Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 58 - AT - Income TaxExemption u/s 11 - principle of mutuality - whether profits are not income u/s 2(24) - society itself has declared its taxable income u/s 2(24) of the Act on account of bank interest etc. - Held that:- This issue is squarely covered against the assessee by the decision in case of Bangalore Club Vs. CIT [2013 (1) TMI 343 - SUPREME COURT], wherein, it has been held that the interest earned by the assessee club on certain fixed deposits kept with certain banks who are also corporate members of the assessee is not covered by the mutuality principles and would therefore, be chargeable to tax in the hands of the assessee. Enhanced compensation - taxable only when it attained finality irrespective of the remedial provision included in the income w.e.f 01.04.2004 u/s 45(5)(c) - Held that:- This issue has already been decided in case of CIT Vs. Ghanashyam (HUF)[2009 (7) TMI 12 - SUPREME COURT] wherein, it has been held that the enhanced compensation is liable to be taxed u/s 45(5) in the year of receipt and interest is also chargeable to tax in the year of receipt as interest on excess compensation u/s 28 of the land acquisition Act form part of the compensation only which is chargeable to tax u/s 45(5) in the year of receipt. However for the purposes of quantification the ld AO is directed to verify the exact amount of interest and compensation received. Credit of the tax and TDS - Held that:- Bank interest is chargeable to tax in the hands of the assessee as it is not covered by the Principles of mutuality relying on the decision of the Hon'ble Supreme Court. With respect to the chargeability of the compensation and interest thereon we have held that it is chargeable to tax in the year in which it is received. Therefore, as we have already held that, there is an income, which is chargeable to tax in the hands of the assessee; this appeal of the revenue becomes infractuous in view of the chargeability of enhanced compensation of ₹ 8.73 crores and bank interest also. In view of this the amount paid by the assessee u/s 140A and the amount of TDS is required to be adjusted against the tax liability of the assessee. Therefore, we direct the ld AO to recompute the tax liability for assessment year 2003-04 after granting credit of the tax and TDS. Changeability of tax on the bank interest - Held that:- Income by way of interest received on compensation or on enhanced compensation referred to any clause (b) of section 145A is chargeable to tax as income under the head income from other sources. Section 145A (b) the interest received by the assessee shall be deemed to be the income of the year in which it is received. Accordingly, we allow ground Nos. 1 and 2 of the appeal of the revenue holding that the compensation and interest thereon is chargeable to tax in the year in which it is received. However for the purposes of quantification the ld AO is directed to verify the exact amount of interest and compensation received . Inadmissible expenditure - Held that:- According to provision of section 57(iii), the deduction of any other expenditure laid out of expenditure wholly and exclusively for the purpose of making or earning such income is available. In the present case the expenditure are OD interest, audit expenditure, salary expenditure, legal expenditure, meeting expenditure etc. They are not capital expenditure in nature. Legal fees are incurred for the purpose of the compensation earned. In view of the above, we do not find any infirmity in the order of the ld CIT (A) in allowing the claim of expenditure of ₹ 5041804/- u/s 57(iii) of the Act. Taxation of enhanced compensation and interest thereon - Held that:- This issue is squarely covered against the assessee by the decision of the Hon'ble Supreme Court in case of Bangalore Club (supra) therefore; we hold that bank interest of ₹ 5025433/- earned by the assessee is chargeable to tax. Therefore, out of total interest income the bank interest is to be fully charged to tax without deduction of expenditure u/s 57(iv) of the Act. In view of this ground No. 2, 3, 5 and 6 of the appeal of the assessee are decided accordingly.
|