Appeal details
Counselvise Citation
17721514 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-09-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
06-08-2012
Assessment Year
2008-2009
Appeal Filed On
13-02-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 176/CHD/2012 ASSESSMENT YEAR: 2008-09 ITO, WARD-3, V M/S HERMITAGE COOP. GROUP PANCHKULA. SOCIETY LTD., CHANDIGARH. PAN: AAAJT-1172A & ITA NO. 177/CHD/2012 ASSESSMENT YEAR: 2008-09 ITO, WARD-3, V HARYANA URBAN ESTATE & PANCHKULA. TOWN &COUNTRY PLANNING EMPLOYEES WELFARE ORGN., PANCHKULA. PAN: AAATH-2091J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT : SHRI HARISH NAYYAR DATE OF HEARING : 06.08.2012 DATE OF PRONOUNCEMENT : 14.09.2012 ORDER PER MEHAR SINGH, AM THE ABOVE CAPTIONED PRESENT APPEALS FILED BY THE RE VENUE ARE DIRECTED AGAINST THE ORDER DATED 02.12.2011 & 0 8.12.2011 RESPECTIVELY, FOR THE ASSESSMENT YEAR 2008-09, PASS ED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (I N SHORT 'THE ACT'). AS BOTH THE APPEALS INVOLVE SIMILAR ISSUES, THEY ARE BEING DISPOSED OFF BY A CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 2. IN BOTH THE APPEALS, THE REVENUE HAS RAISED SIMI LAR GROUNDS OF APPEAL, EXCEPT DIFFERENCE IN AMOUNT. THE GROUNDS OF APPEAL ARE REPRODUCED HEREUNDER : 1 THE LD. CIT(A) HAS ERRED IN H OLDING THAT THE ASSESSEE SOCIETY IS A MUTUAL CONCERN AND ALLOWING THE RELIEF OF INTE REST INCOME OF RS, 11,66, 018 / - (& RS.104,83,813/- IN ITA NO. 177/CHD/2012) DISREGARDING THE FINDING OF A.O. THAT THE ASSESSEE DID NOT FULFILL THE CONDITION OF MUTUAL CONCERN. 2. THE LD.CIT(A) HAS ERRED IN ALLOWI NG RELIEF TO THE ASSESSEE DISREGARDING THE DECISION OF HON'B LE SUPREME COURT IN THE CASE OF M/S CHEMSFORD CLUB VS. , CIT 243 ITR 89. 3. THE APPLICANT CRAVES FOR LEAVE TO ADD OR AMEND T HE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF LD.CIT(A) BE SET ASIDE AND THAT OF THE A.O, MAY BE RESTORED. 3. THE REVENUE CHALLENGED THE RELIEF GRANTED BY CI T(A) IN RESPECT OF INTEREST INCOME OF RS.11,66,108/- ON THE GROUND OF PRINCIPLE OF MUTUALITY, DISREGARDING THE FINDING OF THE AO THAT THE ASSESSEE DID NOT FULFILL THE CONDITION OF MUTUAL CONCERN. SIMILAR GROUNDS HAVE BEEN RAISED IN ITA NO. 177/CHD/2012 (A.Y. 2008-09), HEREIN THE AMOUNT OF I NTEREST AMOUNTING TO RS.1,04,83,813/-, CONSIDERED BY THE CI T(A), AS FALLING WITHIN THE CONCEPT OF MUTUALITY, WHICH HAS BEEN CHALLENGED BY THE REVENUE. 4. BEFORE US, LD. 'DR' SUPPORTED THE FINDING OF THE AO, AS CONTAINED IN ASSESSMENT ORDER. LD. 'DR' ALSO PLACE D RELIANCE ON THE DECISION REPORTED IN CIT V ITI EMPLOYEES DEATH & SUPERANNUATION RELIEF FUND 234 ITR 308 (KAR.)AND CIT MADRAS V KUMBAKONAM MUTUAL BENEFIT FUND LTD. (S.C) 53 ITR 241. 3 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT AVAILABLE RECORDS. THE A SSESSEE IS A GROUP HOUSING COOPERATIVE SOCIETY AND HAS BEEN ENGAGED IN CONSTRUCTING AND PROVIDING TO ITS MEMBERS, RESIDENT IAL FLATS. THE ASSESSEE WAS ALLOTTED LAND FOR CONSTRUCTION OF FLAT S AS A GROUP HOUSING COOPERATIVE SOCIETY IN GURGAON. THE M EMBERS CONTRIBUTED TOWARDS THE COST OF LAND AS WELL AS CON STRUCTION OF THE FLATS, ON THE LAND ALLOTTED TO THE SOCIETY BY H UDA. THE ASSESSEE SOCIETY HAD AT ALL GIVEN POINTS OF TIME AT ITS DISP OSAL SOME LIQUID FUNDS WHICH COMPRISED OF SURPLUSES, AND OTHER CONTRIBUTIO NS RECEIVED FROM MEMBERS. THE SURPLUS EARNED DURING TH E YEAR COMPRISED OF INTEREST RECEIVED FROM VARIOUS BANKS O N THE FDRS HELD BY THE ASSESSEE AND INTEREST EARNED FROM MEMBER S ON ACCOUNT OF DELAYED PAYMENT OF THEIR INSTALLMENT TO THE SOCIETY . 6. IN ITA NO. 177/CHD/2012, THE APPELLANT IS A GROU P HOUSING SOCIETY AND HAS BEEN ENGAGED IN CONSTRUCTIN G AND PROVIDING TO ITS MEMBERS, RESIDENTIAL FLATS. THE A SSESSEE WAS ALLOTTED LAND FOR CONSTRUCTION OF FLATS AS A GROUP HOUSING SOCIETY IN PANCHKULA AND GURGAON. THE MEMBERS CONT RIBUTED TOWARDS COST OF LAND AS WELL AS CONSTRUCTION OF THE FLATS ON THE LAND ALLOTTED TO THE SOCIETY BY HUDA. THE CASE OF THE ASSESSEE SOCIETY HAD ALREADY BEEN SCRUTINIZED U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. IT IS OBSERVED THAT A DDITION MADE TOWARDS INTEREST INCOME EARNED BY THE SOCIETY WAS DELETED BY THE CIT(A), PANCHKULA, WHILE PASSING THE APPELLA TE ORDER. THE SAME WAS ACCEPTED BY THE INCOME TAX DEPARTMENT AND NO FURTHER APPEAL WAS FILED BY THE DEPARTMENT. THE COMMON ADDITION MADE BY THE AO, IN THESE 4 APPEALS, PERTAINS TO THE INTEREST INCOME EARNED BY THE ASSESSEE, TREATING THE SAME AS NOT FALLING UNDER TH E CONCEPT OF MUTUALITY. HOWEVER, THE LD. CIT(A), IN BOTH THE CA SES, ADJUDICATED THE ISSUE IN FAVOUR OF APPELLANT. 7. IN ITA NO. 176/CHD/2012, LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF GYMKHANA CLUB, SECTOR 6, PA NCHKULA IN ITA NO. 900/CHD/2000 FOR THE ASSESSMENT YEAR 1995-9 6. THE RELEVANT FINDINGS OF THE CIT(A) ARE REPRODUCED HERE UNDER : '7, WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IT IS NOT DISPUTED BEFORE US THAT THE MAIN OBJECT OF THE ASSESSEE IS TO AFFORD TO ITS MEMBERS THE USUAL PRIVILEGES AND ADVANTAGES OF A CL UB SOCIETY. THE REVENUE HAS NOT ASSESSED THE INCOME OF THE ASSESSEE DERIVED FROM PROVIDING FACILITIES TO ITS MEMBERS. THE INCOME WHICH WAS SOUGHT TO BE TAXE D, WAS DERIVED BY THE ASSESSEE FROM OUTSIDE SOURCES. THE ISSUE BEFORE US IS AS TO WHETHER THE INCOME DERIVED BY THE ASSESSEE BY WAY OF INTEREST O N FBRS GUEST CHARGES AND OTHER DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS.. BANKIPUR CLUB LTD. (SUPRA) IS NOT DIRECTLY ON THE ISSUE INVO LVED IN THIS APPEAL. IN THE SAID CASE, THE ISSUE BEFORE THE HON'BLE SUPREME COU RT WAS AS TO WHETHER THE VARIOUS CLUBS/ASSOCIATION WERE ENTITLED TO EXEMPTIO N FOR THE RECEIPT OR SURPLUS ARISING FROM THE SALE OF DRINKS, REFRESHMEN TS ETC. OR AMOUNTS RECEIVED BY WAY OF RENTS FOR LETTING OUT THE BUILDI NG OR AMOUNTS RECEIVED BY WAY OF ADMISSIBLE FEE, PERIODICAL SUBSCRIPTIONS AND RECEIPT OF SIMILAR NATURE FROM ITS MEMBERS. IN ALL THE CASES INVOLVED IT WAS FOUND BY THE TRIBUNAL THAT ALL THE RECEIPTS REFERRED TO ABOVE WE RE FROM MEMBERS OF CLUB IN THE COURSE OF PROVIDING PRIVILEGES, CONVENIENCES AND AMENITIES PROVIDED TO THE MEMBERS TO WHICH THEY WERE ENTITLED TO AS PE R THE RULES AND REGULATIONS OF THE RESPECTIVE CLUBS. IN SOME OF THE CASES BEFORE THE HON'BLE SUPREME COURT THE ISSUE INVOLVED WAS ABOUT THE ASSESSMENT OF INCOME DERIVED BY THE CLUBS/ASSESSMENTS FROM LETTIN G OUT OF PROPERTY TO OTHERS AND ALSO INTEREST RECEIVED FROM FDR,NSC ETC. THEIR LORDSHIPS OF THE 5 SUPREME COURT SEGREGATED THE AFOREMENTIONED CASES, AND DIRECTED THESE TO BE PROCEEDED SEPARATELY-FOR HEARING AND DISPOSAL BEFOR E AN APPROPRIATE BENCH. IT IS EVIDENT FROM THE DECISION OF THE SUPRE ME COURT IN THE CASE OF CIT VS. BANKIPUR CLUB LTD.(SUPRA) THAT THE ISSUE RELATI NG TO ASSESSMENT OF INCOME DERIVED FROM LETTING OUT OF THE HOUSE PROPERTY TO N ON MEMBERS AND EARNING OF INTEREST ON FDR AND NSC ETC. WAS LEFT WIDE OPEN. IT IS THUS EVIDENT THAT THE DECISION OF THE SUPERME COURT IN THE CASE OF CIT VS . BANKIPUR CLUB LTD.(SUPRA) IS INAPPLICABLE FOR DECIDING THE ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE. THE DECISION OF THE SUPREME COURT IN THE CASE OF CHELMS FORD CLUB(SUPRA) IS ALSO OF NO HELP AS IN THAT CASE THE ISSUE RELATING TO THE ASSE SSMENT OF ANNUAL VALUE OF THE HOUSE PROPERTY OWNED BY THE CLUB AND THE INCOME DER IVED THEREFROM THE MEMBERS. THERE ARE SOME DECISIONS REFERRED TO BELOW WHEREIN IT HAS BEEN LAID DOWN THAT THE INCOME OF THE CLUB IS TAXABLE ON THE PROFIT DER IVED FROM SUBSCRIPTIONS AND CHARGES PAID BY NON MEMBERS AND ON THE INCOME DERIV ED FROM ITS CAPITAL ASSETS AND INVESTMENTS:- I) UNITED SERVICE CLUB VS. CIT,1ITC113 II) SPORTS CLUB OF GUJARAT VS. CIT 171ITR504(GUJ) III) CUTTACK CLUB P. L TD. VS. CIT 196ITR 407(ORISSA) IV) RAJ PATH CLUB L TD. VS. CIT 211ITR 379(GUJ) ON THE BASIS OF THE ABOVE DECISIONS THE ISSUE COULD BE DECIDED IN FAVOUR OF THE REVENUE. HOWEVER THE LD. COUNSEL FOR THE ASSESSEE H AS RELIED UPON THE DECISION OF THE ITA T, CHANDIGARH BENCH IN THE CASE OF CIT,HARYANA ROHTAK VS. SIR HIND CLUB LTD. AMBALA ITA NO,451/CHD/84 AY 82-83 ORDER DT.20.9.198 5, WHERE IN THE TRIBUNAL HAS DECIDED THE ISSUE RELATING TO ASSESSMENT OF INT EREST ON FDR IN FAVOUR OF THE ASSESSEE. THE DECISION OF THE DELHI HIGH COURT IN T HE CASE OF DIRECTOR OF INCOME TAX VS. ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY (2003) 130 TAXMAN 575 (DELHI) ALSO SUPPORTS THE VIEW CANVASSED ON BEHALF OF THE ASSESSEE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF OUT CO-ORDIN ATE BENCH IN THE CASE OF CIT V HARYANA ROHTAK VS. SIRHIND CLUB LTD. AMBALA (SUPRA) HOLD THAT THE INTEREST INCOME DERIVED BY THE ASSESSEE CLUB WAS NOT LIABLE TO TAX AND THAT THE CIT(A) WAS JUSTIFIED IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. 7(I) SIMILARLY, IN ITA NO. 177/CHD/2012, THE CIT( A) ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE, FO LLOWING THE 6 RELEVANT FINDINGS IN ASSESSMENT YEAR 2002-03 DATED 17.2.2006 OF THE CIT(A), ON THE SAME ISSUE. LD. 'AR' HAS FIL ED DETAILED SUBMISSION, WHEREIN A RELIANCE WAS PLACED ON THE DE CISION OF BANKIPUR CLUB & CHEMSFORD CLUB, BOTH ADJUDICATED BY THE HON'BLE SUPREME COURT, DELHI HIGH COURT IN ALL INDI A ORIENTAL BANK OF COMMERCE WELFARE SOCIETY (2003) 130 TAXMAN 575. REVENUE PLACED RELIANCE ON THE DECISION OF THE HON' BLE SUPREME COURT IN THE CASE OF CIT V KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE ESS ENCE OF MUTUALITY, LIES IN THE RETURN OF, WHAT ONE HAS CONT RIBUTED TO A COMMON FUND, AND IF PROFITS ARE DISTRIBUTED TO SHAR EHOLDERS AS SHAREHOLDERS, THE PRINCIPLE OF MUTUALITY IS NOT SAT ISFIED. THE FACTS OF THE PRESENT CASE DOES NOT FALL UNDER THE R ATIO LAID DOWN BY THE HON'BLE SUPREME COURT, IN VIEW OF THE FACT T HAT NO SUCH PROFIT HAS BEEN DISTRIBUTED IN THE PRESENT CASE. I N NUT-SHELL, THE CASE RELIED UPON BY THE REVENUE IS NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE, BEING DIFFERENT AND DIST INGUISHABLE. THE REVENUE PLACED FURTHER RELIANCE ON THE CASE OF THE CIT V ITI EMPLOYEES DEATH & SUPERANNUATION RELIEF FUND 234 ITR 308 (SUPRA) WHEREIN IT HAS BEEN HELD THAT INTEREST ON I NVESTMENT WOULD NOT BE COVERED BY THE PRINCIPLE OF MUTUALITY. IN THIS CASE, TRUST WAS ESTABLISHED FOR THE BENEFIT OF THE EMPLOYEES OF A PUBLIC SECTOR COMPANY AND TRUST FUNDS CONSISTED OF, CONTRIBUTION FROM EMPLOYEES, CONTRIBUTION FROM EMPL OYER AND DONATION ETC. THE ISSUE WAS DECIDED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CONTEXT OF SECTION 11 READ WITH S ECTION 2(15) OF THE ACT. HOWEVER, DECISION OF THE HON'BLE KARNA TAKA HIGH COURT DID NOT FIND FAVOUR WITH THE DECISION OF THE SUPREME 7 COURT AS DISCUSSED HEREIN AFTER. TRANSACTIONS, SOL ELY WITH OR AS BETWEEN THESE MEMBERS, IS A REQUIREMENT OF PRINC IPLE OF MUTUALITY. HOWEVER, THERE MAY BE INCIDENTAL ACTIVI TY WITH NON- MEMBERS, IF NOT TAINTED BY COMMERCIALITY, AS DECIDE D BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V BANKIPUR CLUB LTD. (1997) 226 ITR 97 (S.C) APPROVING THE DECISION IN C IT V RANCHI CLUB LTD. (1992) 196 ITR 137 (PATNA) (FB), WHERE TH E CLUB HAD INCOME FROM BANK DEPOSITS. THE HON'BLE SUPREME COU RT ITSELF DECIDED IN CIT V CAWNPORE CLUB LTD. (2004) 140 TAXM AN 378 (S.C) THAT WHERE THE SURPLUS FUNDS OF A MUTUAL ASSO CIATION WAS DEPOSITED WITH A BANK, IT COULD NOT COME IN THE WAY OF EXEMPTION, AS WAS POINTED OUT WITH REFERENCE TO THE INCOME FROM BANK DEPOSITS. THIS VIEW, AS REGARDS INCIDENT AL ACTIVITY WITH NON-MEMBERS, WAS ALSO TAKEN BY THE HON'BLE SUP REME COURT, IN THE CASE OF CHELMSFORD CLUB V CIT (2000) 243 ITR 89 (S.C). THE HON'BLE DELHI HIGH COURT HAS DECIDED, I N RESPECT OF SUCH INTEREST ON BANK DEPOSITS, THAT IT IS NOT BARR ED FROM THE BENEFIT OF PRINCIPLE OF MUTUALITY IN CIT V DELHI GY MKHANA CLUB LTD. (1975) 155 ITR 373 (DEL) REITERATED IN (2011) 53 DTR (DEL) 330, INTERALIA REFERRING TO THE DIRECTOR OF INCOME TAX (EXEMPTION) V ALL INDIA ORIENTAL BANK OF COMMERCE W ELFARE SOCIETY (2003) 184 CTR (DEL) 274. IN THE LIGHT OF THE HON'BLE SUPREME COURT DECISION AND THE DECISION OF OTHER HI GH COURTS, INCLUDING HON'BLE KARNATAKA HIGH COURT, WHICH HAVE TAKEN A NARROWER VIEW, IN CIT V BANGALORE CLUB (2006) 287 I TR 263 (KAR), MADRAS GYMKHANA CLUB V DCIT (2010) 328 ITR 3 48 (MAD), WOULD BE NO LONGER GOOD LAW. 8 8. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSIO NS, THE DECISIONS RELIED UPON BY THE REVENUE ARE NOT APPLIC ABLE, TO THE FACT-SITUATION OF THE PRESENT CASE. HOWEVER, THE F ACT-SITUATION OF THE PRESENT CASE AND THE ISSUE INVOLVED THEREIN, ARE SQUARELY COVERED BY THE DECISIONS, DISCUSSED BY US ABOVE. H AVING REGARD TO THE FACT-SITUATION OF THE PRESENT CASE AND THE F INDINGS OF THE LD. CIT(A), WE ARE OF THE CONSIDERED OPINION THAT T HERE IS NO GROUND TO INTERFERE IN THE FINDINGS OF THE LD. CIT( A), IN BOTH THE APPEALS. CONSEQUENTLY, FINDINGS OF THE LD. CIT(A), IN BOTH THE APPEALS, ARE UPHELD. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH SEPT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH
