ACIT 7(3)(1), MUMBAI V. PANCARD CLUBS LTD., MUMBAI

ITA 2773/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4105 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 03-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWUNGSHI GIMSA
• Keywords: Earning of tax free income
• Section: 143(3); 142(1); 153A; 14A; 143(2); 139(1); 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JM & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 2773 / MUM/ 2018 ( / ASSESSMENT YEAR: 20 10 - 11 ) ./ I.T.A. NO . 2774 / MUM/ 2018 ( / ASSESSMENT YEAR: 2015 - 16 ) A.C.I.T 7(3) (1) ROOM NO. 12, GROUND FL., AAYKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 / VS. PANCARD CLUBS LTD. 111 - 113, KALYANDAS UDYOG BHAVAN , NEAR CENTURY BHAVAN, PRABHADEVI, MUMBAI - 400025. ./ ./ PAN NO. AA AC 9093 R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AWUNGSHI GIMSA, DR / RESPONDENTBY : NONE / DATE OF HEARING : 1 7 .12.2019 / DATE OF PRONOUNCEMENT : 08.01.2020 / O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER: THE PRESENT TWO APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE SEPARATE ORDER S OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 4 IN SHORT REFERRED AS LD. CIT(A), MUMBAI, DATED 04/01/2018 /31 - 01 - 2018 FOR ASSESSMENT YEAR S (IN SHORT ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 2 - AY S ) 20 10 - 11 AND 2015 - 16 ON THE FOLLOWING RESPECTIVE GROUNDS OF APPEAL: - ITA NO. 2773/MUM/18 A.Y 2010 - 11 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE RECEIPT ON ACCOUNT OF ADVANCE SALE OF ROOM NIGHTS IS NOT A REVENUE RECEIPT WITHOUT APPRECIATING THE FACT THAT THE PRINCIPLE BUSINESS OF ASSESSEE IS TO PROVIDE ACCOMMODATION AND OTHER FACILITIES TO TOURIST MEMBERS AND ASSESSEE IS DEBITING ALL THE EXPENSES RELATABLE TO THESE RECEIPTS.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROVI SION FOR ' HOLIDAY SCHEME VALUE IS AN ALLOWABLE EXPENDITURE.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE DISALLOWANCE U/S 14A OF THE ACT SHALL BE MADE ONLY IN RESPECT OF THOSE INVESTMENTS FROM WHICH EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR WHEREAS CBDT VIDE CIRCULAR NO. 5/2014 DATED 11.2.2014 HAD CLARIFIED THAT DISALLOWANCE U/S 14A HAS TO BE MADE EVEN IF NO EXEMPT INCOME WAS EARNED DURING THE YEAR FROM THE INVESTMENTS.' 4. 'THE APPELLA NT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' ITA NO. 2774/MUM/18 A.Y 2015 - 16 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE RECEIPT ON AC COUNT OF ADVANCE SALE OF ROOM NIGHTS IS NOT A REVENUE RECEIPT WITHOUT APPRECIATING THE FACT THAT THE PRINCIPLE BUSINESS OF ASSESSEE IS TO PROVIDE ACCOMMODATION AND OTHER FACILITIES TO TOURIST MEMBERS AND ASSESSEE IS DEBITING ALL THE EXPENSES RELATABLE TO T HESE RECEIPTS.' ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 3 - 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROVISION FOR ' HOLIDAY SCHEME VALUE IS AN ALLOWABLE EXPENDITURE.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE DISALLOWANCE U/S 14A OF THE ACT SHALL BE MADE ONLY IN RESPECT OF THOSE INVESTMENTS FROM WHICH EXEMPT INCOME HAS BEEN EARNED DURING THE YEAR WHEREAS CBDT VIDE CIRCULAR NO. 5/2014 DATED 11.2.2014 HAD CLARIFIED THAT DISALLOWANCE U/S 14A HAS TO BE MADE EVEN IF NO EXEMPT INCOME WAS EARNED DURING THE YEAR FROM THE INVESTMENTS.' 4. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 2. SINCE THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. FIRSTLY, WE ARE TAKING ITA NO. 277 3 /MUM/201 8 FOR AY 20 09 - 10 FILED BY THE REVENUE . 3 . BRIEF FACTS OF THE CASE ARE THAT A SEARCH OPERATION U/S. 132 OF THE INCOME - TAX ACT, 1961 ( IN SHORT, THE ACT) WAS CONDUCTED 02 - 10 - 14 IN THE CASE OF ASSESSE COMPANY . THEREAFTER, A NOTICE U/S. 153A DT. 17 - 02 - 2016 OF THE ACT WAS ISSUED AND DULY SERVED UPON THE ASSESSEE ASKING THE ASSESSEE COMPANY TO FILE THE RETURN OF INCOME FOR THE A.Y ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 4 - 2010 - 11 I.E UNDER CONSIDERATION. IN RESPONSE, THE ASSESSEE FILED ITS RETURN FOR THE A.Y (2010 - 11) UNDER CONSIDERATION DECLARING INCOME AT RS . ( - ) 602,15,57,933/ - . THE AO FOUND THAT THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S. 153A WAS THE SAME AS THAT OF ORIGINAL RETURN FILED U/S. 139(1) OF THE ACT AT RS. ( - ) 602,15,57,933/ - ON 12 - 10 - 201. SUBSEQU ENTLY, NOTICES U/S. 143(2) DT. 30 - 09 - 2016 AND 142(1) DT. 04.10.2016 OF THE ACT WERE ISSUED AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE, THE AR OF THE ASSESSEE APPEARED BEFORE THE AO AND FURNISHED DETAILS IN SUPPORT OF THE SAID RETURN AS FILED BY THE ASS ESSEE. THE AO FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OWNING, DEVELOPING AND OPERATING OF HOTELS, CLUBS AND RESORTS AS WELL AS OTHER BUSINESS IN INDIA. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 28 - 02 - 2013 AT RS. NIL AFTER ALLO WING CARRIED FORWARD OF BUSINESS LOSS OF RS.317,83,960/ - . THEREAFTER, THE AO MADE THE FOLLOWING ADDITIONS BY AN ORDER PASSED U/S. 143(3)/153A OF THE ACT DT. 27 - 12 - 2016 : ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 5 - A DIFFERENCE IN COMMISSION PAID AS PER P/L A/C & COMPUTATION RS. 84,14,46,965 B ADVA NCE SALE OF ROOM NIGHTS COLLECTED DURING THE YEAR 538,65,12,287 C HOLIDAY MEMBERSHIP SURRENDER VALUE (DISALLOWED) 297,19,14,641 D DISALLOWANCE U/S. 14A R.W.R 58,03,500 TOTAL ADDITIONS RS.920,56,77,383 5 . AGGRIEVED WITH THE ORDER OF THE A.O THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) CONSIDERING THE DETAILED SUBMISSIONS OF ASSESSEE AND FOLLOWING THE EARLIER ORDER/DECISION OF THE HONBLE BOMBAY HIGH COURT IN ASSESSEES CASE FOR AYS 2004 - 05 AND 2005 - 06 HAS DELETED THE IMPUG NED ADDITIONS MADE ON A/C OF ADVANCE SALE OF ROOMS, HOLIDAY SCHEME/MEMBERSHIP AND DISALLOWANCE MADE U/S. 14A OF THE ACT. 6 . AGGRIEVED WITH THE ABOVE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US AND RAISED THE AFOREMENTIONED GROUND ( S ) OF AP PEAL . 7 . AT THE TIME OF HEARING THE LD. DR BROUGHT TO OUR NOTICE THE GROUNDS OF APPEAL FILED BY THE REVENUE AND SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE SAME. HOWEVER, ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 6 - HE RELIED ON THE ORDER OF THE AO AND OPPOSED THE IMPUGNED ORDER OF THE L D. CIT - A IN ALLOWING THE SAME. 9 . A FTER HEARING THE LD. DR SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD INCLUDING THE ORDERS OF REVENUE AUTHORITIES, WE FIND THAT THE ISSUES INVOLVED IN THE PRESENT APPEAL ARE IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR AYS 2004 - 05 AND 2005 - 06. THE FACTS IN AY 2010 - 11 & 2015 - 16 ARE IDENTICAL AND SIMILAR TO THE FACTS IN EARLIER ASSESSMENT YEARS ( AYS 2004 - 05 AND 2005 - 06), WHICH HAD ALREADY BEEN DECIDED/ DISPOSED BY THE HONBLE HIGH COURT . WE FURTHER FIND THAT THE AO HAS OUGHT TO HAVE FOLLOWED THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT AND THE ITAT ORDER PASSED ON IDENTICAL AND SIMILAR ISSUES/FACTS FOR THE AYS 2006 - 07 TO 2009 - 10 AND FOR THE AYS 2010 - 11 & 2015 - 16 I.E UNDER CONSIDERATION . THE AO MADE ADDITIONS ONLY ON THE REASON THAT THE MATTER IS STILL PENDING IN HONBLE HIGH COURT, IGNORING THE FACT THAT THE HONBLE HIGH COURT HAD ALREADY DECIDED THE ISSUE S IN AYS 2004 - 05 AND 2005 - 06 IN FAVOUR OF ASSESSEE. THUS, THE CIT - A WAS CORRECT ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 7 - IN DELETING THE SAME. WE UPHOLD HIS ORDER ON THIS COUNT. THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO. 2774 /MUM/2018 A.Y 20 15 - 16 8. THE FACTS IN AY 2015 - 1 6 (ITA NO.2774/MUM/18) ARE SIMILAR TO A.Y 2010 - 11 (ITA NO. 2773/MUM/18), THEREFORE, THE FINDINGS AS GIVEN IN ITA NO. ITA NO. 2773/MUM/18, ARE APPLICABLE TO THIS AY ALSO. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE IN ITS BOTH THE APPEALS ARE DISMISSED. 9. I N THE RESULT BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 08 /01 /2020 . SD/ - SD/ - ( SAKTIJIT DEY ) ( S RIFAUR RAHMAN ) (JUDICIAL MEMBER) ACCOUNTANT MEMBER MUMBAI, DATED 08 /01 /20 20 **PP,S PS ITA NO. 2773/MUM/18 A.Y 2010 - 11 ITA NO. 2774/MUM/18 AY 2015 - 16 M/S.PANCARD CLUBS LTD. - 8 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. ( ) / CONCERNED CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// 1. / ( ASST. REGISTRAR) , / ITAT, MUMBAI