Secunderabad Club, Secunderabad V. Income Tax Officer, Ward-10(2), Hyderabad

ITA 1327/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74594 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: S RAMA RAO
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO1327-1329/HYD/2013 ASSESSMENT YEARS: 2005-06 TO 2007-08. SECUNDERABAD CLUB, -V- ITO, WARD-10(2), SECUNDERABAD. HYDERABAD. PAN:AAAAT2543E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. RAMA RAO RESPONDENT BY SHRI B. YADAGIRI DATE OF HEARING 20-02-2014 DATE OF PRONOUNCEMENT 20-02-2014 ORDER PER SAKTIJIT DEY, J.M: THESE ARE THREE APPEALS OF THE SAME ASSESSEE AGAINS T A COMMON ORDER OF THE CIT (A)-VI, HYDERABAD PERTAININ G TO ASSESSMENT YEAR 2005-06 TO 2007-08. SINCE GROUNDS ARE COMMON IN THESE APPEALS, THESE ARE CLUBBED TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THESE APPEALS HAVE BEEN FILED WITH A DELAY OF 1 25 DAYS. THE ASSESSEE HAS FILED PETITIONS FOR CONDONATION OF THE SAID DELAY BEING SUPPORTED BY AFFIDAVITS. THE LEARNED AR EXP LAINING THE CAUSE OF DELAY AS STATED IN THE CONDONATION PETITIO N SUBMITTED 2 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. THAT THE IMPUGNED ORDER OF THE CIT (A) WAS RECEIV ED BY A STAFF SRI N.P. ANJANEYULU, GENERAL MANAGER (FINANCE) WHO WAS LOOKING AFTER THE TAX MATTERS AND WAS ADVISED TO TAKE ACTIO N AFTER CONSULTING THE CHARTERED ACCOUNTANT. HOWEVER, NO AC TION WAS TAKEN BY HIM TO CARRY THE MATTER FURTHER AND THE PA PERS WERE LYING IN THE OFFICE. THIS CAME TO THE KNOWLEDGE OF THE MANAGEMENT IN THE LAST WEEK OF SEPTEMBER, 2013 WHEN THE CIT (A) FOR THE SUBSEQUENT ASSESSMENT YEARS I.E., 2008 -09 TO 2010- 11 INVOLVING THE SAME ISSUE DECIDED THE MATTER AGAI NST THE ASSESSEE AND SUCH ORDER WAS RECEIVED BY THE ASSESSE E ON 26/9/2013.IMMEDIATELY, THEREAFTER THE ASSESSEE GOT THE APPEAL PREPARED FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N THROUGH AN ADVOCATE AND FILED THE SAME BEFORE THE TRIBUNAL ON 1-10-2013. IT WAS FURTHER CONTENDED THAT THE MATTER OF DELAY WAS SERIOUSLY VIEWED BY THE MANAGEMENT AND THE SERVICES OF THE SA ID GENERAL MANAGER (FINANCE) WERE DISCONTINUED WITH EFFECT FRO M 21/10/13. IT WAS THEREFORE REQUESTED FOR CONDONATION OF SAID DELAY. 3. THE LEARNED DR, ON THE OTHER HAND, OPPOSED COND ONATION OF DELAY IN THE INSTANT CASE. 4. WE HAVE HEARD THE PARTIES. AFTER CONSIDERING T HE CAUSE OF DELAY EXPLAINED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THERE IS REASONABLE CAUSE FOR FILING THE APPEALS BELATEDLY. WE THEREFORE BEING SATISFIED WITH THE EXPLANATION SUBMITTED BY T HE ASSESSEE, CONDONE THE DELAY AND ADMIT ALL THE APPEALS FOR DEC IDING THE SAME ON MERIT. 5. GROUNDS ARE COMMON FOR ALL ASSESSMENT YEARS EXCE PT FIGURES. FACTS BEING IDENTICAL AND GROUNDS BEING C OMMON, WE 3 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. WILL DEAL WITH FACTS AS TAKEN FROM ITA NO.1327/HYD/ 13 FOR ASST. YEAR 2005-06. THE GROUNDS RAISED BY THE ASSESSEE A RE AS UNDER:- 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE INTEREST INCOME OF RS.41,15,158/- IS NOT EXEMPT ON THE PRINCIPLES OF MUTUALITY. 3. THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THE FACT THAT THERE WAS OPERATIONAL LOSS DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSING OFFICER OUGHT TO HAVE BEEN DIRECTED TO ADJUST THE LOSS AGAINST THE INCOME TO BE ASSESSED. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 6. GROUND NOS. 1 AND 4 BEING GENERAL IN NATURE, ARE NOT REQUIRED TO BE ADJUDICATED. IN GROUND NO.2, THE AS SESSEE HAS ASSAILED THE TAXABILITY OF INTEREST INCOME RS.41,15 ,158/- ON PRINCIPLES OF MUTUALITY. 7. BRIEFLY THE FACTS ARE, ASSESSEE IS A CLUB ASSESS ED IN THE STATUS OF AOP. IT CARRIES ON SOCIAL ACTIVITIES INC LUDING SPORTS AND RECREATIONAL EVENTS. FOR THE IMPUGNED ASSESSMENT Y EAR THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS.3,00,006/-. DURING THE SCRUTINY ASSESSMENT PROCE EDING THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS REC EIVED INTEREST 4 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. OF RS.41,15,158 FROM MEMBER BANKS WHICH WAS NOT OFF ERED TO TAX. IN RESPONSE TO QUERY MADE BY THE ASSESSING OFF ICER THE ASSESSEE EXPLAINED THAT SINCE INTEREST INCOME IS FR OM MEMBER BANKS, IT IS EXEMPT AS PER THE PRINCIPLES OF MUTUAL ITY. IT WAS SUBMITTED BY THE ASSESSEE THAT ONLY INCOME RECEIVED FROM NON MEMBERS ARE OFFERED TO TAX. THE ASSESSING OFFICER NOTED THAT THE HONBLE ANDHRA PRADESH HIGH COURT IN ASSESSEES OWN CASE IN ASST. YEARS 1996-97 TO 2003-04 HAS HELD THAT IF THE CLUB HAS DEPOSITED ITS SURPLUS WITH NATIONALISED BANKS WITH AN INTENTION TO EARN INTEREST AND IF THE CLUB, BEING A PARTY TO SUC H A BANKING BUSINESS EARNS INTEREST THEN PRINCIPLES OF MUTUALIT Y ENDS. 8. THE HONBLE HIGH COURT ACCORDINGLY HELD THAT INT EREST INCOME EARNED FROM MEMBER BANKS IS TAXABLE AT THE H ANDS OF ASSESSEE. FOLLOWING THE DECISION OF THE HONBLE JU RISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE THE ASSESSING OFF ICER TREATED THE INTEREST ON FDRS WITH MEMBER BANKS AS INCOME OF THE ASSESSEE AND COMPLETED ASSESSMENT ACCORDINGLY. 9. ASSESSEE CHALLENGED THE ASSESSMENT SO MADE IN AN APPEAL PREFERRED BEFORE CIT (A). SIMILAR ADDITIONS MADE F OR ASST. YEARS 2006-07 AND 2007-08 WERE ALSO CHALLENGED BEFORE CIT (A). IN A CONSOLIDATED ORDER PASSED FOR THREE ASST. YEARS THE CIT (A) ALSO CONFIRMED THE ADDITIONS MADE BY ASSESSING OFFICER B Y APPLYING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL H IGH COURT IN ASSESSEES OWN CASE. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. THE LEARNED AR FAIRLY SUBMITTED THAT THE H ONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE (1 50 ITR 401) 5 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY HOLDI NG THAT INTEREST INCOME EARNED FROM DEPOSITS WITH MEMBER BA NKS IS TAXABLE IN THE HANDS OF THE ASSESSEE. CONSIDERING SUCH SUBMISSIONS OF THE ASSESSEE AND GOING THROUGH THE D ECISION OF THE HONBLE HIGH COURT IN ASSESSEES OWN CASE WE UP HOLD THE ORDER OF THE CIT (A) BY DISMISSING THE GROUND RAISE D BY ASSESSEE. 11. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE ISS UE OF SET OFF OF OPERATIONAL LOSS AGAINST INCOME ASSESSED. 12. WE HAVE HEARD THE PARTIES. THE LEARNED AR SUBM ITTED BEFORE US THAT DURING THE YEAR THE ASSESSEE HAS SUS TAINED OPERATIONAL LOSS WHICH SHOULD HAVE BEEN SET OFF AGA INST THE ASSESSED INCOME UNDER THE PROVISIONS OF SEC. 71 OF THE ACT. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT SINCE T HE ASSESSEE IS NOT CARRYING ON ANY BUSINESS ACTIVITY, THERE IS NO QUESTION OF ALLOWING SET OFF OF LOSS U/S 71 OF THE ACT. 13. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S, WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE LEARNED DR . ON A CAREFUL READING OF SEC. 71 OF THE ACT, WE ARE OF TH E VIEW THAT THE AFORESAID SECTION ALLOWS SET OFF OF LOSS UNDER ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS, AGAINST INCOME ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD. ONLY RESTRIC TION BEING, THERE SHOULD NOT BE ANY INCOME UNDER THE HEAD CAPIT AL GAINS. THEREFORE, IF THE ASSESSEE HAS SUSTAINED LOSS UNDER ANY HEAD, EXCEPT CAPITAL GAINS, AND THE ASSESSEE HAS NO INCOM E FROM CAPITAL GAINS DURING THE YEAR, THEN LOSS CAN BE SET OFF AGAINST INCOME ASSESSABLE UNDER ANY OTHER HEAD. HOWEVER, I T APPEARS 6 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. FROM THE RECORD THAT ASSESSEE HAS NOT RAISED THIS I SSUE BEFORE THE FIRST APPELLATE AUTHORITY. THAT APART, FULL FA CTS RELATING TO THIS ISSUE HAVE NOT BEEN BROUGHT ON RECORD. IT IS ALSO SUBMITTED BY THE LEARNED AR THAT SIMILAR ISSUE PERTAINING TO ASST. YEAR 1996-97 AND ASST. YEARS 1998-99 TO 2003-04 ARE PEND ING BEFORE THE CIT (A) HAVING BEEN REMITTED BY THE INCOME-TAX APPELLATE TRIBUNAL. CONSIDERING THE TOTALITY OF FACTS AND CIR CUMSTANCES OF THE CASE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSU E TO THE FILE OF CIT (A) FOR DECIDING AFRESH IN CONSONANCE WITH THE STATUTORY PROVISIONS AND ONLY AFTER AFFORDING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.1328 & 1329/HYD/13:- 14. FOLLOWING OUR DECISION IN ITA NO.1327/HYD/13, W HILE WE DISMISS GROUDNNO.2, GROUND NO.3 IS REMITTED BACK TO THE FILE OF THE CIT (A) FOR CONSIDERING AFRESH. 15. IN THE RESULT, ALL THE APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 20-02-2014. S D / - (CHANDRA POOJARI) ACCOUNTANT MEMBER S D / - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 20 TH FEBRUARY, 2014. JMR* 7 ITA NOS.1327-1329/H/13 SECUNDERABAD CLUB, SECBAD. COPY TO:- 1) SECUNDERABAD CLUB, CANTONMENT, PICKET, SECUNDERABAD. 2) INCOME-TAX OFFICER, WARD-10(2), HYDERABAD. 3) CIT(A) VI, HYDERABAD. 4) CIT-V, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.