Film Nagar Cultural Center, Hyderabad V. Dy. Commissioner of Income Tax , Circle-14(1), Hyderabad

ITA 1027/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3134 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 04-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 21-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: PAWAN KUMAR CHAKARAPANI
• Keywords: Business income; Depreciation; Opportunity of being heard; Rule of consistency; Earning of tax free income
• Section: 142(1); 143(1); 195; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO S . 1021, 1022, 1023, 1024, 1025, 1026, 1027 & 1028 / HYD/201 8 AY: 2008 - 09, 2009 - 10, 2010 - 11, 2011 - 12, 2012 - 13, 2013 - 14 2014 - 15 & 2015 - 16 FILM NAGAR CULTURAL CENTER, HYDERABAD. PAN A A ATF 0572E VS. DY . COMMISSIONER OF INCOME - TAX, CIRCLE 1 4 ( 1 ), HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: S HRI PAWAN KUMAR CHAKARAPANI REVENUE BY: SHRI NILANJAN DEY DATE OF HEARING: 24 / 0 1 / 201 9 DATE OF PRONOUNCEMENT: 28 / 0 2 /201 9 O R D E R PER BENCH : ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF CIT(A) 6, HYDERABAD, FOR THE AYS 2008 - 09 TO 2015 - 16. AS IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND THEREFORE, A COMMON ORDER IS PASSE D FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP THE APPEALS IN ITA NO. 1025 & 1026/HYD/2018 2. THE FACTS AS TAKEN FROM AY 2012 - 13 IN ITA NO. 1025/HY/2018 ARE THAT THE ASSESSEE, AN AOP, ENGAGED IN PROMOTION OF CULTURAL ACTIVITIES AND OTHER RELATED ACTIVI TIES, FILED ITS RETURN OF INCOME FOR THE AY 2012 - 13 ON 20/09/2012 ADMITTING A LOSS OF RS. 1,79,33,695/ - , WHICH WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961. SUBSEQUENTLY, NOTICES U/S I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 2 143(2) AND 142(1) WERE ISSUED ON 20/11/2014, AGAINST WHICH, THE A R OF THE ASSESSEE FILED THE INFORMATION AS CALLED FOR. 2. FROM THE PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, AO OBSERVED THAT ASSESSEE IS CLAIMING TO BE GOVERNED BY THE CONCEPT OF MUTUALITY. THE ASSESSEE HAS RECORDED RECEIPTS FROM ALL THE SOURCES AND HAS BOOKED ALL THE EXPENSES IRRESPECTIVE OF THE FACT WHETHER THEY AROSE FROM MUTUAL ACTIVITY OR NOT. THE NET RESULT FROM ACCOUNTING OF ALL REC EIPTS AND EXPENSES WAS A LOSS. WHEN THE DETAILS WERE PERUSED IT WAS FOUND THAT THE ASSESSEE WAS DERIVING INCOME FROM NON - MUTUAL ACTIVITIES AND WAS SETTING - OFF AGAINST THE EXPENSES INCURRED IN COURSE OF CARRYING OUT THE ACTIVITIES OF THE MUTUAL CONCERN. THE ASSESSEE IS NOT MAINTAINING SEPARATE ACCOUNTS FOR MUTUAL AND NON - MUTUAL ACTIVITIES. THE AO OPINED THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS NOT PROPER IN ARRIVING AT THE TOTAL INCOME UNDER THE INCOME TAX ACT. HENCE THE OPTION AVAILABLE IS O NLY TO SEGREGATE THE ITEMS OF INCOME ARISING FROM NON - MUTUAL ACTIVITY. THE PROFIT OR LOSS ARISING FROM MUTUAL ACTIVITY IS NOT SUBJECTED TO TAX BUT THE INCOME OR LOSS ARISING FROM NON - MUTUAL ACTIVITY IS SUBJECTED TO TAX. AS THE INCOME FROM MUTUAL ACTIVITY I S EXEMPT FROM TAX, THE LOSS ARISING FROM MUTUAL ACTIVITY IS SIMILARLY NOT ALLOWED TO BE SET - OFF AGAINST TAXABLE INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THE INCOMES ARISING FROM NON - MUTUAL ACTIVITIES WERE DISCUSSED BY THE AO AS UNDER: 2.1 INTE REST INCOME : ASSESSEE IS IN RECEIPT OF INCOME FROM TERM DEPOSITS OF RS. 63,02,629/ - FOR THE CURRENT AY . THE INTEREST THOUGH SHOWN AS RECEIPT IN THE INCOME AND EXPENDITURE ACCOUNT WAS SET OFF AGAINST EXPENSES OF MUTUAL ACTIVITY. THE AO REFERRING TO THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S BANGALORE CLUB VS. CIT, I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 3 OBSERVED THAT THE FUNDS OF CLUB HAVE BEEN PLACED IN FIXED DEPOSITS WITH BANKS. THE CLUB GETS THE RETURN ALSO. HOWEVER, BEFORE THAT THEY ARE EXPENDED ON NON - MEMBERS I.E. THE CLIENT S OF THE BANK. THIS LOANING OUT OF FUNDS BY BANKS TO THE OUTSIDERS IS FOR COMMERCIAL REASONS. FURTHER, BANKS ARE ALSO NOT PARTICIPATORS IN THE BENEFITS OF THE CLUB. SO THERE IS NO IDENTITY BETWEEN THE CONTRIBUTION AND THE PARTICIPATORS. HE, THEREFORE, WAS OF THE VIEW THAT THE FIRST PRINCIPLE OF MUTUALITY AS LAID DOWN BY THE APEX COURT IS VIOLATED IN THE CASE OF ASSESSEE. ALSO RELYING ON THE DECISION OF AP HIGH COURT IN THE CASE OF SECUNDERABAD CLUB, THE AO TREATED THE INCOME ON ACCOUNT OF INTEREST ON FIXED DEPOSITS AMOUNTING TO RS. 63,02,269/ - AS INCOME FROM OTHER SOURCES ON THE GROUND THAT NO EXPENDITURE WAS INCURRED TOWARDS EARNING THE SAID ENTIRE RECEIPTS. 2.2 FURTHER, AO NOTICED FROM THE INCOME & EXPENDITURE ACCOUNT THAT THE ASSESSEE HAS CREDITED THE F OLLOWING MISCELLANEOUS RECEIPTS: I) ADVERTISEMENT RECEIPTS RS. 5,54,940/ - II) COMMISSION ON OUTLETS RS.19,38,827/ - III) GUEST FEE RS. 10,27,800/ - IV) SPONSORSHIPS RS. 12,83,455/ - TOTAL RS. 48,05,022 WHEN THE AO ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF RECEIPTS, THE ASSESSEE VIDE LETTER DATED 22/12/2014 SUBMITTED ITS REPLY, WHICH WAS EXTRACTED BY THE AO IN HIS ORDER AT PAGES 4 TO 6 OF HIS ORDER. 2.3 AFTER CONSIDER ING THE ASSESSEES SUBMISSIONS, TH E AO OBSERVED THAT THESE RECEIPTS ARE NOTHING BUT RECEIPTS FROM OUTSIDERS (NON - MEMBERS) IN FURTHERANCE OF THEIR BUSINESS INTERESTS. THE FUNDS HAVE FLOWN FROM COMMERCIAL ACTIVITIES, I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 4 THIRD PARTIES IN THE FORM OF ADVERTISEMENTS, COMMISSION, SPONSORSHIPS AND G UEST FEES. SO THE THREAD OF MUTUALITY IS BROKEN HERE. THERE IS NO COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPANTS IN THESE ACTIVITIES. ALL THE RECEIPTS/ ACTIVITIES MENTIONED ABOVE DO NOT MEET THE CRITERIA OF MUTUALITY AS PER THE DECISION OF THE SUP REME COURT MENTIONED ABOVE. AS THERE IS NO ELEMENT OF MUTUALITY IN THESE RECEIPTS, THE ASSESSEE WAS ASKED VIDE ORDER SHEET NOTING DATED 22.12.2014 TO GIVE THE BIFURCATION OF EXPENDITURE INCURRED TO EARN SUCH INCOME. IN THIS REGARD, ASSESSEE HAS SUBMITTED T HAT IT IS NOT MAINTAINING ANY BOOKS OF ACCOUNTS FOR EXPENDITURE FOR EACH INCOME CREDITED TO ITS INCOME & EXPENDITURE ACCOUNT. 2 .4 IN VIEW OF THE ABOVE OBSERVATIONS, THE AO HELD THAT IN ABSENCE OF SEPARATE BOOKS OF ACCOUNTS FOR MEMBERS AND NON - MEMBERS AND BIFURCATION OF EXPENDITURE ON THESE RECEIPTS, HE IS LEFT WITH NO OPTION BUT TO ESTIMATE THE RECEIPTS. ACCORDINGLY, HE ESTIMATED AT 20% OF THE TOTAL RECEIPTS AS MENTIONED ABOVE OF RS. 48,05,022 WHICH WORKS OUT TO RS.9,61,004 / - , AND BROUGHT THE SAME TO TAX. 5. WHEN THE ASSESSEE PREFERRED APPEAL AGAINST THE ORDER OF AO, THE CIT(A) AFTER DISCUSSING THE ISSUES ELABORATELY WI TH CASE LAW, UPHELD THE ORDER OF AO. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US AND RAIS ED VARIOUS GROUNDS OF APPEAL I.E. GROUND NOS 1 TO 16. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE AND GROUNDS NOS. 5 TO 16 ARE ARGUMENTATI VE IN NATURE. 6.1 THE EFFECTIVE GROUNDS ARE , GROUND NOS. 3 & 4 , WHICH ARE WITH REGARD TO ADDITION OF RS. 63,02,629/ - ON ACCOUNT OF I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 5 INTEREST ON DEPOSITS AND ADDITION OF RS. 9,61,004/ - TOWARDS MISCELLANEOUS INCOME RECEIPT. 7. LD. AR SUBMITTED THAT ASSESS EE IS AN AOP AND IS CARRYING ON THE SOCIETY O N COMMERCIAL BASIS. IT IS SERVING BOTH THE MEMBERS AND NON - MEMBER S AND CHARGES SIMILAR FEES TO THEM AND THE RETURN OF INCOME FILED OFFERING THE INCOME AS BUSINESS INCOME AND NEVER CLAIMED THE PROFIT AS EXEMPT U NDER MUTUALITY CONCEPT. HE SUBMITTED THAT SINCE THE ASSESSEE S FINANCIAL RESULTS SHOWN LOSS AND RECEIVING INTEREST INCOME, THE A.O INVOKED PRINCIPLES OF MUTUALITY S UO - MOTO BY RELYING ON SECUNDERABAD CLUB DECISION. HE SUBMITTED THAT T HE DIFFERENCE BETWEEN SECUNDERABAD CLUB AND ASSESSEE IS THAT ASSESSEE NEVER CLAIMED ITSELF AS MUTUAL CONCERN AND ALWAYS CLAIMED AS COMMERCIAL. HE SUBMITTED THAT ASSESSEE HAS ALWAYS FILED RETURN OF INCOME ON THIS LINE AND DEPARTMENT ACCEPTED THE METHOD ADOPTED BY THE ASSES SEE. EVEN IN THE SCRUTINY ASSESSMENT FOR AY 1997 - 98 , SIMILAR ISSUE WAS RAISED AN D ON SUBMISSION DEPARTMENT ACCEPTED. THE PRINCIPLES OF CONSISTENCY HAS TO BE APPLIED IN THIS CASE. IN THIS REGARD, HE RELIED ON THE FOLLOWING DECISIONS. 1. BANGALORE CLUB V S. CIT, [2013] 350 ITR 509 2. CIT VS. SECUNDERABAD CLUB, [2013] 340 ITR 121 3. CIT VS. BANKIPUR CLUB LTD., [1997] 226 ITR 97 4. CIT VS. BANERJI MEMORIAL CENTER, [1997] 223 ITR 732 5. CIT VS. JAMNA DAS DAGA, [1961] 41 ITR 630 6. CIT VS. CALCUTTA STOCK EXCHANGE ASSOCIATION LTD., [1959] 36 ITR 222 7. ITO VS. NORTHERN INDIA MOTION PICTURES ASSOCIATES, [1983] 5 ITD 9 8. CIT VS. DELHI RACE CLUB [1940] LTD., [1970] 75 ITR 111 9. JCIT VS. NIRU IMPEX, [2009] 31 SOT 0329 10.CIT VS. RADHASOAMI SATSANG, [1992] 193 ITR 321 11. BIRUMAL GAURISHANKAR JAIN VS. IT SETTLEMENT COMMISSION, [1992] 195 ITR 792 12. CIT VS. JAGATJIT INDUSTRIES LTD., [2011] 339 ITR 382 13. CIT VS. HILL VIEW INFRASTRUCTURE (P) LTD., [2016], 384 ITR 451 I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 6 14. ITO VS. SECUNDERABAD CLUB, ITA NO. 1573 TO 1575/HYD/2013 7.1 FURTHER, HE SUBMITTED THAT ACTIVITIES OF T HE ASSESSEE CANNOT BE SEPARATED ON SERVICES TO MEMBERS AND NON - MEMBERS. HE OPPOSED ESTIMATING 20% ON SERVICES TO NON - MEMBERS. FURTHER, HE SUBMITTED THAT SINCE THE ASSESSEE IS NOT FALLING UNDER MUTUALITY, THE ASSESSEE CAN CLAIM THE SET OFF OF INTEREST INC OME U/S 71 OF THE ACT AND ALLOWED TO BE ADJUSTED IN THE LOSS INC URRED FROM THE BUSINESS ACTIVITIES. 8. LD. DR MADE WRITTEN SUBMISSIONS, WHICH IS EXTRACTED BELOW: 2. THE ASSESSEE HAS FILED APPEALS AGAINST THE ORDER OF LD. CIT (APPEALS) FOR 8 ASSESSMENT YEARS FROM A Y: 2008 - 09 TO A Y: 2015 - 16. BARRING THE APPEALS FOR ASSM ENT YEARS: 12 - 13 AND 13 - 14, THE APPEALS FOR OTHER SIX ASS ESS M ENT Y E ARS HAVE BEEN DISMISSED BY THE LD. CIT (A) ON ACCOUNT OF NON PROSECUTION. 3. THE ASSESSEE HAS SUBMITTED THAT THE DOCT RINE OF MUTUALITY IS NOT APPLICABLE IN ITS CASE AS IT HAS NOT CLAIMED EXEMPT INCOME. WHETHER THE PRINCIPLE OF MUTUALITY SHOULD BE APPLICABLE TO THE FACTS OF A CASE DEPENDS ON THE FACTS OF THE CASE AND THE PRINCIPLE LAID DOWN BY THE H ON BLE SUPREME COURT IN THE CASE OF BANGALORE CLUB. FURTHER, THERE IS NO CASE FOR CLAIMING EXEMPTION OF SUCH INCOME BY THE ASSESSEE AS NO INCOME / LOSS ARISES OUT OF MUTUALITY. FOR A CLAIM OF EXEMPTION TO BE MADE THERE SHOULD FIRST ARISE AN INCOME WHICH SUBJECT TO SPECIFIC PROVI SIONS OF LAW DO NOT FORM PART OF TOTAL INCOME. THE ASSESSEE HAS THEREFORE ADJUSTED THE INTEREST INCOME AGAINST THE EXPENDITURE INCURRED TOWARDS THE ACTIVITIES OF THE SOCIETY WHICH IS NOT PERMISSIBLE. 4. IN NONE OF THE CASES CITED BY THE ASSESSEE, IT HAS BEEN HELD THAT THE PRINCIPLE OF MUTUALITY WOULD BE APPLICABLE ONLY WHEN THE ASSESSEES MAKE CLAIM OF EXEMPTION ON THE INCOME EARNED BY IT. WHATEVER BE THE TREATMENT BY THE ASSESSEE, THE PRINCIPLE TO BE APPLIED IS DEPENDENT ON THE GIVEN FACTS OF THE CASE AND NOT ON THE TREATMENT GIVEN IN THE ACCOUNTS BY THE ASSESSEE. I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 7 5. LD. CIT (A) AT PARA 7.3 ON PAGE 9 OF THE APPELLATE ORDER FOR AY: 2013 - 14, HAS REPRODUCED RELEVANT PORTION OF THE MEMORANDUM OF ASSOCIATION. HE HAS OBSERVED THAT ONLY PERSONS BELONGING TO TH E FILM INDUSTRY CAN BECOME PERMANENT MEMBERS OF THE SOCIETY. THE ACTIVITIES OF THE SOCIETY CANNOT BE CATEGORISED AS EITHER COMMERCIAL IN NATURE OR CHARITABLE IN NATURE. IN THE AIMS AND OBJECTIVES IT IS MENTIONED THAT THE SOCIETY IS FORMED WITH NO PROFIT MO TIVE AND NO COMMERCIAL ACTIVITY IS INVOLVED IN ITS WORKING. PAGE 2 OF THE MEMORANDUM OF ASSOCIATION MENTIONS THIS SPECIFICALLY. FROM NON MEMBERS IT COLLECTS SERVICE CHARGES AND IS THEREFORE NOT INTO CHARITABLE ACTIVITIES AS WELL. THERE IS NO MERIT IN ASSES SEE'S GROUND THAT ITS ACTIVITIES CANNOT BE CONSIDERED TO BE MUTUAL IN NATURE. 6. HANDING OVER OF PROPERTIES OF THE CENTER TO SIMILAR TRUS T / CENTER HAVING SIMILAR OBJECTIVES AND REGISTERED U/S 12 A IS NOT AUTOMATIC. UNDER CLAUSE C ON PAGE 34 OF THE MOA NO PROPOSAL SHALL BE DEEMED TO BE PASSED UNLESS THREE FOURTHS OF THE VOTING MEMBERS VOTE IN ITS FAVOUR. THEREFORE, THE HANDING OVER OF PROPE RTIES OF THE CENTER TO SIMILAR TRUST/CENTER WOULD ARISE ONLY WHEN THE MEMBERS HAVE RENOUNCED THEIR RIGHTS AND NOT AUTOMATICALLY. FURTHER, THE BENEFICIARIES ARE THE MEMBERS. RELIANCE PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MIS. BA NGALORE CLUB VS CIT, 350 ITR 509 AND THE JURISDICTIONAL HIGH COURT IN THE SECUNDERABAD CLUB, 340 ITR 121. 7. THE ASSESSEE ADMITS AT PARA 18 OF ITS WRITTEN SUBMISSIONS THAT IT HAS MUTUAL OBJECTS. INCOME RECEIVED FROM SERVICES TO NON MEMBERS WOULD NOT FALL WITHIN THE DOCTRINE OF MUTUALITY. 8. IN CASE IF AN ASSOCIATION IS HAVING TWO KINDS OF ACTIVITIES, I.E. ACTIVITIES WHICH ARE MUTUAL IN NATURE AND CERTAIN OTHER ACTIVITIES WHICH ARE NON MUTUAL IN NATURE, THE APPLICATION OF MUTUALITY IS NOT DESTROYED BY TH E PRESENCE OF TRANSACTIONS WHICH ARE NON MUTUAL IN CHARACTER. HOWEVER, IN SUCH A CASE, THE PRINCIPLE OF MUTUALITY HAS TO BE CONFINED TO TRANSACTIONS WITH MEMBERS POSSESS ING T H E ESSENTIA L C H ARACTERISTIC OF MUTUA L ITY. TH E TWO ACTIVITIES CAN B E SEPARATED, AND THE PROFITS DERIVED FROM TRANSACTIONS OR ACTIVITIES WHICH ARE NOT MUTUAL IN CHARACTER CAN BE BROUGHT TO TAX. 9. IN ITS RETURN OF INCOME HAS BEEN DECLARING UNDER PART A P & L AS SALES/GROSS RECEIPTS FROM BUSINESS OR PROFESSION, CLAIMED DEPRECIATION U/S 3 2, AND DECLARED I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 8 LOSS WHICH IT HAS SET OFF AGAINST THE INTEREST INCOME. THIS IS WITH REGARD TO THE ACTIVITIES OF THE SOCIETY. HOWEVER, WITH REGARD TO THE INTEREST ON FIXED DEPOSITS, THE PRINCIPLE OF MUTUALITY ENDS AS THE AMOUNT HAS BEEN DEPOSITED WITH THE I NTENTION OF EARNING INCOME. 10. AS THE ASSESSEE IS A MUTUALLY AIDED COOPERATIVE SOCIETY, FULFILLING THE BASIC CRITERIA OF IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPATORS / RECIPIENTS TO THE FUND, THE PRINCIPLE OF MUTUALITY IS SQUARELY APPLICABLE BOTH IN RESPECT OF INCOME AND EXPENDITURE. 11. PROFIT ARISING FROM MUTUALITY TRANSACTION IS NOT SUBJECT TO TAXATION. LOSS IS ALSO NOT RECOGNIZED AS ALLOWABLE LOSS AS PER THE ACT. THIS IS PRECISELY BECAUSE PROFIT AS WELL AS LOSS IS OUTSIDE THE AMBIT OF TAXATION. ACCORDINGLY, IN A MUTUALITY TRANSACTION RESULTING IN LOSS /DEFICIT THE SAME CANNOT BE SET OFF AGAINST INCOME TAXABLE AS PER THE REGULAR PROVISIONS OF THE ACT. 12. IN VIEW OF THE DISCUSSION MADE ABOVE, IT IS RESPECTFULLY SUBMITTED THAT THE APPEALS FILED B Y THE ASSESSEE ARE DEVOID OF MERITS AND MAY KINDLY BE DISMISSED . 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE CASES CITED. WE NOTICE THAT ASSESSEE IS A SOC IETY AND ENGAGED IN CULTURAL ACTIVITIES. THE ASSESSEE MAINTAINED ITS BOOKS OF ACCOUNT ON MERCANTILE BASIS AND NOT MAINTAINED ITS BOOKS SEPARATELY FOR MEMBERS AND NON - MEMBERS. ACCORDINGLY, IT HAS PREPARED ITS FINANCIAL STATEMENTS AND FILED RETURN OF INCOME IN ITR - 5. IT HAS NOT CLAIMED ANY BENEFIT U/S 11 OR MUTUALITY IN THE RETURN OF INCOME OR BEFORE THE A.O. THE ASSESSEE OFFERS THE SERVICES TO BOTH MEMBERS AS WELL AS NON - MEMBERS SIMILARLY AND THERE IS NO DISTINCTION MADE IN TERMS OF ADMINISTRATION OR MAIN TENANCE OF THE SOCIETY A ND THE ACTIVITIES ARE CARRIED ON AS A COMMERCIAL ENTITY. BUT ASSESSEE IS EARNING INTEREST INCOME OUT OF DEPOSITS MADE IN THE BANKS AND ALSO IN CURRING LOSSES OVER A PERIOD OF TIME. THE QUESTION IS , WHETHER THIS ENTITY SHOULD BE TRE ATED AS MUTUAL CONCERN OR COMMERCIAL CONCERN. THE A.O AND THE CIT(A) I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 9 TREATED THEM AS MUTUAL CONCERN AND ASSESSED THEM ACCORDINGLY. BOTH RELIED ON VARIOUS CASE LAWS. 9.1 IN OUR CONSIDERED VIEW, THE PRINCIPLE TO APPLY THE TEST OF MUTUALITY IS THAT ALL THE CONTRIBUTORS TO COMMON FUND MUST BE ENTITLED TO PARTICIPATE IN THE SURPLUS AND THAT ALL THE PARTICIPATORS IN THE SURPLUS MUST BE CONTRIBUTORS TO THE COMMON FUND. IN OTHER WORDS, THERE MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATO RS. THE BASI C PRINCIPLE IS THAT NO ONE CAN ENTER INTO A TRADE OR BUSINESS WITH HIMSELF. THE ESSENCE OF MUTUALITY IS COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPATORS AS HELD IN THE CASE OF CIT VS KUMBHAKONAM MUTUAL BENEFIT FUND LTD., 53 ITR 241 ( SC). THE PRINCIPLE OF MUTUALITY WILL APPLY ON THE NON - COMMERCIAL ACTIVITIES AND ANY SOCIETY ENGAGED IN ANY ADV ENTURE OF A COMMERCIAL NATURE, IT WOULD LOSE ITS IDENTITY AS MUTUAL CONCERN. WE NOTICE FROM THE DECISION S OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. KUMBHAKONAM (SUPRA) AND CIT VS. ROYAL WESTERN INDIA TURF CLUB LTD., 24 ITR 551 , IT LAYS DOWN THE BROAD PROPOSITION THAT, IF THE OBJECT OF THE ASSESSEE - COMPANY CLAIMING TO BE MUTUAL CONCERN, IS TO CARRY ON A PARTICULAR BUSINESS AND MONEY IS RE L EALIZED BOTH FROM THE MEMBERS AND FROM NON - MEMBERS, FOR THE SAME CONSIDERATION BY GIVIN G THE SAME AND SIMILAR FACILITIES TO ALL ALIKE IN RESPECT OF THE ONE AND THE SAME BUSINESS CARRIED ON BY IT, THE DEALINGS AS A WHOLE, DISCLOSE THE SAME PROFIT EARNING M OTIVE AND ARE ALIKE TAINTED WITH COMMERCIALITY. IN OTHER WORDS, THE ACTIVITY CARRIED ON BY THE ASSESSEE IN SUCH CASES CLAIMING TO BE A MUTUAL CONCERN OR MEMBERS CLUB IS A TRADE OR AN ADVENTURE IN THE NATURE OF TRADE AND THE TRANSACTIONS ENTERED INTO WITH THE MEMBERS OR NON - MEMBERS ALIKE IS A TRADE AND THE RESULTANT SURPLUS IS PROFIT LIABLE TO TAX. I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 10 9.2 IN THE GIVEN CASE ALSO, ASSESSEE HAS CARRIED ON THE ACTIVITY OF THE SOCIETY WITHOUT MAKING ANY DISTINCTION BETWEEN MEMBERS OR NON - MEMBERS AND CARRIED T HE ACTIVITIES ON COMMERCIAL BASIS. IT IS ANOTHER MATTER THAT IT IS INCURRING LOSSES. IT CAN ONLY BE T ERMED AS INEFFICIENT WAY OF RUNNING ITS ACTIVITIES. BUT THE NATURE OF CARRYING ITS ACTIVITIES ARE IN THE NATURE OF COMMERCIAL. THIS ENTITY CAN ONLY BE T ERME D AS NON - MUTUAL CONCERN. 9.3 FURTHER, THE ASSESSEE HAS NEVER CLAIMED ANY BENEFIT UNDER MUTUALITY AND IT IS AWARE THAT IT IS NOT ELIGIBLE AND IT HAS FILED ITS RETURN OF INCOME ONLY ON COMMERCIAL BASIS. THE DEPARTMENT HAS ALL ALONG ACCEPTED ITS RETURN OF INCOME. THEREFORE, PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED AS HELD IN RADHASOAMI SATSOMY, 193 ITR 321 (SC), THAT RESJUDICATA DOES NOT APPLY TO INCOME TAX PROCEED INGS, EACH ASSESSMENT YEAR BEING A UNI QUE , WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PER M E A TING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLO WED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. THEREFORE, THERE IS NO MATERIAL CHANGE FROM THE EARLIER YEARS, IN DECLARING THE RESULTS OF THE ASS ESSEE WHICH WAS CONSISTENT AND REVENUE ALSO ACCEPTED IT, THE STANDS SHOULD BE ACCEPTED ON PRINCIPLE OF CONSISTENCY BASIS. 9.4 THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHOULD BE TREATED AS COMMERCIAL ENTITY AND NOT AS MUTUAL ENTITY. THE PROFIT / LOSS DECLARED BY THE ASSESSEE SHOULD BE ASSESSED AS AN AOP ON COMMERCIAL BASIS. THE A.O CANNOT SEPARATE THE TRANSACTIONS BETWEEN MEMBER & NON - MEMBER AND APPLY I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 11 ESTIMATION ON THEM. WITH REGARD TO TREATMENT OF INTEREST EARNED FROM BANKS, SINCE IT IS NOT COM ING UNDER MUTUALITY CONCEPT, IT WILL BE TREATED ON COMMERCIAL BASIS. 9.5 THEREFORE, IN THE RESULT, THIS ENTITY CAN NEVER CLAIM ITSELF AS MUTUAL CONCERN IN THE FUTURE. 10. AS REGARDS OTHER APPEALS IN I TA NOS. 1021, 1022, 1023, 1024, 1027 AND 1028/HYD/2018, THE CIT(A) DISMISSED ALL THESE APPEALS IN - LIMINE ON THE GROUND OF NON - PROSECUTION BY THE ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THESE APPEALS BACK TO CIT(A) WITH A DIRECTION TO DECI DE THE ISSUE ON MERIT AND ADJUDICATE THE ISSUE AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THESE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEALS IN ITA NOS. 1025 & 1026/HYD/2018 ARE ALLOWED AN D THE APPEALS IN ITA NOS. 1021, 1022, 1023, 1024, 1027 & 1028/HYD/2018 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUA RY, 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH FEBRUARY , 201 9. KV I.T.A. NO. 1 021 TO 1028 /HYD/1 8 FILM NAGAR CULTURAL CENTER, HYD. 12 COPY FORWARDED TO: 1. FILM N AGAR CULTURAL CENTER, 8 - 2 - 293/82, ROAD NO. 6, FILM NAGAR, JUBILEE HILLS, HYDERABAD 33 2 . D C IT, CIRCLE 1 4 ( 1 ), HYDERABAD . 3 . CIT (A) - 6 , HYDERABAD 4. PR. CIT 6 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE