Assessment of trust income from bank interest and refund interest remanded to AO for de novo assessment; mutuality plea to be considered

ITAT remanded assessment of a trust concerning interest on bank fixed deposits and interest on income-tax refunds to the Assessing Officer for de novo assessment because the lead assessment year remains pending following an earlier Tribunal remand; the remand prevents detailed adjudication at this stage. The Assessing Officer is directed to determine taxable income afresh and to consider, as an alternate plea, the assessees claim under the principle of mutuality while taking into account the position the assessee adopts before the AO.

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Issues: Whether the assessee, registered under section 12A and claiming exemption under sections 11 and 12 of the Income-tax Act, 1961, is a charitable institution not hit by the proviso to section 2(15) (w.e.f. 01.04.2009) and whether interest income on fixed deposits and refund interest is taxable or exempt (including consideration of principles of mutuality); and whether the matter should be remitted for fresh adjudication.

Analysis: The dispute arises from the Assessing Officers determination that the assessee was a mutual association and that interest income from fixed deposits and refund interest, being derived from non-members, was taxable. The tribunal noted that registration under section 12A has not been withdrawn and that the assessment in the year under appeal is linked to the lead year which has been remanded to the Assessing Officer by the Tribunal in the assessees own case. Given that the lead year is pending fresh adjudication following remand, it is appropriate to remit the present year to the Assessing Officer for de novo consideration. The Assessing Officer is directed to examine, in a speaking order, the claim of the assessee to charitable status and exemption under sections 11 and 12, and alternatively to consider the plea based on principles of mutuality, allowing the assessee a reasonable opportunity of being heard before passing a fresh order.

Conclusion: Appeal allowed in favour of the assessee; the matter is remitted to the Assessing Officer for de novo assessment in accordance with law with directions to pass a speaking order after giving the assessee a reasonable opportunity of being heard.

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