company would not take away the claim for exemption. The result of the above discussion is that a company may be eligible for exemption of any surplus derived from the dealings of the members either on the principle of mutuality based on the doctrine that no one can make profit out of himself or on the basis that there is no trading or profit motive in the transactions between a club and its members." The above observations clearly show that the incorporation of the respondent/ assessee as a company to carry on the activities of the club does not result in the deprivation of the admissibility of the claim for exemption based on the concept of mutuality. Regarding the provision in the articles of association as what should be done on winding up or dissolution of the club about the surplus left over, the learned judges, in the same decision, at page 443, observed as follows: "It is well settled that the memorandum and articles of a company represent the contract between the company and the members. It is only by virtue of their ownership of the surplus assets, if any, that the members had agreed to the clause that they would not take back the surplus, but allow it to be transferred to any similar entity. As they themselves are to deal with the surplus, if any, at the time of winding up, it cannot be said that they are not participators in the surplus. The clause is only a fetter in the manner of disposal. The participation envisaged in the principle of mutuality is not that the members should willy-nilly take the surplus to themselves. It is enough if they bad a right of disposal over the surplus to show that they were the participators." It is evident therefrom that the members of the respondent/ assessee have a right of disposal over the surplus to show that they are participators and it cannot be said that the provision dealing with the surplus left over, in the instant case, will nullify the principle of mutuality. The two aspects, highlighted by the Revenue, have been expressly dealt with by the Madras High Court in its decision reported in CIT v. Madras Race Club (105 ITR 433) and they were held to be insufficient to negative the principle of mutuality, and to deny exemption. We respectfully concur with the reasoning and conclusion of the Madras High Court in its decision in CIT v. Madras Race Club (105 ITR 433). The Appellate Tribunal has rightly distinguished other decisions brought to its notice CIT v. Madras Stock Exchange Ltd. (105 ITR 546) (Madras) and Addl. CIT v. Ahmedabad Millowner's Association (106 ITR 725) (Gujarat). Those cases dealt with the question as to whether the assessees therein were entitled to exemption from Income tax (under S.11 of the Act) on the basis that the trust was for a charitable purpose. Similarly, the decision reported in 106 ITR 542 (CIT v. Shree Jari Merchants Association Gujarat) is clearly distinguishable. There, the association was registered under S.27 of the Trade Unions Act. At the time of dissolution, the surplus assets should be used in the manner proposed in the resolution passed by the association and it is clear that the resolution need not necessarily provide for the distribution of the surplus assets only amongst the members of the association. If they are not liable to be returned to the members, the, identity between the contributors and the recipients would be lost. So, the decisions reported in 105 ITR 546,106 ITR 725 and 106 ITR 542 are distinguishable, as held by the Appellate Tribunal in para 7 of its appellate order. The decision of the Appellate Tribunal holding that the respondent/ assessee is a mutual association and the subscriptions received from the members cannot be considered to be income in the hands of the assessee, is clearly justified in law. 4. The Appellate Tribunal also referred to S.44A of the Income Tax Act to re-inverse its conclusion. It was held that the said provision would recognise the position that but for S.44A of the Act, the excess of the expenditure of the nature contemplated which were to have been met out of the subscriptions from the members over the receipts from the members could not be claimed as a deduction from the receipts which would be assessable as business receipts. This will show that the receipts from the members by way of subscription would not be income in the hands of the assessee. It was held that the receipts of a trade association from its members by way of subscriptions or otherwise are receipts that partake the character of mutual receipts. We are of the view that there is no error either in the reasoning or in the conclusion of the Appellate Tribunal, contained in para 9 of its appellate order. 5. No serious argument was advanced to the effect that the respondent/ assessee is not in fact a mutual association. The Appellate Tribunal found that the assessee is a trade association being an association of the oil merchants carrying on a particular trade. Its objects are generally for the promotion and protection of those engaged in coconut oil generally. It renders specific service to its members and non-members for a fee. The assessee/respondent was held to be a mutual association. The said finding is a pure finding of fact. 6. We answer the questions, referred to us, in the following manner: 1. We answer question No.1-- in the affirmative, against the Revenue and in favour of the assessee. 2. We answer question No.2 -- in the affirmative, against the Revenue and in favour of the assessee. 3. We answer question No.3 -- in the affirmative, against the Revenue and in favour of the assessee. 4. We answer question No.4 -- in the affirmative, against the Revenue and in favour of the assessee. We further bold that the Appellate Tribunal rightly stressed the word "otherwise". 5. We answer question No.5 -- in the affirmative, against the Revenue and in favour of the assessee. The above Income Tax Referred Cases are disposed of as above. A copy of this judgment, under the seal of this Court and the signature of the Registrar, will be forwarded to the Tribunal, as required by law.