Sports & Cultural Club (Regd), Noida V. JCIT, Noida

ITA 1897/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7114 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: ASHISH GOEL CAS; VED JAIN SHRI ASHISH CHADHA
• Keywords: Charitable institution; Question of law; Difference of opinion; Change of opinion; Capital expenditure
• Section: 143(3); 12A; 147; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH D DD D : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO S SS S . .. . 1897/DEL/2016, 1898/DEL/2016, 1899/DEL/2016, 1897/DEL/2016, 1898/DEL/2016, 1899/DEL/2016, 1897/DEL/2016, 1898/DEL/2016, 1899/DEL/2016, 1897/DEL/2016, 1898/DEL/2016, 1899/DEL/2016, 1900/DEL/2016 & 1901/DEL/2016 1900/DEL/2016 & 1901/DEL/2016 1900/DEL/2016 & 1901/DEL/2016 1900/DEL/2016 & 1901/DEL/2016 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : : : : 2006 2006 2006 2006 - -- - 07, 2007 07, 2007 07, 2007 07, 2007 - -- - 08, 2010 08, 2010 08, 2010 08, 2010 - -- - 11, 2011 11, 2011 11, 2011 11, 2011 - -- - 12 & 2012 12 & 2012 12 & 2012 12 & 2012 - -- - 13 1313 13 M/S SPORTS & CULTURAL CLUB M/S SPORTS & CULTURAL CLUB M/S SPORTS & CULTURAL CLUB M/S SPORTS & CULTURAL CLUB (REGD.), (REGD.), (REGD.), (REGD.), 225A, SECTOR 225A, SECTOR 225A, SECTOR 225A, SECTOR- -- -15A, 15A, 15A, 15A, NOIDA. NOIDA. NOIDA. NOIDA. PAN : AAAJS0280J. PAN : AAAJS0280J. PAN : AAAJS0280J. PAN : AAAJS0280J. VS. VS. VS. VS. JOINT COMMISSIONER OF JOINT COMMISSIONER OF JOINT COMMISSIONER OF JOINT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, RANGE RANGE RANGE RANGE- -- -1, 2 & 3, 1, 2 & 3, 1, 2 & 3, 1, 2 & 3, NOIDA. NOIDA. NOIDA. NOIDA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN, SHRI ASHISH CHADHA AND SHRI ASHISH GOEL, CAS. RESPONDENT BY : MS. PARAMITA TRIPATHY, CIT - DR. DATE OF HEARING : 31.08.2016 31.08.2016 31.08.2016 31.08.2016 DATE OF PRONOUNCEMENT : 23.09.2016 23.09.2016 23.09.2016 23.09.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THESE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT Y EARS 2006- 07, 2007-08, 2010-11, 2011-12 & 2012-13 ARE DIRECTE D AGAINST THE ORDER OF LEARNED CIT(A)-I, NOIDA DATED 31 ST MARCH, 2016. ITA NO.1897/DEL/2016 ITA NO.1897/DEL/2016 ITA NO.1897/DEL/2016 ITA NO.1897/DEL/2016 ASSESSEES APPEAL FOR AY 2006 ASSESSEES APPEAL FOR AY 2006 ASSESSEES APPEAL FOR AY 2006 ASSESSEES APPEAL FOR AY 2006- -- -07 : 07 : 07 : 07 :- -- - 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS :- 1. THE REASSESSMENT FRAMED IS ILLEGAL, UNLAWFUL AN D IS AGAINST THE NATURAL LAW OF JUSTICE. 2. THAT THE INITIATION OF PROCEEDINGS U/S 147/148 A S WELL AS REASSESSMENT FRAMED IS ILLEGAL AND UNLAWFUL. IT IS WELL SETTLED LAW THAT THE ASSESSMENT CANNOT B E REOPENED MERELY ON CHANGE OF OPINION WHERE THE ITA-1897/D/2016 & OTHERS 2 ASSESSMENT HAS BEEN FRAMED U/S 143(3) OF INCOME TAX ACT, 1961. 3. THAT APART FROM PARA-2 THE DATE GIVEN BY THE LEA RNED CIT(APPEAL) FOR ITS APPROVAL ON 28/03/2013 FROM CIT IS CONTRARY TO THE FACTUAL, THUS, THE ASSESSMENT FRAME D DESERVES TO BE NULL AND VOID. 4. THE LEARNED CIT(APPEAL) HAD FAILED TO APPRECIATE THE WRITTEN SUBMISSION AS WELL AS THE VERBAL SUBMISSION GIVEN BEFORE HIM AND TWISTED IN HIS OWN MANNER TO GO AGAI NST THE HUMBLE APPELLANT. 5. THE LEARNED CIT(APPEAL) WAS NOT JUSTIFIED IN TAK ING THE ENTIRE RECEIPTS OF RS.1,17,47,593/- AS TAXABLE INCOME. SUCH ACTION IS ILLEGAL, UNLAWFUL AND AGAINST THE NA TURAL LAW OF JUSTICE AND SEEMS TO BE UNDUE PRIVILEGE OF THE P ROVISO 251(1A) OF INCOME TAX ACT, 1961. 6. THE LEARNED CIT(APPEAL) WAS UNJUSTIFIED IN MAKIN G AN ADDITION OF RS.69,41,650/- RELATED TO CORPUS FUND. THE CONTENTION GIVEN BY HIM IS CONTRARY TO THE FACTUAL AND SEEMS TO BE HELD IN DISCRETIONARY MANNER. 7. THAT WITHOUT PREJUDICE TO PARA-6 AN ADDITION OF RS.69,41,650/- IS ILLEGAL AND UNLAWFUL AS THE LEARN ED CIT(APPEAL) HAS NOT COMPLIED WITH THE LAWFUL OBLIGA TION IN SERVICE OF NOTICE U/S 251(1A) OF INCOME TAX ACT, 19 61 IN THIS RESPECT. THE NOTICE U/S 251(1A) OF LEARNED CIT(APPEAL) IS ON LY RELATED TO ENHANCEMENT OF RS.1,17,47,593/-, THUS, F URTHER AN ADDITION OF RS.69,41,650/- IS NOT VALID IN THE E YES OF LAW. 8. THE APPELLANT IS A REGISTERED SOCIETY AND IS IN POSSESSION OF REGISTRATION U/S 12A OF INCOME TAX AC T, 1961, THUS IS QUITE ELIGIBLE TO CLAIM THE FULL EXEMPTION OF INCOME. 9. THAT THE LEARNED CIT(APPEAL) ITSELF HAS WORKED O UT AN APPEAL EFFECT FOR AN ENHANCEMENT, WHILE GROSS RECEI PTS ENHANCED BY LEARNED CIT(APPEAL) INCLUDES THE ASSESS ED INCOME OF RS.11,17,180/- RELATED TO INTEREST AND RENT, THUS, IT WILL BE DOUBLE TAXATION TO THIS EXTENT. 10. THAT THE APPELLANT CRAVES THEIR RIGHT TO AMEND, DELETE OR ADD ANY GROUNDS OF APPEAL AT OR BEFORE TH E TIME OF HEARING. ITA-1897/D/2016 & OTHERS 3 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SPORTS AND CULTURAL CLUB WHICH IS REGISTERED U/S 12A(A) VIDE C ITS ORDER DATED 31 ST JULY, 2003. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING LOSS OF `9,54,992/- WHIC H WAS ACCEPTED IN THE ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961. SUBSEQUENTLY, THE CASE WAS REOPENED U/S 147 ON THE GROUND THAT THE ASSESSEE BEING A MUTUAL BENEFIT ORGANIZATION, WAS N OT ENTITLED FOR EXEMPTION U/S 11 IN RESPECT OF INTEREST INCOME AND RENTAL INCOME. WHILE TAKING THIS VIEW, THE ASSESSING OFFICER RELIE D UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF BANGALORE CLUB VS . CIT [2013] 350 ITR 509. THE ASSESSING OFFICER COMPLETED THE ASSES SMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT AND DETERMINED THE INCOME OF THE ASSESSEE AT `11,17,181/-. 4. ON APPEAL BY THE ASSESSEE, LEARNED CIT(A) ENHANC ED THE INCOME TO `1,86,89,243/-. HE WAS OF THE OPINION THAT GROS S RECEIPTS AS WELL AS CONTRIBUTION TO THE CORPUS FUND BOTH ARE TAXABLE. HE FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THERE WAS GROSS RECEI PT OF `1,17,47,593/- AND THERE WAS INCREASE IN THE CAPITAL AMOUNTING TO `69,41,650/-. HE CONSIDERED BOTH THESE AMOUNTS AS ASSESSEES INCOME AND DETERMINED THE TAXABLE INCOME AT `1,86,89,243/- (1,17,47,593 + 69,41,650) AS AGAINST THE TAXABLE INCOME DETERMINED BY THE ASSESS ING OFFICER AT `11,17,181/-. THE ASSESSEE, AGGRIEVED WITH THE ORD ER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 5. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAR AGRAPH 18 OF THE CIT(A)S ORDER AND POINTED OUT THAT LEARNED CIT(A) HAS DENIED THE BENEFIT OF THE DOCTRINE OF MUTUALITY ON THE GROUND THAT IT WAS NOT CLAIMED IN THE RETURN OF INCOME AND, THEREFORE, IT CANNOT BE CLAIMED AT A LATER STAGE. ON MERITS ALSO, HE STATED THAT THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF MUTUALITY. HE STATED THAT T HE CIT(A) WAS FACTUALLY INCORRECT IN OBSERVING THAT THE ASSESSEE HAS NOT CL AIMED THE BENEFIT OF ITA-1897/D/2016 & OTHERS 4 MUTUALITY BEFORE THE ASSESSING OFFICER. HE REFERRE D TO PAGE 1 OF THE ASSESSMENT ORDER AND POINTED OUT THAT NOT ONLY THE ASSESSEE CLAIMED THE BENEFIT OF MUTUALITY BEFORE THE ASSESSING OFFIC ER BUT THE SAME WAS ALSO ACCEPTED BY THE ASSESSING OFFICER. THE ASSESS ING OFFICER HIMSELF HAS NOTED THAT THE ASSESSEE BEING A MUTUAL BENEFIT OF ORGANIZATION WAS NOT ENTITLED FOR EXEMPTION U/S 11 AND INTEREST INCOME AND RENTAL INCOME BEING 3 RD PARTY RECEIPTS WERE TAXABLE IN THE HANDS OF THE ASSESSEE. THUS, IT IS EVIDENT THAT THE BENEFIT OF MUTUALITY WAS CLAIMED BEFORE THE ASSESSING OFFICER AND IT WAS ACCEPTED BY HIM IN ALL OTHER RECEIPTS EXCEPT THE RECEIPT FROM INTEREST INCOME AN D RENTAL INCOME BECAUSE IT WAS RECEIVED FROM THIRD PARTIES. 6. HE FURTHER STATED THAT IT IS A SETTLED LAW THAT THE CLUBS ARE ENTITLED TO BENEFIT OF MUTUALITY. IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CHELM SFORD CLUB VS. CIT [2000] 243 ITR 89 (SC) AND CIT VS. BANKIPUR CLUB LT D. [1997] 226 ITR 97 (SC). HE FURTHER STATED THAT EVEN IN THE DECISI ON OF HONBLE APEX COURT IN THE CASE OF BANGALORE CLUB (SUPRA) RELIED UPON BY THE ASSESSING OFFICER, THE ASSESSEE I.E., BANGALORE CLU B WAS ALLOWED THE BENEFIT OF DOCTRINE OF MUTUALITY IN RESPECT OF ALL OTHER RECEIPTS EXCEPT THE INTEREST INCOME. HONBLE APEX COURT, WHILE UPH OLDING THE DENIAL OF EXEMPTION ON ACCOUNT OF MUTUALITY IN RESPECT OF INT EREST INCOME, HAS OBSERVED THAT THE ASSESSEE HAS ALREADY AVAILED THE BENEFIT OF DOCTRINE OF MUTUALITY IN RESPECT OF SURPLUS AMOUNT RECEIVED AS CONTRIBUTION. THUS, HE SUBMITTED THAT THE ALLOWABILITY OF BENEFIT OF MUTUALITY TO THE CLUBS IS A WELL-SETTLED LAW BY A SERIES OF DECISION S OF HONBLE APEX COURT. MOREOVER, THE SAME WAS CLAIMED AS WELL AS A LLOWED BY THE ASSESSING OFFICER HIMSELF. THUS, THE FINDING OF LE ARNED CIT(A) WHILE REFUSING THE DOCTRINE OF MUTUALITY TO THE ASSESSEE IS FACTUALLY AS WELL AS LEGALLY INCORRECT. HE, THEREFORE, SUBMITTED THAT T HE ENHANCEMENT MADE BY THE LEARNED CIT(A) SHOULD BE DELETED. ITA-1897/D/2016 & OTHERS 5 7. WITH REGARD TO TAXABILITY OF INTEREST INCOME, TH E LEARNED COUNSEL FAIRLY ADMITTED THAT THE ISSUE IS SETTLED AGAINST T HE ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF BANGA LORE CLUB (SUPRA). THEREFORE, THE SAME CAN BE DECIDED AGAINST THE ASSE SSEE. WITH REGARD TO RENTAL INCOME, HE STATED THAT HONBLE APEX COURT IN THE CASE OF CHELMSFORD CLUB (SUPRA) HAS ACCEPTED THAT RENTAL IN COME WOULD BE GOVERNED BY THE PRINCIPLES OF MUTUALITY AND WOULD B E EXEMPT. HOWEVER, THE LEARNED COUNSEL WAS FAIR ENOUGH TO ADM IT THAT IN THE SAID CASE, THE RENTAL INCOME WAS RECEIVED FROM THE MEMBE RS OF THE CLUB BUT IN THE CASE OF THE ASSESSEE, IT WAS RECEIVED FR OM NON-MEMBERS ALSO AND, THEREFORE, THE RATIO OF THE DECISION OF H ONBLE APEX COURT IN THE CASE OF BANGALORE CLUB (SUPRA) IN RESPECT OF IN TEREST INCOME WOULD BE APPLICABLE TO THE RENTAL INCOME ALSO. 8. THUS, IN EFFECT, THE LEARNED COUNSEL WANTED THE DELETION OF THE ENHANCEMENT MADE BY THE LEARNED CIT(A). 9. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF LEARNED CIT(A) AND HE STATED THAT THE CIT(A) HAS DISCUSSED THE ISSUE AT LENGTH AND HAS GIVEN COGENT REASON FOR DENYING THE BENEFIT OF MUTUALITY TO THE ASSESSEE. THE SAME SHOULD BE UPHELD. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. TH E FACTS AS DISCUSSED BY THE ASSESSING OFFICER IN PAGE 1 OF THE ASSESSMENT ORDER READ AS UNDER:- THE RETURN WAS FILED ON 30-10-2006 DECLARING IN LO SS OF RS.9,54,990/- IN THE STATUS OF AOP(T). THE RETURN WAS PROCESSED U/S 143(1) GRANTING REFUND OF RS.1,24,850 /-. THE ASSESSEE IS REGISTERED U/S 12A(A) VIDE LD. CIT ORDE R DATED 31-07-2003. ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS.1,17,47,593/- AND AFTER CLAIMING REVENUE EXPENDI TURE AT RS.1,27,02,485/- THE DEFICIT OF RS.9,54,992/- HA S BEEN ITA-1897/D/2016 & OTHERS 6 SHOWN AS RETURNED INCOME. FURTHER THE ASSESSEE FUR NISHED AUDIT REPORT U/S 12A(B) IN WHICH APPLICATION OF INC OME APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES HAS BEE N SHOWN AT RS.1,80,51,502/- WHICH INCLUDES I) REVENUE EXPEN DITURE AT RS.94,06,793/- AND CAPITAL EXPENDITURE AT RS.86, 44,709/- . GROSS RECEIPTS INCLUDES RENTAL INCOME OF RS.6,30 ,991/- AND INTEREST INCOME OF RS.7,19,656/- WHICH HAVE ALS O BEEN CLAIMED EXEMPT U/S 11 OF THE ACT. THE ASSESSMENT W AS COMPLETED U/S 143(3) OF THE ACT, AT RETURNED LOSS O F RS.9,54,990/-. THE ASSESSEE BEING A MUTUAL BENEFIT OF ORGANIZATION WAS NOT ENTITLED FOR EXEMPTION U/S 11 AND INTEREST INCOME AND RENTAL INCOME BEING 3 RD PARTY RECEIPTS WERE TAXABLE IN THE HANDS OF THE ASSESSEE. SUCH OM ISSION AND FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT HAS NECESSITATED THE INITIATION OF PROCEEDINGS U/S 147 OF THE IT ACT. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 11. FROM THE ABOVE, IT IS EVIDENT THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN DECLAR ING LOSS OF `9,54,990/- WHICH WAS ACCEPTED U/S 143(1) AS WELL A S IN THE REGULAR ASSESSMENT COMPLETED U/S 143(3). THEREAFTER, THE C ASE WAS REOPENED U/S 147. THE ASSESSING OFFICER HAS OBSERVED THAT T HE ASSESSEE IS A MUTUAL BENEFIT ORGANIZATION. HOWEVER, IT IS NOT EN TITLED TO EXEMPTION IN RESPECT OF INTEREST INCOME AND RENTAL INCOME BEI NG THE RECEIPT FROM THIRD PARTIES. THUS, THE BENEFIT OF MUTUALITY BY T HE ASSESSEE WAS CLAIMED IN RESPECT OF ALL THE RECEIPTS WHICH WAS AC CEPTED BY THE ASSESSING OFFICER IN THE ORIGINAL ORDER PASSED U/S 143(3). EVEN IN THE ORDER PASSED U/S 143(3) READ WITH SECTION 147, THE ASSESSING OFFICER ACCEPTED THAT THE ASSESSEE IS A MUTUAL BENEFIT ORGA NIZATION AND ALL OTHER RECEIPTS WERE ACCEPTED TO BE GOVERNED BY THE CONCEPT OF MUTUALITY. IN RESPECT OF INTEREST INCOME AND RENTA L INCOME BEING RECEIPT FROM THIRD PARTIES, THE ASSESSING OFFICER D ENIED THE BENEFIT OF MUTUALITY. IN VIEW OF THIS FACTUAL POSITION, THE F INDING OF LEARNED CIT(A) IN PARAGRAPH 18, WHICH WE REPRODUCE FOR READY REFER ENCE, IS CONTRARY TO THE FACTS ON RECORD :- ITA-1897/D/2016 & OTHERS 7 COMING TO THE NEXT QUESTION OF LAW WHETHER THE APP ELLANT COULD HAVE CLAIMED THE BENEFIT OF THE DOCTRINE OF M UTUALITY IF NOT CLAIMED IN THE RETURN OF INCOME AT A LATER S TAGE AND MORE SPECIFICALLY IN COURSE OF THE APPELLATE PROCEE DING BEFORE THE CIT(A) THE ANSWER IS NEGATIVE AS AN ASSE SSEE WHICH IS REGISTERED AS CHARITABLE INSTITUTION U/S 1 2A CANNOT CLAIM THE BENEFIT OF DOCTRINE OF MUTUALITY EVEN OTH ERWISE EVEN IF IT STAKES ITS CLAIM IN THE RETURN OF INCOME AND SOMETHING WHICH CANNOT BE CLAIMED IN THE RETURN OF INCOME CERTAINLY CANNOT BE CLAIMED IN AN APPELLATE PROCEED INGS BASED ON THE SAID RETURN OF INCOME. 12. LEARNED CIT(A) DENIED THE ASSESSEE THE BENEFIT OF MUTUALITY ON THE PRESUMPTION THAT THE ASSESSEE HAS NOT CLAIMED I T IN THE RETURN OF INCOME. HOWEVER, WE FIND THIS PRESUMPTION OF THE C IT(A) TO BE FACTUALLY INCORRECT. THE ASSESSEE NOT ONLY CLAIMED THE BENEFIT OF MUTUALITY BEFORE THE ASSESSING OFFICER, IT WAS ACCE PTED ALSO IN THE ORDER PASSED U/S 143(3) AS WELL AS ORDER OF REASSES SMENT U/S 147. MOREOVER, WE FIND THAT HONBLE APEX COURT IN THE CA SE OF BANKIPUR CLUB LTD. (SUPRA) EXPLAINED THE CONCEPT OF MUTUALITY IN THE FOLLOWING TERMS :- UNDER THE INCOME-TAX ACT, WHAT IS TAXED IS, THE I NCOME, PROFITS OR GAINS EARNED OR ARISING, ACCRUING T O A PERSON. WHERE A NUMBER OF PERSONS COMBINE TOGETH ER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING O F SOME VENTURE OR OBJECT AND IN THIS RESPECT HAVE NO DEALI NGS OR RELATIONS WITH ANY OUTSIDE BODY, THEN ANY SURPLUS R ETURNED TO THOSE PERSONS CANNOT BE REGARDED IN ANY SENSE AS PROFIT. THERE MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIB UTORS AND THE PARTICIPATORS. IF THESE REQUIREMENTS ARE F ULFILLED, IT IS IMMATERIAL WHAT PARTICULAR FORM THE ASSOCIATION TAKES. TRADING BETWEEN PERSONS ASSOCIATING TOGETHER IN THI S WAY DOES NOT GIVE RISE TO PROFITS WHICH ARE CHARGEABLE TO TAX. WHERE THE TRADE OR ACTIVITY IS MUTUAL, THE FACT THA T, AS REGARDS CERTAIN ACTIVITIES, CERTAIN MEMBERS ONLY OF THE ASSOCIATION TAKE ADVANTAGE OF THE FACILITIES WHICH IT OFFERS DOES NOT AFFECT THE MUTUALITY OF THE ENTERPRISE. 13. THEIR LORDSHIPS, AFTER CONSIDERING THE FACTS OF THE CASE, UPHELD THE ORDER OF THE HONBLE HIGH COURT WHEREIN THE SUR PLUS OF THE RECEIPT ITA-1897/D/2016 & OTHERS 8 OVER EXPENDITURE WAS ALLOWED AS EXEMPT ON ACCOUNT O F MUTUALITY WITH THE FOLLOWING FINDING:- HELD, DISMISSING THE APPEALS, THAT IN THE LIGHT OF THE FINDINGS OF FACT THE RECEIPTS FOR THE VARIOUS FACIL ITIES EXTENDED BY THE CLUBS TO ITS MEMBERS, AS PART OF TH E USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES, ATTACHED T O 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, COU LD NOT BE SAID TO BE INCOME FOR THE PURPOSE OF THE ACT. 14. SIMILAR VIEW WAS REITERATED BY THEIR LORDSHIPS IN THE CASE OF CHELMSFORD CLUB (SUPRA) WITH THE FOLLOWING FINDING :- HELD, REVERSING THE DECISION OF THE HIGH COURT, TH AT THE ASSESSEES BUSINESS WAS GOVERNED BY THE DOCTRINE OF MUTUALITY. IT WAS AN ADMITTED FACT THAT THE BUSINE SS OF THE ASSESSEE DID NOT COME WITHIN THE SCOPE OF BUSINESS REFERRED TO IN SECTION 2(24)(VII). IT WAS NOT ONLY THE SURPLUS FROM THE ACTIVITIES OF THE BUSINESS OF THE CLUB THA T WAS EXCLUDED FROM THE LEVY OF INCOME-TAX, EVEN THE ANNU AL VALUE OF THE CLUB HOUSE, AS CONTEMPLATED IN SECTION 22 OF THE ACT, WOULD BE OUTSIDE THE PURVIEW OF THE LEVY O F INCOME-TAX. 15. THAT EVEN IN THE CASE OF BANGALORE CLUB (SUPRA) RELIED UPON BY THE ASSESSING OFFICER FOR DISALLOWANCE OF INTEREST, THEIR LORDSHIPS HAVE OBSERVED THAT THE ASSESSEE WAS ALREADY ALLOWED THE BENEFIT OF DOCTRINE OF MUTUALITY IN RESPECT OF INCOME OTHER THAN INTERE ST INCOME. THUS, THE CONCEPT OF MUTUALITY WAS ACCEPTED EVEN IN THE CASE OF BANGALORE CLUB (SUPRA) BY HONBLE APEX COURT WHICH IS RELIED UPON BY THE REVENUE. IN THAT CASE, THE BENEFIT OF MUTUALITY WAS NOT EXTENDE D TO INTEREST INCOME BECAUSE IT LACKED COMPLETE IDENTITY BETWEEN THE CON TRIBUTORS AND PARTICIPATORS. 16. IT IS UNDISPUTED THAT THE RECEIPT, OTHER THAN T HE INTEREST INCOME AND RENTAL INCOME, IS FROM THE MEMBERS OF THE CLUB AND, THEREFORE, ITA-1897/D/2016 & OTHERS 9 WOULD FALL WITHIN THE AMBIT OF MUTUALITY AS DEFINED BY HONBLE APEX COURT IN THE CASE OF BANKIPUR CLUB LTD. (SUPRA). TH E ASSESSING OFFICER HAD ALSO ACCEPTED THAT THE ASSESSEE CLUB IS ENTITLE D TO BENEFIT OF MUTUALITY. IN OUR OPINION, THE VIEW TAKEN BY THE A SSESSING OFFICER IS WELL SUPPORTED BY THE DECISION OF HONBLE APEX COU RT IN THE CASE OF BANKIPUR CLUB LTD. (SUPRA), CHELMSFORD CLUB (SUPRA) AS WELL AS BANGALORE CLUB (SUPRA). THEREFORE, ON THIS POINT, WE REVERSE THE ORDER OF LEARNED CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER I.E., ALL RECEIPTS OF THE ASSESSEE CLUB EXCEPT RECEIPT FROM I NTEREST AS WELL AS RENT IS OUT OF THE PURVIEW OF TAXATION ON ACCOUNT O F THE DOCTRINE OF MUTUALITY. INSOFAR AS INTEREST INCOME AND RENTAL I NCOME ARE CONCERNED, WE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF BANGALORE CLUB (SUPRA), HOLD T HAT THE SAME CANNOT BE SAID TO BE GOVERNED BY THE CONCEPT OF MUTUALITY BECAUSE THE RECEIPT IS NOT FROM THE MEMBERS OF THE CLUB. ACCOR DINGLY, THE ASSESSMENT OF THESE TWO INCOMES IN THE HANDS OF THE ASSESSEE IS UPHELD. ITA NOS.1898 TO 1901/DEL/2016 ITA NOS.1898 TO 1901/DEL/2016 ITA NOS.1898 TO 1901/DEL/2016 ITA NOS.1898 TO 1901/DEL/2016 ASSESSEES APPEALS FOR 2007 ASSESSEES APPEALS FOR 2007 ASSESSEES APPEALS FOR 2007 ASSESSEES APPEALS FOR 2007- -- -08, 2010 08, 2010 08, 2010 08, 2010- -- - 11, 2011 11, 2011 11, 2011 11, 2011- -- -12 & 2012 12 & 2012 12 & 2012 12 & 2012- -- -13 : 13 : 13 : 13 :- -- - 17. AT THE TIME OF HEARING BEFORE US, BOTH THE PART IES AGREED THAT THE FACTS AS WELL AS THE GROUNDS RAISED IN ALL THESE FO UR YEARS ARE IDENTICAL TO THE FACTS FOR ASSESSMENT YEAR 2006-07 AND THEREF ORE, THEIR ARGUMENTS WOULD REMAIN THE SAME AS WERE ADVANCED IN ASSESSMENT YEAR 2006-07. 18. THE LEARNED COUNSEL, HOWEVER, POINTED OUT THAT IN ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER ASSESSED THE GR OSS RECEIPT FROM RENT WHILE, IN OTHER YEARS, HE HAS ASSESSED THE REN TAL INCOME AFTER ALLOWING CERTAIN DEDUCTIONS. HIS ONLY PRAYER WAS T HAT THE ASSESSING OFFICER SHOULD BE DIRECTED TO DETERMINE THE RENTAL INCOME FOR ITA-1897/D/2016 & OTHERS 10 ASSESSMENT YEAR 2007-08 ALSO IN THE SIMILAR MANNER AS WAS DONE BY HIM FOR ASSESSMENT YEAR 2006-07, 2010-11, 2011-12 A ND 2012-13. 19. LEARNED DR HAS NO OBJECTION TO THIS REQUEST OF THE ASSESSEES COUNSEL. 20. IN VIEW OF THE ABOVE AND FOR THE DETAILED DISCU SSION MADE WHILE DECIDING THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07, WE DELETE THE ENHANCEMENT MADE BY THE LEARNED CIT(A) A ND UPHOLD THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2010-11, 2011-12 AND 2012-13. FOR ASSESSMENT YEAR 2007-08, WE DELET E THE ENHANCEMENT MADE BY LEARNED CIT(A) AND UPHOLD THE A SSESSMENT OF INTEREST INCOME BY THE ASSESSING OFFICER AND, FOR R ENTAL INCOME, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE SAME AS COMPUTED IN ASSESSMENT YEAR 2006-07. 21. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.09.2016 . SD/- SD/- (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : M/S SPORTS & CULTURAL CLUB (REGD .), M/S SPORTS & CULTURAL CLUB (REGD.), M/S SPORTS & CULTURAL CLUB (REGD.), M/S SPORTS & CULTURAL CLUB (REGD.), 225A, SECTOR 225A, SECTOR 225A, SECTOR 225A, SECTOR- -- -15A, NOIDA. 15A, NOIDA. 15A, NOIDA. 15A, NOIDA. 2. RESPONDENT : JOINT COMMISSIONER OF INCOME TAX, JOINT COMMISSIONER OF INCOME TAX, JOINT COMMISSIONER OF INCOME TAX, JOINT COMMISSIONER OF INCOME TAX, RANGE RANGE RANGE RANGE- -- -1, 2 & 3, NOIDA. 1, 2 & 3, NOIDA. 1, 2 & 3, NOIDA. 1, 2 & 3, NOIDA. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR