SANTACRUZ GYMKHANA, MUMBAI V. ACIT CIRCLE 19(1), MUMBAI

ITA 7505/MUM/2011

• Counselvise Citation: 750519914 RSA 2011
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M RAMCHANDRAN
• Assessee Lawyers: SANTOSH PARAB
• Section: 143(3); 234B; 56

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMB ER . / ITA NO. 7505 /MUM./ 2011 ( / ASSESSMENT YEAR : 20 0 6 07 ) . / ITA NO. 212 /MUM./ 2012 ( / ASSESSMENT YEAR : 2007 08 ) SANTACRUZ GYMKHANA 11 TH ROAD, SANTACRUZ (E) MUMBAI 400 055 .. / APP ELLANT V/S ASSTT . COMMISSIONER OF INCOME TAX CIRCLE 19 ( 1 ), MUMBAI .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAAAS4059E / ASSESSEE BY : MR. SANTOSH PARAB / REVENUE BY : MR. M. RAMCHANDRAN / DATE OF HEARING 0 4 . 03 .201 4 / DATE OF ORDER 14.03.2014 / ORDER / PER BENCH THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 26 TH AUGUST 2011 , PASSED BY THE SANTACRUZ GYMKHANA 2 LEARNED COMMISSIONER (APPEALS) XX II , MUMBAI , FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2 0 06 07 . 2 . SINCE BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUES ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. HOWEVER, IN ORDER TO UNDERSTAND THE IMPLICATION, IT WOULD BE NECESSARY TO TAKE NOTE OF THE FACTS OF ONE APPEAL. WE ARE, ACCORDINGLY, NARRATING THE FACTS, AS THEY A PPEAR IN THE APPEAL IN I TA NO. 7505 /MUM./2011, FOR ASSESSMENT YEAR 2006 07. THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 07 READ AS UNDER: 1 . 1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE INTEREST EARNED ON F.D. OF ` 12,29,584 ON THE PREMISE THAT THE PRINCIPLE OF M UTUALITY IS NOT SATISFIED IN THE APPELLANTS CASE. 1 . 2 THE LEARNED CIT(A) ERRED IN REJECTING THE VARIOUS JUDGMENTS OF HIGH COURTS, TRIBUNAL, ETC., WHEREIN IT IS CLEARLY AND UNAMBIGUOUSLY HELD THAT INCOME FROM INVESTMENT IN CASE OF A MUTUAL ASSOCIATION NIS TOT ALLY EXEMPT FROM TAX ON THE GROUND OF MUTUALITY. 1 . 3 THE ASSESSING OFFICER ERRED IN NOT ALLOWING THE SET OFF OF SEVERAL AND MULTIPLE EXPENSES INCURRED THE APPELLANT AGAINST INTEREST INCOME OF ` 12,29,584. 1 . 4 THE ASSESSING OFFICER ERRED IN SADDLING THE APPELLANT WITH INTEREST U/S 234B AND 234C OF THE ACT. 3 . THE ASSESSEE IS AN ASSOCIATION OF PERSONS (AOP) WHICH IS RUNNING ITS AFFAIRS ON THE PRINCIPLES OF MUTUALITY . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EARN ED INTEREST INCOME OF ` 12,29,584 ON FIXED DEPOSITS WITH THE BANK. THE ASSESSEE, IN RESPONSE TO THE SHOW CAUSE NOTICE, SUBMITTED SANTACRUZ GYMKHANA 3 THAT IN VIEW OF THE VARIOUS DECISIONS, THE INTEREST EARNED BY IT ON THE DEPOSITS WITH THE BANK AND GOVT. COMPANIES SHOULD BE TR EATED AS EXEMPT ON THE GROUND OF MUTUALITY . THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AND HELD THAT INTEREST INCOME DOES NOT FALL WITHIN THE AMBIT OF PRINCIPLES OF MUTUALITY AND THE SAME IS TAXABLE UNDER SECTION 56 I.E., UNDER THE HEAD INCOME FROM OTHER SOURCES . 4 . THE LEARNED COMMISSIONER (APPEALS) TOO HAS CONFIRMED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, PERUSED THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT AND ALS O DISCUSSED THE CASE WITH THE A/R OF THE APPELLANT. IN THIS CASE, THE A.O. TREATED INTEREST INCOME AS TAXABLE U/S 56 OF THE I.T. ACT UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WAS CLAIMED BY THE APPELLANT AS NON TAXABLE INCOME IS ALSO GOVERNED BY THE P RINCIPLES OF MUTUALITY SINCE THE SURPLUS FUND OF THE GYMKHANA IS KEPT WITH BANK AND GOVT. COMPANIES AS MATTER OF PRECAUTION AND NOT IN THE PRIMARY OBJECT OF EARNING INTEREST AND HENCE NOT TAINTED WITH COMMERCIALITY. THE APPELLANT HAS ALSO RELIED UPON SEVER AL LAWS AS ABOVE. HOWEVER, I DO NOT AGREE WITH THE CONTENTION OF THE APPELLANT. THE IDENTICAL ISSUE HAD COME UP BEFORE MY LD. PREDECESSOR WHO VIDE HIS ORDER NO.CIT(A) - 30/ACIT - 19(1)/IT - 53/09 - 10 DATED 26.11.2009 IN APPELLANT'S OWN CASE FOR A.Y. 2005 - 2006, AF TER ANALYZING THE FACTS OF THE CASE LAWS RELIED UPON BY THE APPELLANT, HAS 'HELD THAT THE INTEREST INCOME ON FDR IS NOT GOVERNED BY THE PRINCIPLES OF MUTUALITY AND CONSEQUENTLY IS TAXABLE U/S. 56 OF I.T.ACT UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHE R, IN MADRAS GYMKHANA CLUB VS. DCIT, 226 CTR 176, IT WAS HELD BY HON'BLE MADRAS HIGH COURT THAT INTEREST EARNED ON FIXED DEPOSIT WITH BANK IS NOT COVERED BY MUTUALITY AND HENCE TAXABLE. THE ISSUE ALSO CAME BEFORE HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE CIT VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION, 328 ITR 362 WHEREIN HON'BLE BOMBAY HIGH COURT HELD THAT THE INTEREST INCOME ON FIXED DEPOSIT WOULD NOT POSSESS THE CHARACTER OF MUTUALITY AND HENCE WOULD EXIGIBLE TO TAX AS INCOME FRO M OTHER SOURCES. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE JUDGMENTS AND THE FINDINGS OF MY LD. PREDECESSOR IN EARLIER YEAR, I AM OF THE CONSIDERED OPINION THAT THE A.O. HAS RIGHTLY TREATED THE INTEREST INCOME ASSESSABLE U/S. 56 OF I.T.ACT WHICH IS UP HELD. SANTACRUZ GYMKHANA 4 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THE VERY OUTSET SUBMITTED THAT THIS ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN BANGALORE CLUB V/S CIT, [2013] 350 ITR 509 (SC). THE ASSESSEES REPRESENTATIVE ALSO ADMITT ED THAT THE ISSUE RAISED IN THE GROUND OF APPEAL IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT. 6 . AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS) AND THE D ECISION OF THE HON'BLE SUPREME COURT IN BANGALORE CLUB (SUPRA), WE FIND THAT TH E ISSUE OF INTEREST FROM BANK IN THE CASE OF CLUB GOVERNED BY THE PRINCIPLES OF MUTUALITY STANDS SQUARELY COVERED BY DECISION OF THE HON'BLE SUPREME COURT , WHEREIN IT WAS HELD THAT THE AMOUNT OF INTEREST EARNED BY THE CLUB FROM THE BANK WILL NOT FALL WITHIN THE AMBIT OF PRINCIPLES OF MUTUALITY AND WILL, THEREFORE, BE EXIGIBLE TO THE TAX IN THE HANDS OF THE CLUB. THUS, RESPECTFULLY FOLLOWING THE LAW REITERATED BY THE HON'BLE S UPREME COURT, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE YEARS UNDER APPEAL. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE YEARS I.E., FOR THE ASSESSMENT YEAR 2006 07 AND 2007 08 ARE DISMISSED, AS THE GROUNDS R AISED IN THE ASSESSMENT YEAR 2007 08 BY THE ASSESSEE IS SAME AND OUR FINDINGS WILL APPLY MUTATIS MUTANDIS 7 . IN GROUND NO.1.14 FOR THE ASSESSMENT YEAR 2006 07 AND 2007 08 , THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTION 234B AND 234D. 8 . AFTER HEARI NG BOTH THE PARTIES, WE FIND THAT THIS GROUND IS CONSEQUENTIAL IN NATURE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO GIVE CONSEQUENTIAL EFFECT WHILE RE COMPUTING THE INCOME OF THE SANTACRUZ GYMKHANA 5 ASSESSEE KEEPING IN VIEW OUR FINDINGS GIVEN ABOVE AND IN ACCORDANCE WIT H THE PROVISIONS OF LAW. 9 . 2006 07 2007 08 9. IN THE RESULT, ASSESSEES APPEAL S FOR THE ASSESSMENT YEAR 2006 07 AND 2007 08 ARE DISMISSED. 14 TH M ARCH 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH 2014 SD/ - SANJAY ARORA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 14 TH MARCH 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, M UMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI