M/s. The Malleshwaram Association, Bangalore V. Assistant Commissioner Of Income Tax, Circle- 2(2)(1), Bangalore

ITA 2005/BANG/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3727 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 13-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, A BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER ITA NO.2005/BANG/2019 ASSESSMENT YEAR : 2016-17 M/S THE MALLESHWARAM ASSOCIATION, NO.110, 7 TH CROSS, MALLESHWARAM, BENGALURU-560 003. PAN AAAAT 0715 E VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(2)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SANDEEP, C.A RESPONDENT BY : SHRI GANESH R GHALE, ADVOCATE STANDING COUNSEL TO D EPT. DATE OF HEARING : 27.11.2019 DATE OF PRONOUNCEMENT : .11.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 03-06-2019 PASSED BY LD CIT(A)-2, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2016-17. ALL THE GROUNDS URGED BY THE ASSESSEE RELATE TO THE REJECTION OF CLAIM OF THE ASSESSEE FO R SET OFF OF LOSS ARISING FROM CLUB ACTIVITIES AGAINST RENTAL AND INT EREST INCOME. 2. THE ASSESSEE IS A MUTUAL ASSOCIATION PROVIDIN G VARIOUS FACILITIES TO ITS MEMBERS. THE INCOME ARISING FROM SUCH ACTIVITIES ARE CLAIMED AS EXEMPT UNDER THE PRINCIPLES OF MUTUA LITY. THE ASSESSEE HAS ALSO DERIVED RENTAL INCOME AND INTERES T INCOME. DURING THE YEAR UNDER CONSIDERATION, IT FILED ITS R ETURN OF INCOME ITA NO.2005 /BANG/2019 PAGE 2 OF 4 DECLARING INCOME OF RS.46.53 LAKHS, ADMITTEDLYCONSI STING OF RENTAL AND INTEREST INCOME. SUBSEQUENTLY, IT REVISED ITS RETURN, WHEREIN THE TOTAL INCOME WAS DECLARED AT RS.447/-. IN THE REVISED RETURN OF INCOME, THE ASSESSEE HAD SET OFF THE LOSS ARISING F ROM CLUB ACTIVITIES AGAINST THE RENTAL & INTEREST INCOME. SINCE INCOME ARISING FROM CLUB ACTIVITIES IS EXEMPT UNDER THE PRINCIPLES OF M UTUALITY, THE AO REJECTED THE CLAIM OF SET OFF OF LOSS ARISING FROM CLUB ACTIVITIES. THE LD CIT(A) ALSO CONFIRMED THE SAME. 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS DU LY OFFERED THE RENTAL INCOME AND INTEREST INCOME FOR TAXATION, AS THE PRINCIPLES OF MUTUALITY WOULD NOT APPLY TO THE SAME. HE SUBMITTE D THAT THE DEPOSITS WERE MADE AND THE BUILDING WAS CONSTRUCTED BY USING FUNDS COLLECTED FROM THE MEMBERS ONLY. SINCE THE C LUB ACTIVITIES RESULTED IN LOSS AND SINCE THE FUNDS CONTRIBUTED BY THE MEMBERS WERE ONLY USED TO CONSTRUCT BUILDING AND MAKE FIXED DEPOSITS, THE ASSESSEE HAS SOUGHT DEDUCTION OF ABOVE SAID LOSS AG AINST THE RENTAL & INTEREST INCOME. THE LD A.R SUBMITTED THAT, IF T HE ASSESSEES CLAIM IS REJECTED BY THE TRIBUNAL, THEN ADHOC DEDUC TION TOWARDS EXPENSES MAY BE GIVEN AGAINST INTEREST INCOME, SINC E THE PART OF ESTABLISHMENT EXPENSES COULD BE ATTRIBUTED TO INTER EST INCOME ALSO. 4. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THERE IS NO PROVISION UNDER THE ACT TO ALLOW SET OFF OF LOSS AR ISING FROM CLUB ACTIVITIES (INCOME OF WHICH IS EXEMPT UNDER PRINCIP LE OF MUTUALITY) AGAINST INCOME TAXABLE UNDER THE ACT. WITH REGARD TO ALTERNATIVE CONTENTION FOR ADHOC DEDUCTION OF EXPENSES INCURRED FOR EARNING INTEREST INCOME, THE LD D.R SUBMITTED THAT THE ASSE SSEE HAS FAILED TO SHOW THAT IT HAS INCURRED ANY EXPENDITURE IN EAR NING THE INTEREST INCOME. ITA NO.2005 /BANG/2019 PAGE 3 OF 4 5. I HEARD THE PARTIES AND PERUSED THE RECORD. I AGREE WITH THE SUBMISSION OF LD D.R THAT THERE IS NO PROVISION UND ER THE ACT TO ALLOW SET OFF OF LOSS ARISING FROM CLUB ACTIVITIES (INCOME OF WHICH IS EXEMPT UNDER PRINCIPLE OF MUTUALITY) AGAINST INCOME TAXABLE UNDER THE ACT. HENCE I AM OF THE VIEW THAT THE TAX AUTHO RITIES ARE RIGHT IN LAW IN REJECTING THE CLAIM OF THE ASSESSEE. WITH R EGARD TO ALTERNATIVE CLAIM OF THE ASSESSEE ALSO, I AGREE WITH THE SUBMIS SION OF LD D.R THAT THE ASSESSEE HAS FAILED TO SHOW THAT IT HAS IN CURRED ANY EXPENDITURE IN EARNING INTEREST INCOME. ACCORDINGL Y THE ALTERNATIVE CONTENTION OF THE LD A.R IS ALSO REJECTED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2019. SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH NOVEMBER, 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.2005 /BANG/2019 PAGE 4 OF 4 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED