M/s. Calcutta Cricket & Football Club, Kolkata V. ITO, Exemption, Ward 1(1). Kolkata, Kolkata

ITA 1105/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9774 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: J P KHAITAN; MANOJ KATARUKA
• Keywords: Revision of order; Charitable institution; Opportunity of being heard; Benefit of exemption
• Section: 143(3); 12AA; 10B; 147; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A NO. 1105/KOL/2017 ASSESSMENT YEAR: 2012-13 M/S. CALCUTTA CRICKET & FOOTBALL CLUB (PAN:AACCC 6337 P ) VS. ITO, EXEMPTION WARD 1(1), APPELLANT RESPONDENT DATE OF HEARING 27.09.2018 DATE OF PRONOUNCEMENT 12.12.2018 FOR THE APPELLANT SHRI J.P. KHAITAN, SR. ADV. & MAN OJ KATARUKA, ADV. FOR THE RESPONDENT SHRI P.K. SRIHARI, CIT(DR) ORDER PER SHRI A.T. VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (EXEMPTION) DATED 21.03. 2017 FOR ASSESSMENT YEAR 2012-13 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSE E IS A COMPANY INCORPORATED ON 05.06.2003 U/S 25 OF THE COMPANIES ACT, 1956 WHI CH MEANS THAT THIS ASSESSEE COMPANY IS NOT EXISTING FOR THE PURPOSE OF PROFITS. FOR ASSESSMENT YEAR 2012-13, THE ASSESSEE FILED RETURN OF INCOME ON 27.09.2012 D ECLARING NIL INCOME AND THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THOUGH ASSESSING OFFICER NOTED THAT ASSESSEE WAS REGISTERED U/S 12AA OF THE ACT VIDE ORDER DATED 18.02.1005, THE ASSESSING OFFICER COMPUTED THE TOTA L INCOME OF THE ASSESSEE AT RS.77,69,870/- VIDE ORDER DATED 30.03.2015. THEREAF TER, THE LD. CIT(E) IN EXERCISING POWERS U/S 263 OF THE ACT WAS OF THE VIE W THAT THE ORDER OF THE 2 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE FOR THE FOLLOWING REASONS: THE ASSESSMENT U/S 143(3)/11 OF THE INCOME TAX ACT , 1961 WAS COMPLETED BY ITO(EXEMPTIONS), WARD-1(1), KOLKATA ON 30.03.2015. ON FURTHER VERIFICATION OF RECORDS, IT HAS COME TO THE NOTICE THAT THE ASSESSEE COMPANY HA D INCOME FROM TRADE/COMMERCIAL ACTIVITIES LIKE BAR AND CATERING DURING THE YEA R AND GROSS RECEIPTS FROM SUCH ACTIVITIES WERE RS.1,74,61,840/- AND RS.1,49,05,684/- RESPECTI VELY. IT IS EVIDENT THAT THE ASSESSEE COMPANY NOT BEING A MUTUAL ORGANIZATION HAD GROSS RECEIPT EXCEEDING RS.25 LAKHS FROM TRADE/COMMERCIAL ACTIVITIES AND, THEREFORE, EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 WAS NOT APPLICAB LE. THIS HAS RESULTED IN THE INCOME BEING UNDER-ASSESSED TO THE EXTENT OF RS.2,26,35,44 0/-. ON THE BASIS OF ABOVE OBSERVATION, IT IS FOUND THA T THE ORDER PASSED U/S 143(3)/11 OF THE INCOME TAX ACT, 1961 IS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE, AND AS SUCH IT IS PROPOSED TO INITIATE PROCEEDINGS U/S 263 OF THE I.T. ACT, 1961 FOR CANCELLING THE ORIGINAL ASSESSMENT ORDER U/S 143(3)/11 OF THE I.T. ACT, 1961. 3. THE LD. CIT(E) ACCORDINGLY ISSUED SHOW-CAUSE NOT ICE DATED 21.09.2015 U/S 263 OF THE ACT, THE ASSESSEE REPLIED DATE (NOT STAT ED) BUT REPRODUCED BY CIT(E) WHEREIN IT WAS POINTED OUT THAT IT WAS INCORPORATED ON 05.06.2003 IN TERMS OF SECTION 25 OF THE COMPANIES ACT, 1956 AND WAS A NOT FOR PROFIT COMPANY AND ASSESSEE COMPANY TOOK OVER THE UNINCORPORATED ASSOC IATION, CALCUTTA CRICKET & FOOTBALL CLUB, A MEMBERS CLUB WHICH TRACES ITS ORI GIN TO 1792. THE ASSESSEE POINTED OUT TO THE MAIN OBJECTIVES TO BE PURSUED BY IT ACCORDING TO MEMORANDUM OF ASSOCIATION WAS:- '1. TO PROMOTE THE PLAYING AND ENCOURAGEMENT IN IND IA OF THE GAMES OF CRICKET, FOOTBALL, HOCKEY, TENNIS, GOLF, CYCLE POLO, SWIMMIN G, RUGBY AND OTHER FORMS OF SPORTS. 3 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB 2. TO TAKE OVER THE ASSETS AND LIABILITIES OF THE C ALCUTTA CRICKET & FOOTBALL CLUB, AN UNINCORPORATED ASSOCIATION, INCLUDING ITS OUTSTANDI NG DEBTS AND ITS RIGHT TO USE THE GROUND AT BALLYGUNGE, AND TO CONTINUE CARRYING ON A LL ITS CURRENT ACTIVITIES. 3. TO ORGANIZE AND PARTICIPATE IN COMPETITIVE TOURN AMENTS IN DIFFERENT SPORTS AND GAMES WITH THE OBJECT OF IMPROVING THE STANDARDS OF THE SAME AND ENCOURAGING THE ACHIEVEMENT OF HIGHER STANDARDS OF EXCELLENCE'. 4. THE REPLY OF THE ASSESSEE BEFORE THE LD CIT(E) I S REPRODUCED AS UNDER: {A) THE CURRENT ACTIVITIES OF THE UNINCORPORATED A SSOCIATION ADVERTED TO IN THE MEMORANDUM OF ASSOCIATION WERE THAT OF A MUTUAL ASSOCIATION. CLAU SE X OF OUR MEMORANDUM OF ASSOCIATION PROVIDES THAT UPON WINDING UP OR DISSOLUTION, AFTER SATISFAC TION OF ALL DEBTS AND LIABILITIES, NO PROPERTY SHAL L BE DISTRIBUTED AMONG OUR MEMBERS AND THE SAME SHALL BE GIVEN OR TRANSFERRED TO ANOTHER COMPANY HAVING SIMILAR OBJECTS. WE TOOK OVER THE ASSETS AND LIABILITIES OF THE UNINCORPORATED ASSOCIATION AND IN TERMS OF OBJECTS CLAUSE 2 CONTINUED TO CARRY AN ALL ITS CURRENT ACTIVITIES. (B) THE PROVISION OF FOOD AND DRINKS BY US TO OUR M EMBERS IS A MUTUAL ACTIVITY AND DOES NOT INVOLVE ANY SALE. THE CLUB'S DINING ROOM WHERE FOOD AND DRI NKS ARE PROVIDED TO THE MEMBERS IS NOT A RESTAURANT OR A BAR. A RESTAURANT OR A BAR IS A PUB LIC PLACE WHERE FOOD OR BEVERAGES ARE SERVED TO CUSTOMERS FOR CONSIDERATION. THE CLUB'S DINING ROOM IS FOR MEMBERS ONLY AND IS NOT A PUBLIC PLACE. THE CLUBS MEMBERS ARE NOT ITS CUSTOMERS. THE CONCE PT OF CONSIDERATION FOR PROVISION OF FOOD OR BEVERAGE IS TOTALLY ABSENT. THE CLUB IS ONLY AN AGE NT OF ITS MEMBERS AND RECOUPS ITSELF FOR THE EXPENSES INCURRED AND DOES NOT ACT AS A COMMERCIAL OR BUSINESS CONCERN FOR THE PURPOSE OF MAKING ANY GAIN. (C) THE UNINCORPORATED ASSOCIATION, CALCUTTA CRICKE T & FOOTBALL CLUB, FORMER IN 1792 WAS ADMITTEDLY A MEMBERS CLUB/MUTUAL ASSOCIATION AND WA S ASSESSED AS SUCH UPTO THE ASSESSMENT YEAR 2004-05, THAT IS TILL THE TIME IT WAS TAKEN OVER BY THE COMPANY AS AFORESAID. REFERENCE IN THIS BEHALF IS INVITED TO:- (I) ASSESSMENT ORDER DATED DECEMBER 26, 2006 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 55, KOLKATA, FOR THE ASSESSMENT YEAR 2004-05 HOLDING THAT THE UNINCORPORATED ASSOCIATION WAS A MEMBERS' CLUB/MUTUAL ASSOCIATION BUT SUBJECTING T O TAX INTEREST ON FIXED DEPOSIT AS NON-MUTUAL INCOME. (II) ORDER DATED MARCH 29, 2007 UNDER SECTION 264 P ASSED BY THE COMMISSIONER OF INCOME TAX, KOLKATA - XX, INTER ALIA, FOR THE ASSESSMENT YEAR 2 004-05 HOLDING THAT EVEN THE INTEREST ON FIXED DEPOSIT WAS NOT TAXABLE. D) WE WERE GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT WITH EFFECT FROM APRIL 1, 2004. (E) OUR VERY FIRST ASSESSMENT FOR THE ASSESSMENT YE AR 2004-05, FOR WHICH RETURN WAS FILED UNDER SECTION 139(4A) CLAIMING EXEMPTION UNDER SECTION 11 , WAS MADE SUBJECT MATTER OF PROCEEDINGS UNDER SECTION 147 FOR THE PURPOSE OF BRINGING TO TAX, THE SURPLUS OF RS.6,67,907/- (BEFORE DEDUCTION OF EXPENSES/OVERHEADS DEBITED TO THE INCOME AND EXPEND ITURE ACCOUNT IN RESPECT OF PROVISION OF FOOD 4 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB AND DRINKS TO THE MEMBERS. BY AN ORDER DATED DECEMB ER 3, 2007 PASSED UNDER SECTION 147, THE ASSESSING OFFICER ACCEPTED THE RETURNED INCOME AND DID NOT MAKE ANY ADDITION IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN CIT V, BAN KIPUR CLUB LTD., (1997) 226 ITR 97 (SC). (F) IN CIT V. BANKIPUR CLUB LTD. {SUPRA) IT WAS HEL D BY THE HON'BLE SUPREME COURT THAT FACILITIES BY WAY OF PROVISION OF FOOD AND DRINKS EXTENDED BY A M EMBERS' CLUB TO ITS MEMBERS AND THEIR FRIENDS AS PART OF THE USUAL PRIVILEGES, ADVANTAGES AND CONVEN IENCES ATTACHED TO THE MEMBERSHIP OF THE CLUB WAS NOT A TRADING ACTIVITY AND THE EXCESS OF RECEIP TS OVER THE EXPENDITURE AS A RESULT OF MUTUAL ARRANGEMENT WAS NOT 'INCOME' FOR THE PURPOSE OF THE ACT. (G) WE MAY ALSO DRAW ATTENTION TO THE JOINT COMMERC IAL TAX OFFICER YOUNG MEN'S INDIAN ASSOCIATION, (1970) 26 STC 241 (SC), WHERE IT WAS H ELD BY THE HON'BLE SUPREME COURT THAT SUPPLY OF VARIOUS PREPARATIONS BY A MEMBERS' CLUB, EVEN IF IN CORPORATED, TO ITS MEMBERS DID NOT AMOUNT TO SALE OF SUCH PREPARATIONS. IT WAS HELD THAT THE INCORPOR ATED CLUB ONLY ACTED AS AN AGENT OR TRUSTEE FOR ITS MEMBERS FOR AND ON THEIR BEHALF AND RECOUPED ITSELF FOR THE EXPENSES INCURRED. (H) IN CIT V DARJEELING CLUB LTD., (1985) 153 ITR 6 76 (CAL), AT PAGE 686 OF THE REPORTS, IT WAS HELD THAT A MEMBERS' CLUB DID NOT CARRY ON ANY BUSINESS WITH ITS MEMBERS AND ANY SURPLUS FROM PROVISION OF GOODS AND SERVICES TO THE MEMBERS WAS NOT BUSINE SS INCOME. (I) IN STATE OF WEST BENGAL CALCUTTA CLUB LTD, (200 8) 14 VST 499 (CAL.), AT PAGES 507-08 OF THE REPORTS, IT WAS HELD THAT COLLECTION BY THE CLUB FR OM ITS MEMBERS WAS NOT PAYMENT OF PRICE FOR FOOD OR DRINKS BUT REIMBURSEMENT OF EXPENSES MET FROM THE F UND OF THE CLUB, WHICH HAD BEEN CONTRIBUTED BY THE MEMBERS THEMSELVES EARLIER AND THAT THERE WAS N O SALE OF THE FOOD OR DRINKS AND NO CONSIDERATION WAS INVOLVED. (J) OUR ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS MADE UNDER SECTIONS 143(3 )/11 OF THE ACT AND EXEMPTION UNDER SECTION 11 WAS ALLOWED. THE RET URNS FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 CLAIMING EXEMPTION UNDER SECTION 11 WERE AC CEPTED UNDER SECTION 143(1). IN THE ASSESSMENT YEARS 2008-09 AND 2009-10 THE ASSESSING OFFICER DID NOT ACCEPT OUR CLAIM FOR EXEMPTION AND/OR MUTUALITY BUT SUCH ASSESSMENT WERE NOT SUSTAINED UP ON FIRST APPEAL WHERE IT WAS HELD THAT WE ARE A MEMBERS' CLUB ENGAGED IN THE PROMOTION OF SPORTS AN D GAMES AND ARE ENTITLED TO EXEMPTION UNDER SECTION 11. THE REVENUE ACCEPTED THE ORDERS OF THE COMMISSIONER OF INCOME TAX {APPEALS) FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 AND NO FURTHER APPEAL WAS PREFERRED. IN THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2010-11, 2011-12 AND 2012-13, ALL MADE UNDER SECTION 143(3), THE ASSESSING 0FFICER RIGHTLY ACCEPTED THAT WE ARE A MEMBERS' CLU B ENGAGED IN THE PROMOTION OF SPORTS AND GAMES AND ARE ENTITLED TO EXEMPTION UNDER SECTION 11. (K) WE DID NOT IN FACT HAVE ANY SURPLUS FROM OUR MU TUAL ACTIVITIES FOR THE YEAR IN QUESTION. ATTENTION IN THIS BEHALF IS INVITED TO OUR INCOME AND EXPENDI TURE ACCOUNT READ WITH SCHEDULES 15, 15.1, 15.2, 16, 17, 18, 19 AND 20 TO THE ACCOUNTS. THE EXPENDIT URE FIGURES IN SCHEDULES 15.1, 15.2 AND 17 DO NOT INCLUDE THE ADMINISTRATIVE AND OTHER EXPENSES/OVERH EADS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT. THE AGGREGATE OF ALL EXPENSES AND OVERHEAD S DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT FOR THE SAID YEAR IS RS. 7,02,23,355/-. THE TOTAL O F THE INCOME SIDE OF THE INCOME AND EXPENDITURE ACCOUNT IS RS.7,95,70,182/- WHICH INCLUDES INTEREST AND DIVIDEND O/ RS70,94,276/- (VIDE SCHEDULE 16) AND RS.71,75,000/- ON ACCOUNT OF TRANSFER OF A PORT ION OF THE ADMISSION FEE RECEIVED FROM THE CORPORATE MEMBERS FROM CORPORATE MEMBERS' FUND FORM ING PART OF THE CLUB'S CAPITAL RESERVE TO THE INCOME AND EXPENDITURE ACCOUNT THE DEPOSITS AND UNI TS WHICH GAVE RISE TO INCOME BY WAY OF INTEREST AND DIVIDEND ARE PROPERTY HELD UNDER TRUST FOR A PU BLIC CHARITABLE PURPOSE AND THE INCOME THEREFROM IS UTILISED FOR THE PROMOTION OF SPORTS AND GAMES. THE ADMISSION FEE RECEIVED FROM THE CORPORATE MEMBERS IS ACTUALLY A CAPITAL OR CORPUS RECEIPT [PL EASE SEE THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN CIT -VS- DINERS BUSINESS SERVICES PVT . LTD., [2003) 263 ITR 1 (BOM)], IF SUCH INTEREST AND DIVIDEND (RS.70,94,226/-) AND TRANSFER FROM CAP ITAL RESERVE (RS.71,75,000/-) ARE EXCLUDED FROM INCOME, ONE IS LEFT WITH A FIGURE OF RS. 6,53,00,90 6/- ON THE INCOME SIDE WHICH IS LOWER THAN THE 5 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB EXPENSES/OVERHEADS OFRS.7,02,23,355/- BY RS.49,22,4 49/-. IN THE SHOW CAUSE NOTICE, FIGURES HAVE BEEN TAKEN FROM SCHEDULE 15.1, WHICH REPRESENT GROS S RECEIPTS BEFORE TAKING INTO CONSIDERATION THE EXPENDITURE REFLECTED IN THE SAME SCHEDULE OR THE A DMINISTRATIVE AND OTHER EXPENSES/OVERHEADS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT. FU RTHER, THE FIGURE OF RS. 1,49,05,684/- PERTAINS TO PRECEDING YEAR'S REALISATION ON ACCOUNT OF BEVERAGE S. THE REALISATION ON ACCOUNT OF FOOD FOR THE YEAR IN QUESTION IS RS. 1,43,88,222/-. THERE WAS IN FACT NO INCOME FOR THE YEAR IN QUESTION AND, ON THE OTHER HAND, THERE WAS A DEFICIT OF RS. 49,22,449/- FROM OUR ACTIVITIES, THE SURPLUS OF RS.93,45,827/- WHICH APPEARS IN THE INCOME AND EXPENDITURE ACCOUNT IS ONLY BECAUSE OF THE RESIDUARY INTEREST AND DIVIDEND INCOME OF RS.21,77,827/- (RS. 70,94,276/- - RS. 49,22,449/-) AND TRANSFER OF THE SUM OF RS.71,75,000I- FROM THE CAPITAL RESERVE ACCOUNT. IT IS NOT AT ALL CLEAR TO US AS TO HOW THE FIGURE OF RS. 2,26,35,440/- MENTIONED IN THE NOTICE HAS BEEN ARRIVED AT. WE DID NOT HAVE ANY SUCH INCOME AND THE QUESTION OF ANY UNDER-ASSESSMENT DOES NOT ARISE . L) SURPLUS, IF ANY, FROM OUR MUTUAL ACTIVITIES (THO UGH IN FACT THERE IS NONE IN THIS YEAR) AS ALSO OUR INVESTMENT INCOME IS USED FOR PROMOTION OF SPORTS A ND GAMES. BY CIRCULAR BEARING NO. 11 OF 2008 DATED DECEMBER 19, 2008, REPORTED IN (2009) 308 ITR (STATUTES) 5, IT WAS CLARIFIED BY THE BOARD THAT MUTUALITY AND CHARITY CAN CO-EXIST IN RESPECT OF TH E SAME INSTITUTION/ASSOCIATION. BY CIRCULAR NO. 395 DATED SEPTEMBER 24, 1984, REOPENED IN (1984) 150 IT R (STATUTES) 74, IT WAS CLARIFIED BY THE BOARD THAT AN ASSOCIATION OR INSTITUTION ENGAGED IN THE P ROMOTION OF SPORTS AND GAMES CAN CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. M) WE PROMOTE SORTS AND GAMES BY- (I) TRAINING AND EQUIPPING PLAYERS FREE OF COST; AN D (III IMPROVING THE STANDARDS OF THE GAME AND ENCOUR AGING THE ACHIEVEMENT OF HIGHER STANDARDS OF EXCELLENCE. WE TRAIN AND EQUIP PLAYERS WHO ARE MOSTLY FROM AMON GST THE PUBLIC FREE OF COST AND ARE ALSO INVOLVED IN MULTIFARIOUS ACTIVITIES FOR IMPROVING T HE STANDARDS OF DIFFERENT PRECEDENT FOR THE ASSUMPTION OF JURISDICTION UNDER SECTION 263 DO NOT EXIST IN THE FACTS AND CIRCUMSTANCES OF THE INSTAN T CASE. WE WOULD REQUEST YOU TO WITHDRAW THE NOTICE AND DRO P THE PROCEEDINGS INITIATED UNDER SECTION 263 OF THE ACT. IN THE EVENT ANY OF OUR CONTENTIONS IS NOT ACCEPTAB LE AND THE PROCEEDINGS ARE SOUGHT TO BE PROCEEDED WITH, WE WOULD REQUEST FOR AN OPPORTUNITY OF BEING HEARD IN THE MATTER. AT SUCH PERSONAL HEARING, WE SHALL MAKE FURTHER SUBMISSIONS AND REPRESENTATIONS IN SUPPORT OF OUR VARIOUS CONTENTIONS. AFTER GOING THROUGH THE REPLY OF THE ASSESSEE AS AF ORE-STATED, THE CIT(E) WAS PLEASED TO HOLD THAT ASSESSEE IS NOT ELIGIBLE TO AV AIL THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT IN RESPECT OF INCOME FROM SERVICE CHA RGES RECEIVED ON COMMERCIAL BASIS IN THE COMPUTATION OF INCOME AND SO THE ASSESSMENT OF ASSESSING OFFICER WAS SET ASIDE AND REMANDED BACK TO ASSESSING OFFICE R TO DETERMINE INCOME RECEIVED FROM SERVICE RENDERED IN COMMERCIAL MANNER AND TO COMPUTE THE INCOME ACCORDINGLY. 6 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB 5. AGGRIEVED BY THE AFORESAID ACTION OF THE CIT(E) U/S 263 OF THE ACT IS ASSAILED BEFORE US BY THE ASSESSEE. 6. AT THE OUTSET ITSELF, IT HAS BEEN BROUGHT TO OUR NOTICE THAT A SIMILAR ACTION WAS TAKEN BY THE LD. CIT(E) U/S 263 OF THE ACT AGAINST THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2011-12 WHICH WAS CHALL ENGED BY THE ASSESSEE BEFORE THE TRIBUNAL AND THE TRIBUNAL WAS PLEASED TO QUASH THE ACTION OF CIT(E) U/S 263 BY HOLDING AS UNDER: THE ASSESSEE SUBMITTED THAT ITS ACTIVITIES STILL C ONTINUE TO BE THAT OF THE UNINCORPORATED ASSOCIATION ADVERTED TO IN THE MEMOR ANDUM OF ASSOCIATION WERE THAT OF A MUTUAL ASSOCIATION. THE ASSESSEE ALSO POINTED OUT THAT UNDER CLAUSE X OF THE MEMORANDUM OF ASSOCIATION UPON WINDING UP OR DISSO LUTION, AFTER SATISFACTION OF ALL DEBTS AND LIABILITIES, NO PROPERTY SHALL BE DISTRIB UTED AMONG MEMBERS AND THE SAME SHALL BE GIVEN OR TRANSFERRED TO ANOTHER COMPANY HA VING SIMILAR OBJECTS. THE ASSESSEE FURTHER REITERATED THAT THE UNINCORPORATED ASSOCIATION, CALCUTTA CRICKET & FOOTBALL CLUB, FORMED IN 1792, WAS ADMITTEDLY A ME MBERS' CLUB/MUTUAL ASSOCIATION AND WAS ASSESSED AS SUCH UPTO THE ASSESSMENT YEAR 2 004-05, I.E., TILL THE TIME IT WAS TAKEN OVER BY THE ASSESSEE WHEN IT WAS FORMED AS A COMPANY. THE ASSESSEE DREW THE ATTENTION OF THE CIT TO THE VARIOUS ASSESSMENTS IN THE CASE OF THE ASSESSEE WHICH WERE AS GIVEN BELOW:- (I)ASSESSMENT ORDER DATED DECEMBER 26, 2006 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 55, KOLKATA, FOR THE ASSESSME NT YEAR 2004-05 HOLDING THAT THE UNINCORPORATED ASSOCIATION WAS A MEMBERS' CLUB/MUTU AL ASSOCIATION BUT SUBJECTING TO TAX INTEREST ON FIXED DEPOSIT AS NON-MUTUAL INCO ME. (II) ORDER DATED MARCH 29, 2007 UNDER SECTION 264 P ASSED BY THE COMMISSIONER OF INCOME TAX, KOLKATA - XX, INTER ALIA, FOR THE ASSES SMENT YEAR 2004-05 HOLDING THAT EVEN THE INTEREST ON FIXED DEPOSIT WAS NOT TAXABLE. (III) GRANT OF REGISTRATION UNDER SECTION 12AA OF T HE ACT WITH EFFECT FROM 1 ST APRIL 2004. (IV) THE FIRST ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05, FOR WHICH RETURNS FILED UNDER SECTION 139(4A) CLAIMING EXEMPTION UNDER SECT ION 11, WAS MADE SUBJECT MATTER 7 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB OF PROCEEDINGS UNDER SECTION 147 FOR THE PURPOSE OF BRINGING TO TAX, THE SURPLUS OF RS.6,67,907/- (BEFORE DEDUCTION OF EXPENSES/OVERHEA DS DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT) IN RESPECT OF PROVISION OF FOO D AND DRINKS TO THE MEMBERS. BY AN ORDER DATED DECEMBER 3, 2007 PASSED UNDER SECTION 1 47, THE ASSESSING OFFICER ACCEPTED THE RETURNED INCOME AND DID NOT MAKE ANY A DDITION IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIT V. BANKIPUR CLU B LTD.. (1997) 226 ITR 97 (SC). (V) ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WAS MADE UNDER SECTIONS 143(3)/11 OF THE ACT AND EXEMPTION UNDER SECTION 11 WAS ALLOW ED. THE RETURNS FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 CLAIMING EXEMP TION UNDER SECTION ERE ACCEPTED UNDER SECTION 143( 1). (VI) IN THE ASSESSMENT YEARS 2008-09 AND 2009-10 THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CLAIM FOR EXEMPTION AND/OR MU TUALITY BUT SUCH ASSESSMENTS WERE NOT SUSTAINED UPON FIRST APPEAL WHERE IT WAS H ELD THAT THE ASSESSEE WAS A MEMBERS' CLUB ENGAGED IN THE PROMOTION OF SPORTS AN D GAMES AND ARE ENTITLED TO EXEMPTION UNDER SECTION 11. THE REVENUE ACCEPTED TH E ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEARS 2008- 09 AND 2009-10 AND NO FURTHER APPEAL WAS PREFERRED. IN THE ASSESSMENTS FOR THE AS SESSMENT YEARS 2010-11, 2011-12 AND 2012-13, ALL MADE UNDER SECTION 143(3), THE ASS ESSING OFFICER ACCEPTED THAT THE ASSESSEE WAS A MEMBERS' CLUB ENGAGED IN THE PROMOTI ON OF SPORTS AND GAMES AND ARE ENTITLED TO EXEMPTION UNDER SECTION 11. 5. WITH REGARD TO PROVISION OF FOOD AND DRINKS BY THE ASSESSEE TO MEMBERS, IT WAS SUBMITTED THAT IT WAS A MUTUAL ACTIVITY AND DOES NO T INVOLVE ANY SALE. THE ASSESSEE'S DINING ROOM WHERE FOOD AND DRINKS ARE PROVIDED TO T HE MEMBERS IS NOT A RESTAURANT OR A BAR. A RESTAURANT OR A BAR IS A PUBLIC PLACE WHER E FOOD OR BEVERAGES ARE SERVED TO CUSTOMERS FOR CONSIDERATION. THE CLUB'S DINING ROOM IS FOR MEMBERS ONLY AND IS NOT A PUBLIC PLACE. THE CLUB'S MEMBERS ARE NOT ITS CUSTOM ERS. THE CONCEPT OF CONSIDERATION FOR PROVISION OF FOOD OR BEVERAGE IS TOTALLY ABSENT . THE CLUB IS ONLY AN AGENT OF ITS MEMBERS AND RECOUPS ITSELF FOR THE EXPENSES INCURRE D AND DOES NOT ACT AS A COMMERCIAL OR BUSINESS CONCERN FOR THE PURPOSE OF M AKING ANY GAIN. 6. THE ASSESSEE ALSO POINTED OUT THAT IT DID NOT H AVE ANY SURPLUS FROM MUTUAL ACTIVITIES FOR THE YEAR QUESTION. ATTENTION IN THIS BEHALF WAS INVITED TO INCOME AND EXPENDITURE ACCOUNT READ WITH SCHEDULES 12 AND 13 T O THE ACCOUNTS AND DETAILS OF SCHEDULE 13. THE FIGURES IN SCHEDULES 12 AND 13 ARE BEFORE DEDUCTION OF THE ADMINISTRATIVE AND OTHER EXPENSES/OVERHEADS REFLECT ED IN THE INCOME AND EXPENDITURE ACCOUNT. THE ADMINISTRATIVE AND OTHER EXPENSES/OVER HEADS DEBITED TO THE INCOME AND 8 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB EXPENDITURE ACCOUNT FOR THE SAID YEAR IS RS.2,13,37 263/- PLUS PROVISION FOR LEAVE ENCASHMENT OF RS.2,70,605/-, THAT WAS RS.2,16,07,86 8/-. THE TOTAL OF THE INCOME SIDE OF THE INCOME AND EXPENDITURE ACCOUNT WAS RS.2,36,5 1,788/- WHICH INCLUDES INTEREST AND DIVIDEND OF RS.60,45,944/-. IF SUCH INTEREST AN D DIVIDEND IS EXCLUDED FROM INCOME, ONE IS LEFT WITH A FIGURE OF RS.1,76,05,844/- ON T HE INCOME SIDE WHICH IS LOWER THAN THE EXPENSES/OVERHEADS OF RS.2,16,07 ,868/- BY RS.4 0,02,024/-. IT WAS POINTED OUT THAT IN THE SHOW-CAUSE NOTICE, FIGURES HAVE BEEN TAKEN F ROM SCHEDULE 12 AND DETAILS OF SCHEDULE 13, WHICH ARE BEFORE DEDUCTION OF THE ADMI NISTRATIVE AND OTHER EXPENSES/OVERHEADS REFLECTED IN THE COME AND EXPEND ITURE ACCOUNT. THERE WAS IN FACT NO INCOME OF RS.64,59,364/- FOR THE YEAR IN QUESTIO N AND, ON THE OTHER HAND, THERE WAS A DEFICIT OF RS.40,02,024/- FROM ACTIVITIES. THE SU RPLUS OF RS.80,93,920/- WHICH APPEARS IN THE INCOME AND EXPENDITURE ACCOUNT IS ON LY BECAUSE OF THE RESIDUARY INTEREST AND DIVIDEND INCOME OF RS.20,43,920/- (RS. 60,45,944/- - RS.40,02,024/-) AND TRANSFER OF A PORTION OF THE ADMISSION FEE RECEIVED FROM THE CORPORATE MEMBERS TO THE EXTENT OF RS.60,50,000/- FROM CORPORATE MEMBERS' FU ND FORMING PART OF THE CLUB'S CAPITAL RESERVE TO THE INCOME AND EXPENDITURE ACCOU NT. THE BONDS, DEPOSITS AND UNITS WHICH GAVE RISE TO INCOME BY WAY OF INTEREST AND DI VIDEND ARE PROPERTY HELD UNDER TRUST FOR A PUBLIC CHARITABLE PURPOSE AND THE INCOM E THERE FROM IS UTILIZED FOR THE PROMOTION OF SPORTS AND GAMES. THE ADMISSION FEE RE CEIVED FROM THE CORPORATE MEMBERS IS ACTUALLY A CAPITAL OR CORPUS RECEIPT. R EFERENCE WAS MADE IN THIS REGARD TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN CI T -VS- DINERS BUSINESS SERVICES PVT. LTD., (2003) 263 ITR 1 (BOM)]. IT WAS REITERA TED THAT SURPLUS, IF ANY, FROM MUTUAL ACTIVITIES (THOUGH IN FACT THERE IS NONE IN THIS YE AR) AS ALSO INVESTMENT INCOME IS USED FOR PROMOTION OF SPORTS AND GAMES. IT WAS SUBMITTED THAT BY CIRCULAR BEARING NO. 11 OF 2008 DATED DECEMBER 19,2008, REPORTED IN (2009) 308 ITR (STATUTES) 5, IT WAS CLARIFIED BY THE BOARD THAT MUTUALITY AND CHARITY C AN CO-EXIST IN RESPECT OF THE SAME INSTITUTION/ASSOCIATION. BY CIRCULAR NO. :-5 DATED SEPTEMBER 24, 1984, REPORTED IN (1984) 150 ITR (STATUTES) 74, IT WAS CLARIFIED BY T HE BOARD THAT AN ASSOCIATION OR INSTITUTION ENGAGED IN THE PROMOTION OF SPORTS AND GAMES CAN CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSEE POINTED OUT TH AT IT PROMOTES SPORTS AND GAMES BY- (I) TRAINING AND EQUIPPING PLAYERS FREE OF COST; AN D (II) IMPROVING THE STANDARDS OF THE GAME AND ENCOUR AGING THE ACHIEVEMENT OF HIGHER STANDARDS OF EXCELLENCE. IT TRAINS AND EQUIPS PLAYERS WHO ARE MOSTLY FROM AM ONGST THE PUBLIC FREE OF COST AND ARE ALSO INVOLVED IN MULTIFARIOUS ACTIVITIES FOR IM PROVING THE STANDARDS OF DIFFERENT GAMES AND ENCOURAGING THE ACHIEVEMENT OF HIGHER STA NDARDS OF EXCELLENCE BY ORGANIZING VARIOUS TOURNAMENTS IN WHICH THERE ARE P UBLIC PARTICIPANTS AS ALSO INTER- SCHOOL TOURNAMENTS. THE ASSESSEES ACTIVITIES IN TH AT BEHALF CANNOT BE CONSIDERED AS TRADE/COMMERCIAL ACTIVITIES. IT WAS POINTED OUT THA T THE DIRECTOR OF INCOME TAX (EXEMPTIONS) BY HIS ORDER DATED OCTOBER 21,2011 UND ER SECTION 12AA(3) OF THE ACT HELD THAT PRIMARY OBJECT WAS THE PROMOTION OF ORGAN IZED SPORTS IN THE CITY OF KOLKATA AND THAT EXEMPTION UNDER SECTION 11 WAS AVAILABLE T O THE ASSESSEE. 9 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB 7. IT WAS REITERATED THAT THE ASSESSEE WAS NEVER E NGAGED IN ANY TRADE OR COMMERCIAL ACTIVITY AND HAVE NO RECEIPT OR INCOME FROM ANY SUC H ACTIVITY. THAT IT WAS A MUTUAL ORGANISATION ENGAGED IN THE PROMOTION OF SPORTS AND GAMES AND IS ENTITLED TO THE EXEMPTION UNDER SECTION 11 WHICH HAS ALL ALONG BEEN GRANTED TO US. IN THE YEARS IN WHICH EXEMPTION WAS NOT GRANTED IN THE ASSESSMENT, THE SAME WAS ALLOWED ON FIRST APPEAL, WHICH DECISION WAS ACCEPTED BY THE REVENUE. IT WAS EMPHASIZED THAT THERE HAS BEEN NO CHANGE IN THE FACTS OR THE LAW, WHICH HAVE REMAINED THE SAME IN ALL THE YEARS. THE AMENDED PROVISIONS OF SECTION 2(15) WERE ALSO C ONSIDERED IN THE ASSESSMENT YEAR 2009-10 AND SUBSEQUENT YEARS. IT WAS POINTED OUT T HAT FOR THE ASSESSMENT YEAR 2009- 10 RELIEF WAS GRANTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND HIS ORDER WAS ACCEPTED BY THE REVENUE. 8. IT WAS THUS CONTENDED THAT THE ORDER PASSED BY THE ASSESSING OFFICER GRANTING US EXEMPTION UNDER SECTION 11 OF THE ACT IS NEITHER ER RONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. EXEMPTION UNDER SECTION 11 WAS RIGHTLY ALLOWED AND THERE HAS BEEN NO UNDER ASSESSMENT OF ANY INCOME. IT WAS SUBM ITTED THAT THE CONDITION PRECEDENT FOR THE ASSUMPTION OF JURISDICTION UNDER SECTION 263 DOES NOT EXIST IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. 9. THE CIT WAS HOWEVER NOT CONVINCED WITH THE EXPL ANATION GIVEN BY THE ASSESSEE AND HE HELD AS FOLLOWS :- HAVING GONE THROUGH THE ASSESSEE'S SUBMISSION AND THE RELEVANT PROVISIONS OF THE ACT, I FIND THAT THE AO WHILE PASSING SUCH ORDER U/S 143(3) DT. 25.3.201 5 FAILED TO APPRECIATE THE PROVISIONS OF THE ACT VIS-A-VIS THE ACTIVITY CARRIED ON BY THE ASSESSEE A ND AS SUCH THE AO'S ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ON PERUSAL OF ACCOUNTS SUBMITTED BY AR IT WAS NOTIC ED THAT RECEIPTS FROM SPORTS ACTIVITIES ARE MOSTLY FROM OUTSIDERS/ NON-MEMBERS. AND RECEIPTS FROM BAR, CATERING AND EVENTS ARE FROM MEMBERS, THEIR GUESTS AND OUTSIDERS. ASSESSEE CASE IS COVERED IN 1 ST PROVISO OF SECTION-2(15). SINCE AGGREGATE RECEIPT IS MORE THAN RS.10 LAKHS, THEY ARE ALSO COV ERED BY 2ND PROVISO OF SECTION- 2(15) ALSO. ASSESSEE IS NOT ENTITLED TO CLAIM THE BENEFIT OF SE CTION-11 . ASSESSEE HAS ALSO TRIED TO CLAIM BOTH CHARITABLE AS WELL AS MUTUAL ORGANIZATION IN SPITE OF THE FACT T HAT THEY HAVE DEALINGS WITH NON-MEMBERS. ALSO THEY HAVE SPONSORSHIP FROM NON-MEMBERS, INTEREST INCOME ON FIXED DEPOSIT WHICH IS BEYOND THE PERVIEW OF MUTUALITY. HOWEVER, THE ASSESSEE FAILED TO ADDRESS THE ASPECT OF THE INCOME FROM SPONSORSHIP W HICH WERE MOSTLY EARNED FROM THIRD PARTIES/ OUTSIDERS. IT HAS TO BE CLEARLY UNDERSTOOD THAT SUC H EARNING CANNOT BE TREATED AS MUTUAL ACTIVITY AS WELL SINCE SUCH EARNING IS FROM OUTSIDER AND HAS NO LINK ON MUTUALITY AND IN SUCH RESPECT I FIRMLY AND FULLY RELY ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BANGALORE CLUB V. CIT (2013) 29 10 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB TAXMANN.COM 29 (SC) WHEREIN THE HON'BLE APEX COURT HAD VERY CLEARLY HELD THAT DOCTRINE OF MUTUALITY DOES NOT COME INTO PLAY WHEN THE EARNING IS FROM THIRD PARTY/ OUTSIDERS, ALSO. THE MOST IMPORTANT ASPECT IS THE INTERPLAY OF DOCTR INE OF MUTUALITY AND EXEMPTION U/S. 11. ON ONE HAND, THE ASSESSEE IS CLAIMING EXEMPTION U/S. 11. O N THE OTHER HAND TAKING SHELTER BEHIND DOCTRINE OF MUTUALITY. SECTION 12AA/11 DOES NOT APPLY TO ORGANI ZATION WHOSE WORK IS LIMITED FOR BENEFIT/ WELFARE OF MEMBERS OF CLOSED GROUP. WHEREAS DOCTRINE OF MUT UALITY IS APPLICABLE ONLY FOR CLOSELY HELD SOCIETIES. THERE CANNOT BE AN INTERPLAY BETWEEN SEC TION 11 AND DOCTRINE OF MUTUALITY. AS DISCUSSED ABOVE, THE CLAIM OF THE ASSESSEE FOR S ECTION-11 IS MORE RELEVANT THAN ITS ATTEMPT TO GET COVERED BY DOCTRINE OF MUTUALITY. FURTHER IN THE RE TURN OF INCOME ALSO THE 'A' CLAIMED EXEMPTION U/S.11. THEREFORE, THE ASSESSEE'S CLAIM IS TO BE AD JUDICATED FOLLOWING THE PROVISIONS OF SECTION-11. PROVISION TO SECTION- 2( 15) READ WITH SECTION-13(8 ) WILL COME IN PLAY WHILE ALLOWING A CLAIM OF EXEMPTION U/S. 11. PROMOTION OF SPORTS IS COVERED UNDER THE HEAD 'OTHE R OBJECTS OF GENERAL PUBLIC UTILITY'. BUT ACTIVITIE S RELATED TO BAR, CATERING AND EVENTS ARE COMMERCIAL ACTIVITIES. ASSESSEE IS HIT BY 2ND PROVISO OF SECTION- 2( 15) OF INCOME TAX ACT. AND SINCE THE GR OSS RECEIPT IN SUCH RESPECT IS MORE THAN 10 LAKHS IN THE PREVIOUS YEAR THE EXEMPTION SO GRANTED BY TH E ASSESSING OFFICER U/S 11 IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND AS SUCH THE ACTI ON OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE T HE ORDER OF ASSESSING OFFICER IS SET ASIDE AND THE ASSESSING OFFICER IS DIRE TED TO PASS AN ORDER ACCO RDINGLY AFTER GIVING OPPORTUNITY TO THE ASSESSEE. 10. AGGRIEVED BY ORDER OF CIT THE ASSESSEE HAS PRE FERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 11. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESEE AND THE LD. DR. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE RULES OF THE UNINCORPORATED ASSESSMENT OF THE ASSESSEE IN WHICH UNDER RULE-2 IT HAS BEEN SPECIFICALLY PROVIDED THAT THE CLUB SHALL BE A PRIVATE MEMBERS CLUB ESTAB LISHED FOR PLAYING AND ENCOURAGEMENT IN INDIA OF THE GAMES OF CRICKET, HOC KEY ETC FOR RECREATION AND FOR SOCIAL AMUSEMENT OF SUCH PERSONS AS SHALL BE ADMITT ED TO THE MEMBERSHIP UNDER THE SUBSEQUENT PROVISION OF ITS RULES. IT WAS THUS SUBM ITTED BY HIM THAT THE ASSESSEES INCOME WAS NOT CHARGEABLE TO TAX ON THE PRINCIPLE O F MUTUALITY. IT WAS BROUGHT TO OUR NOTICE THAT UPTO A.Y.2004-05 ASSESSEES INCOME REMA INED NOT CHARGEABLE TO TAX ON THE PRINCIPLE OF MUTUALITY. HOWEVER, IN A.Y.2004-05 I. E., THE FIRST YEAR IN WHICH THE ASSESSEE GOT INCORPORATED AS A COMPANY, IN THE ASSE SSMENT COMPLETED U/S 143(3) OF THE ACT, THE INCOME FROM ACTIVITIES OF THE MEMBERS OF THE CLUB WAS HELD TO BE NOT CHARGEABLE TO TAX. HOWEVER, INTEREST INCOME ON FIXE D DEPOSITS FROM BANKS WHICH WERE MEMBERS IN THE ASSESSEES CLUB WAS HELD TO BE TAXAB LE AND IT WAS HELD THAT THE MEMBERS OF MUTUALITY WILL NOT EXTEND TO SUCH INTERE ST INCOME. THIS ORDER OF THE AO 11 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB WAS HOWEVER REVERSED BY THE CIT IN AN ORDER DATED 2 9.03.2007 PASSED U/S 264 OF THE ACT. FOR A.Y.2005-06, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT TREATING THE ENTIRE INCOME OF THE ASSESSEE AS EXEMPT U/S 11 OF THE ACT. FOR A.Y.2006-07 AND 2007-08 THE RETURNS FILED BY THE ASSESSEE CLAIMED A S EXEMPT U/S 11 OF THE ACT WAS ACCEPTED U/S 143(1) OF THE ACT. FOR A.Y.2008-09 AND 2009-10 IN THE ORDERS PASSED U/S 143(3) OF THE ACT, THE AO HELD THAT THE ASSESSEE WA S CARRYING ON THE ACTIVITIES IN THE NATURE OF BUSINESS AND WAS NOT ENTITLED TO THE BENE FIT OF EXEMPTION U/S 11 OF THE ACT. FOR A.Y. 2009-10, SIMILAR ORDER WAS PASSED BY THE A O IN THE ASSESSMENT COMPLETED UNDER THE PROVISION OF SEC.143(3) OF THE ACT. HOWEV ER ON APPEAL BY THE ASSESSEE THE CIT(A) VIDE ORDER DATED 19.02.2013 AND 08.03.2013 F OR A.Y.2008-09 AND 2009-10 RESPECTIVELY HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENFIT OF EXEMPT U/S 11 OF THE ACT. THE ORDER OF CIT(A) IN THIS REGARD FOR A.Y.200 8-09 IS REPRODUCED HEREIN BELOW :- 4.1. AS PER THE DETAILS SUBMITTED AND AS HELD BY T HE DEPARTMENT FOR ALL EARLIER YEARS, THE ASSESSEE I S A MUTUAL ORGANIZATION. THE AA IS DIRECTED TO TREAT THE ASSESSEE AS MUTUAL ORGANIZATION AS THERE IS NO CHANGE IN THE STATUS/ACTIVITIES OF ASSESSEE IN THIS YEAR VIS-A-VIS EARLIER YEARS. 4.2 AS THE ASSESSEE IS HELD TO BE MUTUAL ORGANIZATI ON, THE ADMISSION FEE RECEIVED FROM ANY MEMBER INCLUDING THE CORPORATE MEMBER CANNOT BE TAXED BECA USE OF PRINCIPLE OF MUTUALITY. AA IS DIRECTED TO REMOVE THE AMOUNT OF ADMISSION FEE FROM THE RECEIPT S OF THE ASSESSEE FOR COMPUTING THE INCOME. 4.3 AS PER CBDT'S CIRCULAR NUMBER 11 OF 2008 DATED 19-12-2008, MUTUALITY AND CHARITY CAN CO-EXIST. THE ASSESSEE HAS NO BUSINESS DEALINGS WITH NON- MEM BERS. THE RELATIONS WITH NON-MEMBERS ARE LIMITED TO ORGANIZATION OF SPORTS ACTIVITIES ON WHI CH THE ASSESSEE' CURS EXPENDITURE. THEREFORE, AO IS DIRECTED TO ALLOW THE EXEMPT' AS PER SECTION 11 ON THE INCOME OF ASSESSEE FROM INVESTMENTS. 12. THE ABOVE SAID ORDER OF THE CIT(A) FOR A.Y.200 8-09 AND 2009-10 HAS BEEN ACCEPTED BY THE REVENUE AND NO APPEAL WAS PREFERRED BEFORE APPELLATE FORUMS. AS FAR AS A.Y.2010-11 IS CONCERNED, EXEMPTION U/S 11 W AS ALLOWED TO THE ASSESSEE BY THE AO FOLLOWING THE ORDER OF THE CIT(A) FOR A.Y.2008-0 9 AND 2009-10. AS FAR AS THE A.Y.2011-12 IS CONCERNED THE AO ALLOWED THE CLAIM U /S 11 OF THE ACT, AFTER TAKING NOTE OF THE HISTORY OF ASSESSMENT IN THE CASE OF THE ASS ESSEE. THEREFORE IT CANNOT BE SAID THAT THE AOS ORDER IS ERRONEOUS CALLING FOR REVISI ON BY THE CIT U/S 263 OF THE ACT. 13. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTE NTION TO THE ACCOUNTS OF THE ASSESSEE AND SUBMITTED THAT IF THE INTEREST AND DIV IDEND INCOME EARNED ON INVESTMENTS IS EXCLUDED THEN THERE SHALL BE DEFICIT AND NO SURP LUS WHATSOEVER. HE BROUGHT TO OUR NOTICE THAT THE FINDINGS OF THE CIT IN THE IMPUGNED ORDER OF 263 WHEREIN THE CIT HAD MADE REFERENCE TO THE SECOND PROVISO TO SECTION 2(1 5) OF THE ACT AS WELL AS THE FIRST PROVISO TO SECTION 2(15) OF THE ACT. IT WAS THE SUB MISSION THAT ALL THESE ASPECTS WERE DEALT BY THE CIT(A) IN THE APPELLATE ORDER FOR A.Y. 2008-09 AND 2009-10. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN 12 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB THE CASE OF RUSSEL PROPERTIES PVT. INDIA VS A.CHOWD HURY, ACIT 109 ITR 229 WHEREIN THE HONBLE CALCUTTA HIGH COURT HELD THAT IF THE AO FOLLOWS DECISION OF TRIBUNAL ON AN ISSUE, THE CIT CANNOT REVISE THE SAME U/S.263 OF THE ACT ON THE GROUND THAT AN APPEAL HAS BEEN FILED AGAINST THE ORDER OF THE TRIB UNAL. IT WAS THEREFORE SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE AFORESAID DECISION WILL CLEARLY APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, IN AS MUCH AS THE AO IN PASSING THE ORDER U/S 143(3) OF THE ACT, HAS TAKEN A VIEW WHICH IN KEEPIN G WITH THE DECISION RENDERED BY THE CIT(A) IN ASSESSEES OWN CASE FOR A.Y.2008-09 AND 2 009-10. IT WAS SUBMITTED THAT IN THE GIVEN CIRCUMSTANCES THE CONCLUSIONS OF THE CIT IN THE IMPUGNED ORDER U/S 263 OF THE ACT CANNOT BE SUSTAINED. 14. THE LD. DR SUBMITTED THAT THE PRINCIPLES OF RE S JUDICATA ARE NOT APPLICABLE IN THE INCOME TAX PROCEEDINGS AND IN EACH YEAR THE REVENUE IS AT LIBERTY TO TAKE A VIEW ON TAXABILITY OR OTHERWISE OF ITEM OF RECEIPT. HE POIN TED OUT THAT THE ASSESSE AS PER THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE, IT ALSO DEALS WITH THE OUTSIDERS AND IT IS CLEAR FROM CLAUSE-3 OF THE MAIN OBJECTS OF THE ASSE SSEE. THERE CANNOT BE ANY DISPUTE THAT IN RESPECT OF INCOME DERIVED FROM THE NON MEMB ERS THE PRINCIPLE OF MUTUALITY IS NOT APPLICABLE AND SUCH RECEIPTS ARE CHARGEABLE TO TAX. IT WAS HIS SUBMISSION THAT THE FACT THAT THE ASSESSEE OBTAINED REGISTRATION U/S 12 AA OF THE ACT IS NOT CONCLUSIVE AND WHILE CONCLUDING THE ASSESSMENT, WHETHER THE ASSESS E IS ENTITLED TO THE BENEFITS OF SECTION 11 OF THE ACT OR NOT IS AN ISSUE WHICH REQU IRES EXAMINATION BY THE AO. REFERENCE WAS MADE TO THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF BANGALORE CLUB CASE WHEREIN IT WAS HELD THAT INTERE ST RECEIVED ON DEPOSITS BY THE CLUB IN A BANK WHICH WERE ITS MEMBER IS NOT EXEMPT ON TH E PRINCIPLES OF MUTUALITY. HE ALSO MADE A REFERENCE TO THE AMENDMENT TO THE PROVISION TO SECTION 2(15) OF THE ACT AND SUBMITTED THAT THE INCOME DERIVED FROM COLLECTING F EES FROM NON MEMBERS AND ALLOWING THEM TO USE THE CLUB WAS CLEARLY IN THE NA TURE OF BUSINESS AND THEREFORE THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF EX EMPT U/S 11 OF THE ACT. THE LD. DR PLACED RELIANCE ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF ADIT(EXEMPTION)(11)(2) MUMBAI VS M/S. NAVI MUMBAI M ERCHANTS GYMKHANA CLUB IN ITA NO.196/MUM/2013 BBENCH DATED 21.05.2014 WH EREIN IT WAS HELD THAT RECEIPTS FROM NON MEMBERS CANNOT BE REGARDED AS EXE MPT ON THE PRINCIPLE OF MUTUALITY. 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE WAS ORIGINAL LY AN UNINCORPORATED ASSOCIATION WHICH IS CLAIMED TO HAVE ITS ORIGIN FROM 1792 AND ESTABLISHED FOR THE PLAYING AND ENCOURAGEMENT IN INDIA OF THE GAME OF CRICKET, HOCK EY, FOOTBALL, TENNIS, GOLF, CYCLE POLO, RUGBY AND OTHER FORMS OF SPORT FOR RECREATION AND FOR THE SOCIAL AMUSEMENT OF SUCH PERSONS AS SHALL BE ADMITTED TO MEMBERSHIP UND ER THE PROVISIONS OF THE RULES. THE RULES OF THE ASSESSEE WERE FIRST ADOPTED AT THE INAUGURAL MEETING OF THE CLUB ON 30 TH APRIL, 1965 AND WAS AMENDED FROM TIME TO TIME. AS PER THE RULES SO ADOPTED, THE 13 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB ASSESSEE CONTINUED TO HAVE ITS OBJECT THE PLAYING O F SPORTS AS AFORESAID BY MEMBERS OF THE ASSESSEE. IT WAS THEREFORE AN ASSOCIATION WHIC H RESTRICTED ITS ACTIVITIES ONLY AMONGST ITS MEMBERS. THE PRINCIPLE OF MUTUALITY W ILL APPLY IN SUCH A SITUATION AND INCOME OR SURPLUS OF SUCH ASSOCIATION CANNOT THEREF ORE BE REGARDED AS INCOME. THE PRINCIPLE OF MUTUALITY IS BASED ON THE CONCEPT THAT NO ONE CAN MAKE PROFIT OUT OF HIMSELF. THE CARDINAL REQUIREMENT IS THAT ALL THE C ONTRIBUTORS TO THE COMMON FUND MUST BE ENTITLED TO PARTICIPATE IN THE SURPLUS AND THUS 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 PARTICIPATORS. IF THIS REQUIREMENT IS SATISFIED THE PARTICULAR FORM WHICH THE ASSOCIAT ION TAKES IS IMMATERIAL . THE PRINCIPLE OF MUTUALITY HAS BEEN APPLIED TO EXEMPT F ROM INCOME-TAX, THE SURPLUS ARISING TO MUTUAL ASSOCIATIONS IN THEIR JOINT ENDEAVOR. 16. ON 5.6.2003, THE ASSESSEE GOT ITSELF INCORPORA TED AS A COMPANY UNDER THE COMPANIES ACT, 1956. THE ASSESSEE WAS INCORPORATED U/S.25 OF THE COMPANIES ACT AS IT WAS FORMED FOR PROMOTING, INTER ALIA, CHARITY OR ANY OTHER USEFUL OBJECT AND INTENDS TO APPLY ITS PROFITS, IF ANY OR OTHER INCOME IN PRO MOTING ITS OBJECTS AND PROHIBITS THE PAYMENT OF ANY DIVIDEND TO ITS MEMBERS. THE MAIN OB JECTS OF THE ASSESSEE AS PER THE MEMORANDUM OF ASSOCIATION, HAS ALREADY BEEN SET OUT IN THE EARLIER PART OF THIS ORDER. THE ASSESSEE APPLIED FOR GRANT OF REGISTRATION U/S. 12AA OF THE INCOME TAX ACT, 1961 (ACT) AS INSTITUTION WHICH EXISTS FOR CHARITABLE PU RPOSE. SEC.11(1) OF THE ACT PROVIDES THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APP LIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET AP ART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOM E SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SU CH PROPERTY, SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME. SEC.12A(1) PROVIDES THAT TO CLAIM EXEMPTION U/S.11, THE ASSESSEE HAS TO GET REGISTRATION U/S.12AA OF THE ACT. BEFORE GRANTING REGISTRATION, THE COMMISSIONER OF INCOME TAX (CIT) HAS TO BE SATISFIED THAT THE OBJEC TS OF THE INSTITUTION SEEKING REGISTRATION U/S.12AA OF THE ACT ARE CHARITABLE AND AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE INSTITUTION AND THE GENUINENESS OF I TS ACTIVITIES, REGISTRATION WILL BE GRANTED. THE ASSESSEE MADE APPLICATION FOR GRANT OF REGISTRATION AND WAS GRANTED REGISTRATION U/S.12AA OF THE ACT VIDE CERTIFICATE D ATED 18.2.2005 ISSUED BY THE DIRECTOR OF INCOME TAX (EXEMPTIONS), KOLKATA. 17. SECTION 2 (15) OF THE ACT, WHICH DEFINES THE EXPRESSION CH ARITABLE PURPOSE FOR THE PURPOSE OF THE ACT HAD UNDERGONE AN AMENDMENT B Y THE FINANCE ACT, 2008 WITH EFFECT FROM 01-04-2009. THE EXPRESSION OF CHARITABL E PURPOSE, PRIOR TO THE AFORESAID AMENDMENT READ AS FOLLOWS; (15) CHARITABLE PURPOSE INCLUDES RELIEF TO THE P OOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY 14 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB THE DEFINITION AFTER THE AMENDMENT READS AS FOLLOWS ; CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, (PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY; PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVI TY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A C ESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 18. IT CAN BE SEEN FROM THE PROVISO TO SEC.2(15) W HICH CAME INTO EFFECT FROM 01-04- 2009 THAT ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. IT IS NOT IN DISPUTE THAT TH E CHARITABLE PURPOSE FOR WHICH THE ASSESSEE WAS FORMED HAS TO BE REGARDED AS FALLING W ITHIN THE CATEGORY ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 19. A SECOND PROVISO WAS INSERTED TO THE PROVISION S OF SECTION 2(15) OF THE ACT BY THE FINANCE ACT, 2010 W.E.F. 1.4.2009, WHICH PROVIDED A S FOLLOWS; PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THE REIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR. (IT BECAME RS.25 LAKHS W.E.F . 1-4-2012) 20. IN THE CASE OF BANGALORE CLUB V/S. CIT 350 ITR 509 (SC), THE QUESTION FOR DETERMINATION BEFORE THE HONBLE SUPREME COURT WAS AS TO WHETHER OR NOT THE INTEREST EARNED BY THE ASSESSEE ON THE SURPLUS FUNDS INVESTE D IN FIXED DEPOSITS WITH THE CORPORATE MEMBER BANKS IS EXEMPT FROM LEVY OF INCOM E TAX, BASED ON THE DOCTRINE OF MUTUALITY? THE HONBLE SUPREME COURT ANSWERED THE AFORESAID QUESTION IN FAVOUR OF THE REVENUE BY HOLDING THAT INTEREST EARNED FROM DE POSITS WITH BANKS WHO ARE MEMBERS OF THE CLUB WOULD NOT BE EXEMPT ON THE PRIN CIPLE OF MUTUALITY BECAUSE THE TESTS FOR APPLICATION OF THE PRINCIPLE OF MUTUALITY WERE NOT SATISFIED. THE APEX COURT HELD THAT NO SOONER ANY AMOUNT IS INVESTED BY AN AS SOCIATION CLAIMING TO BE MUTUAL CONCERN IN A FIXED DEPOSIT WITH THE BANKS THE COMPL ETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS IN THE FUND ON TH E AMOUNTS INVESTED IN MEMBER BANKS IS RUPTURED. IT HELD THAT TILL THE SURPLUS FU NDS WERE GENERATED AND WAS USED ONLY AMONGST THE MEMBERS/CONTRIBUTORS, THE COMPLETE IDEN TITY BETWEEN CONTRIBUTORS AND PARTICIPANTS CONTINUED. HOWEVER THE MOMENT THE FUND S ARE INVESTED IN FIXED DEPOSITS WITH THE BANKS AND THE FUNDS ARE USED FOR ADVANCING LOANS ETC. BY THE BANK TO ITS CUSTOMERS, THE IDENTITY OF PARTICIPANTS AND CONTRIB UTORS IS SAPPED. THUS THE INTEREST EARNED ON FIXED DEPOSITS IS TO BE BROUGHT TO TAX. H OWEVER, IT IS TO BE NOTED THAT IT DID NOT RESULT IN THE BANGALORE CLUB BEING TAXED ON ALL CONTRIBUTIONS OF ITS MEMBERS. IN 15 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB OTHER WORDS INCOME WHICH IS NOT EXEMPT ON THE PRINC IPLE OF MUTUALITY WILL STILL BE ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT, IF THE CO NDITIONS LAID DOWN THEREIN ARE SATISFIED. 21. EVEN AFTER INCORPORATION AS A COMPANY, THE ACT IVITIES OF THE ASSESSEE CONTINUE TO BE WITH ITS MEMBERS ONLY. THE USE OF THE CLUB FACI LITIES IS RESTRICTED ONLY TO MEMBERS. GUESTS OF THE MEMBERS ARE ALLOWED TO USE THE FACILI TY, PROVIDED THE GUESTS ARE ACCOMPANIED BY THE MEMBERS. THEREFORE THE ELEMENT OF MUTUALITY IS NOT LOST AFTER THE ASSESSEE GOT ITSELF INCORPORATED AS A COMPANY. AS ALREADY MENTIONED THE PRINCIPLE OF MUTUALITY DOES NOT VANISH BECAUSE OF THE FORM I.E., FROM AN ASSOCIATION TO A COMPANY. THE MAIN OBJECTS OF THE ASSESSEE AS INCORPORATED IN THE MEMORANDUM OF ASSOCIATION, CONTINUES TO RETAIN THE ELEMENT OF MUTUALITY. IN F ACT IN THE ASSESSMENT COMPLETED AFTER THE ASSESSEE BECAME A COMPANY, THE REVENUE HAS ACCE PTED IN THE ASSESSMENT COMPLETED FOR AY 2004-05 THAT THE ASSESSEE IS A MUT UAL ASSOCIATION. 22. THE INCOME IN THE CASE OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR IS IN THE FORM OF SURPLUS GENERATED FROM MUTUAL ACTIVITIES WH ICH WOULD BE EXEMPT BY APPLYING THE PRINCIPLE OF MUTUALITY. THE SECOND CATEGORY OF INCOME IS INCOME FROM INVESTMENTS IN THE FORM OF INTEREST ETC. THIS WOULD NOT BE EXE MPT ON THE PRINCIPLE OF MUTUALITY ON THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COUR T IN THE CASE OF BANGALORE CLUB (SUPRA). THE THIRD CATEGORY OF INCOME IS INCOME GE NERATED BY ORGANISING SPORTS AND EVENTS, WHERE THE PARTICIPANTS ARE THIRD PARTIES. FOR THIS CATEGORY OF INCOME ALSO THE PRINCIPLE OF MUTUALITY WILL NOT APPLY AS THERE IS N O IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPANTS. THE SECOND AND THIRD CATEGORY OF INCOME WOULD STILL BE EXEMPT U/S.11 OF THE ACT. THE OBSERVATION OF THE CIT IN T HE IMPUGNED ORDER U/S.263 OF THE ACT IS THAT THERE CANNOT BE ANY INTERPLAY BETWEEN SECTI ON 11 AND DOCTRINE OF MUTUALITY. THIS CONCLUSION IN OUR VIEW IS ERRONEOUS. THERE IS NOTHING IN THE ACT OR ANY OTHER PRECEDENT WHICH PROHIBITS ALLOWING THE BENEFIT OF S EC.11 OF THE ACT TO AN ASSESSEE, IF THE CONDITIONS SPECIFIED THEREIN ARE SATISFIED. IN FACT THE CBDT CIRCULARS REFERRED TO BY THE ASSESSEE IN THE SUBMISSIONS BEFORE CIT CLEAR LY SUPPORT THE AFORESAID VIEW. IN CIRCULAR BEARING NO. 11 OF 2008 DATED DECEMBER 19,2 008, REPORTED IN (2009) 308 ITR (STATUTES) 5, IT WAS CLARIFIED BY THE BOARD THAT MU TUALITY AND CHARITY CAN CO-EXIST IN RESPECT OF THE SAME INSTITUTION/ASSOCIATION. BY CIR CULAR NO. :-5 DATED SEPTEMBER 24, 1984, REPORTED IN (1984) 150 ITR (STATUTES) 74, IT WAS CLARIFIED BY THE BOARD THAT AN ASSOCIATION OR INSTITUTION ENGAGED IN THE PROMOTION OF SPORTS AND GAMES CAN CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. THEREFORE, RECEIPT WHICH IS TREATED AS INCOME BECAUSE OF NON APPLICABILITY OF THE MUTUALITY PRINC IPLE WILL STILL BE ENTITLED TO CLAIM THAT INCOME IS NOT CHARGEABLE TO TAX BECAUSE THE IN COME IS APPLIED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SEC.11 OF THE ACT. I T CANNOT THEREFORE BE SAID PRINCIPLE OF MUTUALITY AND BENEFIT OF SEC.11 OF THE ACT CANNO T BE SIMULTANEOUSLY CLAIMED BY AN ASSESSEE. 23. ON THE AVAILABILITY OF EXEMPTION U/S.11 OF THE ACT TO THE ASSESSEE, THE CIT HAS REFERRED TO THE FACILITY OF BAR AND CATERING WHICH GENERATES INCOME AND ACCORDING TO 16 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB THE CIT, DOING SO VIOLATES THE 1 ST AS WELL AS THE 2 ND PROVISO TO SEC.2(15) OF THE ACT, I.E., THE ACTIVITIES WERE IN THE NATURE OF CARRYING ON BU SINESS AND HENCE CANNOT BE REGARDED AS CHARITABLE. AS WE HAVE ALREADY SEEN THE INCOME OR SURPLUS FROM THESE ACTIVITIES HAS ALWAYS BEEN REGARDED AS FALLING WITH IN THE PRINCIPLE OF MUTUALITY AND THEREFORE CANNOT BE REGARDED AS INCOME. 24. AS FAR AS THE INCOME GENERATED BY ORGANISING O F EVENTS OF SPORTS IN WHICH OUTSIDERS PARTICIPATE, THE CONCLUSION OF THE CIT IS THAT SUCH ACTIVITY WAS IN THE NATURE OF CARRYING ON BUSINESS AND THEREFORE THE ASSESSEE CANNOT BE REGARDED AS EXISTING FOR CHARITABLE PURPOSE AND THEREFORE EXEMPTION U/S.11 OF THE ACT OUGHT NOT TO BE ALLOWED TO THE ASSESSEE. THE APPROACH TO BE ADOPTE D IN COMING TO THE CONCLUSION AS TO WHETHER THE PROVISO TO SEC.2(15) OF THE ACT WILL BE APPLICABLE HAS BEEN LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDI A TRADE PROMOTION ORGANIZATION VS. DGIT(EXEMPTION) AND OTHERS 371 ITR 333 (DELHI). THE HONBLE DELHI HIGH COURT HAS LAID DOWN THE FOLLOWING VERY IMPORTANT PR INCIPLES AS TO HOW THE PROVISO TO SEC.2(15) OF THE ACT HAS TO BE INTERPRETED:- (I) THE PROVISO TO SEC.2(15) OF THE ACT INTRODUCED BY VIRTUE OF THE FINANCE ACT, 2008 WITH EFFECT FROM 01.04.2009 HAS TWO PARTS. THE FIRST PART HAS REFERENCE TO THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE SECOND PART HAS REFERENCE TO ANY ACTIVITY OF RENDER ING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. BOTH THESE PARTS A RE FURTHER SUBJECT TO THE CONDITION THAT THE ACTIVITIES SO CARRIED OUT ARE FO R A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OR USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITIES. IN OTHER WORDS, IF, BY VIRTUE OF A CESS OR FEE OR ANY OTHER CONSIDERATION, INCOME IS GENERATED BY ANY OF THE TWO SETS OF ACTIVITIES REFERRED TO ABOVE, THE NATURE OF USE OF SUCH INCOME OR APPLICATION OR RETENTION OF SUCH INCOME IS IRRELEVANT FOR THE PURPOSES OF CONST RUING THE ACTIVITIES AS CHARITABLE OR NOT. (II) IF AN ACTIVITY IN THE NATURE OF TRADE, COMMER CE OR BUSINESS IS CARRIED ON AND IT GENERATES INCOME, THE FACT THAT SUCH INCOME IS APPL IED FOR CHARITABLE PURPOSES, WOULD NOT MAKE ANY DIFFERENCE AND THE ACTIVITY WOUL D NONETHELESS NOT BE REGARDED AS BEING CARRIED ON FOR A CHARITABLE PURPOSE. IF A LITERAL INTERPRETATION IS TO BE GIVEN TO THE PROVISO, THEN IT MAY BE CONCLUDED THAT THIS FACT WOULD HAVE NO BEARING ON DETERMINING THE NATURE OF THE ACTIVITY C ARRIED ON BY THE PETITIONER. BUT, IN DECIDING WHETHER ANY ACTIVITY IS IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, IT HAS TO BE EXAMINED WHETHER THERE IS AN ELEMENT OF PROFIT MAKING OR NOT. SIMILARLY, WHILE CONSIDERING WHETHER ANY ACTIV ITY IS ONE OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, THE ELEMENT OF PROFIT MAKING IS ALSO VERY IMPORTANT. (III) THE MEANING OF THE EXPRESSION 'CHARITABLE PU RPOSES' HAS TO BE EXAMINED IN THE CONTEXT OF INCOME, BECAUSE, IT IS ONLY WHEN T HERE IS INCOME THE QUESTION OF NOT INCLUDING THAT INCOME IN THE TOTAL INCOME WOULD ARISE. THEREFORE, MERELY 17 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB BECAUSE AN INSTITUTION, WHICH OTHERWISE IS ESTABLIS HED FOR A CHARITABLE PURPOSE, RECEIVES INCOME WOULD NOT MAKE IT ANY LESS A CHARIT ABLE INSTITUTION. WHETHER THAT INSTITUTION, WHICH IS ESTABLISHED FOR CHARITABLE PU RPOSES, WILL GET THE EXEMPTION WOULD HAVE TO BE DETERMINED HAVING REGARD TO THE OB JECTS OF THE INSTITUTION AND ITS IMPORTANCE THROUGHOUT INDIA OR THROUGHOUT ANY STATE OR STATES. (IV) MERELY, BECAUSE AN INSTITUTION DERIVES INCOME OUT OF ACTIVITIES WHICH MAY BE COMMERCIAL, THAT DOES, IN ANY WAY, AFFECT THE NATUR E OF THE INSTITUTION AS A CHARITABLE INSTITUTION IF IT OTHERWISE QUALIFIES FO R SUCH A CHARACTER. (V) MERELY BECAUSE A FEE OR SOME OTHER CONSIDERATIO N IS COLLECTED OR RECEIVED BY AN INSTITUTION, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR A CHARITABLE PURPOSE. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCI LLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BU SINESS. IF THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT TO DO CHARITY, T HE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD NOT APPLY. (VI) IF A LITERAL INTERPRETATION WERE TO BE GIVEN T O THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTICLE 14 (THE EQUALITY CLAUSE E NSHRINED IN ARTICLE 14 OF THE CONSTITUTION). COURTS SHOULD ALWAYS ENDEAVOUR TO UP HOLD THE CONSTITUTIONAL VALIDITY OF A PROVISION AND, IN DOING SO, THE PROVI SION IN QUESTION MAY HAVE TO BE READ DOWN, AS POINTED OUT ABOVE. (VII) SECTION 2(15) IS ONLY A DEFINITION CLAUSE. SE CTION 2 BEGINS WITH THE WORDS, PURPOSE' APPEARING IN SECTION 2(15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTION 10(23C)(IV). WHEN THE EXPRESSION 'CHARIT ABLE PURPOSE', AS DEFINED IN SECTION 2(15) OF THE SAID ACT, IS READ IN THE CONTE XT OF SECTION 10(23C)(IV) OF THE SAID ACT, WE WOULD HAVE TO GIVE UP THE STRICT AND L ITERAL INTERPRETATION SOUGHT TO BE GIVEN TO THE EXPRESSION 'CHARITABLE PURPOSE' BY THE REVENUE. (VIII) THE EXPRESSION 'CHARITABLE PURPOSE', AS DEFI NED IN SECTION 2(15) CANNOT BE CONSTRUED LITERALLY AND IN ABSOLUTE TERMS. THE CORR ECT INTERPRETATION OF THE PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT C ARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCEMENT OF ANY OTHER OBJE CT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUS INESS OR THE ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WHICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSES, IS PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RE NDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, THEN I T WOULD NOT BE ENTITLED TO CLAIM 18 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB ITS OBJECT TO BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN INSTITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROF ITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTIL ITY, IT CANNOT BUT BE REGARDED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOS ES. (EMPHASIS SUPPLIED) 25. THE INCOME STREAM OF THE ASSESSEE IN THE PRESE NT CASE IS RECEIPTS IN THE FORM OF SUBSCRIPTION FROM MEMBERS, RECEIPTS FROM ORGANIZING SPORTS AND EVENTS, INTEREST AND DIVIDEND AND OTHER INCOME. ALL THESE TOTAL RS.2,36 ,51,788/-. THE EXPENDITURE OF THE ASSESSEE IS RS.2,13,37,263/-. THE NET SURPLUS GENE RATED IS RS.23,14,525/-. IF THE INTEREST INCOME OF RS.60,45,944/- IS DISREGARDED AS BEING A PASSIVE INCOME, THEN IT CAN BE SAFELY SAID THAT THE ASSESSEE HAS NOT GENERA TED ANY SURPLUS AT ALL. THIS BY ITSELF WOULD DEMONSTRATE THAT THE ASSESSEE DOES NOT EXIST FOR PROFIT. THE USE OF THE CLUB FACILITY BY OUTSIDERS ON PAYMENT OF A FEE WOULD CLE ARLY FALL WITHIN THE AMBIT OF ITS MAIN OBJECT VIZ., ORGANIZE AND PARTICIPATE IN DIFFERENT SPORTS AND GAMES WITH THE OBJECT OF IMPROVING THE STANDARD OF THE SAME AND ENCOURAGING THE ACHIEVEMENT OF HIGHER STANDARDS OF EXCELLENCE. THE FACT THAT A FEE IS CH ARGED FROM OUTSIDERS DOES NOT TAKE AWAY THE CHARACTER OF THE ASSESSEE AS PREDOMINANTLY EXISTING FOR CHARITABLE PURPOSE. THUS THE ASSESSEE CONTINUES TO EXIST FOR CHARITABLE PURPOSE. UNDER CLAUSE X OF THE MEMORANDUM OF ASSOCIATION UPON WINDING UP OR DISSO LUTION, AFTER SATISFACTION OF ALL DEBTS AND LIABILITIES, NO PROPERTY SHALL BE DISTRIB UTED AMONG MEMBERS AND THE SAME SHALL BE GIVEN OR TRANSFERRED TO ANOTHER COMPANY HA VING SIMILAR OBJECTS. IT CANNOT BE SAID THAT THE ASSESSEE IS DRIVEN PRIMARILY BY A DES IRE OR MOTIVE TO EARN PROFIT BUT HAS TO BE CONSIDERED AS EXISTING FOR THE PURPOSE OF CAR RYING ON CHARITABLE ACTIVITY VIZ., THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY. THE ASSESSEE HAS THEREFORE TO BE REGARDED AS EXISTING FOR CARRYING ON ACTIVITI ES FOR CHARITABLE PURPOSE. 26. WE HAVE ALREADY SEEN THAT IN AY 08-09 & 09-10, THE CIT(A) HAS ALREADY HELD THAT THE ASSESSEE IS NOT HIT BY THE PROVISO TO SEC.2(15) OF THE ACT. IN FACT IN AY 2008-09 THE ISSUE WAS RECEIPT OF FEE FROM INDIAN CRICKET LEAGUE FOR ALLOWING USE OF THE CLUB GROUND FOR CRICKET PRACTICE FOR FIVE DAYS, FOR A FE E OF RS.25 LACS. THE CIT(A) IN THE APPELLATE ORDERS FOR BOTH THE AY 08-09 & 09-10 HELD THAT THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF EXEMPTION U/S.11 AS WELL AS O N THE PRINCIPLE OF MUTUALITY. THE FACTS OF THE CASE IN THE PRESENT AY ARE IDENTICAL. IN FACT THE AO WHEN HE COMPLETED THE ASSESSMENT FOR AY 2011-12 I.E., THE ASSESSMENT WHIC H IS THE SUBJECT MATTER OF QUESTION BY THE CIT IN THE IMPUGNED ORDER PASSED U/S.263 OF THE ACT, WAS FULLY AWARE OF THE DECISION OF THE CIT(A) AND HAD COMPLETED ASSESSMENT ON THAT BASIS. IN SUCH CIRCUMSTANCES, CAN THE CIT IN EXERCISE OF HIS POWER S U/S.263 OF THE ACT TERM THE ACTION OF THE AO AS ERRONEOUS? SUCH QUESTION HAD COME FOR CONSIDERATION BEFORE THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RUSSEL P ROPERTIES PVT.LTD. VS. ACIT (SUPRA). THE FACTS OF THE CASE BEFORE THE HONBLE CALCUTTA HIGH COURT WAS THE TRIBUNAL IN THE EARLIER AY OF AN ASSESSEE HELD THAT MAINTENANCE AND SERVICE CHARGES RECEIVED BY AN ASSESSEE WERE ASSESSABLE UNDER THE H EAD 'BUSINESS' AND NOT ASSESSABLE UNDER THE HEAD 'PROPERTY'. FOLLOWING THE DECISION OF THE TRIBUNAL, THE ITO 19 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB IN A SUBSEQUENT AY PROCEEDED TO ASSESS SUCH INCOME UNDER THE HEAD 'BUSINESS'. THE CIT IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT FE LT THAT SUCH INCOME SHOULD HAVE BEEN ASSESSED TO TAX UNDER THE HEAD 'PROPERTY' AS I N RESPECT OF THE PRIOR YEARS' FINDINGS REFERENCE APPLICATION WAS PENDING BEFORE T HE HIGH COURT. THE HONBLE HIGH COURT HAD TO DECIDE AS TO WHETHER IN THOSE CIRCUMST ANCES, CAN IT BE SAID THAT THE ITO WHO HAD ACCEPTED THE TRIBUNAL'S DECISION AS CORRECT AND APPLIED THAT DECISION TO THE FACTS OF THIS CASE ACTED ERRONEOUSLY AND HIS ACTION CAUSED PREJUDICE TO THE INTERESTS OF THE REVENUE. THE HONBLE HIGH COURT HELD THAT AS A MATTER OF FACT WHENEVER THERE IS A DECISION OF THE HIGHER APPELLATE AUTHORITY, THE S UBORDINATE AUTHORITIES ARE BOUND TO FOLLOW THE SAID DECISION IF JUDICIAL DISCIPLINE IS TO BE MAINTAINED. IN THE AFORESAID VIEW OF THE MATTER THE HONBLE COURT HELD THAT THE CONDI TIONS FOR EXERCISE OF THE POWER UNDER S. 263, NAMELY, THAT THERE MUST BE MATERIAL F OR THE CIT TO CONSIDER THAT THE ORDER PASSED BY THE ITO WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WERE NOT FULFILLED. THE PROPOSED EXERC ISE OF THE POWER UNDER S. 263 WAS HELD TO BE ILLEGAL AND WITHOUT JURISDICTION. 27. THE AFORESAID DECISION OF THE HONBLE CALCUTTA HIGH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE DECISION OF THE ITAT MUMBAI IN THE CASE OF NAVI MUMBAI MERCHANTS GYMKHANA, REFERRED TO BY THE LEARN ED DR BEFORE US IS A CASE WHERE THE CLUB GAVE ITS FACILITIES FOR USE BY OUTSI DERS FOR SOCIAL FUNCTIONS. THIS WAS HELD BY THE TRIBUNAL TO BE NOT ELIGIBLE FOR EXEMPTI ON U/S.11 OF THE ACT. SIMILARLY, INCOME FROM EARNED FROM USE OF THE CLUB FACILITIES BY NON MEMBERS FOR PURPOSE OF PLAYING CARDS AND USE OF PERMIT ROOM, CATERING ETC. , WAS HELD TO BE HIT BY THE PROVISO TO SEC.2(15) OF THE ACT. IN THE PRESENT CASE, WE H AVE ALREADY SEEN THAT USE OF CLUB FACILITY BY NON MEMBERS IS PROHIBITED BY THE RULES OF THE ASSESSEE. THE USE BY OUTSIDERS OF THE FACILITIES OF THE CLUB IS IN CONNE CTION WITH PROMOTION OF SPORTS WHICH IS A CHARITABLE PURPOSE AND WHICH IS WELL WITHIN TH E MAIN OBJECTS OF THE ASSESSEE. THEREFORE THE DECISION RELIED UPON BY THE LEARNED D R BEFORE US IS NOT OF ANY ASSISTANCE TO THE CASE OF THE REVENUE. THE PRINCIPL E OF RES JUDICATA IS NO DOUBT NOT APPLICABLE IN INCOME TAX PROCEEDINGS, BUT THE ADMIT TED POSITION IN THE PAST ASSESSMENTS HAVE NOT BEEN SHOWN BY THE CIT IN THE I MPUGNED ORDER AS UNSUSTAINABLE. THE WHOLE APPROACH OF THE CIT IN THE IMPUGNED ORDER HAS BEEN ON THE BASIS OF DECISION IN THE CASE OF BANGALORE CLUB (SUPRA). AS WE HAVE ALREADY EXPLAINED, THAT DECISION IS APPLICABLE ONLY IN RESPECT OF INCOME EA RNED BY THE ASSESSEE FROM INVESTMENTS. WE HAVE ALREADY HELD THAT THE INCOME IN RESPECT OF WHICH PRINCIPLE OF MUTUALITY IS NOT APPLICABLE, WOULD NEVERTHELESS BE ENTITLED TO EXEMPTION U/S.11 OF THE ACT, SUBJECT TO SATISFACTION OF OTHER CONDITIONS LA ID DOWN IN THAT SECTION. WE HAVE ALSO HELD THAT PREDOMINANT PURPOSE FOR WHICH THE ASSESSE E EXISTS IS FOR CHARITABLE PURPOSE AND THAT THE PROVISO TO SEC.2(15) OF THE ACT WOULD NOT BE APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHICH WE HAVE DI SCUSSED IN THE EARLIER PARAGRAPHS. 28. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ORDER PASSED BY THE AO U/S.143(3) OF THE ACT DATED 25.3.2014 FOR AY 011-12, WHICH WAS REVISED BY THE CIT U/S.263 OF THE ACT BY THE IMPUGNED ORDER WAS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THEREFORE THE EXERCISE OF JURISDICTION BY THE CIT U/S.263 OF THE ACT IS HELD 20 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB TO BE NOT SUSTAINABLE. CONSEQUENTLY, THE ORDER U/S .263 OF THE ACT IS HEREBY QUASHED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 29. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOW ED. 7. IN THIS IMPUGNED ORDER OF CIT(E) ALSO ON SIMILAR REASON THE CIT(E) HAS INTERFERED WITH THE ORDER OF ASSESSING OFFICER EXERCISING HIS JURISDICTION U/S 263 OF THE ACT. SINCE, SIMILAR ACTION ON SIMILAR FACTS AND LAW HAS BEEN QU ASHED FOR THE REASON STATED ABOVE AND THE LD. DR COULD NOT POINT OUT ANY CHANGE IN FACTS OR LAW, WE RESPECTIVELY FOLLOW THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2011-12, IN ORDER TO COME TO SAME CONCLUSION. 8. BEFORE CONCLUDING, WE WOULD LIKE TO HAVE A LOOK AT CERTAIN FACTS IN THIS ASSESSMENT YEAR. IN THIS YEAR, THE LD. SENIOR COUNSEL BROUGHT TO OUR NOTICE THAT THE CIT(E) ERRED IN MAKING A FINDING THAT THE ASSESSEE HAD DERIVED INCO ME FROM SALE ON ACCOUNT OF BAR AND CATERING AS RS.1,74,61,840/- AND RS.1,43,88,222/- R ESPECTIVELY. ACCORDING TO THE LD. SENIOR COUNSEL EVEN THOUGH IT WAS BROUGHT TO OUR NO TICE OF THE CIT(E) THAT THERE WAS IN FACT NO INCOME FOR THE YEAR IN QUESTION, THE LD. CI T(E) HAS NOT GIVEN ANY REASON TO ARRIVE AT THE AFORESAID AMOUNTS WHICH ACCORDING TO HIM WAS ERRONEOUS. IT WAS BROUGHT TO OUR NOTICE THAT THE AGGREGATE OF ALL EXPENSES AND OVERH EAD DEBITED TO THE INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR IS RS.7,02,23,355/ -. THE TOTAL OF THE INCOME SIDE OF THE INCOME AND EXPENDITURE ACCOUNT IS RS.7,95,70,182/- WHICH INCLUDED INTEREST AND DIVIDEND OF RS.70,94,276/- AS EVIDENT FROM SCHEDULE 16 (P.B. PAGE-152) AND RS.71,75,000/- ON ACCOUNT OF TRANSFER OF A PORTION OF THE ADMISSION F EE RECEIVED FROM THE CORPORATE MEMBERS FROM CORPORATE MEMBERS FUND FORMING PART O F THE CLUBS CAPITAL RESERVE TO THE INCOME AND EXPENDITURE ACCOUNT. IT WAS BROUGHT TO O UR NOTICE THAT THE DEPOSITS AND UNITS WHICH GAVE RISE TO INCOME BY WAY OF INTEREST AND DI VIDEND ARE PROPERLY HELD UNDER TRUST FOR A PUBIC CHARITABLE PURPOSE AND THE INCOME THERE FROM WAS UTILIZED FOR THE PROMOTION OF SPORTS AND GAMES. IT WAS BROUGHT TO OUR NOTICE THAT IF INTEREST AND DIVIDEND TO THE TUNE OF RS.70,94,226/- AND TRANSFER FROM CAPITAL RESERVE OF RS.71,75,000/- ARE EXCLUDED FROM INCOME THEN THE AMOUNT WILL BE ONLY RS.6,53,00,906/ - ON THE INCOME SIDE WHICH IS LOWER THAN THE EXPENSES OF RS.7,02,23,355/- AND DEFICIT W ILL BE RS.49,22,449/-. IT WAS BROUGHT TO OUR NOTICE THAT THE CIT(E) ERRED IN BOOKING THE FIG URE FROM SCHEDULE 15.1 WHICH 21 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB REPRESENTS GROSS RECEIPTS BEFORE TAKING INTO CONSID ERATION THE EXPENDITURE REFLECTED IN THE SAME SCHEDULE OR THE ADMINISTRATIVE AND OTHER EXPEN SES REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT. IT WAS ALSO BROUGHT TO OUR NOT ICE THAT RS.1,49,05,684/- PERTAINS TO PRECEDING YEARS REALIZATION ON ACCOUNT OF BEVERAGE S AND THE REALIZATION ON ACCOUNT OF FOOD FOR THE YEAR IN QUESTION IS RS.1,43,88,222/-. THUS, IT WAS CONTENDED BEFORE US THAT THERE WAS IN FACT NO INCOME FOR THE YEAR IN QUESTIO N AND THERE WAS IN FACT DEFICIT OF RS.49,22,449/-. IT WAS EXPLAINED TO US THAT SURPLUS OF RS.93,46,827/- WHICH APPEARS IN THE INCOME AND EXPENDITURE ACCOUNT IS ONLY BECAUSE OF T HE RESIDUARY INTEREST AND DIVIDEND INCOME OF RS.21,71,827/- (RS.70,94,276/- - RS.49,22 ,449/-) AND TRANSFER OF THE SUM OF RS.71,75,000/- FROM THE CAPITAL RESERVE ACCOUNT. AC CORDING TO THE LD. SENIOR COUNSEL ALL THESE FACTS AND FIGURES WERE BROUGHT TO THE NOTICE OF THE CIT(E) IN ITS REPLY WHICH HAS BEEN REPRODUCED SUPRA AND BY THE CIT(E) ALSO, HOWEV ER IT WAS POINTED OUT TO US THAT HE HAS NOT DEALT WITH THE CONTENTIONS AND HAS NOT FOUN D FAULT WITH THE BOOKS OF ACCOUNT AND THE AUDITED ACCOUNTS PRODUCED BEFORE HIM. ACCORDING TO LD. SR. COUNSEL, HE HAS SIMPLY PICKED UP FEW FIGURES AND HAVE MADE CERTAIN FINDING S WHICH IS ERRONEOUS. 9. WE FIND THAT THE ASSESSEE IN FACT HAD NO INCOME FOR THE YEAR IN QUESTION AND IT HAD A DEFICIT OF RS.49,22,449/-. IT WAS BROUGHT TO OUR NOTICE BY THE LD. SENIOR COUNSEL IN THIS IMPUGNED ORDER THAT THE CIT(E) FOUND FAULT WITH THE ASSESSEE HAVING EARNED INCOME OF RS.8,42,300/- ON ACCOUNT GUEST CHARGES WHICH ACCORD ING TO HIM IS AGAINST THE PRINCIPLE OF MUTUALITY. WE NOTE THAT THE PROVISION OF FOOD AND D RINKS BY THE ASSESSEE TO ITS MEMBERS WAS A MUTUAL ACTIVITY AND DID NOT INVOLVE ANY SALE. THE CLUBS DINING ROOM WHERE FOOD AND DRINKS ARE PROVIDED TO THE MEMBERS IS NOT A RES TAURANT OR A BAR. IT SHOULD BE KEPT IN MIND THAT RESTAURANT OR A BAR IS A PUBLIC PLACE WHE RE FOOD OR BEVERAGES ARE SERVED TO CUSTOMERS FOR CONSIDERATION. THE CLUBS DINING ROOM IS FOR MEMBERS ONLY AND IS NOT A PUBLIC PLACE. ONE SHOULD BEAR IN MIND THAT THE CLUB S MEMBERS WERE NOT ITS CUSTOMERS. THE ASSESSEE CLUB WAS ONLY AN AGENT OF ITS MEMBERS AND RECOUPS ITSELF FOR THE EXPENSES AND DOES NOT ACT AS A COMMERCIAL OR BUSINESS CONCER N FOR THE PURPOSE OF MAKING ANY GAIN. THE LD. CIT(E) ERRED IN FINDING THAT THE ASSE SSEE HAD INCOME FROM GUESTS CHARGES. IT IS COMMON KNOWLEDGE THAT THE MEMBERS OF THE ASSESSE E CLUB BRING THEIR FRIENDS AND RELATIVES AS GUEST BUT THE FEES ARE GIVEN BY THE ME MBERS AND NOT BY THE GUESTS. THE LD. SENIOR COUNSEL DREW OUR ATTENTION TO CALCUTTA CRICK ET & FOOTBALL CLUB RULES AND DREW OUR ATTENTION TO PAGE 2, SUB-CLAUSE 3 OF CALCUTTA RULES FRAMED FOR THE ASSESSEE CLUB 22 I.T.A NO. 1105/KOL/2017 M/S. CALCUTTA CRICKET & FOOTBALL CLUB WHEREIN WE NOTE THAT EVERY MEMBER IS RESPONSIBLE FO R THE CONDUCT OF AND ALL EXPENSES INCURRED BY HIS WIFE, BY MEMBERS OF HIS FAMILY AND OTHERS INTRODUCED BY HIM AS VISITORS. OUR ATTENTION WAS ALSO DRAWN TO PAGE 2 SUB-CLAUSE 3 OF THE RULES TO SHOW THAT THE GUEST HAVE TO BE ACCOMPANIED BY THE MEMBERS AND THEY CANN OT INDEPENDENTLY COME TO THE CLUB AND USE THE CLUB FACILITY. THE GUESTS/VISITORS OF THE MEMBERS HAVE ALWAYS TO BE ACCOMPANIED BY THE MEMBERS AND MEMBERS PAY FOR THE GUESTS/VISITORS. FOR ACCOUNTING PURPOSES ONLY, THE INCOME WAS SHOWN AS GUESTS CHARG ES BUT NOMENCLATURE USED BY THE ACCOUNTANTS CANNOT DETERMINE THE CHARACTER OF THE R ECEIPTS WHICH IN THIS CASE IS PAID BY THE MEMBERS ONLY AND NOT BY THE GUESTS AND THEREFOR E FOR AFORESAID ADDITIONAL REASONS AND FOR THE REASONS GIVEN BY THE TRIBUNAL IN ITS OR DER TO QUASH THE SIMILAR ACTION OF THE CIT(E) U/S 263 FOR ASSESSMENT YEAR 2011-12, WE QUAS H THE ORDER OF THE CIT(E) DATED 21.03.2017. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 12.12.2018. SD/- SD/- [M. BALAGANESH] [A. T. VA RKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12.12.2017. [R.S, SR.PS] COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/ASSESSEE M/S. CALCUTTA CRICKET & FOOTBALL C LUB, 19/1, GURUSADAY ROAD, KOLKATA 700 019. 2. REVENUE/RESPONDENT - ITO, EXEMPTION WARD 1(1), 10B , MIDDLETON ROW, KOLKATA 700 071. 3. CIT(A)- KOLKATA 4. CIT , KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA TRUE COPY BY ORDER ASSISTANT REGISTRAR KOLKATA BENCHES, KOLKATA