Appeal Details
Counselvise Citation
[2023] 102 COUNSELVISE.COM (IT) 0170 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
11 year(s) 1 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-11-2023
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
Kolkata
Next Hearing Date
25-09-2023
Assessment Year
2008-2009
Appeal Filed On
16-09-2012
Judgement Text
ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President & Dr. Manish Borad, Accountant Member I.T.A. No. 1340/KOL/2012 Assessment Year: 2008-2009 & I.T.A. No. 339/KOL/2013 Assessment Year: 2009-2010 Deputy Commissioner of Income Tax,........Appellant Circle-8, Kolkata, Aayakar Bhawan, 5 th Floor, P-7, Chowringhee Square, Kolkata-700069 -Vs.- The Saturday Club Limited,.....................Respondent 7, Wood Street, Kolkata-700016 [PAN: AABCT1662R] -A N D – I.T.A. No. 837/KOL/2015 Assessment Year: 2010-2011 Deputy Commissioner of Income Tax,........Appellant Circle-8(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 -Vs.- The Saturday Club Limited,.....................Respondent 7, Wood Street, Kolkata-700016 [PAN: AABCT1662R] ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 2 -A N D – I.T.A. No. 2377/KOL/2016 Assessment Year: 2011-2012 & I.T.A. No. 2491/KOL/2017 Assessment Year: 2012-2013 The Saturday Club Limited,......................Appellant 7, Wood Street, Kolkata-700016 [PAN: AABCT1662R] -Vs.- Deputy Commissioner of Income Tax,........Respondent Circle-8(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: Shri N.S. Saini, A.R., appeared on behalf of the assesseee Shri B.K. Singh, JCIT (Sr. DR), appeared on behalf of the Revenue Date of concluding the hearing : September 26, 2023 Date of pronouncing the order : November 06 th , 2023 O R D E R Per Dr. Manish Borad, Accountant Member:- Out of this bunch of five appeals, two appeals, i.e. ITA No. 2377/KOL/2016 and 2491/KOL/2017 are directed at the instance of assessee against the orders of ld. Commissioner of Income Tax (Appeals), Kolkata dated ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 3 08.09.2016 & 20.09.2017 for A.Y. 2011-12 and 2012-13 respectively, whereas remaining three appeals, i.e. ITA Nos. 837/KOL/2015, 339/KOL/2013 & 1340/KOL/2012 are directed at the instance of Revenue against the orders of ld. Commissioner of Income Tax (Appeals), Kolkata dated 31.03.2015, 21.12.2012 & 11.06.2012 for A.Ys. 2010-11, 2009-10 & 2008-09 respectively. 2. These appeals were decided by the Tribunal earlier and dissatisfied with the order of the Tribunal, the appeals were carried before the Hon’ble High Court. The Hon’ble High Court vide its judgment dated 07.07.2023 remanded the instant appeals to this Tribunal to re- decide the question that whether the rent received from Reliance Industries Limited (in short ‘RIL’) was not covered by the principle of mutuality and was taxable under the Income Tax Act, 1961 after taking into account all the disclosure of facts made before the Adjudicating Authorities and the judgment of the Hon’ble Supreme Court as well as the Hon’ble Jurisdictional High Court discussed in their order dated 07.07.2023. 3. In pursuance of the Hon’ble High Court’s decision, we have taken up the appeals and heard the parties. The solitary issue agitated in this bunch of appeals is whether the rental income received by the assessee Club ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 4 from M/s. Reliance Industries Limited is liable to be taxed under the Income Tax Act, 1961 or the assessee is entitled for the benefit of mutuality on these receipts also. 4. The Tribunal is required to take into consideration the complete facts on this rental income. We find that the ld. Assessing Officer has recorded very brief finding on this aspect and we deem it appropriate to take note of the finding of the ld. Assessing Officer as well as of the ld. CIT(Appeals) in each year in appeal before us. 5. ITA No. 1340/KOL/2012 (A.Y. 2008-09) In this year, the assessee has filed its return of income on 26.09.2008 declaring total income of Rs.4,51,510/-. This return was revised by the assessee on 15.01.2010 by declaring total income of Rs.8,81,516/- . The return was selected for scrutiny assessment and a notice under section 143(2) and questionnaire under section 142(1) were issued and served upon the assessee. On scrutiny of the accounts, ld. Assessing Officer found that the assessee has received rent of Rs.78,49,798/- from M/s. Reliance Industries Limited. The finding recorded by the ld. Assessing Officer on this issue reads as under:- ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 5 Rent receipt of Rs.78,49,798/- from Reliance Industries Limited:- The assessee did not offer rental income received from Reliance Industries Ltd. for taxation on the ground that w.e.f. 15.04.2006, it acquired membership of the club. The payment of rent by Reliance Industries Ltd. to the assessee is part of their exclusive prudential business decision. It is clearly evident that the relationship between assessee and Reliance Industries Ltd. is that of a landlord and a tenant. Mere acquisition of a club membership by the later does not change the character of relationship between them. Hence, the argument of assessee is not acceptable and the sum of Rs.78,49,798/- received from Reliance Industries Ltd. is considered for taxation under the head 'Income from House Property'. 6. Dissatisfied with this finding, the assessee carried the matter in appeal before the ld. CIT(Appeals). The finding of the ld. CIT(Appeals) reads as under:- ”5.2. Ground No. 2: This ground of appeal of the appellant is directed against the action of the Assessing Officer in making the addition of Rs.78,49,798/- received from Reliance Industries Ltd. as rental income while computing the appellant’s taxable income. During the appellate proceedings the A/R of the appellant with regard to this ground of appeal made submission as under- “Ground No.2-Addition on account of rental income ofRs..78.49.798/- received from Reliance Industries Ltd:- At the outset it is submitted that similar disallowance inflicted by the AO has been deleted by your predecessor vide order dated 24- 09-2008 for AY 2004-05 (copy of the order is enclosed as Annexure-1). During the year under consideration, the appellant had let a portion of its building to M/s Reliance Industries Ltd. Your kindself will note that. M/s Reliance Industries Ltd. is a corporate member of the appellant since 5 lh October, 2006. The rental income of Rs. 78,49,798 - earned from the corporate member, was not included in ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 6 the total income by the appellant as the property was let out to one of its members. Your kindself may kindly note that aforesaid rental income was collected from the corporate member of the club. Accordingly, such rental income received from the corporate member cannot be taxed in the hands of the club as held by the Hon’ble Supreme Court in the case of CIT-vs-Bankipur Club Ltd. [226 ITR 97 (SC)]. The Supreme Court in the said decision has held the following - “...the amount received by the clubs were for supply of drinks, refreshments or other goods as also letting out of building for rent or by way of admission fees, periodic subscriptions and receipts from the members of the clubs were only for/towards charges for the privileges, convenience and amenities provided to the members, which they were entitled to, as per the rules and regulations of the respective clubs In other words, services offered on the above counts were not done with any profit motive, and were not tainted with commerciality in the light of the findings of fact the receipt for the various facilities extended by the club to its members, as part of the usual privileges, advantages and conveniences attached to the membership of the club, could not be said to be ‘a trading activity’. The surplus- excess of receipts over the expenditure - as a result of mutual arrangement, could not be said to be ‘income’ for the purpose of the Act”. The AO without appreciating the fact of the case and principle, laid down by Hon’ble Supreme Court has included the said rental income while computing the total income of the appellant. It is further submitted that any sum received from the members cannot be treated as club’s income has already been decided in favour of the club by the Calcutta High Court in the appellant’s own case. Copy of the order is enclosed as Annexure-2. The Hon’ble High Court has held the following- “In member's club, there is no question of two sides“ Members" and‘‘club'' both are same entity One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 7 service as per applicability of the revenue tax of the country. " ” I have carefully considered the appellant's submission along with the case laws relied upon, perused the facts of the case including the impugned assessment order and other material available on record. It is observed that the AO has treated the rental income as income from House Property without giving cognizance to the fact that the rental income has been earned from the corporate member, hence was not included in the total income by the appellant as the property was let out to one of its members. It is also well settled law that a club cannot earn from its own members. I also find that identical issue has come up before my predecessor for adjudication in the appellant’s own case for AY 2004-05 and the same was decided in favour of the appellant. In the light of the above observation and discussion, after carefully considering the facts and circumstances of the case and following the decision of my predecessor in the appellant’s own case for AY 2004-05, I hold that such rental income received from the corporate member cannot be taxed in the hands of the club. Therefore, the disallowance of Rs.78,49,798/-made by the AO is directed to be deleted”. 7. ITA No. 339/KOL/2013 (A.Y. 2009-10) In this year, the assessee has filed the return of income on 23.09.2009 declaring total income of Rs.60,21,837/-. The return was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. During the course of assessment proceeding, the ld. Assessing Officer noticed income from Hoarding, Advertisement and Sponsorship. He made an addition of Rs.80,13,884/-. His finding reads as under:- “4. Income from Hoarding, Advertisement and Sponsorship : ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 8 4.1 It is observed that during the year the assessee earned various incomes from letting out its properties for the purposes of hoardings, advertisements and sponsorship activities. These incomes have accrued to the assessee in course of dealing with outsiders (vide note appended with the computation of income). Briefly, they are enumerate as under :- For Hoardings : Tapan Art Centre (Non-member) : Rs.4,75,000/- Sai Media Ventures Pvt. Ltd.( Non-member ) :Rs.2,50,000/- For Advertisement & Sponsorship : Various Parties : Rs.72,88,884/- Total : Rs.80,13,884/- In the return of income the above incomes were not offered to tax. The assessee was asked to justify its claim. In response, the A/R filed party names and amount received on account of hoarding and sponsorship fees. It is stated by the A/R that the hoardings were put up in the tennis court maintained by the club and the income earned therefrom is directly related to club activities. Similarly, it is stated that the advertisement & sponsorship fees are also received by the club in the normal course of club activities. Having stated as such, it is argued by the A/R that all such incomes are exempt from tax on the ground of mutuality. 4.2 The above submission is considered. The A/R has not been able to adduce any evidence :c show that providing the facility or letting out property to outsiders for putting up hoarding and advertisement/ sponsorship is an object of the club or is it supported in any way by the Rules governing the club. The AR's reliance on the concept of mutuality is somewhat misplaced in-as- much as the preponderant judicial view is that the income accruing to a club in the circumstances where it deals with its members alone and does not carry on any commercial activity as such may be covered by the principle of mutuality. In the instant case, the assessee club is engaged in some real, systematic and regular activities of letting out properties to outsiders and exploited the said properties for commercial advantage or gain. There will be no difference even if some of the outsiders are members of the club as long as both members and non-members are dealt with alike. In the case of CIT Vs. Royal Western India Turf Club Ltd. [1953] 24 ITR 551, the Hon’ble Supreme Court found that the assessee, which was an incorporated company, ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 9 carried on the business of race course and that of licensed victuallers and refreshment purveyors and dealt with non- members as well in the ordinary course of business carried on with a view to earning profit as in any other commercial concern. It gave to its members the same or similar amenities as it gave to non-members, like the use of unreserved seat in a stand, the facility to watch the races and to bet on the horses in the races, use of the totalisator in that stand and the facility of refreshment. The facilities were given to members and non-members alike for a price and the dealing in both cases disclosed the same profit earning motive and were tainted alike with commerciality. It held that in the circumstances, the four items of receipt from members which were in dispute were to be taken into account in computing the total income of the company. 4.3. In the instant case, the letting out the properties to outsiders cannot be equated with the facilities extended by the assessee to its members as part of usual privileges, advantages and conveniences attached to the members of the club. Admittedly, the club properties were let out to outsiders and income has accrued to the assessee in the shape of hoarding charges, advertisement charges and sponsorship fees. The activities carried on by the assessee disclose profit-earning motive and are tainted with commerciality. There is complete absence of the identity of contributors and participators to the club fund on account of assessee’s dealing with the outsiders. Therefore, the very claim that the assessee is a mutual concern of the members’ club is of no consequence in the instant case. 4.4. In view of the above discussion, it is held that the activity of letting out club properties to ;ne outsiders constitutes commercial business activity of the assessee which is not covered by the doctrine of mutuality and the income earned therefrom is business income of the assessee. Therefore, the income of Rs.80,13,884/- is assessed as income from business u/s 28. 8. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) has deleted this addition by recording the following finding:- ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 10 “I have carefully considered the appellant’s submission along with the case laws relied upon and supporting evidences furnished , perused the facts of the case including the observation of the AO in the impugned assessment order and other material available on record and I find enough force in the argument of the appellant. Relying on the decision of the Hon’ble Jurisdictional High Court in the appellant’s own case on the principle of mutuality , it is argued that any income received from the members cannot be treated as an income of the club, on the principle of mutuality. I find that the Hon’ble High Court has held the following- In member’s club, there is no question of two sides.“Members” and “club ” both are same entity. One may be called as principal when the other may he called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. ” The AR further argued by drawing my attention that the aforesaid principle that there cannot be any commercial activity between a member and club and both are same entity has also been upheld by my predecessor in the appellant’s own case in the Assessment Year 2004-05 and the appeal .has been decided in favour of the appellant. Following the principle laid down by the Hon’ble Hyderabad Tribunal in the case of Fateh Maidan Club(supra) and by the Hon’ble Mumbai ITAT in the case of MIG Cricket Club vs. ACIT (supra) ,* the appellant further submitted that as the above mentioned sponsorship amount; was received by the club in the normal course of club activities and was utilized to carry out the normal club activities; the same was not includable in the income of the appellant. It is noted that the Hon’ble Mumbai ITAT in referred case has held as under : “11.2 Coming to sponsorship fees received as well as the advertisements, on the same principles on which interest income is held to be exempt, we have to hold that the receipts are not tainted by commerciality and only goes to reduce the costs incurred by the members and as it is for the benefit of the members, the income cannot be considered as taxable. Thus, both advertisement expenditure as well as sponsorship fees cannot be taxed on the principles of mutuality. ” In the light of the above discussion and observation, considering the submission of the appellant and the' facts of the ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 11 case and respectfully following the principle of the decisions of the Hon’ble ITATs Hyderabad and Mumbai in the above referred cases, it is held that the sums received by the appellant from Advertisement and Sponsorship from Various Parties cannot be taxed in the hands of the club. Therefore, the addition of Rs.72,88,884/-made by the AO on this count from Various Parties is hereby deleted. Thus, this ground of appeal of the appellant is allowed”. 9. ITA No. 837/KOL/2015 (A.Y. 2010-11) In this year, the assessee has filed the return of income on 01.10.2010 declaring total income of Rs.3,81,651/-. The return was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. During the course of assessment proceeding, the ld Assessing Officer noticed income from rent of letting out its property. He made an addition of Rs.55,87,395/- and also an addition of Rs.40,88,325/- as service fees. His finding reads as under:- “4. It is observed that during the year the assessee earned rental income amounting to Rs.55,87.395/- from letting out one of its property' to Reliance Industries Ltd- I he assessee was asked to show cause why the rental income earned from Reliance Industries should not be charged to tax as income from other sonrr.es. In response, the A/R stated that the above income is not taxable since amount was received from a corporate member. 4.1. The submission of the A/R as stated above is duly considered but found not tenable because after the decision of Hon’ble Supreme Court in the case of M/s. Bangalore Club -vs- Commissioner of Income Tax dated 15.01.2013 there is no room for debate as far as taxability of above income is concerned. In case of earning interest from fixed deposit made out of surplus fund, assesse had invested its asset (cash) to a corporate member (bank) who used that asset for its own commercial end and in turn paid interest to the assesee. In case of earning rent, assesse has let out its asset (here property) to one of its corporate member (Reliance ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 12 Industries Ltd.) who used that asset for its own commercial end and in turn Paid rent to the assesee. Therefore, in both the cases the transactions are similar in nature and doctrine of mutuality cannot come to assesse's rescue to avoid tax incidence. In view of the above, it is held that the rental income amounting to Rs.55,87.395/- earned by the assessee is not covered by the concept of mutuality. Therefore the rental income of Rs.55,87,395/- is assessed as income from other sources u/s.56 of the Act. Addition : Rs.55,87,395/- It is observed that during the year the assessee earned Service fees amounting to Rs.40,88,325/- for providing case services from Reliance Industries Ltd. The assessee was to show cause why the service fees from Reliance Industries should not be charged to tax as income from other sources, In response, the A/R stated that the above income .is not taxable since amount was received from a corporate member. The submission of the A/R as stated above is duly considered but found not tenable because after the decision of Hon’ble Supreme Court of India in the case of_M/s. Bangalore Club -vs- Commissioner of Income Tax dated 15.01.2013 there is no room for debate as far as taxability of above income is concerned. In case of earning interest from fixed deposit made out of surplus fund, assesse had invested its asset (cash) to a corporate member (bank) who used that asset for its own commercial end and in turn paid interest to the assesee. in case of earning service fees, assesse has provided service as well as its different facilities and amenities for earning the same and in turn Reliance Industries Ltd. paid service fees to the assesee. Therefore, in both the cases the transactions are similar in nature and doctrine of mutuality cannot come to assessed rescue to avoid tax incidence. Further, it is to be noted that Reliance Industries Ltd. paid service fees to the assesse. not the membership fees. Membership fees is covered under doctrine of mutuality but not the service fees. Reliance Industries Ltd. does not pay service fees because it is a member of the assesse, but for the very reason that it avails certain services which is not available to any member against payment of membership fees. 5.2. In view of the above, it is held that the service fees received amounting to Rs.40,88,325/- earned by the assessee is not covered by the concept of mutuality. Therefore, the Service fees of ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 13 Rs.40,88,325/- is assessed as income from other sources u/s.56 of the Act. [ Addition :Rs.40,88,325/-] 10. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) has deleted this addition by recording the following finding:- “4.2, This is also a recurring issue in the appellant’s case. In the appellate order dated 20.06.2014 for the A,Y 2007-08, ld., CIT(A)-XXXII, Kolkata has, following the principle laid down in the decision of Supreme Court in the case of CIT Vs. Bankipur Club Ltd. 226 ITR 97 and of Calcutta High Court in the case of Darjeeling Club Ltd. 153 ITR 676, held that that the-amount was covered by principle of mutuality and deleted the addition. There is no chance in material facts of the case. Considering the reasoning given in the appellate order for A.Y.2007- 08, the addition is deleted. 5. Ground no.3 relates to addition of Rs. 40,88,325/- in respect of service fee from Reliance Industries Ltd,.. The appellant had also received service fee from Reliance Industries Ltd. The assessing officer stated that though membership fee was covered by doctrine of mutuality but not the service fee. He, therefore, added the above amount to the appellant’s income. 5.1. The appellant has made following submission in the matter:- “At the outset it is submitted that similar disallowance inflicted by the AO has been deleted by CIT (Appeals)-XXXII vide order dated 20-06-2014 for AY 2007-08 (copy of the order is enclosed as Annexure 1) [Refer Page No. 12-25 of written submission]. During the year under consideration, the appellant had provided services to M/s. Reliance Industries' Limited. Ld. CIT(Appeals) will note that M/s Reliance Industries Ltd. is a corporate member of the appellant since 5 th October, 2006. The service fees of Rs. 40,88,325/- earned from the member was not included in the total income by the appellant as the service was provided to one of its members. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 14 It is submitted that any sum received from the members cannot be treated as club’s income has already been decided in favour of the club by the Calcutta High Court (enclosed as Annexure 2 — refer Page No. 26-44 of written submission). Similar issue has also been decided in favour of the appellant by the Ld. CIT(Appeals) in the Assessment Year 2005-06 (enclosed as Annexure 3 - refer Page No. 45-67 of written submission). It is also submitted that in the instant case the contributor and participants are club & its member and there is no third party /outsiders involved. Further, the money received has been used for the welfare of the club &/or its members. Hence, the Supreme Court judgment in case of Bangalore Club-Vs.-CIT (350ITR 509)(SC) does not apply. In view of the above, your kindself is requested to kindly direct the Assessing Officer to delete the aforesaid addition while computing the appellant’s taxable income in the interest of justice. 5.2. At the time of hearing, it was informed by the appellant, that the service charges have been received by the appellant from Reliance Industries Ltd. in respect of the same let out premises, for which rent has been received and the service charges relate to the services provided by the appellant in respect of the let out premises only. While deciding ground no.2 earlier, it has been held, that rent from Reliance industries Ltd, a corporate member, was covered by the principle of mutuality in light of the decision of Supreme Court in the case of CIT Vs, Sankipur Club Ltd. 226 ITR 97 and of Calcutta High Court in the case of Darjeeling Club Ltd. 153 ITR 676. Applying the same reasoning, seivice fee received from a member in respect of the let out premises is also covered by the principle of mutuality and, hence, not taxable. Considering the same, the addition is deleted”. 11. ITA No. 2377/KOL/2016 (A.Y. 2011-12) In this year, the assessee has filed its return of income on 29.09.2011 declaring total income of Rs.1,01,430/-. The assessee is engaged in the business of club activity, investment, renting of property. The ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 15 return was selected for scrutiny through CASS and notice under section 143(2) was issued and served upon the assessee on 31.07.2012. The return was selected for scrutiny assessment and a notice under section 143(2) and questionnaire under section 142(1) were issued and served upon the assessee. On scrutiny of the accounts, ld. Assessing Officer found that the assessee has earned interest income amounting to Rs.1,47,77,243/- from parking of its surplus funds in fixed deposits with banks and other deposits/investments/instruments. The finding recorded by the ld. Assessing Officer on this issue reads as under:- “Income From House Property: On perusal of the details filed by the assessee it is observed that during the year the assessee earned rental income amounting to Rs.57,98,259/- from letting out property to Reliance Industries Ltd. The assessee vide order sheet noting dated 18.02.2014 was asked to show cause why the rental income earned from Reliance Industries should not be charged to tax as income from other sources. In response, the assessee stated that the above income is not taxable since amount was received from a corporate member. The submission of the A/R as stated above is duly considered but found not tenable in view of the discussion on principle of mutuality and the decision of Hon’ble Supreme Court in the case of M/s. Bangalore Club -vs- Commissioner of Income Tax dated 15.01.2013 as above. In case of earning interest from fixed deposit made out of surplus fund, the assesse had invested its asset (cash) with a corporate member (bank) who used that asset for its own commercial end and in turn paid interest to the assesee. In the case of earning rent, the assesse has let out its asset (here property) to one of its corporate members (Reliance Industries Ltd.). Reliance Industries Ltd. is a commercial entity and there is nothing on record to show that the premises let out have not been utilized by Reliance ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 16 Industries Ltd. to further its commercial interests. Accordingly, since a profiteering motive is present the said transaction goes out of the ambit of principle of mutuality. In view of the above, it is held that the rental income amounting to Rs.57,98,259/-earned by the assessee does not fall within the ambit of the concept of mutuality and is therefore in the nature of income in the hands of the assessee. Accordingly, the rental income of Rs.57,98,259/-is assessed as income from other sources u/s.56 of the Act. Addition: Rs.57,98,259/-“. Income from Service Fees: v -» On perusal of the details filed by the assessee it is observed that during the year the assessee earned Service fees amounting to Rs.43,50,052/- for providing case services from Reliance Industries Ltd. The assessee was requested to show cause why the Service fees earned from Reliance Industries should not be charged to tax as income from other sources. In response, the A/R stated that the above income is not taxable since amount was received from a corporate member. The submission of the A/R as stated above is duly considered but found not tenable because after the decision of Hon’ble Supreme Court of India in the case of M/s. Bangalore Club -vs- Commissioner of Income Tax dated 15.01.2013 there is no room for debate as far as taxability of above income is -concerned. In case of earning interest from fixed deposit made out of surplus fund, the assesse had invested its asset (cash) to a corporate member (bank) who used that asset for its own commercial ends and in turn paid interest to the assesee. In case of earning service fees, assessee has provided service as p. well as its different facilities and amenities for earning the same and in turn Reliance Industries Ltd. paid service fees to the assesee. As discussed above, Reliance Industries Ltd. is a commercial entity and there is nothing on record to show that the services rendered have not been utilized by Reliance Industries Ltd. to further its commercial interests. Accordingly, since a profiteering motive is present the said transaction goes out of the ambit of principle of mutuality. Further, it is to be noted that Reliance Industries Ltd. paid service fees to the assessee, and not membership fees. Membership fees ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 17 may be claimed to be covered under doctrine of mutuality but not service fees. It is evident that Reliance Industries Ltd. does not pay service fees because it is a corporate member of the assessee club, but for the very reason that it avails certain services which are not available to any member against payment of membership fees. In view of the above, it is held that the service fees received amounting to Rs.43,50,052/- earned by the assessee is not covered by the concept of mutuality. Therefore, the Service fees of Rs.43,50,052/- is assessed as income from other sources u/s.56 of the Act. [Addition: Rs.43,50,052/-] 12. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) has deleted this addition by recording the following finding:- “I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light o record before the assessing officer during the assessment proceedings. The assessee club earned rental income of Rs.57,98,259/- and service fee of Rs 43,50,052/- from Reliance Industries Ltd from letting out the property and services and it was not offered for taxation by the assessee on the ground that the said property was let out to one of its member. The AO has rejected the argument of the assessee and taxed the rental and service fee amount received by the assessee while stating that it does not fall within the concept of mutuality. The AO further has stated that the rental income and service fee as paid by the Reliance Industries Ltd are not membership fee. The Reliance Industries Ltd paid service fee for the very reason that it avail certain services which are not available to any other member against payment of membership fee. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 18 The principle of mutuality relates to the notion that a person cannot make a profit from himself. An amount received from oneself is not regarded as income and is therefore, not subject to tax; here the Reliance Industries Ltd is club member like all other member but at the same time Reliance Industries Ltd has taken a premises on rent for his business purpose and earning profit. Here the Reliance Industries Ltd has dual capacity one as member and another as tenant of the club. The rent and service fee which has been taxed by the AO is paid by the Reliance Industries Ltd as tenant and not as member of the club. The concept of mutuality has been extended to define groups of people who contribute to a common fund, controlled by the group, for a common benefit. Here the situation is different. The Reliance Industries Ltd is paying contribution to common fund and enjoy the benefit the membership. The Reliance Industries Ltd. as tenant is also paying rent and service fee for doing business. The rent and service fee as paid by the Reliance Industries Ltd is for the business use of the premises. The amount of rent and service fee earned by the assessee from the Reliance Industries Ltd as tenant will not fall within the ambit of the mutuality principle and would therefore, be taxable in the hands of the assessee-club. . The Hon'ble Supreme Court in the case of Bangalore Club vs. Commissioner of Income-tax (350 1TR 509 SC) has considered the issue of principal of mutuality and decided the issue in favour of revenue. Keeping in view of above, the order of the AO is upheld and these grounds of appeals are dismissed”. 13. ITA No. 2491/KOL/2017 (A.Y. 2012-13) In this year, the assessee has filed its return of income on 24.09.2012 declaring total income of Rs.1,11,090/-. The assessee is engaged in the business of club activity, ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 19 investment, renting of property. The return was selected for scrutiny through CASS and notice under section 143(20 was issued and served upon the assessee on 05.09.2013. Meanwhile assessee e-filed the revised return of income showing total income of Rs. NIL. The return was selected for scrutiny assessment and a notice under section 143(2) and questionnaire under section 142(1) were issued and served upon the assessee. On scrutiny of the accounts, ld. Assessing Officer found that the assessee has earned income from sub-letting amounting to Rs.69,42,958/- from letting out property to Reliance Industries Limited and income from service fee of Rs.47,95,168/- from M/s. Reliance Industries Limited. The finding recorded by the ld. Assessing Officer on this issue reads as under:- Income from House Property from sub-letting: 3.1. On perusal of the details filed by the assessee it is observed that during the year the assessee earned income from sub-letting amounting to Rs.69,42,958/- from letting out property to Reliance Industries Ltd. and income from service fee of Rs.47,95,168/- from Reliance Industries Ltd. assessee was asked to show cause, through show cause notice dated 12.02.2015, why income from sub-letting and income from service fee earned during F.Y.2011- 12 should not be treated as taxable income of the assessee as per the Hon'ble Supreme Court's decision in the case of Bangalore Club Vs CIT[350 ITR 509]. In response, the assessee has submitted that the club has earned income from subletting from the following parties: Reliance Industries Limited[corporate member]- Rs. 67,84,258 Bharti Cellular Limited- Rs. 1,58,700/- ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 20 Further the club has earned income from service fees from the following party: Reliance Industries Limited[corporate member]- Rs. 47,95,168/- In respect of rental income and service fees received from Reliance Industries Limited, the assessee has submitted that M/s Reliance Industries Limited is a corporate member of the club since 5 th October, 2006. Such income earned from the member was not included in the total income by the club as the property was let out to one of its members and services were also provided to its members only. It is further submitted that similar disallowance was deleted by Ld. CIT(Appeals) for A.Y.2007-08 and for A.Y. 2005-06. The submission of the A/R as stated above is duly considered but found not to be tenable. From the Leave and License Agreement dated 10 th day of February, 2012, it can be observed that Reliance Industries Limited is having its Branch Office at 7,Wood Street,3 rd Floor,Kolkata-16;i.e. the property which has been let out to Reliance Industries Limited by the assessee. Further it is mentioned on the second page of this Agreement that the Licensor (the assessee) grants to the Licensee(Reliance Industries limited) and the Licensee hereby accepts license to use and occupy the Licensed Premises for its office purpose only and for no other purpose. Further the Agreement shall commence from 15 th October 2011 and continue till 11 months. Therefore the property let out is used for maintenance of a Branch office by Reliance Industries Limited to earn profit and for progress/growth of its business. The asset of the assessee club which has been built and maintained out of the fund received from members of the club has been given on rent to Reliance Industries Limited for the individual benefit of one member at the cost of other members. When a club or a society is formed with the cooperation of members, everyone has equal right over the property and assets of the Club. Hence any asset cannot be placed at the disposal of one member for it's benefit or for the purpose of it's profit while restricting the others to enjoy the property or the asset. This is totally antagonistic to the basic tenets of the club and the principle of mutuality in broader terms. In this context the observations of the Hon'ble Apex Court is mentioned hereunder: "The cardinal requirement is that all the contributors to the 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 ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 21 must be complete identity between the contributors and the participators." The term surplus fund in the context of contributors and participators in the present case should be the property which has been constructed, purchased and maintained out of the contributions of the members. 3.2. By drawing analogy from the observations of Hon’ble Apex Court in the case of M/s. Bangalore Club -vs- Commissioner of Income Tax dated 15.01.2013 i.e. In case of earning interest from fixed deposit made out of surplus fund, the assesse had invested its asset (cash) with a corporate member (bank) who used that asset for its own commercial end and in turn paid interest to the assesee. In the case of earning rent, the assesse has let out its asset (here property) to one of its Corporate members (Reliance Industries Ltd.). Reliance Industries Ltd. is a commercial entity and it has utilized the property(asset) of the club by making its branch office and hence for the furtherance of its commercial interests. Accordingly, since a profiteering motive is present the said transaction goes out of the ambit of principle of mutuality. Further Ld. CIT(Appeals) as per the assessee has decided this issue in favour of the assessee,relying on the Hon’ble Apex Court's Judgment in the case of Bankipur Club and the judgment of Hon'ble ITAT in the case of Darjeeling Club. From the perusal of the order of Hon'ble Apex Court in the case of Bankipur Club,it appears that rent or fee is charged from members for using the guest rooms in the club. Hence it appears to be a temporary arrangement and further the guest rooms appear to be constructed for that purpose only and their usage is not restricted exclusively to onemember. No tenancy right is created in the case of Bankipur Club or Darjeeling Club. However in the case of the assessee , property has been let out for the usage of one member as an exclusive right and it is being let out for almost the whole year(during the relevant A.Y.) and it was also let out for a period prior to the relevant A.Y. In the case of Darjeeling Club as well, it had a set of rooms fully furnished which were let out to the members. It provided refreshments and meals to the members and their guests. The club charged for refreshments, meals and drinks supplied and also charged rent for the rooms. The relevant extracts of the observation of the Hon'ble High Court of Calcutta, in the case of Darjeeling Club is mentioned hereunder: ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 22 "As regards assessability of income derived from providing accommodation to the members along with bed, light, etc., it could not be said that the members were paying rent and had, therefore, become tenants of the club during their stay. What was supplied to the members was a composite of many things. Under section 22 income from house property is liable to the taxed. The income that the club had made in the instant case was from letting out the rooms. The income was derived from providing many facilities to the members including accommodation. Neither the club nor the members had treated these facilities separately and the department could not also treat them separately by splitting up the facilities under various heads." In the case of the assessee through leave and license agreement, the property has been let out to Refiance industries Limited. The period of agreement or the period for which the property has been let cut as per the leave and license agreement dated 10 th day of February (submitted by the assessee) is 11 months from 15 lh October 2011. Further as per this agreement, Reliance Industries Limited is required to pay a security deposit of Rs. 46,99,380/- for the usage of the property. In addition as per the clause of the agreement, Reliance Industries Limited is required to pay license fee of Rs.6,35,400/- per month and it has to be paid in advance before 7 th day of a month. Further it is mentioned that the license fee shall include all present and future Municipal taxes as well as any liability of service tax has to be borne by Reliance Industries Limited. In addition Reliance Industries Limited has been made entitled through this agreement to make, fix or install fixtures and fittings in the said premise. Hence this agreement is nothing but a rental agreement unlike in the case of Darjeeling Club and Bankipur club. Therefore merely a nomenclature of license fee will not change the character of the income. From the above, it is evident that the payment duration is fixed and security deposit is taken. Hence in certainty it is a rental agreement and tenancy rights are created unlike in the case of Bankipur Club Darjeeling Club. In the case of M/s. Bharti Cellular Ltd. which is a non member of the club, the principal of Ts-VtuaUty i.e, the class of contributors and the class of participators should be the same is overlooked. And based on the above discussion in the case of Reliance Industries, the rental income received from M/s. Bharti Cellular Ltd. is added back to the income of the assessee. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 23 Further letting out property for rent is nowhere mentioned in the objects of the company mentioned under the Memorandum of Association of the club. In view of the above, it is held that the rental income amounting to Rs.69,42,958/- earned by the assessee does not fall within the ambit of the concept of mutuality and is therefore in the nature of income in the hands of the assessee. Accordingly, the rental Income of Rs.59,42,958/- is assessed as income from house property u/s.22 of the Act”. [ Addition: Rs.69,42,958/-] 14. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) has deleted this addition by recording the following finding:- DECISION: This ground relates to the addition of Rs. 6784258/- made by the AO to total income of the assessee on account of amount received from M/s. Reliance Industries Ltd for letting out of property. This issue is covered by the decision of the Hon’ble ITAT in assessee’s own case in ITA No. 1340/KoI/2012 vide order dated 02.12.2016 wherein it has been held as under: "8. As far as Ground No.2 is concerned, the fact are that the Assessee received a sum of Rs. 78,49,798/- as rent from M/s. Reliance Industries Ltd., who was its member. The income in question was claimed to be not taxable in the light of the principle of mutuality. The AO however rejected the plea of the assessee and taxed the income in question under the head "Income from House Property". The CIT(A) held that the income in question is not taxable applying the principle of mutuality. 9. We have already held that principle of mutuality will not apply in the circumstances of the case as explained by the Hon'ble Supreme Court in the case of Bangalore Club (supra). In view of the said decision, we are of the view that the income in question is taxable and under the head "Income from House Property". Gr.No.2 raised by the revenue is allowed. “ ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 24 Respectfully following the above decision of the Hon’ble ITAT, The action of the AO in taxing the said income in question under the head "Income from House Property” is hereby confirmed. This ground of appeal of the assessee is hereby dismissed”. 15. Aggrieved with the order of ld. CIT(Appeals), the assessee preferred appeal before this Tribunal, where the action of the ld. Assessing Officer was confirmed by the ld. CIT(Appeals) for A.Y. 2011-12 & A.Y. 2012-13 and in the remaining cases, Revenue preferred appeals before this Tribunal. 16. The lead case being Assessment Year 2008-09, we observe that this Tribunal vide its order dated 02.12.2016 in ITA No. 1340/KOL/2012 held against the assessee by placing reliance on the judgment of the Hon’ble Supreme Court in the case of Bangalore Club – vs.- CIT & others reported in (2013) 350 ITR 509 and held that the principle of mutuality will not apply on the rental income received from Reliance Industries Limited and the said rent is liable to be taxed under the head “Income from House Property”. This decision of this Tribunal deciding that the rent and service charges received by the assessee-Club from Reliance Industries Limited cannot be brought under the principle of mutuality and deserves to be taxed as income from house property, has been subsequently followed by this ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 25 Tribunal in their orders for A.Ys. 2009-10 to 2012-13. Thereafter aggrieved with the orders of this Tribunal, the assessee preferred appeal before the Hon’ble Jurisdictional High Court. Hon’ble Court vide order dated 07.07.2023 has remitted the matter to this Tribunal to re-decide this question of law by examining all disclosure of facts made before the adjudicating authorities as well as the judgment of the Hon’ble Supreme Court and Hon’ble High Court discussed in the said order dated 07.07.2023. We reproduce below the relevant extract of the judgment of Hon’ble Jurisdictional High Court dated 07.07.2023 so that the adjudication can be carried out strictly as per the direction of the Hon’ble Jurisdictional High Court:- “Thereafter, Mr. Murarka took us through several other decisions on this point, namely, Commissioner of Income Tax v. Bankipur Club Ltd. reported in 226 ITR 97, Chelmsford Ford v. Commissioner of Income Tax reported in 289 ITR 89, Bangalore Club v. Commissioner of Income Tax reported in 350 ITR 509 and Saturday Club Ltd. v. Assistant Commissioner, Service Tax Cell reported in (2005) Cal LT 575. In reply, learned counsel for the revenue cited a very recent decision in Yuml Resautrants (Marketing) Private Limited v. Commissioner of Income Tax, Delhi reported in (2021) 7 SCC 678. This principle of law-which was canvassed by Mr. Murarka and to be deduced from these cases is this : A club is an association of persons for certain objects and purposes. It may or may not be a body corporate but it has a distinct identity of its own. This identity is akin to that of a body corporate. It is different from that of his members. However, there is a difference between the legal identity of a body corporate and that of a recreational club in certain matters. It is in these matters that the principle of ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 26 mutuality is involved. The members of the club are seen both as contributors and participators. The club and its members are seen as one person. Usually a member has to pay to avail of the services and facilities provided by the club. By way of subscription or contribution a member may contribute a sum of money to the club in a particular month. Similarly other members may also contribute this amount or any lesser or greater sum. "his sum may be utilised by the club to bring in stocks of food, drinks, ;torts gears and other items and also be utilised for the purpose of providing facilities to its members like maintaining a swimming pool or tennis court. The members may consume or enjoy the benefits of whatever they contribute. The concept of mutuality is that whenever money is being spent by a particular member is also being enjoyed by that person in the form of facilities. Members or a group of persons forming the association and the association are seen as a single identity. One cannot make an income out of any sum paid to oneself or spent on oneself. In charging a member for such utility the club should not make any profit. In other words it does not make any income in excess of its expenditure. The transactions ought to have been for the benefit of all the members and also resulted in common facilities for the club. On that principle the income of the club involving contributors and participators is not taxable. In this case, Mr. Murarka submitted that the space given to Reliance remained an asset of the club. The sum paid by Reliance was enjoyed by each and every member of the club in the form of service or facilities offered by the club. Reliance as a corporate member and the club were to be treated as one entity and that any benefit enjoyed by Reliance was to be treated as benefit enjoyed by all the members of the club. To this both learned counsel appearing for the revenue contended that the space provided by the club was in the exclusive occupation of Reliance. It was not being used as a facility of the club. It was an independent transaction between the club and Reliance. Although Reliance may be a corporate member it had entered into a lease agreement with the club not in the capacity of a corporate member but an independent body. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 27 Now, these are questions of facts. These facts had to be established threadbare before any opinion on the substantial question of law could be expressed. On examination of the order of the Assessing Office, CIT (Appeal) and the tribunal we do not find any analysis of the facts, which would go to show whether the principle of mutuality was being maintained in the subject transaction between the club and Reliance. We find that in these orders that only conclusions are made with regard to the status and the transaction between the parties. For all these reasons, the part of the impugned order of the Tribunal contained in paragraph 9 cannot stand and is hereby set aside. We remand the appeals to the tribunal to re-decide the question taking into account all the disclosures of facts made before the adjudicating authorities and the above decisions of the Supreme Court and our Court discussed by us above and to pass a reasoned order within four months of communication of this order. | This remand is limited to the above issue only. The appeals are disposed of. Sd/- (I. P. MUKERJI, J.) Sd/- (BISWAROOP CHOWDHURY, J.) 17. Ld. Counsel for the assessee vehemently argued referring to the following written submission:- “The above appeals are restored to the Hon'ble ITAT by the Hon'ble Calcutta High Court vide its order passed on 07.07.2023 in ITA Nos. 127, 135, 138 of 2019. The Court has directed the Tribunal to re-decide the following question: "Whether the rent received from Reliance Industries Limited was governed by the principle of mutuality and exempt from income tax or was taxable under the Income Tax Act, 1961”? In the impugned assessment years, the appellant received rent and service charges from M/s. Reliance Industries Ltd, a Corporate member of the club, for use of club premises. The same was held taxable under the head “income from “house property” and that it was not exempt from tax on the principle of mutuality. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 28 The said issue was decided by the Hon’ble ITAT passed in A.Y. 2004-05 in ITA No. 2IO6/KOL/2OO8 Order dated 20.03.2013 in the favour of the Appellant. The facts in that year were that M/s. Organon India Ltd was a corporate member of the club and acquired 1 st and 2 nd Floors of the premises of the club against payment of rent to the club. A sum of Rs.5,16,403/- was receivable against the municipal taxes and Rs.2,49,583/- was receivable as additional tax from the said member. The club received Rs.2,49,583/- as additional tax but did not receive Rs.5,16,403/- towards municipal taxes. In its accounts the club had shown Rs.2,49,583/- as an income under the head rent and had claimed deduction for Rs.5,16,403/- as an expenditure. The Assessing Officer taxed Rs.2,49,583/- as rental income of the assessee, but disallowed the deduction for Rs.5,16,403/- for the reason that it was not allowable u/s 37 of the Act. The appellant carried the matter in appeal before the Ld. CIT (A) on the issue of taxability of Rs.2,49,583/- as rental income as well as disallowance of deduction for municipal taxes Rs.5,16,403/- . The Ld. CIT(A) decided the issue in Appeal No. 196/CIT(A)-VIII/Cir- 8/2006-07 Order dated 24.09.2008 by observing as under:- “Ground No. 3: 1. Assessing Officer has brought out the fact that one of the Corporate member of the club, i.e. M/s. Organon (I) Ltd has paid rent to the club (assessee) during the year. The member is using the premise for its business purpose and the rent is paid for the whole year. Assessing Officer has further stated that the decision of Hon’ble Supreme court in case of Bankipur Club Ltd (226 ITR 97) does not apply in case of the appellant 2. Appellant has stated that the club premises were sublet to Organon (I) Ltd and this corporate member is a member since 22 nd May 1995. Appellant has argued that the decision of Hon’ble Supreme Court Bankipur Club Ltd (226 ITR 97) applies in this case. 3. In the decision of Bankipur Club ltd (226 ITR 97), Hon’ble Supreme Court has decided other appeals related to Ranchi Club Ltd (196 ITR 137) Cricket Club of India and India Motion Pictures Association (180ITR 160) also. The questions under consideration were as under: Ranchi Club Ltd.: ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 29 “Whether income derived by the assessee club from its house property let to its members and their guests is not chargeable to tax. ” Cricket Club of India: Whether the income from the property held by the assessee could not be brought charge under the provisions of Sec. 22 to 26 of the Act. India Motion Pictures Association (180 ITR 160): “Whether the principle of mutuality is applicable to the assessee’s receipts under the head ‘Others’.” All the above questions were decided in affirmative, i.e. in favour of assessee by respective High Courts and the same decisions were affirmed by Hon’ble Supreme Court in the same order reported in 226 ITR 97 as Commissioner of Income Tax Vs. Bankipur Club Ltd. 4. Therefore I do not agree with the contention of the Assessing Officer that the ratio of the decision of the Hon’ble Supreme Court in Bankipur Club Ltd does not apply in case of appellant. Moreover, Hon’ble Calcutta High Court has decided the same issue of rental income from member to club in favour of assessee in 153 ITR 676 (Darjeeling Club Ltd). I therefore, hold that the rental income of Rs. 4,42,200/- is a receipt which is exempt from taxation on the principle of mutuality. I must add further that deduction of TDS on certain payment is responsibility of the deductor who may face penalty on non-deduction of such tax. However, it does not by itself converts a non-taxable receipt into a taxable receipt. The exemption of rent received from member from taxation cannot change if the prayer decided to deduct TDS. ” The Department did not file appeal against the order of the Ld. CIT (A) against the finding that rental income of Rs.2,49,583/- was exempt from taxation in the case of the assessee on principle of mutuality following judgment of Hon’ble Supreme Court in the case of Bankipur Club (supra). Therefore, impliedly the Department accepted the decision of the Ld. CIT (A) on the issue which attained finality. On further appeal to the Hon’ble ITAT by the Appellant, the ITAT confirmed the order of the CIT (A) for the reason that since rental income was exempt from tax on the principle of mutuality therefore no deduction of any expenditure was allowable against the ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 30 earning of such income in view of provisions of Sec. 14A of the Income Tax Act. The Tribunal in ITA No.2106/Kol/2008 Order dated 20.03.2013 observed as follows: “6. We heard the rival submissions and carefully considered the same. The Ld. A.r. reiterated the submissions taken before the CIT (A) but it is not denied by the Id. A.R. that M/s. Organon India Ltd was not one of the Corporate members of the club. The finding of the CIT (A) that the rent received by the assessee from Organon India Ltd has become final and the Revenue has not come in appeal The finding of the CIT (A), as relate to the non-taxability of the additional tax Organon India Ltd agreed to pay amounting to Rs.2,49,583/-, has also become final. This is not denied that the municipal tax has been paid by the assessee and written off in its books of accounts, in pursuance of the agreement relating to the income that the assessee earned for making or earning from the Corporate member of the Club. The expenditure incurred for wholly and exclusively for the purpose of making or earning of income cannot be allowed deduction, in view of provisions of section 14A. It is not the plea of the assessee that the provisions of section 14A are not applicable. Therefore, writing off the reimbursement of the municipal tax, disallowance has not been sustained by the CIT (A) under section 57(1) but by applying of section 14A. We, therefore, do not find any merit in the submissions as well as ground taken by the assessee. Thus, this ground stands dismissed. ” The Hon’ble Supreme Court in the case of Bankipur Club Ltd (226 ITR 97) decided the following questions of law: (i) Group A concerned the question with regard to profits arising from the sales made to regular members of a club, being entitled to exemption on the doctrine of mutuality. (ii) Group B was with regard to the question, whether, the income derived by a club from its house property let to its members and their guests was not chargeable to income tax and whether income derived by a club from the sale of liquor to its members and their guests was nt taxable in its hands. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 31 (iii) Group C cases pertained to the question, whether, chambers in the building of a club let out to members, annual value of a club house and pavilions and income earned from such properties owned by a club was liable to be taxed. (iv) Group D cases were with regard to the question as to whether, an association consisting offilm distributors and exhibitors incorporated as a company under Section 25 of the Companies Act, 1956 was liable to be taxed in respect of (a) admission fees, readmission fees, periodical subscriptions from the members etc., under the head “others” and (b) service charges from the members for rendering specific services to the members under the head “service to the members”, or the same would not be taxable on the principle of mutuality. (v) Group E concerned cases where the assessee clubs had derived income from property let out and also interest received from Fixed Deposit Receipt (FDR), National Savings Certificate (NSC), etc. by the clubs. and the Court held that “Now, we turn to the main question canvassed by the Revenue in the appeals coming under Groups-A to D, namely, whether the assessees- mutual clubs, are entitled to exemption for the receipts or surplus arising from the sales of drinks, refreshments, etc., or amounts received by way of rent for letting out the buildings or amounts received by way of admission fees, periodical subscriptions and receipts of similar nature, from its members? In all these cases, the Appellate Tribunal as also the High Court have found that the amounts received by the clubs were for supply of drinks, refreshments or other goods as also the letting out of building for rent or the amounts received by way of admission fees, periodical subscription, etc., from the members of the clubs were only for/ towards charges for the privileges, conveniences and amenities provided to the members, which they were entitled to as per the rules and regulations of the respective clubs. It has also been found that different clubs realised various sums on the above counts only to afford to their members the usual privileges, advantages, conveniences and accommodation. In other words, the services offered on the above counts were not done with any profit motive, and were not tainted with commerciality. The facilities were ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 32 offered only as a matter of convenience for the use of the members (and their friends, if any, availing of the facilities occasionally). In the light of the above findings, it necessarily follows that the receipts for the various facilities extended by the clubs to their members, as stated hereinabove, as part of the usual privileges, advantages and conveniences, attached to the membership of the club, cannot be said to be “a trading activity”. The surplus-excess of receipts over the expenditure as a result of mutual arrangement, cannot be said to be “income” for the purpose of the Act. Our attention was invited to a few decisions which have dealt with the subject- matter in issue herein. The gist of the various English deci- sions has been succinctly summarised in the text books which we have adverted to hereinabove (Halsbury’s Laws of England, Simon Taxes, Wheatcroft, etc.). Particular stress was laid on the decisions of the Supreme Court in CIT v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551; CIT v. Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241; Fletcher (on his own behalf and on behalf of Trustees and Committee of Doctor’s Cave Bathing Club v. Income-tax Commissioner [1971] 3 All ER 1185 (PC). We do not think it necessary to deal at length with the above decisions except to state the principle discernible from them. We understand these decisions to lay down the broad proposition-that, if the object of the assessee-company claiming to be a “mutual concern” or “club”, is to carry on a particular business and money is realised both from the members and from non- members, for the same consideration by giving the same or 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 motive and are alike tainted with commerciality. In other words, the activity carried on by the assessee in such cases, claiming to be a "mutual con-cern” 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/business/transaction and the resultant surplus is certainly profit- income liable to tax. We should also state, that “at what point, does the relationship of mutuality end and that of trading begin” is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. “Whether or not the persons dealing with each other, are a “mutual club” or carrying on a trading activity or an adventure in the nature of trade”, is largely a question of fact. [Wilcock’s case [1924] 9 TC 111, 132 (CA); [1925] 1 KB 30 at pages 44 and 45]. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 33 In the result, we hold that the judgments and orders passed by the High Courts covered by Groups-A, B, C and D, as stated above, do not merit any interference. The reasoning and conclusion of the High Courts in the judgments and orders impugned are in accord with the settled legal principles as laid down by courts. The 16 appeals covered by Groups-A to D filed by the Revenue are, therefore, dismissed with costs, including advocates’ fees which we estimate at Rs. 5,000 in each appeal. ” In the set aside orders of the ITAT, the Tribunal followed the decision of Hon’ble Supreme Court in the case of Bangalore Club Vs CIT (2013) 350 ITR 509 (SC) and held that the rental income received from Reliance Industries Ltd was not exempt on the principles of mutuality and that it was taxable under the head ‘income from house property’. The Hon’ble Supreme Court in the case of Secunderabad Club confirmed the order of the Bankipur Club Ltd. It further held that in that judgment the issue of earning interest on Fixed Deposits from Banks was not decided. It held that in the case of Bangalore Club (supra) the Supreme Court adjudicated the question as to whether interest earned on fixed deposits with bank is liable to be taxed or was exempt on the principle of mutuality and the Court held that interest earned on fixed deposits in bank is liable to be taxed and that the principle of mutuality would not apply. In the case of the appellant it is an undisputed fact that interest income earned on fixed deposits with banks has been offered to tax. Therefore the decision of Bangalore Club does not apply to the facts of the Appellant’s case in the present appeals. It is further submitted that in the A.Y. 2018-19 the National e-Assessment Centre Delhi vide its order dated 08.04.2021 passed u/s 143(3) read with sections 143(3A) & 143(3B) of the Income tax Act has not made any addition for Rent received from Reliance Industries Ltd of Rs.1,05,90,837/- and Service charges of Rs.70,60,558/-. (Copy of Assessment Order, 142(1) notice dated 21.12.2020 and reply of the Appellant dated 28.12.2020 enclosed). It is prayed that considering the submissions made herein above it is held that the amount received from Reliance Industries Ltd, a Corporate Member of the club, for use of property of the club is exempt from tax on principle of mutuality”. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 34 18. Ld. Counsel for the assessee further submitted that in the case of Bangalore Club (supra), the issue was regarding surplus fund available with the Club being given to non-members, which were in the form of Fixed Deposits with Banks to earn interest income. The question before the Hon’ble Court was whether interest earned on Fixed Deposits with member Banks is liable to be taxed or is exempt on the principle of mutuality. Hon’ble Apex Court held that interest on Fixed Deposits is liable to be taxed and that principle of mutuality would not apply. Ld. Counsel for the assessee further stated that in the instant case, the assessee has also offered to tax the interest income earned from Fixed Deposits with Banks and since the issue in the instant appeal is regarding taxability of rental income received from a Corporate Member of the assessee-club, therefore, the judgment of the Hon’ble Supreme Court in the case of Bangalore Club would not apply on the facts of the appellant’s case. He further added that the judgment of the Hon’ble Supreme Court in the case of Bankipur Club Limited reported in 226 ITR 97 squarely applies, wherein Hon’ble Court held that the surplus/excess of receipts over the expenditure as a result of mutual arrangement cannot be said to be income for the purpose of the Act. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 35 19. On the other hand, ld. D.R. vehemently argued by placing reliance on the judgment of the Hon’ble Supreme Court in the case of Bangalore Club (supra) as well as the decision of this Tribunal in assessee’s case deciding in favour of the Revenue. 20. We have heard the rival contentions, perused the relevant material placed before us and carefully gone through the judgments relied upon by the ld. Counsel for the assessee. In this remand proceeding carried out by us in pursuance to the direction of the Hon’ble Jurisdictional High Court vide order dated 07.07.2023, we observe that the question of law admitted by the Hon’ble Court is that “whether the Tribunal was justified in law in holding that rent received from Reliance Industries Limited was not covered by the principle of mutuality and was taxable under the Income Tax Act, 1961”. During the course of hearing before the Hon’ble Jurisdictional High Court, ld. Sr. Advocate appearing on behalf of the appellant-assessee referred to the judgment of the Hon’ble Calcutta High Court in the case of Darjeeling Club Limited reported in 153 ITR 676 and other judgments, namely CIT –vs.- Bankipur Club Limited reported in 226 ITR 97; Chelmsford Ford –vs.- CIT reported in 289 ITR 89; Bangalore Club –vs.- CIT reported in 350 ITR 509 and Saturday Club Limited –vs.- Asstt. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 36 Commissioner, Service Tax Cell reported in (2005) Cal LT 575. 21. On the other hand, ld. Counsel for the Revenue while arguing before the Hon’ble Court cited the judgment, namely Yum Restaurants (Marketing) Private Limited –vs.- CIT, Delhi reported in (2021) 7 SCC 678. 22. Further on perusal of the observations of the Hon’ble Court cited (supra), we observe that Hon’ble Court has discussed about the concept of mutuality observing that one cannot make an income out of any sum paid to oneself or spent on oneself. In charging a member for such utility, the Club should not make any profit. The Hon’ble Court also observed that in other words, it does not make any income in excess of its expenditure. The transactions ought to have been for the benefit of all the members and also resulted in common facilities for the Club. On that principle, the income of the Club involving contributors and participators is not taxable. Hon’ble Court has further referred to the submissions made by the ld. Counsel for the assessee, who stated that the space given to Reliance Industries Limited remained an asset of the Club. The sum paid by Reliance Industries Limited was enjoyed by each and every member of the Club in the form of services or ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 37 facilities offered by the Club. By stating so, ld. Counsel for the assessee meant that the income, which is generated from giving the office space on rent to Reliance Industries is finally used by the Club to provide service or facilities to its members. 23. Hon’ble Court has mentioned that both the ld. Counsels appearing on behalf of the Revenue contended that space provided by the Club was in the exclusive occupation of Reliance Industries Ltd. and it was not being used as a facility of the Club. It was an independent transaction between the Club and ‘RIL’. Although Reliance may be a Corporate Member but it had entered into a Lease Agreement with the Club not in the capacity of a Corporate Member but an Independent Body. Further Hon’ble Court has observed that they did not find any analysis of the facts in the orders of ld. Assessing Officer, ld. CIT(Appeals) and the Tribunal, which would go to show whether the principle of mutuality was being maintained in the transaction between the Club and Reliance Industries Limited. Therefore, we need to examine the specific details about the said transactions and also to examine the same in the light of the judgment of the Hon’ble Supreme Court in the case of Bangalore Club, which has been cited by ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 38 this Tribunal in their orders decided in favour of the Revenue. 24. Before specifically going into the details of the transactions, we would first like to go through the relevant portion of judgment of the Hon’ble Supreme Court in the case of Bangalore Club (supra), wherein various judgments of the Hon’ble Court on the issue of principle of mutuality have been discussed and also the Hon’ble Apex Court has discussed various decisions and fulfilment of certain conditions failing which income would not fall under the principle of mutuality:- “25. In Commissioner of Income Tax, Madras Vs. Kumbakonam Mutual Benefit Fund Ltd.[12], this Court differentiated the facts of the case before it from those of Styles case (supra) and denied the exemption of mutuality because of the taint of commerciality. It was observed thus: “It seems to us that it is difficult to hold that Style's case applies to the facts of the case. A shareholder in the assessee company is entitled to participate in the profits without contributing to the funds of the company by taking loans. He is entitled to receive his dividend as long as he holds a share. He has not to fulfil any other condition. His position is in no way different from a shareholder in a banking company, limited by shares. Indeed, the position of the assessee is no different from an ordinary bank except that it lends money to and receives deposits from its shareholders. This does not by itself make its income any the less income from business within S. 10 of the Indian Income Tax Act.” 26. However, at what point mutuality ends and commerciality begins is a difficult question of fact. It is best summarized in ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 39 Bankipur Club (supra) wherein this Court echoed the following views: “...if the object of the assessee company claiming to be a "mutual concern" or "club", is to carry on a particular business and money is realised both from the members and from non-members, for the same consideration by giving the same or 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 motive 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/business/transaction and the resultant surplus is certainly profit - income liable to tax. We should also state, that "at what point, does the relationship of mutuality end and that of trading begin" is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. "Whether or not the persons dealing with each other, is a ‘mutual club’ or carrying on a trading activity or an adventure in the nature of trade", is largely a question of fact [Wilcock's case - 9 Tax Cases 111, (p.132); C.A. (1925) (1) KB 30 at p. 44 and 45].” 27. In Royal Western India Turf Club Ltd. (supra), this Court made similar observations, holding that it is not always the case that a legal entity cannot make profits out of its members. It held as follows : “The principle that no one can make a profit out of himself is true enough but may in its application easily lead to confusion. There is nothing ‘per se’ to prevent a company from making a profit out of its own members. Thus a railway company which earns profits by carrying passengers may also make a profit by carrying its shareholders or a trading company may make a profit out of its trading with its members besides the profit it makes from the general public which deals with it but that profit belongs to the members as shareholders and does not come back to them as persons who had contributed them. Where a company ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 40 collects money from its members and applies it for their benefit not as shareholders but as persons who put up the fund the company makes no profit. In such cases where there is identity in the character of those who contribute and of those who participate in the surplus, the fact of incorporation may be immaterial and the incorporated company may well be regarded as a mere instrument, a convenient agent for carrying out what the members might more laboriously do for themselves. But it cannot be said that incorporation which brings into being a legal entity separate from its constituent members is to be disregarded always and that the legal entity can never make a profit out of its own members...” (Emphasis supplied) 28. This brings us to the facts of the present case. As aforesaid, the assessee is an AOP. The concerned banks are all corporate members of the club. The interest earned from fixed deposits kept with non- member banks was offered for taxation and the tax due was paid. Therefore, we are required to examine the case of the assessee, in relation to the interest earned on fixed deposits with the member banks, on the touchstone of the three cumulative conditions, enumerated above. 29. Firstly, the arrangement lacks a complete identity between the contributors and participators. Till the stage of generation of surplus funds, the setup resembled that of a mutuality; the flow of money, to and fro, was maintained within the closed circuit formed by the banks and the club, and to that extent, nobody who was not privy to this mutuality, benefited from the arrangement. However, as soon as these funds were placed in fixed deposits with banks, the closed flow of funds between the banks and the club suffered from deflections due to exposure to commercial banking operations. During the course of their banking business, the member banks used such deposits to advance loans to their clients. Hence, in the present case, with the funds of the mutuality, member banks engaged in commercial operations with third parties outside of the mutuality, rupturing the ‘privity of mutuality’, and consequently, violating the one to one identity between the contributors and participators as mandated by the first condition. Thus, in the case before us the first condition for a claim of mutuality is not satisfied. 30. As aforesaid, the second condition demands that to claim an exemption from tax on the principle of mutuality, treatment of the ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 41 excess funds must be in furtherance of the object of the club, which is not the case here. In the instant case, the surplus funds were not used for any specific service, infrastructure, maintenance or for any other direct benefit for the member of the club. These were taken out of mutuality when the member banks placed the same at the disposal of third parties, thus, initiating an independent contract between the bank and the clients of the bank, a third party, not privy to the mutuality. This contract lacked the degree of proximity between the club and its member, which may in a distant and indirect way benefit the club, nonetheless, it cannot be categorized as an activity of the club in pursuit of its objectives. It needs little emphasis that the second condition postulates a direct step with direct benefits to the functioning of the club. For the sake of argument, one may draw remote connections with the most brazen commercial activities to a club’s functioning. However, such is not the design of the second condition. Therefore, it stands violated. 31. The facts at hand also fail to satisfy the third condition of the mutuality principle i.e. the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. This principle requires that the funds must be returned to the contributors as well as expended solely on the contributors. True, that in the present case, the funds do return to the club. However, before that, they are expended on non- members i.e. the clients of the bank. Banks generate revenue by paying a lower rate of interest to club-assessee, that makes deposits with them, and then loan out the deposited amounts at a higher rate of interest to third parties. This loaning out of funds of the club by banks to outsiders for commercial reasons, in our opinion, snaps the link of mutuality and thus, breaches the third condition. 32. There is nothing on record which shows that the banks made separate and special provisions for the funds that came from the club, or that they did not loan them out. Therefore, clearly, the club did not give, or get, the treatment a club gets from its members; the interaction between them clearly reflected one between a bank and its client. This directly contravenes the third condition as elucidated in Styles and Kumbakonam Mutual Benefit Fund Ltd. cases (supra). Rowlatt J., in our opinion, correctly points out that if profits are distributed to shareholders as shareholders, the principle of mutuality is not satisfied. In Thomas Vs. Richard Evans & Co. (supra), at pp. 822-823, he observed thus : ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 42 "But a company can make a profit out of its members as customers, although its range of customers is limited to its shareholders. If a railway company makes a profit by carrying its shareholders, or if a trading company, by trading with the shareholders - even if it limited to trading with them - makes a profit, that profit belongs to the shareholders, in a sense, but it belongs to them qua shareholders. It does not come back to them as purchasers or customers. It comes back to them as shareholders, upon their shares. Where all that a company does is to collect money from a certain number of people - it does not matter whether they are called members of the company, or participating policy holders - and apply it for the benefit of those same people, not as shareholders in the company, but as the people who subscribed it, then, as I understand the New York case, there is no profit. If the people were to do the thing for themselves, there would be no profit, and the fact that they incorporate a legal entity to do it for them makes no difference, there is still no profit. This is not because the entity of the company is to be disregarded, it is because there is no profit, the money being simply collected from those people and handed back to them, not in the character of shareholders, but in the character of those who have paid it. That, as I understand it, is the effect of the decision in the New York case."(Emphasis supplied) In the present case, the interest accrues on the surplus deposited by the club like in the case of any other deposit made by an account holder with the bank. 33. An almost similar issue arose in Kumbakonam Mutual Benefit Fund Ltd. case (supra). The facts in that case were that the assessee, namely, Kumbakonam Mutual Benefit Fund Ltd., was an incorporated company limited by shares. Since 1938, the nominal capital of the assessee was Rs.33,00,000/- divided into shares of Rs.1/- each. It carried on banking business restricted to its shareholders, i.e., the shareholders were entitled to participate in its various recurring deposit schemes or obtain loans on security. Recurring deposits were obtained from members for fixed amounts to be contributed monthly by them for a fixed number of months as stipulated at the end of which a fixed amount was returned to them according to published tables. The amount so returned, covered the compound interest of the period. These recurring deposits constituted the main source of funds of the ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 43 assessee for advancing loans. Such loans were restricted only to members who had, however, to offer substantial security therefor, by way of either the paid up value of their recurring deposits, if any, or immovable properties within a particular district. Out of the interest realised by the assessee on the loans which constituted its main income, interest on the recurring deposits aforesaid was paid as also all the other outgoings and expenses of management and the balance amount was divided among the members pro rata according to their share-holdings after making provision for reserves, etc., as required by the Memorandum or Articles aforesaid. It was not necessary for the shareholders, who were entitled to participate in the profits to either take loans or make recurring deposits. 34. On these facts, as already noted, the Court distinguished Styles case (supra) and opined that the position of the assessee was no different from an ordinary bank except that it lent money and received deposits from its shareholders. This did not by itself make its income any less income from business. In our opinion, the ratio of the said decision is on all fours to the facts at hand. The interest earned by the assessee even from the member banks on the surplus funds deposited with them had the taint of commerciality, fatal to the principle of mutuality. 35. We may add that the assessee is already availing the benefit of the doctrine of mutuality in respect of the surplus amount received as contributions or price for some of the facilities availed by its members, before it is deposited with the bank. This surplus amount was not treated as income; since it was the residue of the collections left behind with the club. A façade of a club cannot be constructed over commercial transactions to avoid liability to tax. Such setups cannot be permitted to claim double benefit of mutuality. We feel that the present case is a clear instance of what this Court had cautioned against in Bankipur Club (supra), when it said: “... if the object of the assessee company claiming to be a "mutual concern" or "club", is to carry on a particular business and money is realised both from the members and from non- members, for the same consideration by giving the same or 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 motive and are alike tainted with commerciality. In other words, the activity carried on by the assessee in such ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 44 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/business/transaction and the resultant surplus is certainly profit - income liable to tax. We should also state, that "at what point, does the relationship of mutuality end and that of trading begin" is a difficult and vexed question. A host of factors may have to be considered to arrive at a conclusion. "Whether or not the persons dealing with each other, is a "mutual club" or carrying on a trading activity or an adventure in the nature of trade" is largely a question of fact [Wilcock's case - 9 Tax Cases 111, (132) C.A. (1925) (1) KB 30 at 44 and 45].” (Emphasis supplied) 36. In our opinion, unlike the aforesaid surplus amount itself, which is exempt from tax under the doctrine of mutuality, the amount of interest earned by the assessee from the afore-noted four banks will not fall within the ambit of the mutuality principle and will therefore, be exigible to Income-Tax in the hands of the assessee-club. 37. In light of the afore-going discussion, these appeals are bereft of any merit and are thus, liable to be dismissed. Accordingly, we dismiss all the appeals with costs”. 25. Now in the light of the above judgment and the discussions made, we now proceed to the specific details of the transaction. We observe that the assessee-Club has entered into Leave and Licence Agreement as well as the Service Agreement with Reliance Industries Limited. These agreements have been renewed year after year. The assessee has placed copies of Leave and Licence Agreement as well as Service Agreement dated 10 th February, 2012. On perusal of the said Leave and ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 45 Licence Agreement, we notice that the assessee in the capacity of a licensor is a tenant and is in the possession of the entire premises of the building situated at 7, Wood Street, Kolkata-700016 and in the entire premises, apart from the Club premises where the entry is allowed only for the members or their guests or other staff persons or employees of the Club, there is a separate Office space admeasuring 7,650 sq.ft. available on the 3 rd floor of the building. The licensor, i.e. the assessee gave the said office space to the licensee for its office purpose only and for no other purposes, which means that the office space was exclusively used by Reliance Industries Limited for its office purposes and there is no connection whatsoever with the Club facilities, which are provided to its members. Apart from various other conditions mentioned in the Leave and Licence Agreement, we would like to take note of Para 7 of the said Agreement, which deals with the obligation of the licensee and the same reads as under:- 7. Obligation of the licensee:- (a) The Licensee shall use and occupy the licensed premises for its office purpose only and for no other purpose. The Licensee shall not carry out any acts or activities which are obnoxious, anti-social, immoral, and illegal or which may cause a nuisance to the other occupants of the building or member of the Club or which may prejudice the rights of the licensor as the tenant of the said premises. The Licensee however will have uninterrupted access rights to and from the licensed premises according to its convenience and requirement. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 46 (b) On the expiration or earlier determination or termination of this license as provided herein, the Licensee shall remove itself along with its belongings from the licensed premises and handover, quiet, vacant and peaceful possession thereof to the Licensor provided simultaneously, the Licensor refunds the interest free security deposit to the Licensee upon the terms herein contained; (c) The Licensee shall permit the Licensor or their agents or representatives at all reasonable times during the period of this License to enter upon the licensed premises for inspecting the state and condition of the same by giving 48 hours notice to the Licensee, (d) The Licensee shall not be entitled to carry out any work of additions, alterations, renovation, construction and/or re-construction whatsoever of a permanent nature into or upon the licensed premises. Licensee shall however be at liberty to make, fix or install fixtures and fittings in the licensed premises including air conditioners, shelves, screens, racks, sunblind, household fittings, water, 'gas electricity, telephone and sanitary installations, lights, fans and other conveniences and requirements required within the scope of this sub- clause for or in connection with the use and occupation of the licensed premises and on the termination of this agreement shall remove the same and make good any damage which may be caused to the licensed premises by such removal. (e) The Licensee shall not store or bring upon the licensed premises any hazardous article of articles of inflammable or combustible nature except cooking gas cylinder not shall the Licensee do or permit to be done or suffered to be done in the licensed premises by reason whereof the insurance effected on the licensed premises may be rendered void or violable or whereby the rate of premium thereof may be increased; (f) The Licensee upon the termination of the License will leave the licensed premises and fittings and fixtures as provided by the licencor during handing over of the licensed premises for the first time in as good condition as they were on the date hereof (normal wear and tear excluded); (g) It is agreed between the Licensor and the Licensee that the Licensee would have the option to buy back the fixtures, fittings, accessories and the interior decoration installed at the cost of the Licensee and used by the Licensee at the licensed premises, at a mutually agreed price, on the determination of the License. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 47 (h) The Licensee will park Licensee’s two cars in the car parking spaces inside the club between 9:30 am to 8:30 pm only and not beyond such period. 26. Service agreement is also made between the assessee-Club and Reliance Industries Limited, though specific details about the nature of services provided by the assessee are not mentioned. It has referred to the monthly compensation for giving permission to use and enjoyment of the said services. The issue of rent and service fee being paid by Reliance Industries Limited to the assessee-Club has been combined together by the ld. Assessing Officer and treated as income on house property and the said action of the ld. Assessing Officer being confirmed by this Tribunal. However, so far as the present proceedings are concerned, the rent given by Reliance Industries Ltd. for A.Ys. 2008-09 to 2012-13 stands at Rs.44,85,598/-, Rs.11,40,403/-, Rs.54,49,395/-, Rs.57,98,259/- and Rs.67,84,258/- respectively. 27. Now on perusal of the Leave and Licence Agreement, it transpires that the assessee-Club is having an extra- space, which is not being used by it for regular Club facilities to its members and this extra office space was being used to generate additional revenue and such ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 48 surplus fund thereafter moved to the common fund of the assessee-Club. 28. So far as the principle of mutuality is concerned, we have referred to the judgment of Hon’ble Supreme Court in the case of Bangalore Club (supra), in which three conditions regarding the principle of mutuality have been discussed. Even the Hon’ble Jurisdictional High Court while remanding the matter to this Tribunal has elaborately discussed the principle of mutuality in pages 5 & 6 of their order and even at the cost of repetition, we would like to reproduce the said observation as under:- This principle of law-which was canvassed by Mr. Murarka and to be deduced from these cases is this : A club is an association of persons for certain objects and purposes. It may or may not be a body corporate but it has a distinct identity of its own. This identity is akin to that of a body corporate. It is different from that of his members. However, there is a difference between the legal identity of a body corporate and that of a recreational club in certain matters. It is in these matters that the principle of mutuality is involved. The members of the club are seen both as contributors and participators. The club and its members are seen as one person. Usually a member has to pay to avail of the services and facilities provided by the club. By way of subscription or contribution a member may contribute a sum of money to the club in a particular month. Similarly other members may also contribute this amount or any lesser or greater sum. "his sum may be utilised by the club to bring in stocks of food, drinks, ;torts gears and other items and also be utilised for the purpose of providing facilities to its members like maintaining a swimming pool or tennis court. The members may consume or enjoy the benefits of whatever they contribute. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 49 The concept of mutuality is that whenever money is being spent by a particular member is also being enjoyed by that person in the form of facilities. Members or a group of persons forming the association and the association are seen as a single identity. One cannot make an income out of any sum paid to oneself or spent on oneself. In charging a member for such utility the club should not make any profit. In other words it does not make any income in excess of its expenditure. The transactions ought to have been for the benefit of all the members and also resulted in common facilities for the club. On that principle the income of the club involving contributors and participators is not taxable. In this case, Mr. Murarka submitted that the space given to Reliance remained an asset of the club. The sum paid by Reliance was enjoyed by each and every member of the club in the form of service or facilities offered by the club. Reliance as a corporate member and the club were to be treated as one entity and that any benefit enjoyed by Reliance was to be treated as benefit enjoyed by all the members of the club. To this both learned counsel appearing for the revenue contended that the space provided by the club was in the exclusive occupation of Reliance. It was not being used as a facility of the club. It was an independent transaction between the club and Reliance. Although Reliance may be a corporate member it had entered into a lease agreement with the club not in the capacity of a corporate member but an independent body”. 29. Now on the conjoint reading of the three conditions mentioned in the judgment of the Hon’ble Supreme Court in the case of Bangalore Club as well as the observations of Hon’ble Jurisdictional High Court extracted (supra), firstly we notice that though the source of revenue is from the Corporate Members Reliance Industries Limited but it is not towards the membership fees or any Club facility fees. The Office space provided to the ‘RIL’ is ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 50 exclusively for its office purposes and by taking the said office space on rent, the same is being exploited by ‘RIL’ for its business objects and it has got no connection whatsoever with the Club facilities provided to the members of the Club. We can understand this situation with the help of an example. If the Club carries out its activities in the premises where entry is strictly for the members or their guests and there is a space provided to a particular company in the said Club premises used by its members for club facilities and a monthly charge is being taken by the Club from such company may be for running the restaurant and such restaurant is exclusively for the use of Club members or their guests, the revenue generated by the Club for providing such space to a Company running restaurant in the Club premises will fall under the concept of principle of mutuality. On the other hand, if outside the Club premises which is not used by the Club members for Club activities, there is some more space available with the Club and such surplus space, which is not being used to carry out the Club facility for its members, in order to generate more income is given on rent to another person or a Company (which may be a corporate member) for its own exclusive purpose to carry out its office/business activities and there is no object to provide any Club facility to its members. Then whether ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 51 such rent income received will fall under the principle of mutuality needs to be addressed. 30. So far as the judgment of the Hon’ble Supreme Court in the case of Bankipur Club Limited (supra) is concerned, the same was regarding the taxability of the surplus remaining on account of the excess of revenue received for availing Club facility over the expenditure incurred by the Club for its members. Hon’ble Apex Court has held that if the activity of the Club is not carried out with the intention of profit motive, but still if there is a surplus on account of the revenue received from the members for providing Club facility, then such income is covered by the principle of mutuality and the same is not taxable. As far as the applicability of this judgment on the facts of the instant case are concerned, we find that the same is not applicable because the issue before us relates to taxability of rental income received from corporate member for providing office space and not towards any Club facility equally used by all the members and since this issue was not before the Hon’ble Apex Court in the case of Bankipur Club Limited (supra), the same is not applicable on the facts of the instant case. Therefore, the analogy drawn by ld. Counsel for the assessee that alleged rent has been finally applied for the ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 52 use of Club member fails because the issue is about the taxability of income and not its application. 31. Now as far as the judgment of the Hon’ble Supreme Court in the case of Bangalore Club (supra) is concerned, wherein Hon’ble Apex Court has discussed about various judgments including that of Bankipur Club Limited (supra), Chelmsford Club –vs.- CIT (2000) 3 SCC 215, CIT –vs.- Royal Western India Turf Club Limited (AIR 1954 SC 85), the issue before the Hon’ble Apex Court was regarding the taxability of interest income earned by a Club from the Fixed Deposits held with member Banks made from the surplus funds available for carrying out the Club facilities. We observe that the Hon’ble Apex Court while deciding in favour of the Revenue exhaustively dealt with the issue of interest earned on Fixed Deposits with the banks, on the touchstone of the three cumulative conditions, of which first is that the arrangement lacks a complete identity between the contributors and the participators. The second condition is that to claim an exemption from tax on the principle of mutuality, treatment of the excess funds must be in furtherance of the object of the club, and the third condition is of the mutuality principle, i.e. the impossibility that contributors should derive profits from ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 53 contributions made by themselves to a fund which could only be expended or returned to themselves. 32. Now so far as examining the above three conditions with regard to the contributions received by the members for the club facilities and the expenditure incurred by the Club for providing such Club facilities and the surplus generated therefrom, we find that there is a complete identity between the contributors and the participators and the excess funds are for the furtherance of the object of the Club. The second condition is that to claim an exemption from tax on the principle of mutuality, treatment of the excess funds must be in furtherance of the object of the club. Thirdly the contribution made by the members is for availing facility for the member himself or herself or dependents and the surplus, if any, would be spent for the members only. Since all these three conditions are fulfilled, therefore, the ratio, which was laid down by the Hon’ble Apex Court in the case of Bankipur Club Limited stands correct so far as the conditions referred by the Hon’ble Apex Court in the case of Bangalore Club (supra). But the situation changes completely, where the source of revenue is not found for the purpose of providing Club facilities. In the case of Bangalore Club, the income in dispute was the interest generated from surplus funds, ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 54 which means that the interest income earned had no direct nexus with the Club activities. 33. Now we will finally examine the facts of the instant case once again so that the discussions made (supra) can be summarized and a result can be drawn up. In the instant case, the Club, i.e. Saturday Club Limited, there was an extra office space available with the Club under its possession as per the Lease Deed between the land owner and the Club. This office space was not used by the assessee-Club for furtherance of objects of the Club and no Club facility was being carried out there. Since the assessee-Club was paying the rent for the total space available with it, a part of this space, which was not used for the Club facilities, was given on rent to a corporate member, namely Reliance Industries Limited and a separate Leave & License Agreement and Service Agreement was prepared which is renewed on annual basis and the rent is charged for the office space provided to Reliance Industries Limited exclusively for carrying out its business activities. Here we will impress upon the words “exclusively used” because this office space is not used by any of the Club members for the Club facilities or any other Club related activity. The office space is exclusively used by the Reliance Industries Limited for its office purposes. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 55 34. Now the revenue received in the form of rent cannot be akin to any Club facility. As discussed supra, the Club provides various facilities like that of serving food, indoor and outdoor games, other activities for the Club members including Yoga classes, exhibition and for each of such activity, which is for the members or their guests, the revenue generated is only towards Club facility. In other words, there is a direct nexus between the revenue received from the member and the Club facilities provided by the Club. But in the issue in hand, there is no direct nexus because alleged rent is not received for providing Club facilities but is only for the purpose of generating additional revenue from the surplus space available, which clearly indicates that the Club has carried out this activity with the intention of profit motive. As discussed (supra), even in the case of Bankipur Club Limited (supra), Hon’ble Apex Court has held that the surplus fund on which principle of mutuality applies should not be arrived at with the intention of any profit motive, which means that in normal course, where earning profit is not the motive, but since surplus is left, then such surplus which is on account of excess of revenue receipt over expenditure incurred for the members, same should come under the principle of mutuality and not liable to tax. ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 56 35. Therefore, under the given facts and circumstances of the case, in our considered view, the ratio laid down by the Hon’ble Apex Court in the case of Bangalore Club (supra), is applicable on the facts of the instant case and we are thus inclined to hold that rent in question which is given to the assessee-Club by Reliance Industries Limited towards providing the Office space exclusively used for carrying out the business activity of ‘RIL’ is not having any nexus with any of the club activities, which are regularly carried out for its members and, therefore, principle of mutuality will not apply on the said rental income and the same should be taxed as Income from House Property. Accordingly the issue remanded is decided against the assessee. 36. In the result, the appeals of the Revenue for A.Ys. 2008-09, 2009-10 and 2010-11 are allowed, whereas the appeals of the assessee for A.Ys. 2011-12 and 2012-13 are dismissed. Order pronounced in the open Court on 06/11/2023. Sd/- Sd/- (Rajpal Yadav) (Manish Borad) Vice-President(KZ) Accountant Member Kolkata, the 06 th day of November, 2023 ITA No. 1340/KOL/2012 (A.Y. 2008-09) ITA No. 339/KOL/2013 (A.Y. 2009-10) ITA No. 837/KOL/2015 (A.Y. 2010-11) ITA No. 2377/KOL/2016 (A.Y. 2011-12) ITA No. 2491/KOL/2017 (A.Y. 2012-13) The Saturday Club Limited 57 Copies to : (1) The Saturday Club Limited, 7, Wood Street, Kolkata-700016 (2) Deputy Commissioner of Income Tax, Circle-8(2), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax (Appeals)-2, Kolkata, (4) Commissioner of Income Tax , (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.
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