2010 (11) TMI 25 - HC - Income Tax

Principle of mutuality - On appeal, the CIT(A) directed that 50% of the income should be treated to be exempt on the principle of mutuality. On appeal of the revenue, the Tribunal set aside the direction to treat 50% income to be exempt on the principle of mutuality on the ground that percentage had to be worked out on facts. Tthe matter was remanded to the Assessing Officer to pass a fresh order of assessment after considering the plea of mutuality raised by the assessee. - Held that - assessment has been made by the Assessing Officer in pursuance of earlier order of the Tribunal. Thus, the said order having attained finality, there is no reason to interfere with the impugned order passed by the Tribunal

Summary

Issues:
1. Appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
2. Application of the principle of mutuality in the assessment of income for a school running other activities.
3. Direction by CIT(A) to treat 50% of income as exempt based on the principle of mutuality.
4. Tribunal setting aside the direction and remanding the matter to the Assessing Officer.
5. Consideration of the plea of mutuality by the Assessing Officer in the fresh assessment.
6. Finality of the earlier order of the Tribunal and dismissal of the appeal.

Analysis:

1. The appeal was filed by the revenue under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal. The substantial question of law raised was whether the principle of mutuality applied in the case at hand.

2. The assessee, operating a school along with other activities, initially declared a loss in its return. However, the Assessing Officer made additions and assessed the income differently. The CIT(A) directed that 50% of the income should be considered exempt based on the principle of mutuality.

3. Upon appeal by the revenue, the Tribunal overturned the direction, stating that the percentage of income to be exempt needed to be determined based on facts. The matter was remanded to the Assessing Officer for a fresh assessment, considering the plea of mutuality raised by the assessee.

4. During the proceedings, the counsel for the appellant was unable to establish the status of the earlier Tribunal order. It was mentioned that a fresh assessment had been conducted by the Assessing Officer following the Tribunal's earlier directive, which had attained finality.

5. The Court observed that since the fresh assessment had been completed in accordance with the Tribunal's previous order, there was no valid reason to interfere with the impugned order. Consequently, the raised question was not deemed a substantial question of law.

6. Based on the above considerations, the Court dismissed the appeal, affirming the decision of the Tribunal and upholding the finality of the earlier order in the case.