The Saturday Club Limited, Kolkata V. DCIT, Circle - 8(2), Kolkata, Kolkata

ITA 2491/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5540 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RABIN CHOUDHURY
• Assessee Lawyers: D S DAMLE
• Keywords: Business income

Judgement Text

1 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 2491/KOL/2017 ASSESSMENT YEAR: 2012-13 THE SATURDAY CLUB LIMITED (PAN: AABCT1662R) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-8(2), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 06.03.2019 DATE OF PRONOUNCEMENT 03.06.2019 FOR THE APPELLANT SHRI D. S. DAMLE, AR FOR THE RESPONDENT SHRI RABIN CHOUDHURY, ADDL. CIT , SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) -3, KOLKATA DATED 20.09.2017 FOR AY 2012-13. 2. THE FOLLOWING GROUNDS OF APPEAL HAS BEEN RAISED BY THE ASSESSEE: 1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING A SUM OF RS.67,84,258/- ON ACCOUNT OF LETTING OUT OF PROPERTY TO M/S. RELIANCE INDUSTRIES LIMITED (BEING CORPORATE MEMBER). 2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING A SUM OF RS.47,95,163/- ON ACCOUNT OF SERVICE FEES FROM M/S. RELIANCE INDUSTRI ES LIMITED (BEING CORPORATE MEMBER). 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING RS.3,27,676/- ON ACCOUNT OF LETTING OUT OF PROPERTY TO M/S. ORGANON INDIA PRIVATE LIMITED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADDING RS.5, 50,000/- RECEIVED FROM TAPAN KUMAR BISWAS. 2 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADDING RS.3, 03,324/- RECEIVED FROM M/S. SAI MEDIA VENTURES (P) LTD. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADDING COMMI SSION OF RS.13,76,606/- RECEIVED FROM AGARWAL MERCHANDISE. 7) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN A DDING SPONSORSHIP/ADVERTISEMENT OF RS. 77,90,076 RECEIVED FROM VARIOUS PARTIES. 8) THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR AT THE HEARING OF THI S APPEAL. 3. GROUND NO. 1 IS AGAINST THE ACTION OF THE LD. CI T(A) IN CONFIRMING THE ACTION OF AO IN ASSESSING SUM OF RS.67,84,258/- ON ACCOUNT OF LE TTING OUT OF PROPERTY TO M/S. RELIANCE INDUSTRIES LTD. A CORPORATE MEMBER OF THE APPELLANT -CLUB AND GROUND NO. 2 IS AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION O F THE AO IN ASSESSING A SUM OF RS.47,95,163/- ON ACCOUNT OF SERVICE FEES RECEIVED FROM M/S. RELIANCE INDUSTRIES LTD AS APPELLANTS INCOME CHARGEABLE UNDER THE HEAD OTHER SOURCES WHICH DID NOT QUALIFY FOR APPLICATION OF PRINCIPAL OF MUTUALITY. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 AND WHICH CLAIMS THAT IT S INCOME IS NOT TAXABLE ON THE BASIS OF THE PRINCIPLE OF MUTUALITY, SINCE ITS MEMBERS ARE T HE CONTRIBUTORS AS WELL AS USERS OF THE SERVICES RENDERED BY THE APPELLANT-CLUB AND IS THER EFORE NOT A PROFIT MAKING BODY. IN THE ASSESSMENT ORDER THE AO HAD CONSIDERED THE SUM OF R S.67,84,258/- & RS.47,95,163/- RECEIVED ON ACCOUNT OF LETTING OUT OF THE PROPERTY AND SERVICE CHARGES RESPECTIVELY FROM M/S. RELIANCE INDUSTRIES LTD. AS INCOME CHARGEABLE UNDER THE HEAD OTHER SOURCES. THE AO WAS OF THE OPINION THAT EVEN THOUGH THE RENT WAS RECEIVED FROM THE CORPORATE MEMBER OF THE APPELLANT CLUB YET THE PRINCIPLE OF MUTUALIT Y WAS NOT APPLICABLE IN RESPECT OF SUCH RECEIPTS BECAUSE THE PREMISES LET OUT TO THE CORPOR ATE MEMBER WERE USED BY IT EXCLUSIVELY FOR CARRYING OUT ITS COMMERCIAL OPERATIONS AND THER EFORE THE PRINCIPLE OF MUTUALITY COULD NOT BE EXTENDED TO USE OF THE PROPERTY BY A CORPORATE M EMBER FOR ITS BUSINESS PURPOSES. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE AO. AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE US. 3 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. IT WAS THE SUBMISSION OF THE LD. AR THAT THE APPELLANT DURING THE RELEVANT YEAR HAD RECEIVED RS.67,84,258/- BEING RENT RECEIVED AND RS. 47,95,163/- BEING SERVICE CHARGES FROM M/S RELIANCE INDUSTRIES LIMITED WHICH WAS ITS CORPO RATE MEMBER. THE LD. AR SUBMITTED THAT IN ORDER TO AVAIL THE PRINCIPLE OF MUTUALITY A LL THAT ASSESSEE IS REQUIRED TO DEMONSTRATE IS THAT THE CONTRIBUTOR AND THE USER ARE SAME SET OF P ERSONS AND THE TRANSACTIONS ARE BETWEEN THE SAME SET OF MEMBERS/ PERSONS. THE LD. AR SUBMIT TED THAT JUST AS THE APPELLANT-CLUB HAD LET OUT CERTAIN SPECIFIED AREAS IN THE BUILDING BEL ONGING TO THE APPELLANT TO M/S RELIANCE INDUSTRIES LIMITED, THE APPELLANT SIMILARLY DERIVED INCOME FROM LETTING OUT THE ROOMS TO MEMBERS FOR RESIDENTIAL ACCOMMODATION AS WELL AS LE TTING OUT BANQUET / CONFERENCE HALLS TO ITS MEMBERS FOR HOLDING FUNCTIONS & MEETINGS. DRAWI NG ATTENTION TO PAGE 33 OF THE PAPER BOOK, THE LD. AR SUBMITTED THAT IN RESPECT OF INCOM E DERIVED FROM LETTING OUT OF PART OF THE PREMISES IN THE FORM OF CLUB ROOMS AND CONFERENCE H ALLS, THE LOWER AUTHORITIES HAD ACCEPTED THE APPELLANTS CLAIM FOR ITS NON-TAXABILITY ON THE PRINCIPLE OF MUTUALITY BUT ONLY IN RESPECT OF THE AMOUNT RECEIVED FROM CORPORATE MEMBER, M/S R ELIANCE INDUSTRIES LIMITED, THE LOWER AUTHORITIES DID NOT ACCEPT THE APPELLANTS CONTENTI ON THAT THESE WERE NOT TAXABLE ON THE SAME PRINCIPLE. ACCORDING TO HIM IT WAS IMPROPER ON THE PART OF THE LOWER AUTHORITIES TO DRAW ARTIFICIAL DISTINCTION BETWEEN THE RENT RECEIPTS FR OM MEMBERS FOR USE OF CLUB ROOMS / HALLS AND THE RENT RECEIVED FROM CORPORATE MEMBER FOR USE OF SPECIFIED PREMISES AS ITS OFFICE. IN THE ALTERNATE THE LD. AR SUBMITTED THAT THE IN THE IMPUGNED ORDER THE AO ASSESSED THE SERVICE CHARGES OF RS.47,95,163/- UNDER THE HEAD O THER SOURCES WHEREAS SUCH INCOME SHOULD HAVE BEEN ASSESSED UNDER THE HEAD HOUSE PRO PERTY BECAUSE IN TERMS OF THE AGREEMENT WITH M/S RELIANCE INDUSTRIES LTD, THE APP ELLANT WAS NOT OBLIGED TO RENDER ANY SEPARATE SERVICE OR PROVIDE ANY SPECIFIED AMENITIES . THE LD. AR POINTED OUT THAT UNDER THE AGREEMENT THE GROSS RENT OF RS.60/- PER SQ.FT. WAS BIFURCATED BETWEEN RS.36/- TOWARDS RENT AND RS.24/-TOWARDS SERVICE CHARGES. THE LD. AR ALSO POINTED OUT THAT AS PER CLAUSE (3) OF THE SERVICE AGREEMENT, THE SAME WAS CO-TERMINUS WIT H THE LICENSE AGREEMENT UNDER WHICH THE PREMISES WERE GIVEN ON RENT TO M/S RELIANCE IND USTRIES LTD. HE THEREFORE SUBMITTED THAT SINCE SERVICE CHARGES WAS ALSO PAID AT SPECIFIED RA TE ON PER SQ FT BASIS AND THERE BEING NO OBLIGATION ON THE APPELLANT TO RENDER ANY SERVICE T HERE AGAINST, IN SUBSTANCE THE AMOUNT WAS CHARGEABLE BY WAY OF RENT AND ASSESSED UNDER THE HE AD HOUSE PROPERTY. HE ALSO DREW OUR 4 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 ATTENTION TO THE APPELLATE ORDERS OF THE COORDINATE BENCH OF THIS TRIBUNAL IN APPELLANTS OWN CASE FOR AY 2008-09 IN ITA NO.1340/KOL/2012 IN WHIC H THIS TRIBUNAL HAD UPHELD THE AOS ORDER IN WHICH THE COMBINED RECEIPTS ON ACCOUNT OF RENT & SERVICE CHARGES TOTALING RS.78,49,798/- WERE HELD TO BE ASSESSABLE UNDER THE HEAD HOUSE PROPERTY. PER CONTRA THE LD. DR STRONGLY RELIED ON THE ORDER OF THE LOWER AU THORITIES. HE ALSO DREW OUR ATTENTION TO THE ORDER OF THIS TRIBUNAL FOR THE AY 2008-09 IN WH ICH THE COORDINATE BENCH OF THIS TRIBUNAL HAD REJECTED THE APPELLANTS CLAIM FOR EXC LUSION OF RENT AND SERVICE CHARGES INCOME ON THE PRINCIPLE OF MUTUALITY. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS OF THE P ARTIES, WE NOTE THAT THE FIRST ISSUE INVOLVED IN THESE GROUNDS I.E. APPLICABILITY OF PRI NCIPLE OF MUTUALITY IN RESPECT OF THE RECEIPTS BY WAY OF RENT & SERVICE CHARGES FROM M/S RELIANCE INDUSTRIES LIMITED A CORPORATE MEMBER OF THE APPELLANT-CLUB, IS NO LONGER RES INTE GRA, QUA THE APPELLANT. THIS TRIBUNAL IN ITS EARLIER ORDER FOR AY 2008-09 RENDERED IN ITA NO .1340/KOL/2012 HAS ALREADY HELD THAT THE PRINCIPLE OF MUTUALITY WILL NOT HAVE APPLICATIO N TO THE APPELLANTS TRANSACTION WITH M/S RELIANCE INDUSTRIES LIMITED FOR LETTING OUT ITS PR EMISES FOR THE PURPOSE OF USING THE SAME FOR ITS BUSINESS PURPOSES. SINCE THE FACTUAL MATRIX OF THE CASE AND THE LEGAL PROVISIONS GOVERNING THE PRINCIPLES OF MUTUALITY HAVE REMAINED SAME IN THE YEAR UNDER CONSIDERATION, WE ARE NOT INCLINED TO DEPART FROM THE VIEW ALREADY TAKEN BY THIS TRIBUNAL IN THE APPELLANTS CASE FOR THE LATTER YEAR. ACCORDINGLY WE UPHOLD ORD ERS OF THE AUTHORITIES BELOW DENYING THE BENEFIT OF MUTUALITY PRINCIPLE IN RESPECT OF RECEIP TS BY WAY OF RENT & SERVICE CHARGES FROM M/S RELIANCE INDUSTRIES LTD. 7. WE HOWEVER FIND MERIT IN THE ALTERNATE SUBMISSIO N OF THE APPELLANT THAT THE SERVICE CHARGES RECEIVED WERE NOTHING BUT BY WAY OF RENT RE CEIVED FOR USE OF PREMISES. FROM PERUSAL OF THE SERVICE AGREEMENT WE NOTE THAT APPEL LANT WAS UNDER NO OBLIGATION TO PROVIDE ANY SERVICE, FACILITY OR AMENITY TO M/S RELIANCE IN DUSTRIES LTD FOR EARNING SERVICE CHARGES. MOREOVER WE FIND THAT BOTH THE AGREEMENTS WERE CO-T ERMINUS AND RAN CONCURRENTLY. IT WAS EXPRESSLY PROVIDED THAT THE SERVICE AGREEMENT WILL REMAIN VALID SO LONG AS LICENSE AGREEMENT WAS IN FORCE. WE THEREFORE AGREE WITH THE LD. ARS SUBMISSIONS THAT BOTH RENT & SERVICE CHARGES WERE HAVING THE SAME CHARACTER AND BOTH WERE BEING CHARGED ON PER SQUARE 5 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 FEET BASIS WITHOUT INCURRING ANY CORRESPONDING EXPE NDITURE. WE THEREFORE FIND IN THE LD ARS SUBMISSION THAT BOTH THESE RECEIPTS MUST BE CO NSIDERED TO BE COMPOSITE ONE AND CHARGED UNDER THE HEAD HOUSE PROPERTY. WE ALSO FIND THAT IN THE AY 2008-09 IN WHICH THE APPELLANTS CLAIM FOR MUTUALITY WAS REJECTED BY THE AO, THE COMPOSITE RECEIPT BY WAY OF RENT & SERVICE CHARGES WAS ASSESSED UNDER THE HEAD HOUS E PROPERTY. IN THE CIRCUMSTANCES THE AO IS DIRECTED TO ASSESS BOTH THE RECEIPTS ON ACCOU NT OF RENT AND SERVICE CHARGES UNDER THE HEAD HOUSE PROPERTY IN TERMS OF SECTION 23 & 24 O F THE ACT. THEREFORE, GROUND NO. 1 IS DISMISSED AND GROUND NO. 2 IS PARTLY ALLOWED. 8. COMING TO GROUND NO. 3 WHICH IS AGAINST THE ACTI ON OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ASSESSING RS.3,27,676/- ON ACCO UNT OF LETTING OUT OF PROPERTY TO M/S. ORGANON INDIA LTD. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D GIVEN ON RENT A PORTION OF THE PREMISES TO M/S. ORGANON INDIA LTD. THE ASSESSEE H AD TERMINATED THE TENANCY IN 2008 AND THE ASSESSEE FILED EVICTION SUIT IN 2010 TO EVICT T HIS COMPANY. THOUGH THE SAID COMPANY HAS DEPOSITED AN AMOUNT OF RS. 5,80,879/- TILL 31.03.20 11 UNDER THE LEGAL ADVICE, THIS AMOUNT WAS SHOWN AS LIABILITY IN THE APPELLANTS BOOKS. AFTER 01.04.2011, THE A PPELLANT DID NOT ACCEPT ANY MONIES FROM M/S ORGANON INDIA LIMITED AS THE APPELLANT HAD INSTITUTED LEGAL PROCEEDINGS FOR ITS EVICTION. IN THE IMPUGNED ORDER THE AO NOTED THAT IN THE NOTES ON ACCOUNT THE ASSESSEE HAD RECEIVED RS.5,80,879/- TIL L 31.03.2011 WHICH HAD BEEN SHOWN UNDER THE HEAD LIABILITY. THE RECEIPT FOR THE CUR RENT YEAR WAS NOT DISCUSSED IN NOTES ON ACCOUNTS AND THEREFORE THE AO OPINED THAT RECEIPT O F THIS AMOUNT WAS NOT DISPUTED AND NO PROVISION WAS CREATED. ACCORDINGLY THE AO MADE THE ADDITION OF RS.3,27,676/- WHICH WAS CONFIRMED BY THE LD. CIT(A). AGGRIEVED, THE APPELLA NT IS NOW IN APPEAL BEFORE US. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AT THE OUTSET THE LD. AR SUBMITTED THAT DURING THE RELEVAN T FINANCIAL YEAR THE APPELLANT DID NOT RECEIVE ANY SUM FROM M/S ORGANON INDIA LIMITED AS A LLEGED BY THE AO. DRAWING ATTENTION TO NOTES TO ACCOUNTS HE SUBMITTED THAT TILL 31.03.2 011 THE APPELLANT HAD RECEIVED RS.5,80,879/- FROM M/S ORGANON INDIA LTD AND THE SA ME WAS SHOWN AS LIABILITY AND REQUISITE DISCLOSURE WAS MADE IN THE ACCOUNTS. SUBS EQUENT TO 31.03.2011, NEITHER THE 6 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 APPELLANT RECEIVED ANY FURTHER SUMS FROM M/S ORGAN ON INDIA LTD NOR WAS ANY SUM RECEIVED ACCOUNTED BY THE APPELLANT IN ITS BOOKS FOR THE REL EVANT FY 2011-12. HE FURTHER SUBMITTED THAT SINCE M/S ORGANON INDIA LTD CONTINUED TO REMAI N IN ADVERSE POSSESSION OF THE PROPERTY DURING THE RELEVANT YEAR, DEEMED NOTIONAL VALUE OF THE PROPERTY WAS ALSO NOT ASSESSABLE TO TAX IN THE APPELLANTS HANDS. HE ALSO SUBMITTED THA T ULTIMATELY THE DISPUTE WITH M/S ORGANON INDIA LTD WAS SETTLED AND THE TERMS OF SETTLEMENT W ERE EVIDENCED IN THE DEED OF SETTLEMENT DATED 27.04.2018, COPY OF WHICH WAS FILED IN THE PA PER BOOK AT PAGES 93 TO 96. REFERRING TO THE SAID SETTLEMENT DEED, THE LD. AR POINTED OUT TH AT THE ENTIRE ARREARS TOWARDS RENT AND MAINTENANCE CHARGES FOR THE PERIOD APRIL 2008 TO SE PTEMBER 2018 WERE ULTIMATELY PAID TO THE APPELLANT IN THE FY 2018-19 AND THEREFORE IT WA S BEING OFFERED TO TAX IN THE CURRENT YEAR. THE LD. AR ALSO SUBMITTED THAT IN ASSESSMENTS ORDER PASSED FOR SUBSEQUENT YEARS U/S 143(3), THE AOS HAVE ACCEPTED THIS FACTUAL POSITION AND NO PROPERTY INCOME ON NOTIONAL BASIS HAS BEEN ASSESSED IN THE HANDS OF THE APPELLA NT. PER CONTRA THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D SUFFICIENT FORCE IN THE LD. ARS SUBMISSIONS. FROM NOTE NO. 23.1 OF THE ANNUAL AUDIT ED ACCOUNTS OF THE APPELLANT, WE FIND THAT THE ASSESSEE HAD MADE A DISCLOSURE ABOUT INSTI TUTION OF LEGAL CASE AGAINST M/S ORGANON INDIA LTD FOR VACATING THE CLUB PREMISES OCCUPIED B Y THEM. IT WAS CLARIFIED THAT AMOUNT OF RS.5,80,879/- RECEIVED TILL 31.03.2011 FROM M/S ORG ANON INDIA LTD WAS SHOWN UNDER LIABILITY. WE FIND THAT NOWHERE IN THE AUDITED AC COUNTS COPIES OF WHICH ARE AVAILABLE AT PAGES 1 TO 31 OF THE PAPER BOOK THERE WAS AN ADMISS ION THAT RS.3,27,676/- WAS RECEIVED FROM M/S ORGANON INDIA LTD DURING FY 2011-12. WE AL SO NOTE THAT EVEN THOUGH THE ASSESSEE HAD INSTITUTED EVICTION SUIT AGAINST THE T ENANT IT CONTINUED TO RETAIN POSSESSION AND DID NOT PAY ANY RENT. IN THE CIRCUMSTANCES NOTIONAL ANNUAL VALUE OF THE PROPERTY WAS ALSO NOT ASSESSABLE AS THE PROPERTY WAS NOT CAPABLE OF BEING LET ON THE GROUND OF ADVERSE POSSESSION. WE THEREFORE HOLD THAT THE AUTHORITIES WERE NOT JUS TIFIED IN ASSESSING RS.3,27,676/- UNDER THE HEAD HOUSE PROPERTY. GROUND NO. 3 THEREFORE STAND S ALLOWED. 12. GROUND NO. 4 WAS NOT PRESSED AND IS THEREFORE DISMISSED. 13. GROUND NO. 5 IS AGAINST THE ASSESSMENT OF RS.3, 03,324/- RECEIVED FROM M/S. SAI MEDIA VENTURES P. LTD. ON ACCOUNT OF HOARDING RENT UNDER THE HEAD BUSINESS INCOME. 7 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 BRIEFLY STATED FACTS ARE THAT ACCORDING TO AO, THE ASSESSEE HAD RECEIVED HOARDING RENT AND ASSESSEES CLAIM FOR APPLICATION OF MUTUALITY PRINC IPLE WAS REJECTED BY THE AO AND HE ASSESSED THE INCOME UNDER THE HEAD BUSINESS INCOME . ON APPEAL, THE LD. CIT(A) UPHELD THE AOS ORDER. AGGRIEVED THE APPELLANT IS NOW IN A PPEAL BEFORE US. 14. ASSAILING THE ORDER OF THE LOWER AUTHORITIES, THE LD. AR SUBMITTED THAT PART OF THE PREMISES WERE LET OUT TO M/S TAPAN ART CENTRE AND M /S. SAI MEDIA VENTURES P. LTD. TO ENABLE THEM TO DISPLAY ADVERTISEMENTS IN THE CLUB P REMISES. THE LD. AR ADMITTED THAT IN THE RETURN FILED THE APPELLANT HAD EXCLUDED THESE RECEI PTS FROM THE TAXABLE INCOME ON THE PRINCIPLE OF MUTUALITY. HE FAIRLY CONCEDED THAT SIN CE THE AMOUNTS WERE NOT RECEIVED FROM THE MEMBERS, THE PRINCIPLE OF MUTUALITY WAS NOT APP LICABLE. THE LD. AR SUBMITTED THAT THE NATURE OF RENT RECEIVED FROM M/S TAPAN ART CENTRE A ND M/S. SAI MEDIA VENTURES P. LTD. WAS ONE AND THE SAME. IN THE CASE OF RENT RECEIVED FROM M/S TAPAN ART CENTRE, THE LOWER AUTHORITIES ASSESSED THE SAME UNDER THE HEAD HOUSE PROPERTY WHEREAS IN THE CASE OF M/S SAI MEDIA VENTURES P. LTD. IT WAS ASSESSED UNDER TH E HEAD BUSINESS INCOME. THE LD. AR SUBMITTED THAT SINCE THE NATURE OF RECEIPTS IN BOTH THE CASES BEING IDENTICAL, THE LOWER AUTHORITIES BE DIRECTED TO ASSESS THE SUM OF RS.3,0 3,324/- UNDER THE HEAD HOUSE PROPERTY 15. HAVING CONSIDERED THE SUBMISSIONS OF BOTH PARTI ES AND ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE APPELLANT HAD RECEIVED RENT FROM M /S TAPAN ART CENTRE AND M/S. SAI MEDIA VENTURES P. LTD AMOUNTING TO RS.5,50,000/- & RS.3,0 3,324/- FOR LETTING OUT AREAS WITHIN THE CLUB PREMISES WHERE THEY WERE PERMITTED TO DISPLAY ADVERTISEMENTS. SINCE THE ADVERTISEMENTS WERE DISPLAYED FOR VIEWING BY THE ME MBERS DURING THEIR VISIT TO CLUB PREMISES, THE APPELLANT CLAIMED APPLICATION OF MUTU ALITY PRINCIPLE TO SUCH RECEIPTS AS WELL. HOWEVER AT THE TIME OF APPEAL HEARING, THE LD. AR F AIRLY CONCEDED THAT ON THE GIVEN FACTS MUTUALITY PRINCIPLE WAS NOT APPLICABLE TO THESE REC EIPTS AND IN THAT VIEW OF THE MATTER GROUND NO. 4 WAS NOT PRESSED. WE HOWEVER FIND THAT EVEN THOUGH THE NATURE OF RECEIPTS IN BOTH THE CASES WAS IDENTICAL, THE LOWER AUTHORITIES ERRED IN DIFFERENTLY CLASSIFYING THESE TWO AMOUNTS UNDER TWO DIFFERENT HEADS OF INCOME, WHICH IN OUR OPINION WAS NOT APPROPRIATE. SINCE EVEN IN THE CASE OF M/S. SAI MEDIA VENTURES P . LTD THE AMOUNT WAS RECEIVED FOR LETTING OUT SPECIFIED AREA FOR DISPLAY OF ADVERTISE MENTS, THERE WAS NO REASON FOR THE AO TO 8 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 ASSESS THE AMOUNT RECEIVED FROM M/S. SAI MEDIA VENT URES P. LTD UNDER THE HEAD BUSINESS INCOME WHEN IN THE CASE OF M/S TAPAN ART CENTRE TH E IDENTICAL RECEIPT WAS ASSESSED UNDER THE HEAD HOUSE PROPERTY. FOR THE REASONS SET OUT IN THE FOREGOING THEREFORE, THE AO IS DIRECTED TO ASSESS THE HOARDING RENT OF RS.3,03,324 /- RECEIVED FROM M/S. SAI MEDIA VENTURES P. LTD UNDER THE HEAD HOUSE PROPERTY. GROUND NO. 5 THEREFORE STANDS PARTLY ALLOWED. 16. GROUND NO. 6 OF ASSESSEES APPEAL IS AGAINST TH E ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ASSESSING COMMISSION OF RS.13,7 6,606/- RECEIVED FROM M/S AGARWAL MERCHANDISE ON THE GROUND THAT PRINCIPLE OF MUTUALI TY WAS NOT APPLICABLE. 17. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS RECEIVED RS.13,76,606/- FROM M/S AGARWAL MERCHANDISE TIE-UP PVT. LTD. WHICH RUNS A G ROCERY SHOP WITHIN THE CLUB PREMISES. ACCORDING TO AO, AS PER THE AGREEMENT BETWEEN ASSES SEE AND M/S AGARWAL MERCHANDISE, THE ASSESSEE RECEIVED 5% OUT OF THE SALE PROCEEDS R ECEIVED BY M/S AGARWAL MERCHANDISE. THE ASSESSEE HAS CLAIMED THE SAID AMOUNT AS EXEMPT UNDER THE CONCEPT OF MUTUALITY. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AN D HELD THAT THE CONCEPT OF MUTUALITY BREAKS DOWN AND SINCE M/S. AGARWAL MERCHANDISE TIE- UP PVT. LTD IS OPERATING WITH A PROFIT MOTIVE AND IS PURSUING AN ORGANIZED AND SYSTEMATIC BUSINESS ACTIVITY IN THE PREMISES OF THE ASSESSEE. THE AO THEREFORE ASSESSED THE RECEIPT OF RS.13,76,606/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONF IRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE APPELLANT CLUB HAD GRAN TED FRANCHISEE TO SHRI K.N. AGARWAL IN 1993 FOR OPERATING A SHOP WITHIN THE CLUB PREMISES AND IN TERMS OF THE SAID AGREEMENT ONLY THE MEMBERS OF THE CLUB WERE ENTITLED TO USE THE FA CILITY OF THE CLUB-SHOP FOR PURCHASING VARIOUS ITEMS OF PROVISIONS FROM THE SAID SHOP. EXC EPT THE MEMBERS OF THE CLUB, NO MEMBER OF THE PUBLIC COULD ACCESS OR AVAIL THE FACILITY OF THE SHOP RUN AND OPERATED FROM THE CLUB PREMISES. THE LD. AR SUBMITTED THAT EVEN THOUGH M/S . AGARWAL MERCHANDISE TIE-UP PVT. LTD OPERATED THE SHOP ON COMMERCIAL PRINCIPLES, IT PAID LICENSE FEES CALCULATED AT THE RATE OF 5% ON THE GROSS REVENUE/SALES MADE FROM THE SHOP. T HE LD. AR POINTED OUT THAT SINCE THE SALE PROCEEDS WERE REALIZED BY M/S. AGARWAL MERCHAN DISE TIE-UP PVT. LTD ONLY FROM THE 9 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 MEMBERS OF THE CLUB THERE WAS NO BREAKDOWN ON THE P RINCIPLE OF MUTUALITY BETWEEN THE CLUB AND ITS MEMBERS BECAUSE THE 5% AMOUNT RECEIVED THRO UGH M/S. AGARWAL MERCHANDISE TIE- UP PVT. LTD ORIGINATED ONLY FROM MEMBERS OF THE CLU B AND NOT FROM ANYONE ELSE . THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE CLAIMED BENEFIT OF MUTUALITY PRINCIPLE IN RESPECT OF COMMISSION INCOME SINCE 1993-94 WHICH WAS ALLOWED B Y THE REVENUE IN ALL THE PAST ASSESSMENTS EXCEPT FOR AY 2007-08 AND AY 2012-13 I. E. THE YEAR UNDER CONSIDERATION. TAKING US THROUGH THE APPELLATE ORDER OF LD. CIT(A) -XXXII, KOLKATA DATED 20.06.2014 FOR AY 2007-08 WHICH IS AT PAGES 68 TO 81 OF PAPERBOOK, THE LD. AR DREW OUR ATTENTION TO HIS FINDINGS WHEREIN HE HAD ALLOWED THE BENEFIT OF MUTU ALITY PRINCIPLE. HE SUBMITTED THAT SINCE IN THE PRESENT CASE THE COMMISSION RECEIVED REPRESE NTED 5% OF THE SUMS COLLECTED BY M/S. AGARWAL MERCHANDISE FROM THE MEMBERS OF THE CLUB ON LY, THE PRINCIPLE OF MUTUALITY WAS SATISFIED AND THEREFORE THE SUM OF RS.13,76,606/- W AS NOT CHARGEABLE AS INCOME OF THE APPELLANT. PER CONTRA THE LD. DR FULLY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES AND CLAIMED THAT SINCE THE AMOUNT WAS PAID AS COMMISSIO N BY M/S. AGARWAL MERCHANDISE WHO OPERATED THE CLUB STORE ON COMMERCIAL BASIS, THE AM OUNT WAS RIGHTLY ASSESSED AS BUSINESS INCOME OF THE APPELLANT-CLUB AND PRINCIPLE OF MUTUA LITY WAS RIGHTLY DENIED. 19. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS AND THE FACTS INVOLVED IN THE PRESENT CASE. IT IS NOTED THAT IN T ERMS OF THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT-CLUB, ONE OF THE OBJECTIVES IS TO DEA L WITH THE PROPERTY OF THE COMPANY FOR SELLING & DISTRIBUTING STORES. IT IS IN PURSUANCE O F THIS OBJECTIVE THAT THE APPELLANT-CLUB ENTERED INTO AN AGREEMENT WITH M/S. AGARWAL MERCHAN DISE TIE-UP PVT. LTD PERMITTING IT TO RUN A GROCERY STORE IN THE CLUB SOLELY FOR THE BENE FIT AND USE OF ITS MEMBERS. OUT OF THE TOTAL SALE PROCEEDS DERIVED FROM THE MEMBERS, M/S. AGARWA L MERCHANDISE TIE-UP PVT. LTD IS REQUIRED TO PAY 5% COMMISSION TO THE APPELLANT-CLUB WHICH IN TURN IS UTILIZED BY THE APPELLANT-CLUB FOR THE BENEFIT OF THE MEMBERS. ONE WAY TO VIEW THIS FACT IS THAT BY THIS AGREEMENT THE APPELLANT ENFORCES A DISCOUNT OF 5% O N THE SALES MADE BY M/S. AGARWAL MERCHANDISE TIE-UP PVT. LTD TO ITS MEMBERS. THIS RE CEIPT OF COMMISSION BY THE APPELLANT IS THEREFORE AN INDIRECT RECEIPT FROM THE CLUB MEMBERS . IT MAY BE TRUE THAT M/S. AGARWAL MERCHANDISE TIE-UP PVT. LTD IS OPERATING THE SHOP O N COMMERCIAL BASIS BUT AT THE SAME TIME IT IS ALSO CLEAR THAT THIS IS NOT A BUSINESS ARRANG EMENT FOR THE APPELLANT-CLUB. M/S. AGARWAL 10 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 MERCHANDISE TIE-UP PVT. LTD SELLS ONLY TO CLUB MEMB ERS AND THEREFORE THE COMMISSION REALIZED BY THE CLUB IS INDIRECTLY RECEIVED ONLY FR OM THE CLUB MEMBERS AND NO ONE ELSE, WHICH IN TURN IS UTILIZED FOR THE BENEFIT OF THE ME MBERS. FROM THE FOREGOING FACTS IT IS THEREFORE CLEAR THAT THERE IS NO BREAKDOWN IN THE P RINCIPLE OF MUTUALITY BECAUSE THE CONTRIBUTORS OF THE SUMS AND THE BENEFICIARIES THER EOF REMAIN SAME. 20. IT IS COMMON FEATURE IN CASE OF ORGANIZATIONS L IKE CLUBS TO PROVIDE FOOD, BEVERAGES ETC. AT THE CLUB PREMISES THROUGH THIRD PARTY VENDO RS FOR WHICH IT ENTERS INTO ARRANGEMENT AS DISCUSSED ABOVE FOR THE BENEFIT OF THE MEMBERS. IN CONSIDERATION OF PERMITTING A VENDOR TO OPERATE WITHIN THE CLUB PREMISES, IT IS COMMON TO C HARGE A PERCENTAGE OF THEIR REVENUES DERIVED FROM THE MEMBERS AS FEES / COMMISSION WHICH IS THEN UTILIZED BY THE CLUB FOR THE BENEFIT OF ITS MEMBERS. THIS QUESTION WHETHER SUCH COMMISSION / FEE QUALIFIES FOR THE BENEFIT OF MUTUALITY PRINCIPLE IN THE HANDS OF THE CLUB WAS CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS KAMALA VIHAR SPORTS CLUB (36 TAXMANN.COM 55) AND ANSWERED IN FAVOUR OF THE ASSESSEE. THE REL EVANT EXTRACTS OF THE DECISION IS AS FOLLOWS: 12. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE AFOREMENTIONED TWO CONDITIONS, WE FIND THAT IN THE INSTANT CASE, THERE IS NO DISPUTE SO FAR AS THE IDENTITIES OF THE CONTRIBUTORS AND THE PARTICIPATORS ARE CONCERNED. WHAT HAS BEEN QUESTIONED BY THE ASSESSING OFFICER IS THAT THE PROFITS OF THE INSTITUTION ARE NOT FULLY F OR THE BENEFITS OF ITS MEMBERS INASMUCH AS THE CONTRIBUTORS/PARTICIPATORS ARE DERIVING PROFITS NOT ONLY FROM THEMSELVES BUT ALSO FROM OUTSIDERS. IT IS THE SAY OF THE ASSESSEE THAT THE B ANQUET HALL/GROUND ARE GIVEN ONLY TO THE MEMBERS OF THE CLUB AND THEIR FAMILIES. FURTHER, ON LY THE MEMBERS OF THEIR FAMILIES AND GUESTS ARE ALLOWED TO PARTICIPATE IN THE CLUB ACTIV ITIES. THESE FACTS HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER SIMPLY BECAUSE SOME PROFES SIONALS/CONTRACTORS ARE ENGAGED IN ORGANISING THE CLUB ACTIVITIES FROM WHOM THE CLUB D ERIVES ROYALTY/COMMISSION AT FIXED RATE 20 PER CENT. ON TOTAL RECEIPTS, IT CANNOT BE SAID T HAT THE CLUB IS NOT ELIGIBLE FOR EXEMPTION ON THE PRINCIPLES OF MUTUALITY. THE HON'BLE SUPREME CO URT IN THE CASE OF BANKIPUR CLUB LTD. (SUPRA) HAS HELD THAT (HEADNOTE) : 'IN THE LIGHT OF THE FINDINGS OF FACT THE RECEIPTS FOR THE VARIOUS FACILITIES EXTENDED BY THE CLUBS TO ITS MEM BERS, AS PART OF THE USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES, ATTACHED TO THE MEMBER SHIP OF THE CLUB, COULD NOT BE SAID TO BE 'A TRADING ACTIVITY'. THE SURPLUS-EXCESS OF RECE IPTS OVER THE EXPENDITURE AS A RESULT OF MUTUAL ARRANGEMENT, COULD NOT BE SAID TO BE 'INCOME ' FOR THE PURPOSE OF THE ACT'. 11 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 21. KEEPING IN VIEW THE FACTS AS DISCUSSED IN THE F OREGOING AND FOLLOWING THE ABOVE CITED DECISION OF THIS TRIBUNAL, WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE COMMISSION RECEIVED FROM M/S. AGARWAL MERCHANDISE TIE-UP PVT. LTD OUT OF THE SALES MADE BY THEM TO THE CLUB MEMBERS WAS NOT CHARGEABLE TO TAX ON THE P RINCIPLE OF MUTUALITY. ACCORDINGLY THE ADDITION OF RS.13,76,606/- IS DIRECTED TO BE DELETE D. GROUND NO. 6 IS THEREFORE ALLOWED. 22. GROUND NO. 7 OF ASSESSEES APPEAL IS AGAINST TH E ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN ASSESSING GROSS RECEIPTS BY WAY OF SPONSORSHIP/ADVERTISEMENT OF RS.77,90,076/- RECEIVED FROM VARIOUS PARTIES AND WI THOUT GIVING SET OFF FOR THE CORRESPONDING EXPENSES INCURRED. BRIEFLY STATED FAC TS OF THE CASE ARE THAT THE ASSESSEE, AS A PART OF PROVIDING THE USUAL CLUB FACILITIES TO ITS MEMBERS, ORGANIZES VARIOUS EVENTS AND FESTIVALS. DURING THE YEAR THE CLUB ORGANIZED VARI OUS EVENTS FOR WHICH THE CLUB RECEIVED SPONSORSHIP/ADVERTISEMENTS FROM 13 PARTIES. THE AO HAS ASSESSED THE SAID RECEIPTS ON GROSS BASIS UNDER THE HEAD INCOME FROM OTHER SOURCES BY OBSERVING THAT THE SAID AMOUNT WAS RECEIVED BY THE ASSESSEE IN ITS NORMAL COURSE OF CL UB ACTIVITIES. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO ALTHO UGH CONFIRMED THE ACTION OF THE AO IN ASSESSING THE INCOME ON GROSS BASIS BUT DIRECTED TH AT THE SAME BE ASSESSED UNDER THE HEAD PROFITS & GAINS OF BUSINESS. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US. 23. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LOWER AUTHORITIES HAVE HELD THAT THE DEPARTMENTAL EXPENSES INCURRED FOR ORGANIZING CLUB EVENTS PERTAINED TO AC TIVITIES OF THE CLUB AND THEREFORE SUCH EXPENSES COULD NOT BE CONSIDERED AS BEING INCURRED IN RELATION TO EARNING INCOME BY WAY OF SPONSORSHIP FEES / ADVERTISEMENT FEES. THE LD. AR H OWEVER SUBMITTED THAT THE SPONSORSHIP / ADVERTISEMENT FEES WERE RECEIVED WITH THE SPECIFIC UNDERSTANDING THAT THE AMOUNTS WOULD BE UTILIZED FOR ORGANIZING SPECIFIED EVENTS WHICH ARE BEING SPONSORED BY THE SPONSORS OR WHERE THE ADVERTISEMENTS WOULD BE DISPLAYED AT THE EVENTS . THE LD. AR THEREFORE SUBMITTED THAT THERE WAS DIRECT AND PROXIMATE NEXUS BETWEEN THE RE CEIPT BY WAY OF SPONSORSHIP / ADVERTISEMENT FEES RECEIVED FROM PARTIES AND CORRES PONDING EXPENSES INCURRED ON CONDUCTING EVENTS. MERELY BECAUSE IN THE BOOKS OF A CCOUNTS MAINTAINED THE EXPENSES WERE ACCOUNTED DEPARTMENT-WISE, SUCH MANNER OF ACCOUNTIN G PRESENTATION COULD NOT DENY THE 12 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 APPELLANT THE BENEFIT OF DEDUCTION OF THE EXPENSES INCURRED AGAINST THE CORRESPONDING RECEIPTS. THE LD. AR SUBMITTED THAT IN THE APPELLAN TS OWN CASE FOR THE AY 2009-10 THE AO HAD SIMILARLY ASSESSED THE SPONSORSHIP FEES / ADVER TISEMENT FEES ON GROSS BASIS AND ON APPEAL THIS TRIBUNAL IN ITS ORDER DATED 02.12.2016 IN ITA NO. 339/KOL/2013 FOR AY 2009-10 HAD DIRECTED THE AO TO ALLOW ALL EXPENSES PERMISSIB LE AS DEDUCTION AGAINST THE SPONSORSHIP FEES / ADVERTISEMENT FEES. THE LD. AR FURTHER SUBMI TTED THAT EVEN THOUGH SIMILAR SPONSORSHIP FEES / ADVERTISEMENT FEES WERE RECEIVED IN THE EARLIER AS WELL AS SUBSEQUENT YEARS, THE REVENUE HAD NEVER DENIED THE BENEFIT OF NETTING OFF OF THESE RECEIPTS AGAINST THE DEPARTMENT-WISE EXPENSES. THE LD. AR ALSO DREW OUR ATTENTION TO THE ASSESSMENT PROCEEDINGS RECENTLY CONCLUDED FOR THE AY 2016-17 I N WHICH THE AO HAD ALLOWED THE BENEFIT OF NETTING OFF THE SPONSORSHIP FEES / ADVER TISEMENT FEES AGAINST DEPARTMENT-WISE EXPENSES AND THEREAFTER ASSESSED THE TOTAL INCOME. PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 24. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIE S, WE FIND MERIT IN THE SUBMISSIONS OF THE LD. AR THAT THE RECEIPTS BY WAY OF SPONSORSH IP FEES / ADVERTISEMENT FEES CANNOT BE CONSTRUED TO BE INCOME IN ITSELF. WHAT IS CHARGEABL E TO TAX UNDER THE LAW IS NOT GROSS RECEIPT BUT THE INCOME EMBEDDED THEREIN. IN ORDER TO ARRIVE AT THE INCOME IT IS NECESSARY TO DEDUCT THE CORRESPONDING EXPENSES INCURRED FOR EARNING THE RECEIPT. IT IS ALWAYS THE EXCESS OF RECEIPT OVER CORRESPONDING EXPENDITURE WHICH IS CON SIDERED AS INCOME FOR THE PURPOSES OF LEVY OF TAX. IN THE CASE OF THE SOCIAL ORGANIZATION S LIKE CLUBS, EVENTS OR FESTIVALS ARE ORGANIZED FOR THE BENEFIT OF MEMBERS. KEEPING IN MI ND THE FACT THAT A LARGE CONGREGATION OF PEOPLE IS ASSEMBLED, THE CORPORATE ARE INTERESTED I N DERIVING ADVERTISING MILEAGE BY PARTICIPATING IN THESE EVENTS OR FESTIVALS IN THE F ORM OF SPONSORS. ACCORDINGLY IT IS A CUSTOMARY PRACTICE FOR THE CORPORATE TO SPONSOR SUC H EVENTS SO THAT PUBLIC RELATION OPPORTUNITIES FOR ADVANCING THEIR BUSINESS INTEREST S ARE ACHIEVED. ACCORDINGLY THE SPONSORSHIP FEES ARE PAID TO ENABLE SOCIAL ORGANIZA TIONS LIKE CLUBS TO MEET PART OF THE COSTS THAT THEY INCUR FOR ORGANIZING THE EVENTS OR FESTIV ALS FOR THEIR MEMBERS. BEING SPONSORS THESE CORPORATE ARE ALSO PERMITTED TO DISPLAY THEIR ADVERTISEMENTS OR PROMOTE THEIR PRODUCTS AT THESE EVENTS. HAVING REGARD TO THESE FACTS, WE A RE OF THE CONSIDERED OPINION THAT THE LOWER AUTHORITIES WERE UNJUSTIFIED IN CONSIDERING THE REC EIPTS BY WAY OF SPONSORSHIP FEES / 13 ITA NO. 2491/KOL/2017 THE SATURDAY CLUB LIMITED, AY 2012-13 ADVERTISEMENT FEES IN ISOLATION AND WITHOUT ALLOWIN G THE BENEFIT OF SET OFF OF THE DEPARTMENT- WISE EXPENSES ACCOUNTED IN THE BOOKS OF THE APPELLA NT. WE ALSO NOTE THAT IN ALL THE PAST ASSESSMENTS AS WELL AS IN THE SUBSEQUENT ASSESSMENT S THE REVENUE HAD ALLOWED THE BENEFIT OF NETTING OFF OF RECEIPTS AGAINST EXPENSES AND ONL Y THE NET AMOUNT WAS CONSIDERED FOR TAXATION PURPOSES WITHOUT ALLOWING THE BENEFIT OF M UTUALITY PRINCIPLE. IT WAS ONLY IN AY 2009-10 WHEN THE AO DID NOT ALLOW THE BENEFIT OF NE TTING OFF BUT ON APPEAL THIS TRIBUNAL IN IN THEIR ORDER RENDERED IN ITA NO. 339/KOL/2013 ALL OWED THE DEDUCTION FOR DEPARTMENT WISE EXPENSES BY OBSERVING AS UNDER: 25. FOLLOWING THE SAME, WE DIRECT THE AO TO ALLOW T HE DEDUCTION FOR DEPARTMENT-WISE EXPENSES AGAINST THE SUM OF RS.77,90,076/- RECEIVED BY WAY OF SPONSORSHIP FEES / ADVERTISEMENT FEES AND ONLY THE NET INCOME, IF ANY, SHALL BE CHARGED TO TAX UNDER THE HEAD OTHER SOURCES. GROUND NO. 7 IS THEREFORE ALLOWED. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD JUNE, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT THE SATURDAY CLUB LIMITED, 7, WOOD STREE T, KOLKATA-700 016. 2 RESPONDENT DCIT, CIRCLE-8(2), KOLKATA 3 4 5 CIT(A)-3, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR