The Doctrine of Mutuality

My Lord, What is the Doctrine of Mutuality?

The said doctrine… is predicated on the principle enunciated in Styles v. New York Life Insurance Company, (1889) 2 TC 460, 471 (HL) by Lord Watson in the following words:

When a number of individuals agree to contribute funds for a common purpose, such as the payment of annuities or of capital sums, to some or all of them, on the occurrence of events certain or uncertain, and stipulate that their contributions, so far as not required for that purpose, shall be repaid to them, I cannot conceive why they should be regarded as traders, or why contributions returned to them should be regarded as profits.”

This doctrine was subsequently explained in IR v. Cornish Mutual Assurance Co. Ltd., [1926] 12 TC 841 [HL]… and examined by this Court in CIT v. Royal Western India Turf Club Ltd., AIR 1954 SC 85 and then in CIT v. Bankipur Club Ltd., (1997) 5 SCC 394, followed by Chelmsford Club v. CIT, (2000) 3 SCC 214.”

My Lord, Is the Doctrine of Mutuality applicable to an Incorporated Club [receiving funds from its members and using it to provide certain privileges to the same members] after the 46th Amendment to Article 366 (29A) of the Constitution?

The matter should be referred to a larger bench.”

– Hon’ble Justice Dipak Misra, State of West Bengal v. Calcutta Club, [Civil Appeal No. 4184 of 2009].

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