2015 (9) TMI 1717 - AT - Income Tax

Assessment of trust - Principle of mutuality - amount had received as non-occupancy charges by the society from members and not from the occupants - principle of mutuality‟ to the non-occupancy charges received by the cooperative housing society - HELD THAT - Similar issue was adjudicated by the Tribunal in the assessee‟s own case for the AY 2003-2004 - After hearing both the parties and on perusal of the said order of the Tribunal (supra), find vide paras 17 and 18, the assessee was given relief on account of non-occupancy charges received by the assessee in that AY 2003-04. Considering the commonality of the issue and binding nature of the coordinate Bench decision, ground no.1 raised by the Revenue is dismissed and to that extent the order of the CIT (A) is fair and reasonable and it does not call for any interference. Principle of mutuality to the interest amount received from the bank on the FDs - HELD THAT - Heard both the parties and perused the orders of the Revenue Authorities as well as the cited judgment of the Hon‟ble Supreme Court in the case of Bangalore Club 2013 (1) TMI 343 - SUPREME COURT - On perusal of the said judgment of the Apex Court, we find that the said judgment is relevant in this regard, wherein it was held that The principle of mutuality relates to the notion that a person cannot make a profit from himself. The concept of mutuality has been extended to defined groups of people who contribute to a common fund, controlled by the group, for a common benefit. Any amount surplus to that needed to pursue the common purpose is said to be simply an increase of the common fund and as such neither considered income nor taxable . Applying the above ratio to the factual matrix of the present case, there is no dispute on the fact of receiving interest from the Bank of India‟ and the said bank is not a member of the club , so that the principle of mutuality‟ does not apply. Therefore, considering the same, the decision taken by the CIT (A) in this regard requires to be reversed - Ground no.2 raised by the Revenue is allowed.

Summary

Issues:
1. Whether the deletion of addition of non-occupancy charges by the CIT (A) under the principle of mutuality is justified.
2. Whether the deletion of addition of FD interest by the CIT (A) under the principle of mutuality is justified.

Analysis:

Issue 1:
The appeal by the Revenue challenged the CIT (A)'s deletion of the addition of non-occupancy charges and FD interest for the assessment year 2010-2011. The assessed income included disallowances of non-occupation charges and interest on Fixed Deposits. The CIT (A) deleted these additions after considering the submissions made by the assessee. The Revenue contended that the non-occupancy charges received by the cooperative housing society were not covered under the principle of mutuality. However, the Tribunal referred to a previous decision in the assessee's case for AY 2003-2004 where relief was granted on similar grounds. The Tribunal dismissed the Revenue's ground related to non-occupancy charges, stating that the order of the CIT (A) was fair and reasonable based on the precedent.

Issue 2:
Regarding the deletion of FD interest under the principle of mutuality, the CIT (A) relied on a coordinate Bench decision in the case of Bombay Gymkhana Ltd vs. ITO. The Revenue appealed this decision, citing the judgment of the Supreme Court in the case of Bangalore Club. The Revenue argued that the interest received from the bank on FDs was outside the scope of mutuality. The Tribunal analyzed the Supreme Court judgment, emphasizing that the concept of mutuality involves a common fund for a common benefit, and any surplus is not considered income. The Tribunal concluded that since the bank was not a member of the club, the principle of mutuality did not apply to the interest received. Therefore, the Tribunal allowed the Revenue's appeal on this ground.

In conclusion, the Tribunal partly allowed the Revenue's appeal, reversing the CIT (A)'s decision on the deletion of FD interest. The judgment was pronounced on 30th September 2015 by Shri D. Karunakara Rao, Accountant Member.