DDIT (E), New Delhi V. The Country Club (Saket), New Delhi

ITA 606/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 6990 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law

Judgement Text

IN THE INCOME TA X AP PELLA TE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE H ON'BLE SENIOR VICE P RESIDENT, SHRI R.P. GARG AN D HON'BLE JUDICIAL MEMBER, SHRI A.D. JAIN ITA NO.606/DEL./2009 (ASSESSMENT YEAR : 2005-06 ) DY . DIRECTOR OF INCOM E TAX ( E), VS. THE COUNTR Y CLUB (SAKET CLUB), INV. CIRCLE II , NEW DELHI. 181/2, SAINIK FARM S, NEW DELHI. (P AN : AAATS3760K) (APP EL LANT ) (RES PONDENT ) ASSE SSE E BY : S HRI S.K. SA RKAR, CA REV ENUE B Y : SH RI A.K. SINHA, SENIOR DR O R D E R GARG, SENIOR VP : T HIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CI T ( APPEALS) FOR THE ASSESS ME NT YEA R 2005 -06 DELETING THE ADDITION OF RS.17,33,390/- ON ACCOUNT OF INTEREST INCOM E EA RNED ON BANK DEPOSITS FROM TAXABILITY ON THE G ROUND THAT IT IS COVERED BY P RINCIPLE OF M UTUALITY. 2. AFTER HEARING THE PARTIES, WE FIND T HAT THE MATTER STANDS COVERED IN THE ASSE SSEE S OWN CASE FOR THE ASSE SS ME NT Y EARS 2003-04 & 2004 -05 IN IT A NOS.4521 & 4522/DEL/2007 O RDER DATED 30.6.2008 WHEREIN THE TR IBUNAL DIS MI SSED THE APPEALS OF THE REVENUE VIDE PA RAGRAPH 4 OF THE O RDER AS UNDER : 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON R ECORD. HON'BLE DELHI HIGH COURT IN T HEIR DECISION DATED 11 /05/2007 IN IT A. 84/2003 IN ASSE SSEE S OWN CASE HELD THAT THE DOCTRINE OF MUTUALITY WAS APPLICABLE TO T HE IN TEREST EARNED ON DEPOSITS WITH THE BANK. I TA T, DELHI BENCH B IN 2 ITA NO.606/DEL./2009 THE O RDER DATED 29 TH JUNE, 2006 IN I TA NO.869 (DEL ) OF 2004 FOR ASSE SS ME NT Y EAR 2001 -02 FOLLOWING T HE DECISION OF HON'BLE DELHI HIGH COURT IN ASSE SSEES OWN CASE DECIDED THE M ATTER IN FAVOUR OF THE ASSE SSEE. I T HAS BEEN HELD T HAT T HE ENTI RE INTEREST INCO ME IS COVERED BY THE P RINCIPLE OF MUTUALITY AND WILL BE EXE MPT. ITA T, I BENCH FOR ASSES SM EN T Y EAR 2002-03 IN I TA NO.3765 (DEL. ) OF 2005 DATED 24 T H AUGUST, 2007 DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE. SINCE THE INTEREST INCO ME EARNED ON FIXED DEPOSITS WITH THE BANK HAS BEEN HELD TO BE EXE MPT ON THE PRINCIPLE OF M UTUALITY B Y HON'BLE DELHI HIGH COURT IN THE CASE OF ASSES SEE AND THE DECISION HAS BEEN FOLLOWED BY DELHI BENCHES IN ASSES SEES OWN CASE, THERE IS NO REASON FOR US TO DEFER FRO M THE DECISION TAKEN BY COORDINATE BENCHES OF THE TR IBUNAL. RESPECT FULLY FOLLOWING THE P RECEDENTS, IT IS HELD THAT THE INTEREST EA RNED ON FIXED DEPOSITS WILL BE EXE MPT ON THE PRINCIPLE OF MUTUALITY. WE ACCORDINGLY D IS MI SS THE APPEALS FILED B Y THE REVENUE. 3. THIS O RDER NOW STANDS UPHELD BY THE DELHI HIGH COURT IN IT A NO.84/2003 O RDER DATED 11.5.2007 WHEREIN THE HIGH COURT B Y OBSERVING IN PARAGRAPHS 5, 6 & 7 OF THE O RDER ANSWERED T HE QUESTION IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE AS UNDE R : 5. APPLY ING THE DOCTRINE OF MUTUALITY, THE TR IBUNAL HELD THAT INCO ME RECEIVED B Y THE ASSES SEE FOR T HE USE OF FACILITIES BY GUESTS OF THE M EM BER S IS EXEMPT FROM TAXATION. TH IS BEING THE POSITION, WE ARE OF THE VIEW T HAT DEPOSITS MADE AS A R ESULT OF THIS INCOME RECEIVED AND THE INTEREST RECEIVED T HEREON FRO M THE BANKS CANNOT BE SAID TO BE OUTSIDE T HE DOCT RINE OF MUTUALITY. 6. LEARNED COUNSEL FOR THE ASSES SEE HAS RELIED UPON DIRECTOR O F INCO ME TAX V. ALL INDIA ORIEN TAL BAN K OF CO M M ER CE WEL FARE SOCIET Y, [2003] 130 TA XM AN 575 (DELHI ), IN WHICH THIS COURT HAS RELIED UPON THE CHELM SFORD CLUB V. CIT [2000] 243 ITR 89 ( SC) . IT WAS HELD, FOLLOWING THE DECISION OF THE SUP RE ME COURT, THAT WHERE A NUMB ER OF PERSONS CO MBINE TO CONTRIBUTE TO A COM MO N FUND AND HAVE NO 3 ITA NO.606/DEL./2009 DEALINGS OR R ELATIONS WITH AN Y OTHE R BODY , THEN AN Y SURPLUS GENERATED CANNOT, IN ANY SENSE BE REGARDED AS P ROFITS CHARGEABLE TO TAX. ON THIS BASIS, THE DOCTRINE OF MUTUALITY WAS APPLIED TO THE FACTS OF THAT CASE. WE SEE NO DISTINCTION IN THE DECISION RENDERED B Y THIS COURT IN ALL INDIA ORIEN TAL BAN K OF CO M M ER CE WELFARE SOCIET Y AND THE PRESENT CASE. 7. UNDER THE CIRCUM STANCE S, WE ANSWER THE QUESTION OF LAW IN THE AFFIR MA TIVE, IN FAVOUR OF THE ASSESS EE AND AGAINST T HE REVENUE. 4. FACTS AND CIRCUM STANCE S BEING SI MILAR, WE UPHOLD THE ORDER OF THE CIT (APPEALS) AND DIS MI SS THE APPEAL OF THE REVENUE. O RDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF APRIL 2009. ( A.D. JAIN) ( R.P. GARG) JU DICIAL ME MB ER SENIOR VICE P RESIDENT DATED THE 22 N D DA Y OF AP RIL 2009 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XX I, NEW DELHI. 5.CIT (I TAT), NEW DELHI. AR, I TA T NEW DE LHI.