9911796707
TMI Blog2019 (5) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Hyd/2018 for AY 2014-15 2. Brief facts of the case are, the assessee is a mutually aided co-operative society, with the main object, being construction of residential flats for its members i.e. cine workers of Telugu Film Industry. The assessee society filed its return of income for the AY 2014-15 on 24.09.2014 declaring a taxable income of Rs. 49,960/-. The case was selected for scrutiny and the assessment was completed u/s. 143(3) of the Act vide order dated 19.08.2016, determining the taxable income of the assessee at Rs. 18,55,900/-. While doing so, the AO assessed a sum of Rs. 16,86,217/-, being the interest on FDRs of Rs. 14,40,506/- and interest on SB A/c of Rs. 2,45,711/-, as income from other sources. 2.1 During the course of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee preferred an appeal before the CIT(A) and contended that the principle of mutuality is applicable even in respect of interest received on FDRs parked with banks. Alternatively, it was requested to allow set off of expenditure debited to the P&L A/c against 'income from other sources'. 4. The CIT(A) after considering the submissions of the assessee, relying on the decision of Jurisdictional High court in the case of CIT Vs. Secunderabad Club and the decision of Hon'ble Supreme Court in the case of Bangalore Club Vs. CIT, dismissed the assessee's ground. 4.1 As regards the set off of operational loss against income from other sources, the CIT(A) relying on various case law, held as under: "1) The activities of the assessee wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and, therefore, it is not allowed to be set off against income computed under Other Sources. Thus, the grounds of appeal raised by the assessee are dismissed and the addition made by the AO is confirmed." 5. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: "1. The order of the Ld. Commissioner of Income Tax (Appeals)-12 Hyderabad ('CIT(A)') in sustaining the addition of Rs. 14,40,586/- being the interest received from Temporary Fixed deposits with banks and Rs. 2,45,711 on Savings Bank account, is unsustainable, both in law and on facts. 2. The CIT(A) failed to note that the loss computed, being administration and other expenditure was exigible to be set off ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ld. CIT(A) brought out distinction between mutual and non-mutual transactions in his order and he relied on the orders of revenue authorities. 8. Considered the rival submissions and perused the material on record. We noticed that assessee is a registered cooperative society under Andhra Pradesh Cooperative Societies Act, 1964 with the primary object to build houses for its members and to carry other objects like trade of building, housing, selling, hiring, letting and developing land in accordance with cooperative society principles and to give loans to members for construction of new dwelling houses. The members of the society are cine workers, who are contributors to the capital of the society and who do not have any house in city in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual association. It collects subscriptions from its members to use the club facilities. It deposits the excess funds with its corporate members of club i.e. banks. It claimed exempt from tax as the interest was earned from its members under mutuality concept. But in the given case, the funds are not surplus, but, additional funds which are required for completion of the project. These funds collected from the members are in the nature of capital. The capital required for the project are kept in the bank as a necessity not for the sole aim of making any profit. The interest earned by the society are surplus, which can be applied for the main purpose of the society or it may reduce the cost of the project. Therefore, applying the ratio of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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