| The Tax Publishers2019 TaxPub(DT) 1649 (Del-Trib) INCOME TAX ACT, 1961
Section 4
As apparet, Bank in which money was deposited in the form of FDR was neither a member of assessee association nor was in any way participating in activity of the association nor being benefited by any of the activities. Interest income on said deposits had been utilised purely and exclusively for the benefit of members, i.e., maintenance and upkeep of the resdiential flats and maintenance of the area and common services hence, all the ingredients of applicability of mutuality existed, and accordingly, no such income could be taxed in view of the principle of mutuality.
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Income - Mutuality principle - Interest earned by charitable association on deposits of surplus funds with bank -
Assessee, a charitable association was engaged in providing housing to serving and retired employees of Indian Railways and PSUs established by the Ministry of Railways on no profit and no loss basis through the Indian Railway Welfare Organisation (IRWO). It was also engaged in providing common services such as general maintenance and upkeep of housing society, sanitation, security, general common lighting, working of lifts, water supply, etc., which were in the nature of public services. It claimed exemption under section 11. AO taxed interest on investment of surplus funds with bank as 'income from other sources' on the ground that same was not being utilised for any charitable activity albeit for the benefit of members.Held: As apparent, bank in which money was deposited in the form of FDR was neither a member of assessee association nor was in any way participating in activity of the association nor being benefited by any of activities. Interest income on said deposits had been utilised purely and exclusively for the benefit of members, i.e., maintenance and upkeep of resdiential flats and maintenance of the area and common services hence, all the ingredients of applicability of mutuality existed, and accordingly, no such income could be taxed in view of the principle of mutuality.
Distinguished:Bangalore Club v. CIT (2013) 350 ITR 509 (SC) : 2013 TaxPub(DT) 434 (SC).
REFERRED : All India Oriental Bank of Commerce Welfare Society (2003) 184 CTR 274 (Del) : 2003 TaxPub(DT) 0914 (Del-HC) and CIT v. Delhi Gymkhana Club Ltd. (2011) 339 ITR 525 (Del) : 2011 TaxPub(DT) 707 (Del-HC) and CIT v. Talangang Co-operative Group Housing Society Ltd. (2010) 195 Taxman 110 (Del) : 2010 TaxPyb(DT) 2074 (Del-HC).
FAVOUR : In assessee's favour.
A.Y. :
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