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2018 (3) TMI 209 - AT - Income TaxTaxability of interest received from bank and MSEB - Held that - Interest income received from bank and MSEB to the tune of ₹ 75,63,440/- in the hands of assessee being not governed by the principle of mutuality. Authorized Representative for the assessee fairly pointed out that the said issue is covered against the assessee by the order of Apex Court in Bangalore Club Vs. CIT & Anr. (2013 (1) TMI 343 - SUPREME COURT). - Decided against assessee Claim of deduction under section 57(iii) - activities undertaken by the assessee club - entrance fee receipt - Held that - The entrance fees in assessment year 2003-04 was ₹ 44,88,265/- and in assessment year 2007-08, it had raised to ₹ 1,05,20,178/-. In all these years, expenditure to the extent of 7.5% of income has been allowed in the hands of assessee. During the year, entrance fees at ₹ 2.12 crores and in assessment year 2009-10 to the tune of ₹ 1.34 crores. In view of the above said facts and circumstances, we find no merit in the plea of assessee in this regard and the same is dismissed. Accordingly, we hold that the assessee is not eligible to claim any deduction under section 57(iii) of the Act over and above the deduction earlier allowed by the Tribunal in assessee s own case to the extent of 7.5%. The second issue raised by the assessee is thus, dismissed.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Taxability of interest received from bank and MSEB. 3. Deduction under section 57(iii) of the Income Tax Act from interest income. Issue-wise Detailed Analysis: Condonation of Delay in Filing the Appeal: The appeals were filed by the assessee with a delay of 56 days. The assessee provided an affidavit explaining the delay, attributing it to the resignation of their Manager (Accounts) who was responsible for filing the appeal. The Tribunal found merit in the assessee's explanation and condoned the delay, allowing the appeals to be heard on merits. Taxability of Interest Received from Bank and MSEB: The primary issue was whether the interest income received from bank and MSEB amounting to ?75,63,440 should be treated as part of the mutual receipts of the assessee club and thus not taxable under the principle of mutuality. The Tribunal referred to the Supreme Court decision in Bangalore Club Vs. CIT & Anr., which held that interest income from banks does not fall under the principle of mutuality. Consequently, the Tribunal ruled that the interest income was taxable. Deduction under Section 57(iii) of the Income Tax Act from Interest Income: The assessee argued for the deduction of expenses under section 57(iii) from the interest income. The Tribunal examined the nexus between the expenditure incurred and the income earned. The assessee claimed that the expenses were for the upkeep and maintenance of the club, which indirectly facilitated the earning of interest income. The Tribunal, however, emphasized that for a deduction under section 57(iii), the expenditure must be incurred wholly and exclusively for earning the income. The Tribunal found that the assessee failed to establish a direct nexus between the expenditure incurred and the interest income earned. The Tribunal noted that the assessee had not maintained separate details for the expenses related to earning interest income and had been inconsistent in its claims. The Tribunal upheld the CIT(A)'s decision, allowing only a 7.5% deduction of the interest income as previously accepted in earlier years. Conclusion: The appeals by the assessee were dismissed. The Tribunal held that the interest income was taxable and the assessee was not entitled to any deduction under section 57(iii) beyond the 7.5% previously allowed. The decision applied to both assessment years 2008-09 and 2009-10.
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