Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri Laliet Kumar & Shri Manjunatha, G.
Per Laliet Kumar, J.M These appeals filed by the assessee are directed against the common order dated 24/09/2023 of the learned CIT (A)-NFAC Delhi, relating to A.Ys.2017-18 & 2018-19 respectively. Since the issues raised in these two appeals are common, for the
Page 1 of 7 sake of convenience, these were heard together and are being disposed of by this common order.
The brief facts of the case are that the assessee society filed its return of income for the A.Y.2017-18 on 30-03- 2018 claiming the status as that of Mutual benefit society, declaring income at NIL. The return was processed U/s.143(1) by CPC. Subsequently, the case was selected for scrutiny notice u/s.143(2) of the Income Tax Act, 1961 dated 29-08-2018 was issued and duly served on the assessee. Thereafter, notices 142(1) along with questionnaire were issued and assessee furnished the information called for to which the assessee filed requisite details. The Assessing Officer observed from the return of income filed for A.Y.2017-18 that during the year under consideration, the assessee has shown interest on FDRs with SBH at Rs.90,95,519/- as ‘income from other sources’ and claimed the entire amount as expenses/deduction u/s.57 of the Income Tax Act, thereby declaring NIL income. The Assessing Officer rejected contentions of the assessee since the assessee mainly contended that the funds were kept with non-member for the benefit of members only as the appeals are pending before Hon’ble Supreme Court and no developmental activity started. However, the basic and distinctive feature of principles of mutuality is all participants must be contributors to the common fund i.e., what is returned to members should be contributed by a member only. The Assessing Officer further observed that the nature of the transaction
Page 2 of 7 between the assessee and the banks would disqualify the application of the principle of mutuality. The basic principle for applying mutuality concept is that there must be a complete identity between the contributors and participators. According to the Assessing Officer, in the present case, the interest income was earned from bank which was non-member of the assessee society will not fulfill this basic principle because the arrangement lacks a complete identity between contributors and participators. With the funds of the club, member banks engaged in commercial operations with third parties outside of the mutuality and consequently, violating the one to one identity between the contributors and participators. Thus, the Assessing Officer completed the assessment and disallowed an amount of Rs. 90,95,519/- on the FDRs.
In this regard, the learned AR has moved an application for adjournments of the appeals. We do not find any reason to adjourn the cases as the issues involved in these appeals are squarely covered by the decision of the Hon'ble Supreme Court in the case of Bangalore Club vs. CIT (2000) 243 ITR 89 (SC) as well as the decision of the Hon'ble Supreme Court in the case of Secunderabad Club vs. CIT. With regard to the Ground No.1, the learned DR has brought to our notice the order passed by the learned CIT (A) whereby the learned CIT (A) disallowed the interest earned by the assessee on account of deposits made in the nationalized Banks. It was the contention of Page 3 of 7 the Assessing Officer/learned CIT (A) that the principle of mutuality is not applicable once the money has been deposited in the Bank as the bank is not a member of the assessee society.
We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. We find that the issue involved in these appeals are squarely covered by the decision of the Hon'ble Supreme Court in the case of Bangalore Club vs. CIT and Secunderabad Club vs. CIT (Supra). Respectfully following the decision of the Hon'ble Supreme Court, we reject the grounds taken by the assessee.
The next ground raised by the assessee is with respect to allowing expenditure incurred by the assessee. In this regard the Assessing Officer has held as under:
The learned CIT (A) held as under:
We have heard the rival contentions and perused the material available on record. As there was no able assistance from the assessee as the assessee chose to be remain absent in the matter. We are of the considered view that the expenditure debited by the assessee are normal administrative and general expenses incurred by the assessee for day-to-day maintenance of the Society, therefore, we are of the considered opinion the expenditure are allowable under the Act. In the light of the above, we allow the grounds taken by the assessee. Furthermore, grant of stay by the Hon'ble High Court is no ground to reject the claim
Page 6 of 7 of the assessee, more particularly when the expenditure were incurred for and on behalf of the assessee for achievement of its objects. Facts of the appeals are identical; hence both the appeals are allowed for statistical purposes.
In the result, appeals filed by the assessee are allowed for statistical purposes.