2013 (9) TMI 1293 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of interest on fixed deposits received from banks.
2. Taxability of interest received on deposits with BESCOM.
3. Taxability of income from diesel generator operation.
4. Taxability of interest for late payment received from members.
5. Taxability of rent received from a private company.
6. Taxability of charges for banner/display received from members.
7. Taxability of rent charges for occupancy of common area from members.

Summary:

1. Interest on Fixed Deposits:
The issue of taxability of interest on fixed deposits received from banks, which are members of the Assessee, was decided against the Assessee based on the Supreme Court decision in Bangalore Club v. CIT. The Court held that interest earned on fixed deposits with banks, even if they are members, does not fall within the principle of mutuality and is thus taxable.

2. Interest on Deposits with BESCOM:
The Assessee argued that interest received from BESCOM should not be treated as income because it is adjusted against electricity consumption charges. The Tribunal allowed the Assessee's plea to set off electricity expenses against the interest received from BESCOM, recognizing the direct nexus between the interest receipt and the expenditure. However, the principle of mutuality was not accepted for non-taxability of this interest.

3. Income from Diesel Generator Operation:
The Assessee did not press the ground regarding the receipts from diesel generator operation, and it was dismissed as not pressed.

4. Interest for Late Payment from Members:
The Tribunal held that the interest on late payment of subscription charges from members falls within the principle of mutuality and is not taxable. It distinguished this from the Supreme Court decision in Bangalore Club, noting that the interest on late payment is akin to subscription charges, which are not taxable.

5. Rent from a Private Company:
The rent received from ICON Hospitality Pvt. Ltd. was held to be taxable. The Tribunal noted that ICON was not a member of the Assessee at the time of the MoU and that the payments were for the use of common areas not related to the mutual objectives of the Assessee. The principle of mutuality did not apply as there was no identity of contributors and participants.

6. Charges for Banner/Display from Members:
The Tribunal held that charges for banners and display of name boards collected from members are not taxable, as they fall within the principle of mutuality. These charges are for the maintenance and convenient enjoyment of the complex, aligning with the mutual objectives of the Assessee.

7. Rent Charges for Occupancy of Common Area from Members:
Similarly, rent charges for the occupancy of common areas from members were held to be non-taxable under the principle of mutuality. These charges are for the benefit of the members and are used for the purposes for which the members contribute.

Conclusion:
The appeals were partly allowed, with certain incomes being held taxable and others exempt under the principle of mutuality.