2009 (12) TMI 106 - HC - Income Tax

Club Concept of mutuality interest income of a club - Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the interest income of the appellant club was not exempt on the principles of mutuality? - Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the miscellaneous income viz., hall charges, guest charges, mike charges, etc., of the appellant club was not exempt on the principles of mutuality? held that matter remanded back in view of decisions in the matter of MADRAS GYMKHANA CLUB VS. DEPUTY COMMISSIONER OF INCOME-TAX 2009 -TMI - 34308 - MADRAS HIGH COURT and COMMISSIONER OF INCOME TAX VS. BANKIPURCLUB LIMITED 2008 -TMI - 5595 - SUPREME Court

Summary

Issues:
1. Exemption of interest income of the appellant club on the principles of mutuality.
2. Exemption of miscellaneous income of the appellant club on the principles of mutuality.

Analysis:

Issue 1: Exemption of Interest Income on the Principles of Mutuality
The case involved appeals filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding the taxability of interest income and miscellaneous income of the appellant club. The appellant club, a company registered under Section 25 of the Companies Act, 1956, claimed exemption under section 11 for interest income from fixed deposits and miscellaneous income received from members. The assessing officer assessed the interest income and miscellaneous income to tax, stating that the concept of mutuality did not apply as these amounts were received from non-members. The Commissioner of Income Tax (Appeals) dismissed the appeals, leading to the filing of appeals before the Income Tax Appellate Tribunal. The Tribunal also dismissed the appeals, prompting the present appeals before the High Court.

Issue 2: Exemption of Miscellaneous Income on the Principles of Mutuality
The appellant club contended that the miscellaneous income, including charges for hall, guest, mike, and telephone calls, should be exempt from tax under the principles of mutuality. The Tribunal's order lacked findings on this specific issue. The counsel for the appellant referred to a Supreme Court judgment in the case of COMMISSIONER OF INCOME TAX VS. BANKIPURCLUB LIMITED, highlighting the need for the Tribunal to reconsider the issue in light of this judgment. The High Court agreed with the appellant's submission and remitted the matter back to the Tribunal for a fresh consideration based on the Supreme Court's ruling.

In conclusion, the High Court upheld the Tribunal's decision regarding the interest income of the appellant club, ruling against the assessee and in favor of the revenue. However, the Court remitted the issue of miscellaneous income back to the Tribunal for further examination in accordance with the Supreme Court's directive. Therefore, the High Court disposed of some appeals while dismissing one, providing clarity on the tax treatment of different types of income for mutual concerns like the appellant club.