Marathi Bandhkam Vyavsayik Association Vs ITO (ITAT Pune)
Mutuality Not Applicable to Bank FD Interest – Income Taxable as ‘Other Sources’ – ITAT Pune Allows 5% Expense Deduction
The ITAT Pune held that interest earned by a builders’ association on bank FDs & savings accounts is taxable under the head “Income from Other Sources” & not exempt on the principle of mutuality. Relying on Supreme Court rulings in Bangalore Club & Secunderabad Club, the Tribunal observed that dealings with banks involve third parties, breaking the identity between contributors & participants required for mutuality.
However, on the alternate claim, the Tribunal accepted that some indirect expenditure must have been incurred to earn such interest income. While rejecting the assessee’s request for a fixed percentage without supporting working, it allowed an estimated deduction of 5% of the bank interest income towards expenses, holding that only real income should be taxed.
Accordingly, the addition of interest income was upheld, but the AO was directed to allow 5% expenditure deduction, resulting in the appeal being partly allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 08.07.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19.
