THE BOMBAY PRESIDENCY GOLF CLUB LTD, MUMBAI V. ITO (E) 1(1), MUMBAI

ITA 1361/MUM/2015

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9844 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 1361 / MUM/20 15 ( ASSESSMENT YEAR : 2007 - 08 ) THE BOMBAY PRESIDENCY GOLF CLUB LTD., DR. CHOITARAM GIDWANI ROAD CHEMBUR, MUMBAI 400 0 74 VS. INCOME TAX OFFICER (E) - 1(1) 505, PIRAMAL CHAMBERS, 5 TH FLOOR, LALBAUG, PAREL MUMBAI 400 012 PAN/GIR NO. AAATT5024B APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SHEKHAR GUPTA REVENUE BY SHRI SUMAN KUMAR DATE OF HEARING 11 / 07 /201 8 DATE OF PRONOUNCEMENT 24 / 09 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE A.Y.2007 - 08 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.254 OF THE IT ACT. 2. FO LLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER AND NOT FOLLOWING THE ORDER OF THE HON'BLE TRIBUNAL REGARD TO: A) CARRY FORWARD OF DEFICIT OF PREVIOUS YEARS. B) ALLOWABILITY OF CAPITAL EXPENDITURE OF RS.88,94,038/ - C) NOT ALLOWI NG ACCUMULATION OF INCOME U/S.1 1(2) OF THE I. T. ACT. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER O F THE ASSESSING OFFICER IN NOT ALLOWING ACCUMULATION OF INCOME U/S.11 (2) OF THE I. T. ACT ALTHOUGH DEDUCTION OF ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 2 15% HAS BEEN ALLOWED U/S. 11 (1) (A) OF THE ACT, THEREUPON GIVING THE BENEFIT OF SECTION 11 OF THE ACT . 3. THE LEARNED CIT (APPEALS) HAS ERRE D IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING DEPRECIATION OF RS.70,77,531/ - 4. THE ASSESSEE COMPANY CRAVES LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. BRIEFLY THE FACTS OF THE CASE IS THAT THE ASSESSEE IS REGISTERED U/S 12A OF THE I.T. ACT, 1961 VIDE REGI STRATION 'NO.INS/36487 DATED 06. 06 .2002 AND FILED ITS RETURN OF INCOME FOR AY 2007 - 0 8 DECLARING DEFICIT OF RS.3,75,8 80/ - ALONG WITH INCOME & EXPENDITURE ACCOUNT, BALANCE SHEET AND AUD IT REPORT IN FORM NO.10B, THE AO COMPLETED THE ASSESSMENT U/ S 143(3) VIDE ORDER DATED 29.12. 2009 AT INCOME OF RS.1,13,60,399/ - . THE ASSESSEE HAS CONTESTED THAT THE AO HAS NOT FOLLOWED THE ORDER S OF THE TRIBUNAL WITH REGARD TO CARRY FORWARD OF DEFICIT OF PREVIOUS YEARS, ALLOWABILITY OF CAPITAL EXPENDITURE AND ACCUMULATION OF INCOME U/S 11(2). A PERUSAL OF THE ORDER U/S 143(3) R.W.S. 254 SHOWS THAT THE DEFICIT OF EARLIER YEARS WAS NOT ALLOWED TO T HE ASSESSEE AS IT WAS NOT CLAIMED IN THE RETURN OF INCOME BUT HOWEVER, THE HON'BLE TRIBUNAL ALLOWED ON THIS GROUND THAT CLAIM CAN BE MADE DURING THE ASSESSMENT PROCEEDINGS AND RESTORED THE ISSUE BACK TO THE AO. THE AO ON THIS ISSUE HAS NOTED AND CONCLUDED IN THE ASSESSMENT ORDER THAT A SSESSEE WAS ASKED TO GIVE BIFURCATION OF THE DEFICIT PERTAINING TO MEMBERS AND NON - MEMBERS VIDE NOTICE DATED 11.02.2013. THIS WAS NECESSITATED BECAUSE ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 3 DURING THE YEAR THE ASSESSING OFFICER HAD BIFURCATED THE DEFICIT WHILE COMP UTING THE TOTAL INCOME AND DEFICIT PERTAINING TO MEMBERS WERE NOT ADJUSTED AGAINST THE INCOME FROM NON - MEMBERS. THI S WAS ACCEPTED BY THE ASSESSES A ND WAS NOT CONTESTED BEFORE THE APPELLATE AUTHORITIES. HOWEVER, THE ASSESSES HAS FAILED TO SUBMIT THE BIFURCA TION OF THE DEFICIT OF EARLIER YEARS AS DEFICIT PERTAIN ING TO MEMBERS AND NON - MEMBERS. 5. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF AO AFTER OBSERVING AS UNDER: - 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION OF TH E APPELLANT. THE COPY OF LETTER DATED 30 TH JULY, 2012 FILED BY THE APPELLANT IN SUPPORT OF BIFURCATION OF DEFICIT FROM 'MEMBERS' AND 'NON - MEMBERS' BEFORE AO AND RELIED BEFORE ME IS MATERIALLY DEFICIENT AS THERE IS NO BIFURCATION OF AMOUNT OF DEFICIT RELATI NG TO 'MEMBERS' AND 'NON - MEMBERS'. IT IS ALSO ON RECORD THAT IN THE ORIGINAL ASSESSMENT ORDER AND AS PER THE CLAIM OF THE APPELLANT ITSELF, THE COMPUTATION OF TOTAL INCOME HAS BEEN MADE ON THE 'PRINCIPLE' OF MUTUALITY. THEREFORE, THERE IS NEITHER A VALID R EASON NOR SUCH FACTS WHICH CALL FOR DEVIATING FROM COMPUTATION OF INCOME OF THE APPELLANT ON THE 'PRINCIPLE OF MUTUALITY'. SINCE THE RECORDS/BIFURCATION OF DEFICIT AMOUNT IS NOT AVAILABLE ON RECORD, EVEN IN TERMS OF LETTER DATED 3070772012 AND THE INCOME O F THE APPELLANT IS SUBSTANTIALLY ATTRIBUTABLE TO NON MUTUALITY, THEREFORE, THERE IS NO BASIS TO ALLOW SUCH CLAIM. THE ONUS IS ON THE APPELLANT FOR CLAIMING ANY DEDUCTION, WHICH HAS NOT BEEN DISCHARGED ON THIS ISSUE. THEREFORE, THE ORDER PASSED BY THE AO D ENYING THE DEDUCTION OF CLAIMED DEFICIT IS UPHELD AND GROUND NO.1(A) IS DISMISSED. 6. AS PER GROUND NO.1(B) OF APPEAL, CLAIM OF CAPITAL EXPENDITURE HAS BEEN AGITATED FOR DEDUCTION AS 'APPLICATION OF INCOME' U/S 11 OF THE I.T. ACT, 1961. THE HON'BLE TRIBUN AL IN ITA NO.7244/MUM/20LO IN THE CASE OF THE APPELLANT HAS ALLOWED THE GROUND ON THE ISSUE OF CLAIM OF CAPITAL EXPENDITURE TO THE LIMITED EXTENT OF ADMITTING THE SAME FOR THE PURPOSE OF ALLOWING DEPRECIATION IN PARA 13 OF THE SAID ORDER. HOWEVER, THE APPE LLANT HAS CLAIMED AND THE INCOME OF THE APPELLANT HAS BEEN COMPUTED ON PRINCIPLE OF MUTUALITY' FROM YEAR TO YEAR, IT IS NOTED IN THE ASSESSMENT ORDER FOR AY 2003 - 04 THAT - ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 4 ''THE ASSESSEE IS A NON - PROFIT MAKING COMPANY REGISTERED AND GOVERNED BY THE PROVISI ONS OF THE COMPANIES ACT, 1956 AND IT IS CONSTITUTED AS A MEMBERS CLUB AND IS OPERATING AND FUNCTIONING AS A MEMBERS CLUB. FOR PAST SEVERAL YEARS THE ASSESSEE COMPANY IS ENGAGED IN PROVIDING SPORTS GROUND TO ITS MEMBERS BY WAY OF GOLF COARSE FOR PLAYING TH E GAME OF GOLF AND FOR GOLF SPONSORED TOURNAMENTS. FURTHER,, THE ASSESSEE COMPANY IS A MUTUAL MEMBERS CLUB AND THE 'PRINCIPLES OF MUTUALITY' IS APPLICABLE'. 6.1 IT IS FURTHER NOTED IN THE ASSESSMENT ORDER FOR AY 2004 - 05 THAT 'THE ASSESSEE IS A NON - P ROFIT MAKING COMPANY REGISTERED AND GOVERNED BY THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IT IS CONSTITUTED AS A MEMBERS CLUB AND IS OPERATING AND FUNCTIONING AS A MEMBERS CLUB. FOR PAST SEVERS! YEARS THE ASSESSEE COMPANY IS ENGAGED IN PROVIDING SPORTS GROUND TO ITS MEMBERS BY WAY OF GOLF COURSE FOR PLAYING THE GAME OF GOLF AND FOR GOLF SPONSORED TOURNAMENTS, FURTHER, THE ASSESSEE COMPANY IS A MUTUAL MEMBERS CLUB AND THE 'PRINCIPLES OF MUTUALITY' IS APPLICABLE'. 6.2 SIMILAR IS THE POSITION FOR YEAR UND ER APPEAL THAT THE APPELLANT HAS CLAIMED AND AVAILED ITS COMPUTATION OF INCOME ON THE PRINCIPLE OF MUTUALITY, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT FROM YEAR TO YEAR, A PERUSAL OF THE COMPUTATION OF INCOME OF THE APPELLANT REVEALS THAT ONCE THE DEPRECI ATION HAS BEEN ALLOWED BY WAY OF DEDUCTION IN THE ACCOUNTS OF THE APPELLANT, A SEPARATE CLAIM OF CAPITAL EXPENDITURE U/S 11 OF THE I. T, ACT, 1961 IS NOT VALID WHEN THE COMPUTATION OF INCOME OF THE APPELLANT IS ACCEPTED FROM YEAR TO YEAR AND CLAIMED IN THE CURRENT YEAR ON THE PRINCIPLE OF MUTUALITY; WHICH HAS BEEN ACCEPTED BY THE AO. UNDER THE CIRCUMSTANCES, PEACE - MEAL APPLICATION OF MACHINERY PROVISIONS OF SEC.11 OF THE I. T, ACT, 1961 ARE NOT PROVIDED UNDER LAW TO BE APPLIED WHEN THE TOTAL INCOME OF THE A PPELLANT IS COMPUTED ON A TOTALLY DIFFERENT BASIS OF PRINCIPLE OF MUTUALITY. THEREFORE, FOR THE REASONS AS ABOVE, THE DEDUCTION FOR CAPITAL EXPENDITURE AS 'APPLICATION OF INCOME' UNDER THE MACHINERY SECTION OF COMPUTATION OF INCOME U/S 11 IS NOT PERMISSIBL E NEITHER ALLOWABLE. ACCORDINGLY, GROUND NO. 1 (B) OF THE APPEAL IS DISMISSED. 7. THE APPELLANT HAS CLAIMED FOR ACCUMULATION OF INCOME U/S 11(2) OF THE I. T. ACT, 1961 IN GROUND NO. 1 (C) OF APPEAL. THIS ISSUE HAS ALSO BEEN AGITATED IN GROUND 2 OF APPEAL. FRO M THE FACTS AND CIRCUMSTANCES OF THE CASE AS DESCRIBED ABOVE, THE ISSUE IS AGAIN AS TO WHETHER DEDUCTIONS AVAILABLE UNDER MACHINERY COMPUTATION PROVISIONS OF SEC. 11 OF THE I.T. ACT, 1961 ARE AVAILABLE TO THE APPELLANT WHERE THE TOTAL INCOME' OF THE APPELL ANT IS CLAIMED, COMPUTED AND ALLOWED ON THE 'PRINCIPLE OF MUTUALITY', IT IS FOR THE SAME REASONS THAT THE CLAIM OF ACCUMULATION OF INCOME U/S 11(2) IS ALSO NOT ALLOWABLE AS DISCUSSED ABOVE. THE DECISIONS IN THE CASE OF SURAT CITY GYMKHANA VS. DCIT ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 5 (GUJ) 25 4 ITR 733 IS RELEVANT WHERE IT WAS HELD THAT 'THE ENTIRE SCHEME OF ASSESSMENT OF CHARITABLE TRUST IS LAID DOWN IN SECTIONS 11, 12 & 13 AND THE PROVISIONS OPERATE AS AN INTEGRATED CODE'. THEREFORE, IT IS ABUNDANTLY CLEAR THAT THE PROVISIONS AND SUB PROVISIO NS CONTAINED UNDER SECTION 11, 12 & 13 ARE NOT APPLICABLE IN IS ISOLATED OR SPLIT MANNER. THE COMPUTATION OF INCOME UNDER ONE SET OF PROVISIONS - ON THE BASIS OF PRINCIPLE OF MUTUALITY - DO NOT PROVIDE FOR INCLUSION OF THE OTHER MACHINERY SECTIONS OF COMPUTA TION OF INCOME UNDER DIFFERENT HEADS OF INCOME OR UNDER DIFFERENT COMPUTATION PROVISIONS. 7.1 THE HON'BLE KERALA HIGH COURT HAS OBSERVED IN THE DECISION IN THE CASE OF INVESTOR CLUB TRICHUR VS. CIT 318 ITR THAT 'SEC, 11 AND MUTUALITY ARE EXCLUSIVE TO EACH OTHER' I.E. THE CLAIM AND COMPUTATION OF INCOME BASED ON THE PRINCIPLE OF MUTUALITY, AVAILED BY THE APPELLANT FROM YEAR TO YEAR AND ACCEPTED BY THE DEPARTMENT IS NOT ENTITLED FOR COMPUTATION OF INCOME U/S 11 OF THE IT. ACT, 1961 IN A PEACE - MEAL MANNER PAR TICULARLY WHEN 5EC.LL - INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSE - AND PRINCIPLE OF MUTUALITY ARE TOTALLY DISTINCT AND DIFFERENT AS PER INCOME TAX LAW AND IN TERMS OF DOMAINS OF ACTIVITIES IN THE RESPECTIVE FIELDS. THEREFORE, IN VIEW OF ABOVE DISCUS SION, GROUND NO.L(C) AND GROUND (VO.2 OF APPEAL ARE DISMISSED. 8. GROUND NO.3 OF APPEA L , CLAIM OF DEPRECIATION IS NOT A SUBJECT MATTER OF THE ORDER UNDER APPEAL BEFORE ME AND NO CASE HAS BEEN MADE BY THE APPELLANT ON RECORD THAT DEPRECIATION HAS NOT BEEN ALLOWED / CLAIMED IN ITS FINAL ACCOUNTS AND THE RESULTANT INCOME FILED IN THE RETURN FOR THE YEAR. IT SEEMS THAT THE CLAIM OF CAPITAL EXPENDITURE IN GROUND OF 'APPLICATION OF INCOME' L(B) IS ITSELF IN THE CONTEXT THAT DEPRECIATION HAS ALREADY BEEN ALLOWED. IN ANY CASE, THE AO IS DIRECTED TO VERIFY AND NORMAL DEPRECIATION AS PER COMPUTATION OF INCOME IN COMMERCIAL MANNER IS TO BE ALLOWED WHEREAS IT IS CLARIFIED THAT THE CLAIM OF CAPITAL EXPENDITURE AS 'APPLICATION OF INCOME' IS NOT ALLOWABLE. THE GROUND NO.3 OF APPEAL IS THEREFORE, DISMISSED WITH THE ABOVE OBSERVATIONS, 9. GROUND NO,4 OF APPEAL IS VAGUE AND GENERAL AND FOR WHICH NO SUBMISSIONS HAS BEEN MADE AND THEREFORE, SAME IS DISMISSED. 6. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE ORDER OF THE TRIBUNAL IN ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 6 ASSESSEES OWN CASE. WITH REGARD TO THE GROUND NO.1 REGARDING CARRY FORWARD OF DEFICIT OF PREVIOUS YEAR S , WE OBSERVE THAT VIDE LETTER DATED 30/07/2012, THE ASSESSEE HAS FILED COMPLETE DETAILS OF LOSS WHICH PERTAINS TO NON - MEMBERS. AS THE ASSESSEE HAS DULY FILED THE DETAILS OF DEFICIT RELATES TO NON - MEMBERS, THE SAME IS ELIGIBLE FOR CARRY FORWARD. WE DIRECT A CCORDINGLY. 8. WITH REGARD TO ALLOWING ACCUMULATION OF INCOME U/S.11(2), WE OBSERVE THAT ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE DATED 02/11/2017, THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER: - 18. AFTER HEARING BO TH THE SIDES, WE FIND THAT ALTHOUGH THE ASSESSEE HAS NOT FILED THE FORM NO.10 WHILE FILING THE RETURN OF INCOME OR BEFORE COMPLETION OF THE ASSESSMENT, HOWEVER, THE SAME HAS BEEN FILED BEFORE THE ORDER PASSED BY THE LD. CIT(A). THE RESOLUTION OF THE COMPAN Y WAS ALSO FILED ON THAT DATE. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF MAYUR FOUNDATION (SUPRA), WE HOLD THAT THE ASSESSEE HAS FULFILLED THE CONDITIONS LAID IT A NO.7244/MUM/2010 11 ( ASSESS ME NT YEA R: 2007 - 08) DOWN IN PROVISION OF SECTION 11(2) OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 9. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY MERIT FOR DECLINING AC CUMULATION OF INCOME U/S.11(2) OF THE IT ACT. 10. ISSUE WITH REGARD TO ALLOWABILITY OF CAPITAL EXPENDITURE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING 264 ITR 110. WE FOUND THAT ASSESSEE HAS ADDED THE AMOUNT OF RS.88,94,038/ - TO THE GROSS BLOCK WHICH IS AS PER THE SCHEDULE OF FIXED ITA NO. 1361/MUM/2015 THE BOMBAY PRESIDENCY GOLF CLUB LTD., 7 ASSETS PLACED ON RECORD, ACCORDINGLY, THERE IS NO REASON TO ALLOW THE CAPITAL EXPENDITURE SO INCURRED BY THE ASSESSEE. 11. WITH REGARD TO ASSESSEES CLAIM OF DEPRECIATION OF RS.70,7 7,531/ - , WE OBSERVE THAT ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2008 - 09 DATED 19/10/2015, WHEREIN THE ISSUE WAS HELD TO BE COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING 264 IT R 110 AND PUNJAB AND HARYANA HIGH COURT IN THE CASE OF TINY TOTS EDUCATION SOCIETY 330 ITR 21. THUS, THERE IS NO REASON TO DIS ALLOW THE DEPRECIATION EVEN THOUGH THE CAPITAL EXPENDITURE HAS BEEN ALLOWED AS DEDUCTION. AS PER THE BOMBAY HIGH COURT, THERE IS N O DOUBLE DEDUCTION EVEN IF DEPRECIATION ON SUCH CAPITAL ASSETS IS ALSO ALLOWED FOR COMPUTATION OF INCOME. WE DIRECT ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 09 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 09 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDEN T. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//