Bhuabneswar Club Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 434/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4411 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 03-12-2010
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 434 AND 435 /CTK/2010 / ASSESSMENT YEAR S 2004 - 05 AND 2005 - 06 BHUBANESWAR CLUB LTD., RAJPATH AGS SQUARE, UNIT IV, BHUBANESWAR 751 001 PAN: AABCB 3582 C - - - VERSUS - ASST.C OMMISSIONEROF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI RAJAT KAR, AR / FOR THE RESPONDENT: / SMT. PARAMITA TRIPATHY, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THESE TWO APPEALS BY THE ASSESSEE RAISE A COMMON ISSUE ON THE LEARNED CIT(A) HAVING ERRED IN LAW TO CONCLUDE THAT INTEREST ON DEPOSITS AND INVESTMENT IN BANKS AND OTHER INSTITUTIONS WILL F ORM PART OF THE TAXABLE INCOME OF THE ASSESSEE CLUB PARTICULARLY WHEN ALL THE DEPOSITS HELD WITH BANKS AND OTHER INSTITUTIONS ARE FROM THE CONTRIBUTIONS/RECEIPTS FROM MEMBERS ONLY ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPEALS FOR THE AY 2004 - 05 AND 2005 - 06 ARE ON IDENTICAL ISSUE WHICH WAS ALSO AGITATED BY THE ASSESSE FOR THE AYS 1998 - 99 TO 2003 - 04. 3. THE BRIEF FACTS ARE THAT THE ASSESSE CLUB HAS BEEN SUBJECTED TO TAX ON THE INCOMES WHICH IN ACCORDANCE WITH THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF CHEMSFORD CLUB V. CIT REPORTED IN 243 ITR 89 AND ALSO THE DELIBERATION IN THE CASE OF CIT V. BANKIPUR CLUB LTD. [1997] 226 ITR 97 WAS TO I.T.A.NO. 434/CTK/2010 2 CONSIDER THE SE RECEIPTS/INCOME ON THE CONCEPT OF MUTUALITY BETWEEN THE MEMBERS AND THE ASSESSEE CLU B FOR ITS TAXABILITY. THE LEARNED CIT(A) NOTED THAT THERE ARE DECISIONS CONTRARY TO THE OBSERVATION WHEN CONCEPT OF MUTUALITY CONFINED TO THE EARNING OF INTEREST FROM THE BANKS ETC. HE NOTED THAT HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. BANGALORE CLUB [2006] 287 ITR 263 (KAR), HONBLE GUJARAT HIGH COURT IN THE CASE OF RAJPATH CLUB LIMITED V. COMMISSIONER OF INCOME TAX ( 211 ITR 379) HAVE CLEARLY HELD THAT THE EARNING OF INTEREST BECOMES EARNING FROM A THIRD PARTY AND HAS N O BEARING TO THE CONCEPT OF MUTUALITY FOR CLAIMING EXEMPTION FROM TAXATION AS WAS HELD BY HONBLE APEX COURT IN THE CASES STATED SUPRA. AFTER DELIBERATION OF THE LEARNED COUNSEL BEFORE US ON AN EARLIER OCCASION FOR THE FIVE YEARS NAMELY AYS 1998 - 99 TO 2003 - 04, THE LEARNED COUNSEL AGREED TO THE PROPOSITION THAT THE ISSUE REGARDING TAXABILITY ON EARNING OF INTEREST IN THE HANDS OF THE ASSESSEE CLUB MAY BE RESTORED TO THE FILE OF THE AO FOR DETERMINING WHETHER IN TEREST EARNED FROM THIRD PARTY IN ANY WAY COULD BE RELATED TO THE MEMBERS HAVING MUTUAL BENEFIT CONCEPT AS WAS ENVISAGED BY THE HONBLE APEX COURT INSOFAR AS EARNING OF INTEREST BEING A FINANCIAL TRANSACTION LOSES THE CONCEPT OF MUTUALITY BENEFIT WHEN A CLUB SUCH AS THE ASSESSEE IS ESTABLISHE D NOT FOR THE PURPOSE OF EARNING INTEREST . 4. AFTER HEARING THE RIVAL CONTENTIONS, WE AGREE TO THE PROPOSITION THAT THE MATTER BE CONSIDERED AT LENGTH BY THE AO IN VIEW OF THE CONTROVERSY RAISED BY THE CITED CASE LAWS AND NOTED BY THE LEARNED CIT(A) CATEGORICALLY H OLDING THE CONCEPT OF MUTUALITY NOT APPLICABLE TO THE EARN ING OF INTEREST FROM DEPOSITS IN BANKS AND OTHER INVESTMENTS. THE AO IS DIRECTED TO DETERMINE THE INTEREST INCOME WHICH CANNOT BE ASSIGNED TO THE RECEIPTS FROM MEMBERS AS SUCH. NEEDLESS TO SAY HE H AS TO AFFORD A REASONABLE OPPORTUNITY I.T.A.NO. 434/CTK/2010 3 OF BEING HEARD TO THE ASSESSEE AS WAS ALSO DIRECTED BY THE TRIBUNAL IN THE EARLIER COMMON ORDER. 5. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES AS MENTIONED ABOVE. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DAT E: 13 TH MAY, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : BHUBANESWAR CLUB LTD., RAJPATH AGS SQUARE, UNIT IV, BHUBANESWAR 751 001. 2 / THE RESPONDENT: ASST.COMMISSIONEROF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.