ACIT, Circle 1(1), Bhubaneswar V. M/s. Bhubaneswar Club Limited, Bhubaneswar

ITA 439/CTK/2012

• Counselvise Citation: 43922114 RSA 2012
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2012
• Court: TRIBUNAL
• Department Lawyers: ARISES FROM
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 (C.O.FILED BY THE ASSESSEE) / ASSESSMENT YEAR 2008 - 09 ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. - - - VERSUS - M/S .BHUBANESWAR CLUB LTD., RAJPATH, AGS SQUARE, BHUBANESWAR PAN: AABCB 3582 C ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.K.NEB, DR / FOR THE RESPONDENT: / SHRI G.NAIK/R.KAR, ARS / DATE OF HEARING: 06.11.2012 / DATE OF PRONOUNCEMENT: 09.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THE APPEAL BY THE REVENUE ARISES FROM THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME - TAX (APPEALS) DT.1.5.2012 WHEN THE LEARNED CIT(A) ON THE BASIS OF FINDING OF FACTS AS BROUGHT ON RECORD BY THE ASSESSING OFFICER IN HIS ORDER DT.6.12.2010 PASSED BY THE ASSESSING OFFICER U/S.143(3) CHOSE TO HOLD THAT THE CONCEPT OF MUTUALITY W HICH BENEFIT IS TO BE DISTRIBUTED AMONGST THE MEMBERS HOLDS TRUE FOR THE ITEMS CONSIDERED BY THE ASSESSING OFFICER AS RECEIPTS OF THE ASSESSEE CLUB NOT FOR THE MUTUAL BENEFIT OF THE MEMBERS. IT HAS BEEN BROUGHT ON RECORD THAT THE CASE LAWS CITED BY THE ASS ESSING OFFICER WERE DEALT WITH BY THE LEARNED CIT(A) WHEN DISTINGUISHING THE FACTS, THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE TO THE EXTENT THAT THE LEARNED CIT(A) RESTORED THE ISSUE PARTLY TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER WHETHER T HE RECEIPTS RELATE TO THE MEMBERS OF THE ASSESSEE CLUB INSOFAR AS THE RECEIPTS FROM I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 2 MEMBERS SUCH A TEMPORARY MEMBERS, AFFILIATED MEMBERS OR GUESTS ALONG WITH THE HONORARY MEMBERS WHETHER COULD BE CONSIDERED FOR THE PURPOSE OF MUTUAL BENEFIT. A CROSS OBJEC TION HAS BEEN PREFERRED BY THE ASSESSEE RESPONDENT OBJECTING TO THE LEARNED CIT(A) HAVING MADE INCORRECT OBSERVATION INSOFAR AS THE GROUND RAISED BY THE REVENUE I.E., GROUND NO.2 CLARIFIES THE SITUATION AS WAS BROUGHT ON RECORD BEFORE THE LEARNED CIT(A). 2 . AT THE OUTSET THE LEARNED COUNSEL OF THE ASSESSEE RESPONDENT SUBMITTED THAT THE ISSUES STAND COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 IN ITA NO.415 AND 424/CTK/011 DT.13.1.2012, A COPY OF WHICH IS PLA CED ON RECORD. HE SUBMITTED THAT THE VARIOUS CASE LAWS HAVE BEEN CONSIDERED BY THE TRIBUNAL INSOFAR AS THE OVERWHELMING FACT WAS ON THE BASIS OF HONBLE APEX COURTS DECISION IN THE CASE OF CHELM S FORD CLUB V. CIT [ 243 ITR 89 (SC) ]. FOR THE PURPOSE OF THE A PPEAL EFFECT GIVEN BY THE ASSESSING OFFICER, HE HAS SUBMITTED THE ORDER DT.20.7.2012 WHEN THE TOTAL INCOME AS PER THE FINDING OF FACTS NOTED BY THE LEARNED CIT(A) ON THE DIRECTION OF THE LEARNED CIT(A) , THE ASSESSING OFFICER HAS DETERMINED THE INCOME NOT PERTAINING TO THE INCOME FOR THE MUTUAL BENEFIT HAS BEEN MENTIONED. 3. THE LEARNED DR, INITIATING HIS ARGUMENTS, SUBMITTED THAT THE LEARNED CIT(A) ERRED IN TRYING TO CORRELATE THE FACT FINDING OF THE ASSESSING OFFICER WITH THE CASE LAWS CITED BY HIM DISTIN GUISHING THE FEATURES AS WERE RELIED UPON BY THE ASSESSING OFFICER TO COMPUTE THE INCOME TO BE TAXED IN THE HANDS OF THE ASSESSEE AMOUNTING TO 24,92,845. HE SUBMITTED THAT THE ASSESSEES OWN DISCLOSURE OF THE NATURE OF INCOMES OR RECEIPTS CANNOT BE CONSIDERED AS FOR THE MUTUAL BENEFIT OF THE MEMBERS INSOFAR AS THEY HAVE BEEN GENERATED FROM THE PROPERTY OF THE ASSESSEE CLUB BUT AS FROM THIRD PART Y. THEREFORE, THE LEARNED CIT(A) ERRED IN GRANTING BLANKET DIRECTION TO I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 3 THE ASSESSING OFFICER TO DELETE THE RESIDUAL EXCEPT TO THE EFFECT THAT CERTAIN MEMBERS WHO HAD ENJOYED THE FACILITY OF THE CLUB WERE NOT IN THE GENERAL AMBIT OF MUTUAL BENEFIT TO BE GR ANTED INSOFAR AS THE INCOME WAS CONSIDERED TAXABLE IN THE HANDS OF THE ASSESSEE CLUB AFTER ALLOWING EXPENSES AS PER THE APPEAL EFFECT OR DER PLACE ON RECORD BY THE LEARNED COUNSEL OF THE ASSESSEE . HE SUBMITTED THAT THE RECEIPTS FROM THIRD PARTIES WHEN THE PROPERTIES ARE BEING ENJOYED BY THE MEMBERS BECOME INCOME NOT AS INCOME CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CHELM S FORD CLUB (SUPRA). HE TRIED TO BRING ON RECORD THE VARIOUS OTHER JUDICIAL PRONOUNCEMENTS IN RESPECT OF DIFFERENT OTHER COUR TS FOR DIFFERENT OTHER CLUBS IN OTHER STATES WHEN FOLLOWING THE DECISION OF HONBLE APEX COURT THE JUDICIAL PROPRIETARY HELD THAT CERTAIN INCOMES CANNOT BE CONSIDERED FOR MUTUAL BENEFIT EXPRESSION. HE THEREFORE, SUPPORTED THE ORDER OF THE ASSESSING OFFICER FOR HIS PART OF SUBMISSIONS. 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN ALLOWING EXEMPTION TO THE ASSESSEE ON THE GROUND OF MUTUALI TY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE CONCEPT OF MEMBER WILL INCLUDE GUESTS AND RELATIVES OF THE MEMBERS AND MEMBERS OF THE AFFILIATED CLUBS. 3. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE INTEREST ON BANK DEPOSITS MADE OUT OF SURPLUS CONTRIBUTIONS OF MEMBERS WAS EXEMPT ON THE GROUND OF MUTUALITY . 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS ON FACTS IN DIRECTING THE AO TO CONSIDER THE TOSS RETURNED BY THE ASSESSEE ON THE GROUND OF MUTUALITY ? I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 4 5. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN ITS CROSS OBJECTIO N. FOR THAT THE LEARNED CIT(A) SHOULD NOT HAVE MADE INCORRECT OBSERVATION AT PARA - 5.2.2 OF PAGE - 13 OF THE IMPUGNED ORDER DATED 01.05.2012 THAT THE APPELLANT SUBMITS THAT SUCH RECEIPTS RELATE TO MEMBERS OF THE APPELLANT CLUB, AT LEAST TO A LARGE EXTENT A ND THEREFORE SHOULD NOT HAVE DIRECTED THE A.O. TO EXAMINE SUCH RECEIPTS AGAIN INSTEAD OF DECIDING HIMSELF, PARTICULARLY WHEN THE RECORDS SHOW NO AMOUNT HAS BEEN RECEIVED FROM NON - MEMBERS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE . 6. THE LEARNED COUNSEL OF THE ASSESSEE JOINING AFTER HAVING SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE CONTINUED THAT THE LEARNED CIT(A) HAS JUDICIALLY CONSIDERED THE CASE OF ASSESSEE APPELLANT BEFORE HIM WHEN IT W AS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT ALL THE PARAPHERNALIA/INFRASTRUCTURE BELONGING TO THE ASSESSEE CLUB WAS THE PROPERTY OF THE MEMBERS WHICH THEY WERE FREE TO UTILIZE. IT IS NOT THE CASE OF THE REVENUE THAT A PROPERTY WHICH MAY HAVE BEE N PARTLY USED BY NON - MEMBERS WHETHER COULD BE DENIED DEPRECIATION FOR THAT PART OF PERIOD HAS NOT BEEN SPECIFIED BY THE ASSESSING OFFICER. THE LEARNED CIT(A) THEREFORE, CONSIDERED THE JUDICIAL PRONOUNCEMENTS FOR AND AGAINST THE CONCEPT OF MUTUAL BENEFIT DE RIVED EVEN FOR EARNING INTEREST FROM BANK DEPOSITS WHICH BANK DEPOSITS WERE MADE WHEN THE MEMBERS CONTRIBUTED SURPLUS AND MEMBERS COULD INCUR LESS EXPENDITURE THEMSELVES WERE FREE TO USE THAT MONEY FOR EARNING INTEREST AGAIN TO BE DISTRIBUTED AMONGST THE MEMBERS. IN THIS SCENARIO THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICERS ENDEAVOR FOR BRING ING TO TAX ITEMS ARE TABULATED UNDER , HEADS INCOME COMPUTER COLLECTION COUNTER 2,88,507 TELEPHONE COLLECTION ACCOUNT 25,415 I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 5 RENT F ROM ATM COUNTER 45,544 ADVERTISEMENT COLLECTON FOR MEMBERS DIRECTORY. 6,17,697 DIRECTORY COLLECTION. 2,88,800 REIMBURSEMENT OF ELEC TRICITY CHARGES 49,117 T - SHIRT AND TIE ACCOUNT 8,000 TOTAL 14,63,943 WAS THE EXERCISE IN FUTILITY WHEN THE LEARNED CIT(A) NOTED THAT THE RECEIPTS FROM HONORARY AND INSTITUTIONAL MEMBER WAS 2,75,535 AND 1,47,445 RESPECTIVELY. THIS WAS TO BE CONSIDERED FOR THE PURPOSE OF DETERMINING WHETHER THE RECEIPTS FROM THESE MEMBERS WHETHER COULD DECIDE THE CONCEPT OF MUTUALITY WAS GIVEN APPEAL EFFECT BY THE ASSESSING OFFICER HIMSELF WHEN HE NOTED THAT A SUM OF 2,21,556 ALONE COULD BE TAXED IN THE HANDS OF THE ASSESSEE AFTER HAVING ADJUDICATED THE COVERED ISSUE. HE SUBMITTED THAT THESE ARE THE ITEMS WHICH HE HAS CONSIDERED WHICH ITEMS AS PER HIS CROSS OBJECTION SHOULD NOT BE COMPUTED INSOFAR AS THE REN T FROM ATM AND THE ELECTRICITY CHARGES CONSUMED WHICH ARE REIMBURSED BY THE BANK COULD NOT BY ANY IMAGINATION BE CONSIDERED AS OUTSIDE THE SCOPE OF MUTUAL BENEFIT. THE BANK HOLDING THE ATM IS A CORPORATE MEMBER AND THEREFORE THE SERVICE PROVIDED BY A CORPO RATE MEMBER IS FOR THE BENEFIT OF THE MEMBERS ALONG WITH ITSELF CANNOT BE SUBJECTED TO DISALLOWANCE AS PER THE DIRECTION OF THE LEARNED CIT(A) ON THE FACTS AND CIRCUMSTANCES BROUGHT ON RECORD. THE ASSESSING OFFICER THEREFORE WAS GRATEFUL TO ACKNOWLEDGE TH AT THE EXPENSES HAVE BEEN MADE FROM THE COMMON POOL WAS TO BE ALLOWED FOR THE PURPOSE OF TAXATION INSOFAR AS THE EXPENSES WERE CONSIDERED OTHERWISE ALLOWABLE AS PER THE DIRECTION OF THE LEARNED CIT(A). HE LEFT IT TO THE DISCRETION OF THE BENCH INSOFAR AS T HE DIRECTION OF THE LEARNED CIT(A) HAS BEEN MADE TO HAVE LIMITED EXTENT THAT THE ADDITIONAL RENT FOR RENT FROM A THIRD PARTY IS NOT FROM A NON - MEMBER HAS TO BE ESTABLISHED BY THE ASSESSING OFFICER. I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 6 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. ON CAREFUL CONSID ERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT(A) AND ALSO PARTLY ALLOW THE CROSS OBJECTION OF THE ASSESSEE BEFORE US INSOFAR AS BOTH THE ORDERS HAVE RATHER CLARIFIED THE ISSUES AS COVERED BY THE DECISION OF THIS BENCH IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2007 - 08. FOR THE SAKE OF AVOIDING REPETITION WE HOLD THAT THE LEARNED CIT(A)S ORDER DOES NOT SUFFER FROM ANY INFIRMITY TO THE EXTENT THAT HE CHOSE TO DIRECT THE ASSESSING OFFICE R TO FIND OUT THE RECEIPTS FROM NON - MEMBERS ALONE TO BE TAXED WHEN THE ASSESSING OFFICER COMPUTED INCOME IN HIS JURISDICTION BY GRANTING 70 % EXPENSES THEREON INDIRECTLY ALLOWED THE CLAIM OF THE ASSESSEE THAT THE EXPENSES WERE INCURRED BY THE MEMBERS FOR TH E PURPORTED NON - MEMBERS. IN OTHER WORDS, THE CONCEPT OF MUTUALITY HAD BEEN ADMITTED INSOFAR AS WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE RENT RECEIVED BY THE CLUB FROM BANK BEING A CORPORATE MEMBER FOR ALLOWING THE OTH ER MEMBERS TO UTILIZE ITS ATM MACHINE HAS ALSO REIMBURSED THE ELECTRICITY CHARGES INCURRED BY THE ASSESSEE CLUB JUSTIFIES THE APPEAL EFFECT GIVEN PARTLY ONLY. THE ASSESSING OFFICER, THEREFORE, CONSIDERED TAXATION AS PER THE DIRECTION OF THE LEARNED CIT(A) THE RECEI PT FROM HONORARY AND INSTITUTIONAL MEMBER AND TEMPORARY MEMBERS IN HIS WISDOM HAS ALLOWED THE EXPENDITURE WHICH WAS THE SUBMISSIONS OF THE LEARNED DR ALSO TO HOLD THAT ONLY INCOME OUTSIDE THE SCOPE OF MUTUAL BENEFIT CAN BE BROUGHT TO TAX. WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) INSOFAR AS THE TOTAL INCOME COMPUTED AFTER THE APPEAL EFFECT SHOULD BE 1,26,895 AND NOTRS.2,21,556 ON THE BASIS OF FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER AS WELL AS DEALT WITH BY THE LEARNED CIT(A). I.T.A.NO. 439/CTK/2012 C.O.NO.34/CTK/2012 7 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 09.11.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ACIT, CIRCLE 1(1), BHUBANESWAR. 2 / THE RESPONDENT: M/S.BHUBANESWAR CLUB LTD., RAJPATH, AGS SQUARE, BHUBANESWAR 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR . P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 06.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENC H CLERK 09.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.