AMAR SINGH CLUB Vs. UNION OF INDIA

JUDGEMENT

(1.) THE question raised in this case is whether the receipt of interest on FDRs and bank deposits is covered by principle of mutuality and hence is liable to tax even though it does not constitute business activity of the club ? 2004 -05. Grievance raised by the assessee for both assessment years was that the CIT was not justified in upholding the additions of Rs. 2,55,182 for the asst. yr. 2003 -04 and Rs. 2,06,090 and Rs. 25,598 for the asst. yr. 2004 -05 as made by the AO. In the returns of income for both the assessment years the assessee, on the principle of mutuality, had claimed exemption in respect of interest income of Rs. 2,55,182 and Rs. 2,06,090 on bank deposits and FDRs for the asst. yrs. 2003 -04 and 2004 -05. The AO had observed that interest from the banks and excess of receipts over the expenditure being interest was not income arising out of mutual activities/arrangements among the members of the club. Accordingly, he had made additions at the time of completion of assessment. The order of the AO was upheld by the CIT and later by the Tribunal. Aggrieved by the same, this appeal has been preferred.

(2.) CONTENTION raised was that since the assessee was a club, taxability of its income was governed by the principles of mutuality. It was pointed out that judgment of the Supreme Court in CIT vs. Bankipur Club Ltd. (1997) 140 CTR (SC) 102 : (1997) 226 ITR 97 (SC), was wrongly relied upon by the AO for the reason that the question of taxability of interest was never subject -matter of appeal before the apex Court and the issue had been referred to Larger Bench.

(3.) LEARNED counsel appearing for the respondents stated that matter had already been decided by the Tribunal, Amritsar Bench in the case of the assessee, ITA No. 184/Asr/2002 for the asst. yr. 1988 -89, upholding the action of the AO. Learned counsel, therefore, submitted that identical issue raised pertaining to the asst. yr. 1988 -89 as well hence stands concluded against the assessee.