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Mutuality principle: surplus from member transactions is:
ATaxable above threshold
BAlways taxable
CNot chargeable (mutuality)
DConcessional rate
Answer & Solution
Correct answer: C. Not chargeable (mutuality)
1. Doctrine of mutuality: person cannot derive income from himself.
2. Three tests: identity between contributors and participants, no profit motive, common fund managed for members.
3. Income from non-members (investments, sales to outsiders) is taxable normally.
_Source: ICAI BoS CA Final Paper 7, Ch 9 "Assessment of Various Entities"_
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