Addition on FD Interest Remanded as Authorities Failed to Examine Mutuality Principle

Eldeco Eden Park Apartment Owners Welfare & Maintenance Association Vs ITO (ITAT Lucknow)

The appeal before the Income Tax Appellate Tribunal (ITAT), Lucknow, was filed by the assessee for Assessment Year 2017–18 against the appellate order dated 28.01.2025 passed by the Commissioner of Income Tax (Appeals) [CIT(A)], Gurugram.

The Assessing Officer, through an order dated 27.11.2019, determined the total income of the assessee at ₹8,06,784 as against a returned income of NIL. This addition arose from interest earned by the assessee on fixed deposits with banks. The CIT(A) upheld the addition, holding that the principle of mutuality does not apply to such interest income, as funds invested in fixed deposits are subjected to commercial banking operations. The CIT(A) relied on Supreme Court decisions, including rulings affirming that interest income from bank deposits is taxable, irrespective of whether the banks are members of the entity.

Aggrieved by this decision, the assessee appealed before the ITAT and filed a paper book containing various documents such as the registration certificate, income computation, income tax return, audited financial statements, and relevant judicial precedents. The assessee argued that reliance on the Supreme Court rulings was misplaced, as its case was distinguishable on facts. It further contended that certain factual aspects and supporting documents submitted were not examined or discussed by the Assessing Officer or the CIT(A).