2014 (2) TMI 1244 - AT - Income Tax

Taxability of interest income on principles of mutuality - Held that - The Hon ble jurisdictional High Court in assessee s own case (1975 (12) TMI 6 - ANDHRA PRADESH High Court ) has decided the issue against the assessee by holding that interest income earned from deposits with member banks is taxable in the hands of the assessee. Considering such submissions of the assessee and going through the decision of the Hon ble High Court in assessee s own case we uphold the order of the CIT (A) by dismissing the ground raised by assessee. Set off of operational loss against income assessed - Held that - On a careful reading of sec. 71 of the Act, we are of the view that the aforesaid section allows set off of loss under any head of income, other than capital gains, against income assessable for that assessment year under any other head. Only restriction being, there should not be any income under the head capital gains. Therefore, if the assessee has sustained loss under any head, except capital gains, and the assessee has no income from capital gains during the year, then loss can be set off against income assessable under any other head. However, it appears from the record that assessee has not raised this issue before the first appellate authority. That apart, full facts relating to this issue have not been brought on record. It is also submitted by the learned AR that similar issue pertaining to asst. year 1996-97 and asst. years 1998-99 to 2003-04 are pending before the CIT (A) having been remitted by the Income-tax Appellate Tribunal. Considering the totality of facts and circumstances of the case, we deem it appropriate to remit this issue to the file of CIT (A) for deciding afresh - Decided in favour of assessee for statistical purposes.

Summary

Issues:
- Delay in filing appeals
- Taxability of interest income on principles of mutuality
- Set off of operational loss against income assessed

Delay in filing appeals:
The assessee filed three appeals against a common order of the CIT (A) for assessment years 2005-06 to 2007-08 with a delay of 125 days. The reason for the delay was explained as the General Manager (Finance) failing to take action despite receiving the order. The Tribunal, after hearing both parties, condoned the delay, considering the reasonable cause presented by the assessee.

Taxability of interest income on principles of mutuality:
The assessee, a club assessed as an AOP, received interest income from member banks, which was not offered for tax, citing principles of mutuality. The Assessing Officer, based on a previous High Court decision, held the interest income taxable. The CIT (A) confirmed this decision for all three assessment years. The Tribunal upheld the CIT (A) order, citing the High Court's decision against the assessee.

Set off of operational loss against income assessed:
The assessee claimed a set off of operational loss against the assessed income under sec. 71 of the Act. The Tribunal noted that while sec. 71 allows set off of loss under any head of income, except capital gains, against income assessable under any other head, the issue was not raised before the CIT (A). The Tribunal remitted this issue back to the CIT (A) for a fresh decision, ensuring a reasonable opportunity for the assessee to be heard.

Conclusion:
The appeals were partly allowed for statistical purposes, with ground No. 2 dismissed, and ground No. 3 remitted back to the CIT (A) for reconsideration. The Tribunal's decision provided clarity on the delay in filing appeals, taxability of interest income based on mutuality principles, and the set off of operational loss against assessed income, ensuring a fair and thorough examination of each issue involved.