The Mylapore Club, CHENNAI V. DCIT, CHENNAI

ITA 2892/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7866 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Difference of opinion; Change of opinion
• Section: 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS. 2887 TO 2892/MDS/2016 / ASSESSMENT YEARS : 2007 08 TO 2012 - 13 M/S. THE MYLAPORE CLUB, 39. LUZ CHURCH ROAD, MYLAPORE, CHENNAI - 600004 PAN : AABAT0599B V. THE DEPUTY COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE II, CHENNAI - 34 NEW JURISDICTION THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE2, CHENNAI - 34 ( /APPELLANT) ( !' /RESPONDENT) # /APPELLANT BY : SHRI V. S. JAYAKUMAR, ADVOCATE !' # /RESPONDENT BY : SHRI V. NANDAKUMAR, JCIT # /DATE OF HEARING : 27.12.2016 # /DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME TA X (APPEALS)- 2, CHENNAI, DATED 29.07.2016 AND PERTAINS TO THE AS SESSMENT YEARS 2007-08, 2008-09, 2009-10, 2010-11, 2011-12 & 2012- 13. SINCE 2 I.T.A. NO.2887 TO 2892/MDS/2016 COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THE AP PEALS, WE HEARD THE SAME TOGETHER AND DISPOSING OFF THE SAME BY THIS CO MMON ORDER. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS REOPE NING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 3. SHRI V.S. JAYAKUMAR, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE REOPENING OF THE ASSESSMENT IS D UE TO MERE CHANGE OF OPINION. EVEN THOUGH, THE ASSESSMENT FOR ALL TH E YEARS UNDER CONSIDERATION WERE MADE UNDER SECTION 143(1) OF THE ACT, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE IN THE ABSENCE OF ANY FRESH MATERIAL, THE ASSESSING OFFICER CANNOT SAY THAT INCOME CHARGE ABLE TO TAX AS ESCAPED ASSESSMENT. THEREFORE REOPENING OF ASSESS MENT WAS NOT JUSTIFIED. 4. ON THE CONTRARY, SHRI V. NANDAKUMAR, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT NO ASSESSMENT WAS MAD E UNDER SECTION 143 (3) OF THE ACT. THE RETURN FILED BY TH E ASSESSEE WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT. SINCE, THE ASSESSING OFFICER FOUND THAT INCOME CHARGEABLE TO TAX WAS ESC APED FROM ASSESSMENT, AND DUE TO EXPIRY OF TIME LIMIT FOR NOT ICE UNDER SECTION 3 I.T.A. NO.2887 TO 2892/MDS/2016 143 (2) OF THE ACT, THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THEREFORE, IT IS NOT A CASE OF CHANGE OF OPINION. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT. FOR MAKING PRIMA FACIE ADJUSTMENT NO ASSESSMENT ORDER WAS PASSED UNDER SECTION 143 (3) OF THE ACT. THEREFORE IT CANN OT BE SAID THAT THE ASSESSING OFFICER APPLIED HIS MIND TO ANY OF THE IS SUE RAISED BY THE ASSESSEE AND EXPRESSED HIS OPINION. FOR THE PURPOS E OF CHANGE OF OPINION, THE ASSESSING OFFICER WAS EXPECTED TO EXPR ESS AN OPINION EARLIER. IN THE CASE BEFORE US, IT IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSING OFFICER EXAMINED ANY OF THE ISSUE OR THE CLAIM MADE BY THE ASSESSEE AND EXPRESSED HIS OPINION. SINCE, THE CONDITIONS PROVIDED FOR REOPENING OF THE ASSESSMENT UNDER SECT ION 147 OF THE ACT WAS SATISFIED, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE ASSESSING OFFICER HAS RIGHTLY ISSUED NOTICE UNDER S ECTION 148 OF THE ACT FOR REOPENING OF THE ASSESSMENT UNDER SECTION 1 47 OF THE ACT. THEREFORE IT IS NOT A CASE OF CHANGE OF OPINION AS C LAIMED BY THE ASSESSEE. ACCORDINGLY, THE REOPENING OF THE ASSESS MENT BY ISSUING NOTICE UNDER SECTION 148 IS UPHELD. 4 I.T.A. NO.2887 TO 2892/MDS/2016 4. THE NEXT ISSUE ARISES FOR CONSIDERATION IS INTERE ST INCOME EARNED BY THE ASSESSEE FROM FIXED DEPOSIT. 5. WE HEARD SHRI. V.S. JAYAKUMAR, THE LD. COUNSEL F OR THE ASSESSEE AND SHRI V. NANDAKUMAR, THE LD. DEPARTMENT AL REPRESENTATIVE. 6. ADMITTEDLY, THE ASSESSEE DEPOSITED FIXED DEPOSIT IN THE BANK AND THE INTEREST EARNED BY THE ASSESSEE WAS CLAIMED AS EXEMPTION ON THE PRINCIPLES OF MUTUALITY. THIS ISSUE WAS EXAMIN ED BY THIS TRIBUNAL ELABORATELY IN OOTACAMUND CLUB V INCOME TAX OFFICER, (2015) 42 ITR (TRIB) 0435 (CHENNAI), FOUND THAT WHEN THE ASSESSEE RECEIVED INTEREST EITHER FROM THE BANK OR ANY OTHER FINANCIAL INSTITU TION WHICH ARE NOT THE MEMBERS OF THE ASSESSEE CLUB CANNOT BE ALLOWED AS E XEMPT, SINCE, THE PRINCIPLE OF MUTUALITY CANNOT BE APPLIED TO SUC H TRANSACTION. IN VIEW OF THIS DECISION OF THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN OOTACAMUND V ITO (SUPRA) , THIS TRIBUNAL DID NOT FIND ANY REASON TO INTERFERE THE ORDER OF THE LOWER AUTHORITY. ACCORD INGLY THE SAME IS CONFIRMED. 5 I.T.A. NO.2887 TO 2892/MDS/2016 7. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXPEN DITURE FOR EARNING INTEREST INCOME. 8. SHRI V.S. JAYAKUMAR, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE ASSESSEE DEPOSITED MONEY IN THE FIXED DEPOSIT AND EARNED INTEREST. FOR THE PURPOSE OF DEPOSITING THE MONEY AND TO FOLLOW UP THE MATTER, THE ASSESSEE HAS TO NATURALLY DEPUTE AN EMPLOYEE. THEREFORE THE ASSESSEE HAS TO INCUR CERTA IN EXPENDITURE ON PAYMENT OF SALARY TO SUCH EMPLOYEE WHICH HAS TO BE ALLOWED FOR EARNING THE INTEREST INCOME. 9. ON THE CONTRARY, SHRI V. NANDAKUMAR, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT FOR EARNING INTEREST INCOME FROM FIXED DEPOSIT OF THE BANK, THE ASSESSEE NEED NOT INCUR AN Y EXPENDITURE AT ALL. THE EMPLOYEE DEPUTED BY THE ASSESSEE, IS EMPLO YEE OF THE ASSESSEE FOR THE PURPOSE OF CARRYING OUT HIS REGULA R ACTIVITY. MAKING FIXED DEPOSIT AND EARNING OF INTEREST IS NOT THE BU SINESS OF THE ASSESSEE. THEREFORE AT THE BEST, THE SALARY PAID T O THE EMPLOYEE MAY BE CLAIMED AS EXPENDITURE WHILE COMPUTING THE OPERA TIONAL INCOME OF THE ASSESSEE. MAKING FIXED DEPOSIT AND EARNING IN TEREST CANNOT BE CONSTRUED AS AN OPERATION ACTIVITY OF THE ASSESSEE. THEREFORE THE CIT (APPEALS) HAD RIGHTLY DISALLOWED THE CLAIM OF THE A SSESSEE. 6 I.T.A. NO.2887 TO 2892/MDS/2016 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SEE IS A CLUB AND CLAIMING EXEMPTION ON THE PRINCIPLES OF MUTUALITY. THE OPERATIONAL INCOME FROM THE MUTUAL ACTIVITY HAS TO BE COMPUTED AFTER ALLOWING OF OPERATIONAL COST. THE SALARY PAID TO THE EMPLOYEE OF THE ASSESSEE IS ONE OF THE OPERATIONAL COSTS WHICH NEED TO BE DEDUC TED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. AS RIG HTLY SUBMITTED BY THE LD. D.R., MAKING FIXED DEPOSIT IS NOT THE BUSIN ESS OF THE ASSESSEE. IT IS ALSO NOT THE ACTIVITY OF THE ASSESSEE. INTER EST INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . SINCE, THE BANK OR FINANCIAL INSTITUTION FROM WHICH THE INTERE ST INCOME IS RECEIVED IS NOT A MEMBER OF THE ASSESSEE CLUB, SUCH AN INCOM E CANNOT BE CLAIMED TO BE EXEMPTED ON THE PRINCIPLES OF MUTUALI TY. HOWEVER, THE EXPENDITURE NAMELY THE SO CALLED SALARY PAID TO THE EMPLOYEE WHO WAS DEPUTED BY THE ASSESSEE FOR MAKING THE FIXED DEPOSI T WAS THE EMPLOYEE OF THE ASSESSEE. THEREFORE, AS RIGHTLY SUB MITTED BY THE LD. D.R., THE SALARY CAN BE TAKEN AS OPERATIONAL COST F OR THE PURPOSE OF RUNNING THE CLUB. HOWEVER AT ANY STRETCH OF IMAGIN ATION, IT CANNOT BE CONSTRUED AS EXPENDITURE FOR EARNING THE INTEREST O N THE FIXED DEPOSIT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO I NTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY THE S AME IS CONFIRMED. 7 I.T.A. NO.2887 TO 2892/MDS/2016 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE STA NDS DISMISSED. ORDER PRONOUNCED ON 31 ST JANUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 31 ST JANUARY, 2017. JR. # ! $ % $ /COPY TO: 1. /APPELLANT 2. !' /RESPONDENT 3. &' ( )/CIT(A)-2, CHENNAI 4. &' /CIT 5. ! $ /DR 6. () /GF.