2016 (4) TMI 530

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....rt, 'the Tribunal') pertaining to assessment years 1997-1998 and 1998-1999. M. A. No. 541 of 2007 arises out of assessment year 1998-1999 whereas M.A. No. 542 of 2007 arises out of assessment year 1997-1998. 2. This court has formulated following substantial questions of law arise for consideration:- (i) Whether the Tribunal is justified in following the judgements of Karnataka High Court and Gujarat High Court reported in 287 ITR page 263 and 211 ITR Page 379 for holding that interest income received by the club from fixed deposit in bank is not income from mutual activity? (ii) Whether on the facts and in the circumstances of the case the Tribunal is justified in not considering the submission that interest cannot be trea....

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....segregated from other batch of cases. In the seven cases, the income was derived from the property let out and also interest received from F.D.R. etc.. It is not disputed that income from property is taxable only under the head Income from House property. The amount claimed to be exempted was from income received from the property let out and the interest by way of FDR etc. The group of seven cases falling in Group -E was decided by separate order reported as (2004) 140 Taxman 378 - Commissioner of Income tax Vs. Cawnpore Club Ltd. The order reads as under:- "1. One of the questions which the High Court had decided in other cases relating to the same assessee was that the doctrine of mutuality applied and, therefore, the income earned by....

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....b to invest and deal with moneys of the club not immediately required in such manner as may from time to time be determined by them. Under this clause, the investment need not be confined to investment by way of fixed deposits with banks. It can take any other form or shape, such as investment in shares, real estate, etc. When income is derived from such investment, whether by way of interest, dividend or rent, it is derived from a third party and is not by way of contribution from the members of the club. .....9. It was lastly argued by counsel for the assessee that the investment of the unutilized surplus in fixed deposits was merely incidental to the main objects of the club and, therefore, the income from interest received from the b....