Interest on FDs earned by a club is not taxable - ITAT
PrintListen to this Article
During financial year 2008-09, it earned Rs 2.17 crore as bank interest from fixed deposits, which it claimed as exempt under Section 11 of the Income-Tax (I-T) Act. The entrance fees received from its members were invested as fixed deposits with scheduled banks and the interest earned was spent towards the trust's objective of promoting golf. Even after earning an interest income, the club had a deficit of Rs 10.97 crore during this particular year.
Under Section 11 of the I-T Act, a charitable trust claiming I-T exemption is required to utilize at least 85% of its income in a given financial year. The balance income (of up to 15% of the total), though, even if not utilized during the year, are not taxable. These can be invested in eligible investments. FDs with scheduled banks are one of the eligible investment specified by the I-T Act.
The club did not claim such interest income to be exempt based on the "principle of mutuality" but under provisions of Section 11 of the I-T Act. By investing in bank deposits, the ITAT observed that the Bombay Presidency Club did not fall foul of the tax laws. Thus, the ITAT, in its order dated February 29, held that "interest income should be tax exempt in the hands of the club".
This ruling will benefit several clubs and associations that are registered as charitable trusts, carrying on activities for advancement of general public utility, such as promotion of sports, animal welfare, arts or culture.
In this case, the tax authorities, on various grounds, had sought to tax the bank interest in the club's hands. Their key contention was that the investments made with banks was "an activity in the nature of trade, commerce or business". Thus, the bank interest was not eligible for I-T exemption.
Their other contention was that bank interest was not received from club members, but from a third party--the bank. Thus, the principle of mutuality, which says that one cannot make profit out of itself, did not apply, thus rendering the bank interest taxable. Consequently, Bombay Presidency Club had filed an appeal with the ITAT--the first level of appeal at the judicial level available to the tax payer. According to experts, tax authorities raise similar objections during assessment of clubs and associations. The recent ITAT order should help mitigate future litigation. (TNN - Times of India)
Category : Income Tax | Comments : 0 | Hits : 507
If you earn income other than salary or have multiple income streams, the advance tax deadline falling today—Monday, December 15, 2025—should not be overlooked. Failure to pay advance tax on time, or paying less than the required amount, may attract interest charges that continue to accumulate. As the Income Tax Act operates on a “pay as you earn” basis, being aware of advance tax provisions and the financial impact of delays can help you avoid unnecessary costs and last-...
If you earn income other than salary or have multiple income streams, the advance tax deadline falling today—Monday, December 15, 2025—should not be overlooked. Failure to pay advance tax on time, or paying less than the required amount, may attract interest charges that continue to accumulate. As the Income Tax Act operates on a “pay as you earn” basis, being aware of advance tax provisions and the financial impact of delays can help you avoid unnecessary costs and last-...
As many as 5,44,205 appeals were pending resolution with the Income Tax (IT) Department at commissioner (appeals) level as of January 31 this year, and 63,246 at various Income Tax Appellate Tribunals (ITATs), High Courts, and the Supreme Court, FE has learnt. To be precise, the cases pending in ITATs were 20,266 High Courts, 37,436; and Supreme Court 5,544. The large pendency is even as the Central Board of Direct Taxes (CBDT) has laid emphasis on disposing of income tax appeals in its 10...
The Central Board of Direct Taxes (CBDT) has facilitated taxpayers to file their Income Tax Returns (ITRs) for the Assessment Year 2024-25 (relevant to Financial Year 2023-24) from 1st April, 2024 onwards. The ITR functionalities i.e. ITR-1, ITR-2 and ITR-4, commonly used by taxpayers are available on the e-filing portal from 1st April, 2024 onwards for taxpayers to file their Returns. Companies will also be able to file their ITRs through ITR-6 from April 1 onwards. As ...
It has come to notice that misleading information related to new tax regime is being spread on some social media platforms. It is therefore clarified that the new regime under section 115BAC(1A) was introduced in the Finance Act 2023 which was as under as compared to the existing old regime (without exemptions): New Regime 115BAC (1A) introduced for FY 2023-24 Existing old Regime 0-3 lacs 0% 0-2.5 lacs 0% ...
Comments