AI Drafter 
TaxTMI 
TaxTMI 
2021 (10) TMI 1290
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.... CIT(A)-6/15-16 -do 7 1395/Hyd/2015 2000-01 CIT(A)-6, Hyderabad; 30.09.2015; No.0698A/2011-12 / CIT(A)-6/15-16 -do 8 1396/Hyd/2015 2001-02 CIT(A)-6, Hyderabad; 30.09.2015; No.0696A/2011-12 / CIT(A)-6/15-16 -do 9 1397/Hyd/2015 2002-03 CIT(A)-VI, Hyderabad; 27.02.2013; No.0697/2011-12 / CIT(A)-VI 143(3) rws 147 of Income Tax Act, 1961. 10 1398/Hyd/2015 2003-04 CIT(A)-6, Hyderabad; 30.09.2015; No.0692A/2011-12 / CIT(A)-6/15-16 -do 11 1399/Hyd/2015 2009-10 CIT(A)-6, Hyderabad; 30.09.2015; No.0595/2014-15/ CIT(A)-6/15-16 -do 12 1400/Hyd/2015 2010-11 CIT(A)-6, Hyderabad; 30.09.2015; No.0175A/2012-13 / CIT(A)-VI/15-16 143(3) rws 147 of Income Tax Act, 1961. 13 940/Hyd/2015 2011-12 CIT(A)-4, Hyderabad; 27.02.2015; 0533/2014-15/ITO, Wd.10(2)/CIT(A)-4 / Hyd/2014- 15 143(3) of Income Tax Act, 1961. 14 941/Hyd/2015 2012-13 CIT(A)-4, Hyderabad; 27.02.2015; 0532/2014-15/ITO, Wd.10(2)/CIT(A)-4 / Hyd/2014- 15 -do- 15 1103/Hyd/2018 2014-15 CIT(A)-6, Hyderabad; 16.02.2018; 0416/2016-17/A3/ CIT(A)-6 -do- 16 1696/Hyd/2018 2015-16 CIT(A)-6, Hyderabad; 04.05.2018; 10251/2017-18/ B2/ CI....
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....account section 71 of the Act in light of facts on records before denying the impugned set off allowing set off of loss pertaining to mutuality deficit. The assessee quoted (2012) 19 taxmann.com 141 (Bom) CIT Vs. Galaxy Surfactants Ltd. that such a loss of 100% "EOU" entitled for section 10B deduction is eligible for set off against profit of other units under the same head. Learned counsel next cited CIT(Exemption) Vs. Dawat E. Hadiyah ITA No.741 & 755/2016 dt.3.12.2018; CIT Vs. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bom) affirmed in (2018) 89 taxman.com 127 (SC); CIT Vs. Rajasthan & Gujarati Charitable Trust that an income derived from trust's activities has to be computed as per normal commercial principles only. Meaning thereby that set off of expenses against income of subsequent year's is duly allowable. Learned counsel lastly referred to DIT (Exemption) Vs. M/s. Najam Baug Trust ITA No.69/2013 dt.14.01.2015 reiterating the very proposition. Mr. Firose accordingly closed his arguments that the clinching issue herein as to whether section 71 is applicable regarding set off assessee's loss / deficit in mutuality against its interest incom....
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....ce satisfying the foregoing three ingredients. It is at this stage that we take note of the clinching statutory expressions employed in section 71 of the Act providing for "Set Off of loss from one head against income from another". We deem it appropriate to observe that the legislative expression "head" of income must be taken as any of the five heads of income provided u/s. 14 of the Act i.e. salary, income from house property, profits and gains of business or profession, capital gains and income from other sources; respectively. We thus are of the opinion that once the assessee's impugned deficit arising from mutuality account is neither covered in any of the said heads as well nor u/s. 2(24)(vii) defining "income" in the very account, section 71 of the Act would not apply in isolation. We further deem it proper to refer to hon'ble apex court's recent larger bench decision in Commissioner of Customs Vs. Dilip Kumar & Co. (2018) 9 SCC 1 (SC) that provisions of a taxing statutes have to be strictly construed only. We next quote CIT Vs. Hariprasad and Co. P. Ltd. (1975) 99 ITR 118 (SC) that a loss arising from a head of income not chargeable to tax is not eligible to b....
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.... 11. Lastly comes the learned counsel's argument that the tribunal had already accepted applicability of section 71 of the Act qua set off of its loss claim in remand directions (supra), we hold that the CIT(A) had been directed to consider the assessee's going by the corresponding statutory provisions in light of relevant facts rather than allowing the same on merits. We further make it clear that the assessee had raised the impugned argument for the first time before the learned co-ordinate bench wherein it thought it proper to redirect the same back to the CIT(A) for necessary verification and adjudication. We thus decline the assessee's instant solitary substantive grievance as well as the main "lead" appeal ITA No.1388/Hyd/2015. Same order to follow in assessee's remaining three appeals 1389 & 1390/Hyd/2015 (heard on 22.09.2021) since learned counsel fairly stated at Bar for all these four cases raise identical substantive grounds. 12. Next comes the assessee's appeals ITA Nos.1392 to 1398/Hyd/2015 (heard on 29.09.2021) wherein learned counsel has made a similar statement that our foregoing adjudication squarely covers the outcome therein. These seven appe....
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....====== Document 1 01.0 The assessee is a club. It earned income of Rs.41,15,158/- by way of interest on investments with banks and claimed the same as non-taxable on the ground that the banks were its corporate members and that any income earned from members was exempt from taxation on the ground of mutuality. The Assessing Officer rejected the claim, holding that, even though the banks were corporate members, the interest earned by the assessee out of the deposits made with those banks in course of their regular business fell out of the circle of mutuality and, hence was chargeable to tax. While doing so, he drew strength from the decision of the Hon'ble AP High Court in the assessee's own case. The addition was confirmed in appeal by the CIT(A) as well as the ITAT. it had operational loss and in Before the ITAT, however, it took a newhich case the income by way of interest operational loss should be allowed आयà¥à¤•à¥à¤¤ ssioner oce Tax Tat o be charged to tax, such the interest income could Document 2 be subjected to tax. The Hon'ble ITAT (ITA No 1327-1329/Hyd/2013) considered the plea an....
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....ispute about taxability of income 'I'. The assessee claimed the income 'II' as exempt but the same has been held to be chargeable to tax (this issue has already been dealt with in the decision of the Hon'ble ITAT). The issue to be decided how is the operational deficit at 'III' eligible to be set off against the income at 'I' and 'II' above. For deciding this issue, it is necessary to first consider the nature of the said deficit. 04.0 It is settled law that any surplus arising out of activity based on mutuality is not chargeable to tax. The underlying principle is that a person cannot earn income from himself. The same principle applies at the group level also provided, however that there is complete identity of the contributors of the funds and consumers of the goods/services. This issue has been discussed by the Hon'ble Supreme Court in the case of CIT vs Bankipur Club Ltd. (226 ITR 97) which was again reaffirmed in Chelmsford Club vs CIT (243 ITR 89) as below: "Under the Income-tax Act, what is taxed is the income, profits or gains' earned or 'arising', 'accruing to a 'person'. Where a number of persons combine together and contri....
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....o be taxable. When that happened, it came up with the innovative idea that the operational deficit arising from the activities based on mutuality should also be excluded from the circle of mutuality and should effectively be treated as a 'loss' for purposes of income tax. This is another example of a club trying to avoid payment of tax on its income by resorting to subterfuge. 05.0 It is seen that the assessee collect substantial sum by way of admission of new persons as members. Apart from that, it also earns substantial income outside the circle of mutuality. It is due to these revenue streams that it can afford to subsidise the price of goods/services offered to the members and still manage to have net cash surplus year after year. Its net asset value which stood at Rs.3.10 crores in A.Y. 1996-97 swelled to Rs.38.57 crores in A.Y. 2010- 11. Considering this healthy cash flow, it may even offer its goods/services to the members free of cost. The 'operational deficit' within the circle of mutuality is really a consumption expenditure. Personal consumption expenditure is not allowable as deduction while computing total income under th....