Asstt. Commissioner of Income Tax-5, Kanpur V. M/s Cawnpore Club Ltd., Kanpur

ITA 665/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4853 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.665/LKW/2014 ASSESSMENT YEAR:2009-2010 A.C.I.T.-5, KANPUR. VS. M/S CAWNPORE CLUB LTD., 33, CANTOMENT CANTT, KANPUR. PAN:AAACC5804H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY SHRI SARVAN SINGH, F.C.A. SHRI SUDHINDRA JAIN, F.C.A. DATE OF HEARING 14/12/2015 DATE OF PRONOUNCEMENT 14/01/2016 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF LEARNED CIT(A)-II, KANPUR DATED 21/04/2014 FOR THE ASSESSMENT YEAR 200 9-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS: 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.8,80, 029/- BEING ADDITION MADE BY THE AO ON ACCOUNT OF PROVISION FOR BAD & DOUBTFUL DEBTS WHICH IS NOT ACCEPTABLE. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN GRANTING RELIEF OF RS. 20,83,29 7/- BEING INCOME FROM BOOKING OF LAWN IN THE NAME OF OTHER TH AN MEMBERS OR THE CLUB WHICH VIOLATES THE PRINCIPLES O F MUTUALITY. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 7, 68,434/- OUT OF MISC EXPENSES BEING PAID TO TEMPORARY WORKERS BE ING NOT VERIFIABLE IN NATURE. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 25 ,91,314/- 2 BEING ADDITION ON GROSS SALE OF LIQUOR @ 50% WHICH WAS BASED ON THE SPECIFIC CALCULATION MADE BY THE AO. 5. THAT THE ORDER OF CIT(A) BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF ASSESSING OFFICER B E RESTORED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT THE MAIN ISSUE IN THIS CASE IS THIS THAT AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF THE PRINCIP LE OF MUTUALITY WHICH HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER BUT ALLOWED BY CIT (A) AND ONCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, ALL OTHER GROUND S RAISED BY THE REVENUE WILL BECOME OF ACADEMIC INTEREST ONLY BECAUSE IF THE INC OME ITSELF IS NOT TAXABLE BECAUSE OF THE PRINCIPLE OF MUTUALITY, ANY ADDITION OR DISALLOWANCE IS NOT RELEVANT. ON THIS ISSUE, HE PLACED RELIANCE ON A TRIBUNAL ORD ER RENDERED IN THE CASE OF ACIT VS. MOHD. BAGH CLUB LTD. IN I.T.A. NO.627/LKW/2007 D ATED 11/07/2014, COPY OF WHICH IS AVAILABLE ON PAGES 107 TO 114 OF THE PAPER BOOK. IN PARTICULAR OUR ATTENTION WAS DRAWN TO PAGE NO. 112 OF THE PAPER BO OK WHEREIN IT IS HELD BY THE TRIBUNAL THAT SINCE THE LAWN IS ALWAYS BOOKED IN TH E NAME OF THE MEMBERS AND NOT IN THE NAME OF OUTSIDERS, THEN ALTHOUGH IN SOME CASES, IT MAY BE USED FOR THE FUNCTIONS OF ANY RELATIVE OR FRIEND OF THE MEMBER, IT CANNOT BE ACCEPTED THAT RECEIPTS FOR THE BOOKING OF LAWN FROM MEMBERS CAN A LSO BE TREATED AS RECEIPTS FROM OUTSIDERS. HE FURTHER SUBMITTED THAT IN THE P RESENT CASE ALSO, THE ONLY REASONING GIVEN BY ASSESSING OFFICER FOR NOT ALLOWI NG THE BENEFIT OF PRINCIPLE OF MUTUALITY IS THAT THE LAWNS WERE BOOKED IN THE MEMB ERS NAME BUT SOMETIMES FUNCTIONS WERE HELD OF THEIR RELATIVES AND FRIENDS AND ACQUAINTANCES. HE SUBMITTED THAT BECAUSE SAME REASONING IS ADOPTED BY THE ASSESSING OFFICER FOR REJECTING THE CLAIM OF THE ASSESSEE FOR THE BENEFIT OF MUTUALITY, THIS TRIBUNAL ORDER IS SQUARELY APPLICABLE AND ONCE THIS CLAIM OF THE A SSESSEE IS ACCEPTED THAT INCOME OF THE ASSESSEE IS NOT TAXABLE BECAUSE OF PRINCIPL E OF MUTUALITY, ANY OTHER ADDITION/DISALLOWANCE EVEN IF CONFIRMED WILL NOT MA KE ANY EFFECT BECAUSE EVEN THEN, THERE WILL BE NO TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. 3 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND FORCE IN THE SUBMISSIONS OF LEARNED A. R. OF THE ASSESSEE. WE F IND THAT THE CLAIM OF THE ASSESSEE REGARDING BENEFIT OF PRINCIPLE OF MUTUALIT Y WAS DENIED BY THE ASSESSING OFFICER ON THE SOLE REASONING THAT ALTHOUGH THE LAW NS WERE BOOKED IN THE NAME OF THE MEMBERS BUT SOMETIMES THE SAME WERE USED FOR TH E FUNCTIONS OF THEIR RELATIVES, FRIENDS AND ACQUAINTANCES. SIMILAR ISSU E WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE CASE OF ACIT VS. MB C LUB LIMITED (SUPRA) AND THEREFORE, BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, WE HOLD THAT IN THE PRESENT CASE ALSO, THE ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF MUTUALITY. ONCE WE HOLD THIS, OTHER DISALLOWANCES MADE BY THE ASSESSING OFFICER A ND DELETED BY CIT(A) ARE OF ACADEMIC INTEREST ONLY BECAUSE ONCE THE ASSESSEE IS ELIGIBLE FOR BENEFIT OF MUTUALITY, NO INCOME IS TAXABLE IN THE HANDS OF THE PRESENT ASSESSEE AND THEREFORE, DISALLOWANCE MADE BY THE ASSESSING OFFI CER AND DELETED BY CIT(A) IS OF ACADEMIC INTEREST ONLY BECAUSE EVEN IF WE REVERS E THE ORDER OF CIT(A), IT WILL NOT MAKE ANY EFFECT ON THE TAXABLE INCOME OF THE AS SESSEE. HENCE, WE HOLD THAT THERE IS NO MERIT IN ANY OF THE GROUNDS RAISED BY T HE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED:14/01/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT . REGISTRAR