Income Tax Appellate Tribunal - Pune
Marathi Bandhkam Vyavsayik ... vs Ito, Exemption, Pune, Pune on 8 April, 2026
आयकर अपीलीय अधिकरण "बी" न्यायपीठ पु णे में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
BEFORE SHRI R.K. PANDA, VICE PRESIDENT
AND
MS. ASTHA CHANDRA, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.2309/PUN/2025
धििाारण वर्ा / Assessment Year : 2017-18
Marathi Bandhkam Vyavsayik Association, ITO, Exemption,
201, 2nd Floor Pro 1 Business Centre, Opp. Ward-1(1), Pune
Ratna Hospital Centre, Senapati Bapat Road, Vs.
Pune-411016
PAN : AACTM0747L
अपीलार्थी / Appellant प्रत्यर्थी / Respondent
Assessee by : Shri Suhas Bora
Department by : Shri Sandip Pawar
Date of hearing : 02-04-2026
Date of 08-04-2026
Pronouncement :
आदे श / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 08.07.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi ["CIT(A)/NFAC"] pertaining to Assessment Year ("AY") 2017-18.
2. There is a delay of 03 days in filing of this appeal before the Tribunal for which the assessee has filed an affidavit explaining the reasons for such delay. After hearing both the sides, we are of the view that the delay is attributable to the sufficient cause. We, therefore, in light of the decisions of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC) and in the case of Inder Singh Vs. The State of Madhya Pradesh reported in 2025 Live Law (SC) 339, condone the said delay and proceed to decide the appeal.
3. Briefly stated, the facts of the case are that the assessee is a trust registered under the Bombay Public Trust Act, 1950. It is carrying on the charitable activity of bringing all the builders engaged in the business of construction and development of properties etc. under one roof and providing solutions for their peculiar problems with various Government organizations as well as the problems of the public at large. For AY 2017- 2 ITA No. 2309/PUN/2025, AY 2017-18 18, the assessee filed its return of income electronically on 06.11.2017 declaring total income at Rs. „Nil‟, subsequently, followed by filing of a revised return on 27.03.2019 declaring total income at Rs. Nil. The case of the assessee was selected for scrutiny under CASS for the reason "Large deduction claimed u/s 57 of the Income Tax Act, 1961 (the "Act") (Business ITR)". Accordingly, statutory notice(s) u/s 143(2) and 142(1) of the Act along with questionnaire were issued and served upon the assessee. In response thereto, the assessee furnished the relevant information as called for online on e-assessment portal along with certain paper submission. After considering the submissions of the assessee, the Ld. Assessing Officer ("AO") completed the assessment u/s 143(3) of the Act on 16.12.2019 holding that the assessee trust is not entitled for claiming exemption u/s 11 and 12 of the Act and he computed and assessed the income of the trust at Rs.63,80,720/- as under :
Gross Receipts as per ROI Nil
Add.:
Surplus generated (58,77,205/- less 48,52,882/-) 10,24,320/-
Disallowance of accumulation U/Sec. 11(2) 50,00,000/-
Disallowance of accumulation U/Sec. 11(1)(d) 3,56,000/-
--------------
63,80,320/-
4. On appeal, the Ld. CIT(A)/NFAC partly allowed the appeal of the assessee by observing as under :
"5. Decision:
5.1 Grounds no. 2 and 3 are on the claim that the Assessing Officer has not considered the figures declared, as well as the revised computation of income filed by the appellant in the revised return of income. The Assessing Officer has denied the exemption based on the following observations:
"3. In response to the online notices issued during the assessment proceedings, the assessee furnished information online on e-assessment portal as called for vide questionnaire. The submission made through e-filing portal and paper submission has been examined and is placed on record. The assessee vide its submission dated 16.11.2019 has submitted that the assessee is not registered u/s 12A of the I.T. Act. 1961. Since the assessee is not registered u/s 12A, for taxation purpose, the status of the assessee is treated as an AOP.
4. The assessee is a charitable trust with an objective to bring all the builders under one roof and provide solution for their peculiar problems with various government organizations. On verification of Income and expenditure account and computation of total income, it is observed that the assessee has shown gross receipts of Rs. 58,77,205/- and after claiming expenditure of Rs. 48,52,885/-, there is surplus of Rs. 10,24,320/- In original return of income (ITR-7), the assessee has claimed accumulation of Rs. 8,81,008/- u/s 11(1)(a) of the I.T. Act, 1961. In the revised return of income (ITR-5), the assessee has shown this surplus of Rs. 10,24,320/- in Profit & Loss account. It has, however, not considered this surplus in computation of income of the return of income. Since the assessee is not registered u/s 12A, 3 ITA No. 2309/PUN/2025, AY 2017-18 it is not eligible for any exemption u/s 11 & 12 of the Income-tax Act, 1961. Therefore, the assessee's claim of accumulation of Rs. 8,81,008/- made u/s 11(1)(a) of the Income-tax Act, 1961 is hereby rejected. In the original return of income, the assessee has made a claim to which it is not eligible and in the revised return of income, it has not offered the surplus to tax. The assessee has, thus, under-reported its income. Therefore, penalty proceedings u/s 274 r.w.s. 270A of the I. T. Act. 1961 are initiated separately for underreporting the income.
5. The assessee has further claimed accumulation of Rs. 50,00,000/- u/s 11(2) of the Income-tax Act, 1961. For the reasons discussed at Para 4 above, the assessee is not eligible to any deduction u/s 11(2) as well. It has also not filed form 10 as required u/s 11(2) of the Income-tax Act, 1961. In the revised return of income, the assessee has shown this amount in Balance Sheet as other reserve. It has, however, not routed this amount through Profit & Loss account. Therefore, further addition of Rs. 50,00,000/- is hereby made to the total income of the assessee. Also, penalty proceedings u/s 274 r.w.s. 270A of the 1. T. Act. 1961 are initiated separately for underreporting the income.
6. It is further noticed that the assessee has claimed corpus donation of Rs 3,56,000/-u/s 11(1)(d) of the Income tax Act, 1961. The provisions of section u/s 11 & 12 are applicable only for the trust registered u/s 12A of the Act. Since the assessee is not registered u/s 12A of the I.T. Act, 1961, the assessee is not eligible for exemptions u/s 11 & 12 of the Act. In view of the above, further addition of Rs 3,56,000/- is made to the total income of the assessee. By claiming deductions to which it is not eligible, the assessee has under-reported its income. Therefore, penalty proceedings u/s 274 r.w.s. 270A of the I. T. Act, 1961 are initiated separately for under reporting the income."
5.2 In the written submission, on the other hand, furnished during the appellate stage, the appellant has stated the following:
"B. Ground No.2 - The assessment order passed by the AO u/sec.143(3) of the Act is bad in law as the learned AO ignored the submissions made by the appellant trust, which is against the principle of natural justice.
And Ground No.3 - The learned AO has failed to appreciate the valid revised return filed by the appellant trust in Form ITR-5 and has made the additions on the basis of original return of income filed by the appellant trust in Form ITR-7.
The discussion about the addition is made at Para 4 to 6 on Page No.2 of the assessment order. The learned AO has made the addition amounting to Rs. 10,24,320/- on account of surplus generated, Rs.50,00,000/- on account of Disallowance of accumulation U/Sec. 11(2) and Rs.3,56,000/- on account of Disallowance of accumulation U/Sec. 11(1)(d) on the ground that the appellant trust is 'not registered u/sec. 12AA of the Act and not considering the contention of the assessee trust that the income of the association is exempt on the principle of mutuality.
Contention:
1. At the outset, we draw kind attention of Your Honour to the fact that the assessee is a registered trust engaged in the charitable activity of bringing all the builders. engaged in the business of construction and development of properties etc. under one roof and providing solutions for their peculiar problems as well as the problems of the public at large. The said trust is a public trust registered under the Bombay Public Trust Act, 1950.
2. Further, the assessee trust had filed original return of income in Form ITR- 7 for AY 2017-18 on 06.11.2017 disclosing taxable income at Rs. Nil (Refer Page No.1 to 3). The assessee trust thereafter filed revised return of income in Form ITR-5 on 27.03.2019 disclosing taxable income at Rs. Nil by claiming 4 ITA No. 2309/PUN/2025, AY 2017-18 exemption on the ground of principle of mutuality (Refer Page No.4 to 8), The revised return filed by the appellant is within the due date u/sec. 139(5) of the Act.
3. We draw kind attention of Your Honour to the provisions of Section 139(5) of the Act which are reproduced as under: "(5) If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier." From the above provision, it is evident that the any person who identifies any wrong claim in the return of income filed, can revise the same within the due date specified under the said section. Accordingly, the assesse had filed the original return in ITR-7, however the assesse trust is not registered u/sec. 12A, therefore the assesse trust voluntarily filed the revised return in ITR-5.
4. The learned AO has also confirmed this fact at Para 1 on Page No.1 of the assessment order that assessee trust has filed Revised Return of income in ITR-5 for AY 2017-18 on 27.03.2019, declaring Total income at Rs. Nil.
5. However, the learned AO has made the additions on the basis of the original return filed by the assessee in Form ITR-7 and has failed to consider the revised return filed in Form ITR-5 wherein assessee trust has not claimed deduction U/Sec.11 of the Act, but has claimed that the surplus exempt on the principle of mutuality.
6. We further submit that the income of the assessee is exempt on the principle of mutuality as the activity of the association is out of the contributions which are collected from the members and the income is also applied for the purpose of benefit of the members and accordingly question of addition of surplus does not arise. The learned AO himself has mentioned in Para 3 of the assessment order that "since the assessee is not registered u/s 12A, for taxation purpose, the status of the assessee is treated as an AOP"
and thus the income of assessee is exempt on the principle of mutuality.
7. It is submitted before Your Honour that the additions have been made without appreciating the submissions made by the appellant and not accepting the contention of the assessee that the income of the association is exempt on the principle of mutuality as per the revised return of income filed by the assessee within due date. Therefore, the additions made U/Sec. 11 of the Act are against the principle of natural justice.
8. In the context of fair hearing, it is of interest to note that the requirements of natural justice has two justiciable elements. The first is that an opportunity of hearing must be given; and the second is that the opportunity must be reasonable. In Mineral Development Ltd. vs. The State of Bihar [AIR 7960 SC 468], the Apex Court held that the concept of "reasonable opportunity", is an elastic one and is not susceptible of easy and precise definition, The Apex Court further held that what is reasonable opportunity under one set of circumstances need not be reasonable under different circumstances. A realistic view has to be taken while determining whether the opportunity given was reasonable or not.
9. It is further submitted before Your Honour that principle of natural justice is a vital part of the rule of the law and therefore before making any addition an opportunity has to be given to the assessee.
10. In following judicial decisions Hon'ble Courts have held that order passed in violation of principle of natural justice is bad in law:
i) Smt. Sunita Dhadda vs DCIT 71 DTR 33
ii) Dhakeshwari Cotton Mills 26 ITR 775
iii) Lalchand Bhagat Ambikaram vs CIT 37 ITR 288
iv) Ponkunnam Traders 83 ITR 508 5 ITA No. 2309/PUN/2025, AY 2017-18
v) Suraj Mall Mohta & Co. vs A.V. Visvanatha Sastri & others 26 ITR 001
vi) C. B. Gautam vs CIT 199 ITR 530
vii) Sarupchand Hukamchand 13 ITR 245.
In view of above the additions made by the AO are not justified in law and hence deserves to be deleted."
5.3.1 I have perused the submission of the appellant vis-à-vis the observations of the Assessing Officer. It is venfied that the appellant actually filed the revised return of income on 27.03.2019 vide acknowledgement no. 442982750270319. wherein the total income has been revised as follows Revised Statement of Income Profits and gains of Business or Profession Sch. No Rs Business1 Net Profit Before Tax as per P & L a/c 10,24,319 Add: Inadmissible expenses & Income not included Depreciation debited to P & L a/c 1,68,651 Less: Deductible expenditure & income to be excluded 11,92,970 Incomes considered separately 1 10,24,319 Adjusted Profit of Business1 1,68,651 Total income of Business and Profession 1,68,651 Less: Depreciation as per IT Act 5 1,68,651 Income from other sources Other Contribution from Members 2 0 Bank Interest 3 0 Income chargeable under the head "other sources"
Total Income 0Schedule 2 Income: Contribution from Members Income details Contribution from Members 29,52,918 Commission Received 5,21,739 Sale of Scrap 320 Sponsorship Fees 10,02,469 44,77,446 Deductions u/s 57 Expenditure incurred on maintenance and other charges 34,53,127 Surplus on Principle of Mutuality 10,24,319 44,77,446 Taxable income 0 6 ITA No. 2309/PUN/2025, AY 2017-18 TDS 4 1,73,201 Total prepaid taxes 1,73,201 Refund Due Schedule 1 1,73,201 Income considered under other heads Amount Other Income 10,24,319 Grand Total 10,24,319 Schedule 3 Bank interest Name of the Bank Interest Interest on FD 13,85,205 Bank Interest 14,553 Total 13,99,758 Deductible expenses Expenditure Incurred 13,99,758 Taxable interest 0 5.3.2 The Assessing Officer, in the introductory paragraph of the impugned assessment order, has also admitted in unambiguous terms that "later on, the assessee trust filed a revised return in ITR-5 on 27.03.2019 declaring total income at Rs. NIL". Therefore, the claim of the appellant in Para 5 of the submission that "the learned AO has made the additions on the basis of the original return filed by the assessee in Form ITR-7 and has failed to consider the revised return filed in Form ITR-5 wherein assessee trust has not claimed deduction U/Sec. 11 of the Act, but has claimed that the surplus exempt on the principle of mutuality is accepted. It is held that the additions/ disallowances, if any, were to be made based on the revised computation of income furnished in the revised return of income only.
5.4.1 Now, the appellant's claim that the surplus is exempt on the principle of mutuality, is to be examined. The principle of mutuality is predicated on the fundamental requirement of complete identity between contributors to a common fund and the beneficiaries of that fund. Hon'ble Supreme Court of India has consistently upheld this principle, emphasizing that any breach of this identity results in the transactions assuming a commercial character, thereby making the surplus taxable. This position has been reinforced in several landmark rulings. In Chelmsford Club v. CIT [2000] 109 Taxman 215/243 ITR 89 (SC). Hon'ble Supreme Court underscored the necessity of a reciprocal relationship where all contributors to a fund must also be beneficiaries of the surplus. The Apex Court held that if contributors are excluded from receiving benefits, the principle of mutuality is breached, and the resulting surplus is taxable. This decision highlighted that mutuality requires a strict identity between contributors and participants, and any deviation from this identity transforms the nature of the transactions from mutual to commercial. In Bankipur Club Ltd. [1997] 92 Taxman 278 (SC)[08- 05-1997], the Hon'ble Supreme Court has held that income derived from transactions involving non-members or from the activities in the nature commercial activities does not qualify for mutuality. The ruling emphasized that the absence of identity between contributors and beneficiaries converts the surplus into taxable income. This judgment reinforced the notion that mutuality is strictly confined to activities within the mutual entity where contributors and beneficiaries are the same. Such a principle was again reaffirmed in Bangalore Club [2013] 29 taxmann.com 29 (SC), where Hon'ble Supreme Court held that interest income earned from fixed deposits in banks by clubs is taxable. The involvement of third parties, such as banks, 7 ITA No. 2309/PUN/2025, AY 2017-18 breaches the mutuality principle, making the income derived from such transactions taxable. This decision reiterated that mutuality applies only to transactions within the mutual entity and does not extend to dealings with external parties.
5.4.2 In the instant case, as per revised computation of income, the appellant has undisputedly earned interest income earned from to the extent of Rs.13,99,758/-from FDs and other accounts with Bank, which, going by the ratio laid down by the Hon'ble Supreme Court in the case of Bangalore Club (supra) is taxable. As regards the claim of expenditure of Rs. 13,99,758/-
made by the appellant in the revised computation of income, no evidence of incurring such expenditure was allowed. Hence, the claim of deduction u/s 57 to the tune of Rs.13,99,758/-cannot be admitted. As far as the remaining amount of Rs.44,77,446/- representing contribution from members, the Assessing Officer's action in denial of exemption based on the original return of income cannot be sustained for reasons stated in Para 5.3.2 of this order. All the submissions made by the appellant and the decisions in respect of such denial stand considered and disposed of in favour of the appellant. With this decision, the grounds 4, 5, 6 and 7 taken by the appellant stands partly allowed.
5.4.3 Therefore, I hold it proper to restrict the disallowance to Rs. 13,99,758/- being the unsubstantiated claim of expenditure in respect of income received as interest from bank, which is not covered by the principles of mutuality, and to delete the remaining addition. Accordingly, I direct the Assessing Officer to restrict the total addition to Rs.13,99,758/- in view of the observations made in paragraphs 5.4.1 and 5.4.2 of this order. The grounds no. 2, 3, 4, 5, 6 and 7 are therefore treated as partly allowed."
5. Aggrieved, the assessee is in appeal before the Tribunal raising the following grounds of appeal :
"On facts and in law,
1. The learned CIT(A) erred in confirming the action of the Assessing Officer in holding that the interest income of Rs. 13,99,758/-earned on Fixed Deposits with Banks is taxable, by wrongly applying the decision of the Hon'ble Supreme Court in the case of Bangalore Club v. CIT [2013] 29 taxmann.com 29 (SC), without appreciating that the said decision is distinguishable on facts and does not apply to the appellant's case.
2. The learned CIT(A) failed to appreciate that the Fixed Deposits were made out of members' contributions and surplus funds of the Association, which are inextricably linked to its mutual activities, and therefore, the interest income partakes the same character as the mutual contributions and is exempt on the principle of mutuality.
3. The learned CIT(A) erred in not appreciating that there exists complete identity between the contributors and the beneficiaries of the Association, and the surplus, including the interest income, is applied only for the common benefit of members; hence the principle of mutuality squarely applies.
4. Without prejudice, the learned CIT(A) ought to have allowed deduction of proportionate expenditure incurred in relation to the earning of interest income, even if such income were to be treated as taxable, in accordance with settled principles of law.
5. The learned CIT(A) further erred in not considering that the revised return of income filed in Form ITR-5, claiming exemption on the principle of mutuality, was validly filed under section 139(5) of the Act, and hence the assessment as well as appellate order ought to have been framed in accordance with the said revised return.8 ITA No. 2309/PUN/2025, AY 2017-18
6. On facts and in law, the learned CIT(A) erred in passing the appellate order without granting the appellant an opportunity of personal hearing through video conferencing, despite the specific request made under Ground 7(c) of the appeal memo. The order so passed is in gross violation of the principles of natural justice and is therefore bad in law and liable to be quashed.
7. The appellant craves leave to add, alter, amend, substitute, or withdraw any of the above grounds of appeal at the time of hearing."
6. At the outset, the Ld. AR submitted that all the grounds except ground No. 4 which is an alternate ground taken by the assessee are decided against the assessee by the Co-ordinate Bench of the Tribunal in assessee‟s own case in ITA No. 2310/PUN/2025 for AY 2018-19 dated 10.02.2026, a copy of which was placed on record.
7. The Ld. DR fairly conceded with the above submissions of the Ld. AR.
8. We have heard the Ld. Representatives of the parties and perused the material available on record. We find that the Ld. AO completed the assessment at the assessed income of Rs.63,80,720/- comprising of addition of :-(i) Rs.10,24,320/- on account of surplus generated by the trust; (ii) disallowance of accumulation u/s 11(2) of Rs.50,00,000/- and
(iii) disallowance of accumulation u/s 11(1)(d) of Rs.3,56,000/-. The Ld. CIT(A)/NFAC has partly allowed the appeal of the assessee for the reasons reproduced in the preceding paragraphs. Before us, the Ld. Counsel for the assessee has submitted that all the grounds of appeal (i.e. Ground Nos. 1, 2 and 3) raised by the assessee before the Tribunal are covered against the assessee vide Tribunal‟s order in assessee own case for AY 2018-19 (supra). Only one ground i.e. ground No. 4 which is an alternate ground has been decided in favour of the assessee by the Tribunal in its order (supra).
9. We have perused the order of the Tribunal in ITA No. 2310/PUN/2015 dated 10.02.2026 (supra) and find that the similar grounds of appeal are raised by the assessee in the present appeal for AY 2017-18 as that of AY 2018-19. The Tribunal while deciding the impugned issues for AY 2018-19 held as under:
"8. We have heard Ld. counsels from both the sides and perused the material available on record including the paper book and copy of case laws furnished/relied on by the assessee. In this regard, we find that the dispute is only with regard to the taxability of interest income earned from bank FDR & savings bank by the assessee. The claim of the assessee is that the 9 ITA No. 2309/PUN/2025, AY 2017-18 interest income earned from bank FDR & savings bank account is exempted income on the ground of principle of mutuality whereas the Assessing Officer and Ld. CIT(A)/NFAC are of the view that the principle of mutuality is not applicable on bank FDR/savings bank interest income, hence it is taxable income in the hands of the assessee trust.
9. With regard to ground nos.1, 2 and 3 raised by the assessee before the bench, we find that Hon‟ble Supreme Court in the case of Secundrabad Club vs. CIT has held in para 43(v) that "thus the interest income earned on fixed deposits made in the banks by the appellant club has to be treated like any other income from other sources within the meaning of section 2(24) of Income Tax Act, 1961."
10. We also find that Hon‟ble Supreme Court in the above case law also approved the order passed in the case Bangalore Club vs. CIT [2013] 29 taxmann.com 29 (SC) which was relied on by Ld. CIT(A)/NFAC in the instant case in hand. Accordingly, we do not find any error in the order passed by Ld. CIT(A)/NFAC wherein the appeal of the assessee was dismissed by holding that principle of mutuality does not apply with regard to Bank interest income. Accordingly, the ground nos.1, 2 & 3 raised by the assessee are dismissed.
11. With regard to alternate ground no.4 raised by the assessee, we find that it is also claimed by the assessee that the entire gross bank FDR interest income cannot be taxed without allowing deduction of proportionate expenses incurred for earning the said bank FDR & savings bank interest income. With regard to this alternative claim the assessee relied on the decision passed by a coordinate bench of this Tribunal in the case of Poona Club Ltd. vs. CIT in ITA No.894/PUN/2017 for A.Y. 2011-12 order dated 20- 04-2022 wherein the Tribunal allowed the appeal filed by the assessee by observing as under :-
"24. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal no.3 relates to the allowance of expenditure at the rate of 7.5% of the interest income claimed. Admittedly, there is no specific expenditure incurred to earn the interest income. However, incurring of sum indirect expenditure cannot be ruled out. It is trite law that what can be taxed is only real income not hypothetical income, when the specific expenditure cannot be identified, it is appropriate to estimate certain amount of expenditure. In the present case, in earlier year, the Tribunal took a view that 7.5% of interest income should be allowed as deduction. This finding had attained the finality, accepted both the assessee as well as the Department. Even on the principle of consistency, the same should have been followed by the lower authorities. The decision of the Hon‟ble ITAT in assessee‟s own case is also in consonance with the ratio of decision of the Hon‟ble Allahabad High Court in the case of CIT vs. Kisan Sahkari Chini Mills Ltd., 274 ITR 119, wherein, the Hon‟ble Allahabad High Court confirmed the findings of the Tribunal that where the assessee held some interest income other than the exempted income, it must incur some expenses for earning the interest income and the expenditure cannot be identified. Then estimated expenditure in terms of the percentage of the income can be allowed as deduction by holding as under :-
"4. It is not in dispute that the respondent-assessee earned interest on investments with banks and post-office deposits. However, it claimed expenses to the tune of Rs. 2,03,573. The aforesaid expenses, which it had debited was towards maintenance of office, staff, audit and other ex-penses. Under section 57 of the Act certain deductions are permissible while computing income chargeable under head „Income from other sources‟. Section 57(iii) provides for deduction of any other expenditure, which is not in the nature of capital expenditure and is laid out or expended wholly and exclusively for the 10 ITA No. 2309/PUN/2025, AY 2017-18 purpose of making or earning such income. The respondent- assessee must have incurred some expenses for earning interest income other than the exempted interest income and, therefore, if the Tribunal has fixed 5 per cent of the taxable interest income as a deduction while computing income from other sources, it cannot be said that the Tribunal has committed any illegality.
25. Further, admittedly, the issue in the grounds of appeal i.e. allowance of 7.5% of the interest income as expenditure against the interest income came to be accepted by the Department in the assessment year 2010-11 and as well as earlier years. Though, the principle of res-judicata does not apply in respect of matter pertaining to income-tax as each assessment is separate and distinct proceedings but in the absence of any change in the facts and law warranting different view, no authority of the quasi judicial or judicial can generally be permitted to take a different view. This position is laid down by the Hon‟ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. vs. Union of India, 282 ITR 273 (SC). The Hon‟ble Bombay High Court in the case of PCIT vs. Quest Investment Advisors (P.) Ltd., 409 ITR 545 (Bom.-HC) after extracting the observation made by the Hon‟ble Supreme Court in the case Bharat Sanchar Nigam Ltd. (supra) made in para 20 held as follows :-
"8. However, subsequently the Apex Court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 has after referring to the decision of Radhasoami Satsang (supra) has observed as under :--
"20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasijudicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction."
(emphasis supplied)
9. The principle accepted by the Revenue for 10 earlier years and 4 subsequent years to the Assessment Years 2007-08 and 2008-09 was that the entire expenditure is to be allowed against business income and no expenditure is to be allocated to capital gains. Once this principle was accepted and consistently applied and followed, the Revenue was bound by it. Unless of course it wanted to change the practice without any change in law or change in facts therein, the basis for the 11 ITA No. 2309/PUN/2025, AY 2017-18 change in practice should have been mentioned either in the assessment order or atleast pointed out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistently applied for the earlier assessment years and also for the subsequent assessment years. Therefore, the view of the Tribunal in allowing the respondent's appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd.'s case (supra)."
26. Similarly, the Hon‟ble Bombay High Court placing reliance on its earlier decision in the case of CIT vs. Arts and Crafts Exports, 22 taxmann.com 53 (Bom.-HC) held in the case of CIT vs. Macbrout Engineering (P.) Ltd., 52 taxmann.com 219 (Bom.-HC) that where the decision of the Tribunal in the case of the assessee for the earlier years had been accepted by the Revenue and no argument was advanced to establish that the said decision of the Tribunal was erroneous, the decision cannot be assailed by the Revenue in the subsequent years. Therefore, we do not see any reason to deviate from the decision of the Hon‟ble ITAT for earlier years in assessee‟s own case and, accordingly, we allow 7.5% of the interest income as allowable expenditure.
27. The ratio of the decision of the Hon‟ble Supreme Court in the case of Bangalore Club (supra) has no application in deciding the issue of allowability of expenditure. The issue in the said decision is in relation to the taxability of interest income received from corporate members invoking the principle of mutuality, whereas, in the present case, it is a question of allowability of expenditure against the interest income, therefore, the decision of Hon‟ble Supreme Court in the case of Bangalore Club (supra) has no application to the instant case. Accordingly, the ground of appeal no.3 raised by the assessee stands allowed."
12. On the basis of above decision passed in the case of Poona Club Ltd. in ITA No.894/PUN/2017 order dated 20-04-2022, the assessee is requesting to allow deduction of proportionate expenses incurred for earning the said interest income. In this regard, we find that in the other appeal of Poona Club Ltd. vs. ACIT in ITA No.1068/PUN/2014 order dated 23-01-2018, the assessee has furnished the working on the basis of which the Tribunal in earlier years has quantified the expenditure and following the earlier years orders the assessee was claiming 7.5% expenditure in his return of income, however, in the instant case in hand the assessee has not furnished any such working/basis in support of his contention, therefore, we are of the considered opinion that a fixed amount of % of expenses cannot be allowed without any reasonable basis until & unless the assessee establishes nexus between expenditure incurred under various heads to earn the bank interest income. However, considering the totality of facts & in the light of coordinate bench decision passed in the case of Poona Club Ltd. in ITA No.894/PUN/2017 order dated 20-04-2022 & in the absence of any working provided by the assessee, we deem it appropriate to allow 5% towards expenditure out of the total bank interest income earned by the assessee. Accordingly, we direct the Assessing Officer to allow 5% towards expenditure out of the total interest income earned by the assessee from bank FDR & savings bank account. Thus, the alternate ground no.4 raised by the assessee is partly allowed.
13. Since we have allowed the alternate ground no.4 in favour of the assessee, ground no.5 becomes infructuous hence dismissed."
10. Respectfully, following the Tribunal‟s order (supra) ground Nos. 1,2 and 3 raised by the assessee are dismissed. Alternate ground No. 4 raised 12 ITA No. 2309/PUN/2025, AY 2017-18 by the assessee is partly allowed pursuant to which ground No. 5 becomes infructuous and dismissed as such. Ground No. 6 is not argued by the Ld. AR, hence dismissed as not pressed.
11. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 08th April, 2026.
Sd/- Sd/-
(R.K. Panda) (Astha Chandra)
VICE PRESIDENT JUDICIAL MEMBER
पुणे / Pune; दिन ां क / Dated : 08th April, 2026.
रदि
आदे श की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to :
1. अपील र्थी / The Appellant.
2. प्रत्यर्थी / The Respondent.
3. The Pr. CIT concerned.
4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, "बी" बेंच, पुणे / DR, ITAT, "B" Bench, Pune.
5. ग र्ड फ़ इल / Guard File.
//सत्य दपि प्रदि// True Copy// आिे श नुस र / BY ORDER, सहायक पं जीकार/ Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune