Income earned by a mutual concern from mutual activities is no taxable whereas income earned from non-mutual activities is chargeable to tax.
Step 1 Compute Deficiency =
- Expenditure incurred by such Applicability: Applicable to trade or professional or similar associations, which do not distribute any part of income to its members.
- Exception: Association for the purpose of control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, architecture, computer science, chemistry, material management, town planning.
- Computation:
AssociationLess: Subscription from members
Step 2 Compute total income of the association before making any deduction under this section.
In computation of the total income, effect shall first be given to any other provisions of this act under which any loss or allowance in respect of any earlier assessment year is carried forward.
Compute 50% of total income.
Step 4 Allowable deduction: 50% of such total income as per step 3 or
Amount of deficiency as per step 1
Whichever is less
Step 5 Allowable deficiency as per step 4 shall be first set off against profits or gains of business or profession and any balance left over shall be set off against income under any other head.
