Royal connaught Boat club, Pune V. ITO, Pune

ITA 1738/PUN/2012

• Counselvise Citation: 173824514 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 27-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: D Y PANDIT
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1738 TO 1742/PN/2012 (ASSESSMENT YEARS : 2004-05 TO 2007-08 & 2009-10) ROYAL CONNAUGHT BOAT CLUB, 7/6, BOAT CLUB ROAD, PUNE 411001 PAN NO.AAAAR0274N .. APPELLANT VS. ITO, WARD-2(2), PUNE .. RESPONDENT ASSESSEE BY : SHRI D.Y. PANDIT REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 03-12-2014 DATE OF PRONOUNCEMENT : 04-12-2014 ORDER PER R.K. PANDA, AM : THE ABOVE 5 APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE COMMON ORDER DATED 26-04-2012 OF THE CI T(A)-II, PUNE RELATING TO ASSESSMENT YEARS 2004-05 TO 2007-0 8 AND 2009-10 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ALL THESE APPEALS, THEREFO RE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. ITA NO.1738/PN/2012 (A.Y. 2004-05) : 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE AB OVE APPEAL RELATES TO THE VALIDITY OF THE ASSESSMENT PR OCEEDINGS U/S.147/148. 2 2.1 THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING DID NOT PRESS THIS ISSUE FOR WHICH THE LD. DEPARTME NTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE FIRST ISSUE IN THIS APPEAL IS DISMISSED AS NOT PRESSED. 3. THE SECOND ISSUE RAISED BY THE ASSESSEE IN THE A BOVE APPEAL IS REGARDING TAXING THE INTEREST INCOME ON T ERM DEPOSITS, SAVINGS BANK ACCOUNTS AS INCOME FROM OTH ER SOURCES AND NOT ALLOWING THE CLAIM OF PRINCIPLE O F MUTUALITY. 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A MEMBERSHIP CLUB INCORPORATED AS A SOCIETY AND REGIS TERED UNDER THE SOCIETIES REGISTRATION ACT, 1860. ON THE BASIS OF NOTICE ISSUED U/S.148 OF THE I.T. ACT, THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FILED BY IT ON 28-10-2004 MAY BE TREATED AS RETURN OF INCOME IN COMPLIANCE TO THE NO TICE U/S.148 OF THE I.T. ACT. ACCORDINGLY, THE AO ISSUE D NOTICE U/S.143(2) AND 142(1). DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTED THAT IN THE INCOME AND EXP ENDITURE ACCOUNT, THE CLUB HAS SHOWN INCOME FROM OTHER SOURC ES IN THE FORM OF INTEREST ON TERM DEPOSITS, INTEREST ON DEPO SITS, INTEREST ON SAVINGS ACCOUNT AND INTEREST ON INCOME-TAX REFUN DS. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AFORESAID AMOUNT SHOULD NOT BE TAXED AS INCOME FRO M OTHER SOURCES AS THE PRINCIPLE OF MUTUALITY DO NOT APPLY TO THE INTEREST INCOME GENERATED FROM DEPOSITS WITH THE RE SPECTIVE 3 BANKS. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION REPORTE D IN 328 ITR 362 (BOM.) THE AO TAXED THE INTEREST AMOUNT OF RS.21,28,567/- AS INCOME FROM OTHER SOURCES (WRONGL Y TYPED IN THE GROUND AS RS.29,60,649/-.). 4. IN APPEAL THE LD.CIT(A) FOLLOWING VARIOUS DECISI ONS UPHELD THE ACTION OF THE AO. AGGRIEVED WITH SUCH O RDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET R EFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB VS. CIT REPORTED IN 350 ITR 309 SUBM ITTED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSE E. HE HOWEVER SUBMITTED THAT PROPORTIONATE EXPENDITURE FO R EARNING THE INTEREST INCOME SHOULD BE ALLOWED AS DEDUCTION AS PER THE PROVISIONS OF SECTION 57(III). HE ACCORDINGLY SUB MITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO TH E FILE OF THE AO WITH A DIRECTION TO ASCERTAIN THE EXPENDITURE IN CURRED FOR EARNING THE INTEREST INCOME. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F BANGALORE CLUB (SUPRA). 4 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. IT IS NOW SETTLED LAW BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB (SUPRA) THAT THE PRINCIPLE OF MUTUALITY DO NOT APPLY TO INTEREST EAR NED ON DEPOSITS WITH BANKS. THE LD. COUNSEL FOR THE ASSES SEE HAS ALSO CONCEDED THE ABOVE. HOWEVER, IT IS THE CONTEN TION OF THE LD. COUNSEL FOR THE ASSESSEE THAT EXPENDITURE REQUI RED FOR EARNING THE INTEREST INCOME AS PER THE PROVISIONS O F SECTION 57(III) OF THE I.T. ACT SHOULD BE ALLOWED TO THE AS SESSEE. FINDING FORCE IN THE ABOVE SUBMISSION OF THE LD. CO UNSEL FOR THE ASSESSEE, WE RESTORE THE ISSUE TO THE FILE OF T HE AO WITH A DIRECTION TO GIVE OPPORTUNITY TO THE ASSESSEE TO SU BSTANTIATE BEFORE HIM THE EXPENSES THAT IS REQUIRED FOR EARNIN G THE INTEREST INCOME. THE AO SHALL DECIDE THE ISSUE AS PER LAW AND FACTS AFTER GIVING DUE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. SECOND ISSUE RAISED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ITA NOS. 1739 TO 1742/PN/2012 (A.YRS. 2005-06 TO 20 07- 08 AND 2009-10) : 8. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSE E IN THE ABOVE APPEALS. THEREFORE, FOLLOWING THE SAME R EASONING, THE FIRST ISSUE IN ALL THE ABOVE APPEALS ARE DISMIS SED AS NOT PRESSED WHEREAS THE SECOND ISSUE IN ALL THE APPEAL S ARE 5 RESTORED TO THE FILE OF THE AO FOR DETERMINING THE ALLOWABLE EXPENDITURE, IF ANY. 9. IN THE RESULT, ALL THE 5 APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 04-12-2014. SD/- SD/- (R.S.PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 04 TH DECEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE