Madras Gymkhana Club, CHENNAI V. DCIT, CHENNAI

ITA 229/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9243 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2016
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: A S SRIRAMAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.228 & 229/MDS/2016 / ASSESSMENT YEARS : 2010-11 & 2011-12 MADRAS GYMKHANA CLUB THE ISLAND, ANNA SALAI CHENNAI 600 002 VS. THE DY. COMMISSIONER OF INCOME-TAX NON-CORPORATE CIRCLE 9(1) CHENNAI [PAN AAATM 7562 R ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI A.S SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI A.B KOLI, JCIT / DATE OF HEARING : 13 - 04 - 2016 ! / DATE OF PRONOUNCEMENT : 26 - 05 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE ASSESSEE IS DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-10, CHENNAI, DATED 30.11.2015 FOR ASSESSMENT YEARS 2010 -11 AND 2011- 12. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING OF THE SAME B Y THIS COMMON ORDER. ITA NOS. 228 & 229/16 :- 2 -: 2. SHRI A.S. SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE IS A SOCIETY CLAIMING EXEMPTION ON THE PRINCIPLES OF MUTUALITY. THE ASSESSEE, DURING THE COURSE OF ITS ACTIVITY, DEPOSITED SURPLUS FUNDS IN FIXED DEPOSITS WITH NATIONALIZED B ANKS. THE ASSESSEE HAS EARNED INTEREST ON SUCH DEPOSITS AND CLAIMED TH E SAME AS EXEMPT ON THE PRINCIPLES OF MUTUALITY. HOWEVER, THE ASSES SING OFFICER FOUND THAT THE INTEREST INCOME WAS OUTSIDE THE SCOPE OF P RINCIPLES OF MUTUALITY. ON IDENTICAL CIRCUMSTANCES, THIS TRIBUN AL FOR THE EARLIER ASSESSMENT YEAR, CONFIRMED THE ORDER OF THE CIT(A). THE ASSESSEE HAS FILED APPEAL BEFORE THE MADRAS HIGH COURT WHICH WAS ADMITTED AND PENDING FOR ADJUDICATION. 3. ON THE CONTRARY, SHRI A.B KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ADMITTEDLY, THE ASSE SSEE DEPOSITED SURPLUS FUNDS WITH SOME BANKS AND OTHER INSTITUTION S IN THE FORM OF FIXED DEPOSITS AND SECURITIES FOR EARNING INTEREST INCOME. IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98, AN IDENTICAL ISSUE CAME UP BEFORE THE MADRAS HIGH COURT, REPORTED IN 3 28 ITR 348. THE MADRAS HIGH COURT FOUND THAT INVESTMENT OF SURPLUS FUNDS WITH SOME OF MEMBER BANKS AND OTHER INSTITUTIONS IN THE FORM OF FIXED DEPOSITS AND SECURITIES WHICH, IN TURN, RESULTED IN EARNING OF INTEREST INCOME COULD NOT BE HELD AS INCOME EARNED ON PRINCIPLES OF MUTUALITY. BY PLACING RELIANCE ON THE JUDGMENT OF THE KARNATAKA H IGH COURT IN THE ITA NOS. 228 & 229/16 :- 3 -: CASE OF CIT VS I.T.I EMPLOYEES DEATH AND SUPERANNUA TION RELIEF FUND, 234 ITR 308, THE HIGH COURT FOUND THAT THE PRINCIPL ES OF MUTUALITY COULD BE CONFINED IN RESPECT OF THE INCOME EARNED B Y THE CLUB OUT OF THE CONTRIBUTION RECEIVED FROM THE MEMBERS OF THE C LUB. THE PRINCIPLES OF MUTUALITY WOULD HAVE NO APPLICATION IN RESPECT OF INTEREST EARNED FROM FIXED DEPOSITS AND SECURITIES. ACCORDI NGLY, THE IDENTICAL ORDER OF THE CIT(A) WHICH WAS CONFIRMED BY THE TRIB UNAL WAS APPROVED BY THE MADRAS HIGH COURT. THE LD. DR HAS ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE C ASE OF BANGALORE CLUB VS CIT, 350 ITR 509, AND SUBMITTED THAT ON IDE NTICAL SITUATION, THE APEX COURT CONFIRMED SIMILAR ORDER OF THE CIT(A ). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE SURPLUS FUNDS OF THE ASSESSEE-CLUB WAS DEPOSIT ED IN THE BANKS IN THE FORM OF FIXED DEPOSITS AND EARNED INTEREST INCO ME. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE INTEREST IN COME EARNED BY THE ASSESSEE FROM FIXED DEPOSITS MADE WITH BANKS IS ELI GIBLE FOR EXEMPTION ON THE PRINCIPLES OF MUTUALITY OR NOT? THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE PRINCIPLES OF MUTUALITY CANNOT BE EXTENDED TO INCLUDE THE INTEREST INCOME RECEIVED FROM FIXED DEPOSITS WITH BANKS. THUS, THE PRINCIPLES OF MUTUALITY COULD BE CONFINED ONLY IN RESPECT OF INCOME EARNED BY THE ASSESSEE-CLUB FROM AND OUT OF THE CONTRIBUTION ITA NOS. 228 & 229/16 :- 4 -: RECEIVED FROM ITS MEMBERS. THEREFORE, THE INTEREST INCOME EARNED BY THE ASSESSEE-CLUB FROM FIXED DEPOSITS WITH BANKS I S NOT ELIGIBLE FOR EXEMPTION ON THE PRINCIPLES OF MUTUALITY. THEREFOR E, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE SAME IS CONFIRMED. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S TAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 26 TH MAY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF