O R D E R

Per: Anikesh Banerjee (JM):

The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2016-17, date of order 26.11.2025. The impugned order emanated from the order of the Ld. Income Tax Officer (Exem.) ward-2(2), Mumbai (for brevity the ‘Ld. AO’) order passed under section 143(3) of the Act date of order 22.12.2018.

2. The brief facts of the case are that the assessee is a members club carrying of sports activity for its members. The assessee company collects membership fees from the Members including entrance fee and monthly subscription. The club carries on activities and the surplus of the funds was deposited in fix deposit so as to earn more income by way of interest for running of the club’s activity. The question was duly raised before the Bench whether the interest income should be treated as part of business income or as income from other sources in the impugned assessment year. On considering the fact, the assessee filed the return by declaring total income Rs.80,93,670/-. The case was selected for scrutiny and it is found that the assessee is always been taxed under the head of income from “profit and gains of business and profession” in earlier years. The assessee offered its non-mutual income of Rs.3,47,41,645/- inclusive of interest of fixed deposits amount to Rs.2,10,65,855/- to tax under the head in “profit and gains of business” and claim deduction of proportionate expenses amount to Rs.2,66,47,976/-. The Ld. AO has considered this interest income earn from the surplus funds in fixed deposits amount to Rs.2,10,65,855/- as income from other sources and added back with the total income of the assessee. Being aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) rejected the assessee’s plea and confirm the additions. Being aggrieved assessee filed an appeal before us.

3. The Ld. AR stated that the assessee is a member club and operating on principle of mutuality. The main object is to encourage and promote games and sports of any form. The assessee has been in existence for over hundred years. The assessee is following the same line of income in earlier years and treated this interest income as an income from business. But the Ld. AO denied the assessee’s claim and treated the interest income as income from other sources. The issue was already decided and adjudicated by the Coordinate Bench of ITAT Mumbai in favor of the assessee. But Ld. AR contended that the said issue was already placed before the Ld. CIT(A) and the Ld. CIT(A) had made this observation in following paragraphs which is reproduced as below:

“2.3 From the above refereed findings of the Hon'ble Jurisdictional Tribunal in Appellant's own case it becomes crystal clear that in the present circumstantial facts; the interest income earned by the Appellant needs to be considered as business income only.

4. Moreover, in Appellant's own case for the following Assessment Years; it has been consistently held by the Appeal authorities that interest income earned by the Appellant should be classified under the head of 'profits and gains from business or profession' and not under income from other sources":