SECUNDRABAD CLUB ETC. versus C.I.T.-V ETC.

Citation: [2023] 12 S.C.R. 979 · Decided: 17-08-2023 · Supreme Court of India · Bench: B.V. NAGARATHNA · Disposal: Dismissed

Cited by 3 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

[2023] 12 S.C.R. 979 : 2023 INSC 736
979
CASE DETAILS
SECUNDRABAD CLUB ETC.
v.
C.I.T.-V ETC.
(Civil Appeal Nos. 5195-5201 of 2012)
AUGUST 17, 2023
[B. V. NAGARATHNA AND 
PRASHANT KUMAR MISHRA, JJ.]
HEADNOTES
Issues for consideration: Whether the deposit of surplus funds by the 
assessee Clubs by way of bank deposits in various banks is liable to be taxed 
in the hands of the Clubs or, whether, the principle of mutuality would apply 
and the interest earned from the deposits would not be subject to tax under 
the provisions of the Income Tax Act, 1961; and whether the judgment of 
this Court in *Bangalore Club’s case would call for reconsideration in light 
of the order of this Court in **Cawnpore Club’s case.
Income Tax Act, 1961 – s. 2(24) – Deposit of surplus funds by the 
Clubs by way of bank deposits in various banks – Interest earned on 
the fi xed deposits, if liable to be taxed in the hands of the clubs:
Held: Interest income earned on fi xed deposits made in the banks 
by the assessee Clubs has to be treated like any other income from other 
sources within the meaning of s. 2(24) and the principle of mutuality would 
not apply – Conversely, if any income is earned by the Clubs through its 
assets and resources, from persons who are not members of the Clubs, such 
income would also not be covered under the principle of mutuality and 
would be liable to be taxed under the provisions of the Income Tax Act. 
[Para 43 (ii), (v), (vi)]
Income Tax Act, 1961 – *Bangalore Club vs. Commissioner of 
Income Tax’s case wherein it was held that the amount of interest 
earned by the assessee club from the banks would not fall within the 
ambit of the mutuality principle and would be exigible to income tax 
980
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
in the hands of the assessee – Reconsideration of, in view of the earlier 
order of this Court in **Cawnpore Club’s case:
Held: Reasoning given by the Coordinate Bench of this Court 
in *Bangalore Club’s case is just and proper – It would not call for 
reconsideration even when viewed in light of the previous Order of this 
Court in **Cawnpore Club’s case – Judgment in *Bangalore Club is not 
per incuriam although, the earlier Order passed by a Coordinate Bench of 
this Court in the case of **Cawnpore Club was not noticed in *Bangalore 
Club – Principle of mutuality would not apply to interest income earned 
on fi xed deposits made by the appellant Clubs in the banks irrespective 
whether the banks are corporate members of the club or not – Said judgment 
in *Bangalore Club’s case holds the fi eld. [Para 5, 26-28, 39, 41 and 43 
(ii), (iii), (vii)]
Constitution of India – Art. 141 – Declaration of law – Binding 
eff ect of – **Commissioner of Income Tax vs. M/s Cawnpore Club Ltd.’s 
case, if a binding precedent:
Held: Order of this Court in **Cawnpore Club’s case cannot be 
treated as a precedent within the meaning of Art. 141 as the said order does 
not declare any law – Appeals fi led by the revenue as against **Cawnpore 
Club were disposed of without going into the larger question as to whether 
**Cawnpore Club could be taxed on the interest income earned on fi xed 
deposits made by it in the banks, or whether the principle of mutuality 
would apply to the said income – There is no ratio decidendi emanating 
from the said order which would be a binding precedent for subsequent 
cases – **Cawnpore Club’s case ought not to have been taken note of and 
considered by a Co-ordinate Bench of this Court while deciding the case of 
*Bangalore Club – Order passed in **Cawnpore Club binds only the parties 
in those appeals and cannot be understood as a precedent for subsequent 
cases. [Para 11, 26, 27 and 43 (i)]
Constitution of India – Art. 141 – Declaration of law – Binding 
eff ect of – Judgment of the Karnataka High Court in ***Canara Bank’s 
case, if a binding precedent – 
Held: Judgment of the Division Bench of the Karnataka High Court 
in ***Canara Bank must be restricted to apply to the facts of the said case 
981
alone though the special leave petition fi led against the said judgment was 
dismissed by this Court – It cannot be a precedent for subsequent cases – 
Judgment of another Division Bench of the said High Court in the case of 
*Bangalore Club was not brought to the notice of the Division Bench, which 
rendered the judgment in the case of ***Canara Bank – It is the judgment 
of the Division Bench of the said High Court in *Bangalore Club that has 
been sustained by a Coordinate

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