Interest on Fixed Deposits by Apartment Association Taxable? ITAT sets aside ₹8.06 Lakh Addition for Failure to Examine Mutuality Claim [Read Order]

The Income Tax Appellate Tribunal (ITAT) Lucknow Bench quashed the addition of ₹8.06 lakh to the interest income earned from fixed deposits and directed that the case be sent back to the AO for re-assessment after giving appropriate chances to the assessee.

The assessee being an Apartment Owners Welfare and Maintenance Association, filed the return showing zero income for the Assessment Year 2017-18. But the Assesseeing Officer [AO] considered their total income to be ₹8,06,784,as per the assessment order passed for the tax on interest earned on bank deposits on account of fixed deposits and denied the benefit of the principle of mutuality.

It was submitted on behalf of the assessee that the reliance on Supreme Court judgments such as Bangalore Club and Secunderabad Club cases was improper since the facts of their case were different.

Further, they stated that they were not given an adequate chance to prove how their case differs from these judgments.On the contrary, the Department favored the orders made by the lower authorities.

The Tribunal comprising Anadee Nath Mishra [Accountant Member] observed that neither the AO nor the Commissioner of Income Tax [Appeal] CIT(A) had adequately examined the factual distinctions claimed by the assessee.

It noted that the assessee was not provided sufficient opportunity to establish that its case fell outside the scope of the Supreme Court rulings on mutuality and bank interest. Considering the facts and circumstances, the Tribunal held that the matter required fresh examination.

Accordingly, it set aside the appellate order and restored the issue to the file of the AO for de novo assessment in accordance with law after granting reasonable opportunity of being heard.

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