The M.P.C. Gymkhana, Baroda V. The Income Tax Officer, Ward-5(1), Baroda

ITA 3131/AHD/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6998 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ I.T.A. NO.3131/AHD/2014 ( / ASSESSMENT YEAR : 2010-11) THE M.P.C. GYMKHANA JAWAHARLAL NEHRU ROAD, BARODA- 390001 / VS. ITO WARD- 5 (1), BARODA ./ ./ PAN/GIR NO. : AAA AT4 891 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BANDISH SOPARKAR, A.R. / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. DR / DATE OF HEARING :24/04/2019 !'# / DATE OF PRONOUNCEMENT :26/04/2019 $% / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA (CIT(A) FOR SHORT) DATED 19.09.2014 PERTAINING TO THE ASSESSMENT YEAR (AY) 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER DATED 19.09.2014 PASSED BY THE LD. CI T(A) BARODA IS ILLEGAL AND BAD IN LAW. RESP. CIT(A) BARODA HAS ERRED BOTH ON FACTS AND LAW. IT IS SUBMITTED THAT IT MAY BE HELD SO NOW. 2. RESP. CIT(A), BARODA HAS ERRED IN CONFIRMING ADD ITION OF RS. 24,82,968/- BEING SURPLUS AS PER INCOME AND EXPENDI TURE ACCOUNT BY DENYING EXEMPTION 11 OF THE I.T. ACT 1961. IT I S SUBMITTED THAT LD. AO HAS ERRED IN DENYING EXEMPTION U/S. 11 OF TH E I.T. ACT 1961. IT IS SUBMITTED THAT LD. AO HAS ERRED BOTH ON FACTS AND IN LAW. IT IS SUBMITTED THAT IT MAY BE HELD SO NOW. ITA NO.3131/AHD/2014 THE M.P.C. GYMKHANA VS. ITO ASST.YEAR 2010-11 - 2 - 3. RESP. CIT(A), BARODA HAS ERRED IN CONFIRMING DIS ALLOWANCE OF RS. 2,45,375 BEING LOSS CLAIMED ON DESTRUCTION OF C ERTAIN ASSETS DUE TO FIRE DURING YEARS. IT IS SUBMITTED THAT LD. AO HAS ERRED DISALLOWING THE LOSS ON ACCOUNT OF FIRE. IT IS SUB MITTED THAT LD. AO HAS ERRED ON FACTS AND ON LAW OF THE CASE. IT IS S UBMITTED THAT IT MAY BE HELD SO NOW. 4. RESP. CIT(A), BARODA HAS ERRED IN CONFIRMING DIS ALLOWANCE OF RS. 4,94,017 BEING AMOUNT DUE FROM THE MEMBERS WRIT TEN OFF DURING THE YEAR. THE AMOUNT WRITTEN OFF WAS TOWARD S SUBSCRIPTION AND CHARGES TO BE RECOVERED FOR USE OF RESTAURANTS AND OTHER CHARGEABLE SERVICES. IT IS SUBMITTED THAT LD. AO H AS DISALLOWING THE LOSS ON ACCOUNT OF BAD DEBTS. IT IS SUBMITTED THAT LD. AO HAS ERRED ON FACTS AND ON LAW OF THE CASE. IT IS SUBMI TTED THAT IT MAY BE HELD SO NOW. 5. YOUR APPELLANT CARVES FOR LEAVE TO ADD OR TO AME ND ALL OR ANY OF THE GROUNDS OF APPEAL. 2. GROUND NO. 1 TO 5 IS GENERAL IN NATURE NEEDS NO SEPARATE ADJUDICATION AND HENCE DISMISSED. 3. THE FACTS IN BRIEF ARE THAT THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 HEREINAFTER REFERRED TO AS THE (THE ACT) WAS FRAMED VIDE ORDER DATED 13.03.2013. THE AO WHILE FRAMING THE ASSESSM ENT WITHDRAW CLAIM OF EXEMPTION U/S. 11 OF THE ACT AND THEREBY MADE AD DITION OF SURPLUS OF INCOME AND EXPENDITURE OF RS. 24,82,968/- DISALLOWA NCE OF CAPITAL LOSS, DISALLOWANCE OF INCOME TAX OF EARLIER YEARS AND DIS ALLOWANCE OF TERMINATED MEMBERS DUES WRITTEN OFF THUS ASSESSED I NCOME AS RS. 34,54,290/-, AGAINST THE NIL INCOME AS CLAIMED BY T HE ASSESSEE. 4. AGGRIEVED, BY THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS DISMISSED THE APPEAL. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. ITA NO.3131/AHD/2014 THE M.P.C. GYMKHANA VS. ITO ASST.YEAR 2010-11 - 3 - 5. GROUND NO. 1 IS AGAINST CONFIRMING ADDITION OF RS. 24,82,968/- BEING SURPLUS AS PER INCOME AND EXPENDITURE ACCOUNT BY DENYING EXEMPTION U/S. 11 OF THE ACT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING ADDITION AND CONFIRMING THE SAME. LD. COUNSEL SUBMITTED THAT TH E BASIS OF WITHDRAWING THE EXEMPTION IS CONTRARY TO THE BINDIN G PRECEDENTS. LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE KOLK ATA BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF CALCUTTA CRICKET & FOOTBALL CLUB VS. INCOME-TAX OFFICER, EXEMPTION-I, KOLKATA (2017) 88 TAXMANN.COM 384 (KOLKATA TRIB.). LD. COUNSEL FOR THE ASSESSEE FU RTHER SUBMITTED THAT THE AUTHORITIES BELOW GROSSLY ERRED IN CONSTRUING SEC. 2(15) OF THE ACT. THE ASSESSEE HAD BEEN PROVIDING COACHING TO THE MEMBERS IN RESPECT OF THE GAMES WHICH ESSENTIALLY AN EDUCATIONAL AND CHARITAB LE. HE, THEREFORE, SUBMITTED THAT UNDER THE FACTS OF PRESENT CASE THE LEARNED AUTHORITIES OUGHT TO HAVE ALLOWED THE CLAIM OF THE ASSESSEE. 6. PER CONTRA LD. DR SUPPORTING THE ORDERS OF THE A UTHORITIES BELOW AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE OR DER OF THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT DECISION OF THE K OLKATA BENCH OF ITAT AS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE IS NO T APPLICABLE ON THE FACTS OF THE PRESENT CASE. AS IN THE PRESENT CASE THE AS SESSEE HAS PROVIDED FACILITIES TO NON-MEMBERS AND HAS ALSO CHARGED FOR PROVIDING OF THE FACILITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY BASIS OF DENYING THE EXEMPTION BY THE AUTH ORITIES BELOW IS THAT THE ASSESSEE HAS NOT BEEN CARRYING OUT CHARITABLE A CTIVITIES AS SUCH THE ITA NO.3131/AHD/2014 THE M.P.C. GYMKHANA VS. ITO ASST.YEAR 2010-11 - 4 - FACILITIES/SERVICES ARE PROVIDED IN LIEU OF THE FEE S/ANNUAL SUBSCRIPTION PAID TO ITS MEMBERS. IT IS FURTHER STATED THAT THE CLUB IS ALSO PROVIDED LAWN TO NON-MEMBERS FOR ORGANIZING PARTIES/SOCIAL FUNCTIONS . THUS IT IS CLEARLY LET BY THE SEC. 2(15) OF THE ACT. 8. WE FIND THAT THE AUTHORITIES BELOW HAVE NOT POIN TED OUT SPECIFIC INSTANCES WHERE THE CLUB FACILITIES WERE PROVIDED T O THE NON-MEMBERS ON COMMERCIAL BASIS. THE ASSESSEE HAS ALSO NOT PROVID ED THE DETAILS AS TO HOW THE LAWN OF CLUB WAS USED BY THE NON-MEMBERS. THEREFORE, THIS ASPECT REQUIRES RE-CONSIDERATION. THE ISSUE IS THE REFORE SET ASIDE TO AO FOR DECISION AFRESH. 9. GROUND NO. 3 IS AGAINST THE CONFIRMING DISALLOWA NCE OF RS. 2,45,375/- BEING LOSS CLAIMED ON DESTRUCTION OF CER TAIN ASSETS DUE TO FIRE DURING THE YEAR. LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT ALLOWING THE CLAIM. IT IS SUBMITTED THAT THE LOSS IS ALLOWABLE AS IT IS A BUS INESS LOSS TO THE ASSESSEE. 10. ON THE CONTRARY, THE LD. DR OPPOSED THE SUBMISS IONS. HE SUBMITTED THAT THERE IS NO MATERIAL ON RECORD SUGGE STING THAT THE ASSESSEE SUFFERED LOSS WHICH IS ALLOWABLE AS THE BUSINESS LO SS AT THE MOST IT COULD BE A CAPITAL LOSS. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE COURSE OF THE HEARING A QUERY WAS RAISED TO THE ASSESSEE WHETHER ANY INSURANCE CLAIM HAS BEEN MADE. LD. COU NSEL COULD NOT REPLY IN AFFIRMATIVE. THEREFORE, CONSIDERING THE F ACT THAT THERE IS NO DISPUTE WITH REGARD TO FIRE. THE ASSESSEE IS REQUI RED TO DEMONSTRATE THAT ITA NO.3131/AHD/2014 THE M.P.C. GYMKHANA VS. ITO ASST.YEAR 2010-11 - 5 - LOSS SO CAUSED BY FIRE IS ALLOWABLE. HOWEVER, NOTH ING HAS BEEN BROUGHT ON RECORD HENCE, THIS GROUND OF ASSESSEES APPEAL I S REJECTED. 12. GROUND NO. 4 IS AGAINST DUES WRITTEN OFF. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUES THAT THE AUTHORITIES BEL OW ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF ASSESSEE. HE SUBMITTED THAT THERE IS NO DISPUTE THAT DUES ARE RELATED TO AND ARE RAISED DURING THE COURS E OF RENDERING SERVICES TO ITS MEMBERS. THE REASONING AS ADOPTED BY THE AO AND AFFIRMED BY THE LD. CIT(A) IS CONTRARY TO LAW. PER CONTRA LD. DR O PPOSED THESE SUBMISSIONS AND SUBMITTED THAT THE ASSESSEE COULD V ERY WELL RECOVER THESE DUES FROM THE SECURITY DEPOSITS. HE SUBMITTE D THAT THE PURPOSE OF SECURITY DEPOSIT IS TO ADDRESS SUCH CIRCUMSTANCES. WE HAVE HEARD THE RIVAL SUBMISSIONS SO FAR THE CLAIM OF ASSESSEE IS C ONCERNED HE IS REQUIRED TO DEMONSTRATE THAT DUES HAVE BECOME BAD AND ARE NO T RECOVERABLE. IT IS NOT CLEAR AS TO HOW MUCH SECURITY DEPOSIT WAS AVAIL ABLE WITH ASSESSEE IN RESPECT OF MEMBERS WHOSE DUES WERE OUTSTANDING. WE , THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE T HE ISSUE TO THE FILE OF AO TO VERIFY HOW MUCH SECURITY DEPOSITS RELATED TO THE MEMBERS WAS AVAILABLE WITH THE ASSESSEE AND DECIDE IT AFRESH. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD/- SD/- (AMARJIT SINGH) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 26/ 04 /2019 TANMAY TRUE COPY !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. ITA NO.3131/AHD/2014 THE M.P.C. GYMKHANA VS. ITO ASST.YEAR 2010-11 - 6 - 3. & '( ) / CONCERNED CIT 4. ) ( ) / THE CIT(A)-III, BARODA 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. & ' / BY ORDER, (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION . 24.04.2019 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.04.2019 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S..25.04.2019 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 25.04.2019 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.26.04.2019 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.04.2019 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK.. . 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER