M/s City Club, Mandya V. ITO, Mandya

ITA 853/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0239 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: L BHARATH
• Keywords: Business income; Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.853/BANG/2015 ASSESSMENT YEAR : 2009-10 M/S. CITY CLUB, M.C. ROAD, MANDYA. PAN: AAAAC 2861Q VS. THE INCOME TAX OFFICER, WARD 1, INCOME TAX DEPARTMENT, CAUVERY PARK ROAD, MANDYA. APPELLANT RESPONDENT APPELLANT BY : SHRI L. BHARATH, CA RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 21.06.2016 DATE OF PRONOUNCEMENT : 30.06.2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF CIT(APPEALS), MYSURU DATED 10.02.2015 FOR THE ASSESSMENT YEAR 200 9-10. 2. THE ASSESSEE IS A CLUB AND IS ASSESSED AS AOP. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLE D FOR BOOKS OF ACCOUNT, IN PARTICULAR REGARDING MADHURA SAMMILANA , A RUMMY ITA NO.853/BANG/2015 PAGE 2 OF 7 TOURNAMENT CONDUCTED BY THE CLUB ON 4.1.2009. SINC E THE ASSESSEE DID NOT FURNISH THE DETAILS, AN INSPECTOR WAS DEPUTED T O CAUSE ENQUIRIES. EVEN A PROPOSITION NOTICE WAS SENT PROPOSING TO PRINT TH E ENTIRE RECEIPTS OF MADHURA SAMMILANA, FOR WHICH ALSO THERE WAS NO RE SPONSE. ACCORDINGLY, THE ASSESSMENT WAS CONCLUDED BASED ON THE MATERIAL AVAILABLE BEFORE THE AO. 3. DURING THE PREVIOUS YEAR, THE ASSESSEE MADE A CO LLECTION OF RS.53,29,100 FROM MADHURA SAMMILANA, A RUMMY TOUR NAMENT. THE ASSESSEE IN ITS LETTER DATED 16.10.2011 STATED THAT THIS AMOUNT WAS COLLECTED FROM THEIR MEMBERS ONLY TOWARDS CONDUCTIN G THE SPORTS AND NO OUTSIDERS WERE ALLOWED. THE ASSESSEE PLEADED THAT THE PROFIT OF RS.26,24,952 WAS UTILIZED FOR THE ACTIVITIES OF THE CLUB AND BASED ON THE CONCEPT OF MUTUALITY, THE ASSESSEE BEING A SOCIAL C LUB REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, IS A MUTUAL ASSOCIATION AND HENCE THE SURPLUS IS NOT TAXABLE. THE ASSESSEE WAS ASKED TO PRODUCE THE RELEVANT BOOKS AND DOCUMENTS OF THE TOURNAMENT WHICH WAS NOT PRODUCED. THE AO OBSERVED THAT THE ASSESSEE IS TRYING TO MISLEAD THE DEPARTME NT. SHRI BHAKTAVATSALA, WHO WAS THE SPECIAL COMMITTEE MEMBER OF MADHURA SA MMILANA, STATED THAT THE BOOKS OF ACCOUNT IS LOOKED AFTER BY THE TR EASURER AND SECRETARY OF THE CLUB AND HE DOES NOT KNOW ANYTHING ABOUT THE BO OKS. THE AO CAME TO THE CONCLUSION THAT SINCE THE ADDRESSES OF THE PART ICIPANTS WERE NOT FURNISHED AND THE CONCERNED BOOKS OF ACCOUNT WERE N OT PRODUCED, THE ASSESSEE WAS NOT ENTITLED TO CLAIM EXEMPTION ON THE BASIS OF PRINCIPLE OF ITA NO.853/BANG/2015 PAGE 3 OF 7 MUTUALITY. THE AO CONCLUDED THAT THE GROSS COLLECT ION OF RS.53,29,100 WAS CASH CREDIT AND TAXED THE SAME U/S. 68 OF THE ACT. 4. ON APPEAL BEFORE THE CIT(APPEALS), THE LD. AR AR GUED THAT THE GROSS AMOUNT OF RS.53.29 LAKHS HAS BEEN DISCLOSED IN THE INCOME & EXPENDITURE ACCOUNT UNDER SCHEDULE 16, WHICH IS PART OF THE AUD ITED ACCOUNTS. THE CIT(A) HELD THAT THOUGH THE ASSESSEE WAS GIVEN ENOU GH OPPORTUNITIES AT THE TIME OF ASSESSMENT, THE ASSESSEE CLAIMING THAT IT NEEDS COPIES OF STATEMENTS OF THE DEPARTMENT BY AO FROM MEMBERS WHI CH WERE FURNISHED. THE CIT(A) GAVE OPPORTUNITY TO CROSS-EXAMINE DURING THE REMAND PROCEEDINGS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE REASON FOR NON- FURNISHING OF BOOKS OF THIS EVENT WAS DUE TO ATTITU DE OF THE ACCOUNTANT WHO WAS REMOVED FROM THE SERVICE AND THE SAME WAS RECOV ERED FROM HIM AND PRODUCED LATER ON. REGARDING PARTICIPATION OF NON- MEMBERS, IT WAS EXPLAINED THAT MEMBERS OF CITY CLUB ARE ALSO MEMBER S OF OTHER CLUBS AND ONLY MEMBERS OF THE CLUB MEMBERS, THEIR CHILDREN & FAMILY MEMBERS PARTICIPATED IN THE EVENT. 5. THE CIT(APPEALS) HELD THAT TO ATTRACT PRINCIPLES OF MUTUALITY, THE ASSESSEE SHOULD ESTABLISH THAT THE COLLECTIONS WERE FROM THE MEMBERS ONLY AND NO OUTSIDERS WERE INVOLVED. THE ASSESSEE FILED LIST OF MEMBERS WHO CONTRIBUTED RS.9,000 BEFORE THE AO VIDE LETTER DATE D 28.8.2011 ALONG WITH THEIR MEMBERSHIP NOS. FROM THE MEMBERSHIP NOS., IDE NTIFICATION OF MEMBERS WERE CLEARLY ESTABLISHED AND SOME OF THE ME MBERS WERE EXAMINED BY THE AO AT THE TIME OF ASSESSMENT, BUT T HEY DENIED HAVING ITA NO.853/BANG/2015 PAGE 4 OF 7 CONTRIBUTED. THE CIT(A) OBSERVED THAT DURING THE R EMAND PROCEEDINGS, THE SAME MEMBERS CONFIRMED THEIR CONTRIBUTION. HENCE T HERE WERE LOT OF CONTRADICTIONS IN THE STATEMENTS OF THE ASSESSEE. FURTHER, THE CIT(A) NOTED THAT MR. BHAKTAVATSALA EXPLAINED TO THE AO THAT SOM E OF THE MEMBERS OF AFFILIATED CLUB ALSO PARTICIPATED IN THE EVENT, BUT THE LIST OF CONTRIBUTORS SHOWS THAT THE ENTIRE CONTRIBUTION IS MADE FROM MEM BERS ONLY. THE CIT(A) HELD THAT THE ASSESSEE COULD NOT FURNISH DETAILS OF PARTICIPANTS FOR THIS PROGRAMME EITHER BEFORE THE AO OR DURING THE PROCEE DINGS BEFORE HIM. HENCE RELYING ON THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF BANGALORE CLUB V. CIT, 29 TAXMANN 296 (SC) , THE CIT(A) HELD THAT ASSESSEE WAS NOT ABLE TO ESTABLISH THAT CREDITABLE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPANTS AND HENCE THE SURPLUS IN THIS EVENT IS TO BE TAXED UNDER THE HEAD BUSINESS INCOME. HE, HOWEVER, ALLOWED THE CONNECTED EXPENDITURE FROM THE GROSS COLLECTION. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE STAND THAT THE SUM OF R S.53.29 LAKHS ON MADHURA SAMMILANA WAS CONTRIBUTED BY THE CLUB MEM BERS AND THERE IS COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS AND THE AMOUNT HAS BEEN COLLECTED BY THE CLUB FROM THE MEMB ERS OF THE CLUB ONLY. ONLY THE CLUB MEMBERS, THEIR CHILDREN AND FAMILY ME MBERS HAVE PARTICIPATED IN THE MADHURA SAMMILANA EVENT. THE REFORE, THE SURPLUS DERIVED FROM THIS ACTIVITY IS EXEMPT FROM TAXATION. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A BROCHURE (ANNEXURE 2) ON MADH URA SAMMILANA ITA NO.853/BANG/2015 PAGE 5 OF 7 RUMMY TOURNAMENT HELD ON 4.1.2009. HE TOOK US THRO UGH PAGES 69 AND 70 OF THE PAPERBOOK WHICH ARE SWORN STATEMENTS MADE BY MR BHAKTAVATSALA. QUESTION NOS.24, 25, 29 & 30 AND ITS ANSWERS WHICH ARE RELEVANT TO THE ISSUE ARE REPRODUCED HEREUNDER:- Q.NO.24. WHAT WAS THE CONTRIBUTION COLLECTED FROM THE MEMBERS TOWARDS THE MADURA SAMMLANA PROGRAMMES AND ALSO PLEASE STATE WHEN WAS THE CONTRIBUTION COLLECTED? ANS: RS.9,000/- WAS COLLECTED FROM EACH OF THE CLU B MEMBERS AND THE CONTRIBUTION WAS STARTED ONE MONTH PRIOR TO THE MADHURA SAMMILANA PROGRAMME. Q.NO.25 PLEASE STATE THE FACILITIES PROVIDED BY THE CLUB TO THE MEMBERS AND THEIR FAMILY MEMBERS FOR THE CONTRIBUTI ON OF RS.9,000/- MADE BY THE CLUB MEMBERS? ANS: THE CLUB STARTED SPORT ACTIVITIES FOR MEMBERS AND THEIR FAMILY MEMBERS 15 DAYS PRIOR TO THE CONDUCT OF THE MADHURA SAMMILA PROGRAMME. THE CULTURAL ACTIVITIES AND RUMM Y TOURNAMENT WAS CONDUCTED ON 04/01/2009. THE CLUB P ROVIDED BREAKFAST, LUNCH AND DINNER ALONG WITH SOFT DRINKS AND SNACKS. Q.NO.29 PLEASE STATE WHETHER NON-MEMBERS OF THE CIT Y CLUB HAVE ATTENDED MADHURA SAMMILANA PROGRAMME? ANS: NO. Q.NO.30 IN THE SWORN STATEMENT RECORDED ON 24/12/20 11 TO THE Q.NO.6 YOU HAVE ANSWERED AS THE DISCOUNT FACIL ITIES WERE AVAILABLE TO OTHER CLUBS WHO COME IN THE GROUP OF 1 0 MEMBERS AND ABOVE AND ALSO WHO HAVE PAID THE SAME IN ADVANC E ALSO. PLEASE CLARIFY WHO WERE THE OTHER CLUB MEMBERS? ANS: THE SPECIAL COMMITTEE HAD TAKEN A DECISION THA T, IF MEMBERS OF THE OTHER AFFILIATED CLUB PARTICIPATES IN THIS P ROGRAMME IN THE GROUP OF 10 MEMBERS AND ABOVE WILL BE GIVEN DISCOUN T FROM THE CONTRIBUTION OF RS.9,000/-. BUT NO AFFILIATED MEMBE RS FROM OTHER CLUBS NEITHER CONTRIBUTED NOR PARTICIPATED. ITA NO.853/BANG/2015 PAGE 6 OF 7 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE HAVE GONE THROUGH THE SWORN STATEMENT MADE BY MR. BHAKTA VATSALA, BUT SINCE THERE ARE CONTRARY STATEMENTS MADE BEFORE THE AO ON THE ISSUE OF PARTICIPATION OF NON-MEMBERS ALSO, WE DEEM IT FIT T O REMIT THE MATTER BACK TO THE FILE OF AO. ACCORDINGLY, THE ISSUE IS RESTORE D TO THE FILE OF THE AO, WHO SHALL ONCE AGAIN EXAMINE THE ISSUE WITH RESPECT TO PARTICIPATION OF NON- MEMBERS IN THE MADHURA SAMMILANA EVENT, AFTER AFF ORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN CAS E THE ASSESSEE ESTABLISHES THAT THE MADHURA SAMMILANA EVENT WAS ORGANIZED BY THE CLUB FOR THE MEMBERS ONLY INASMUCH AS THE ASSESSEE FULLY DEMONSTRATES WITH EVIDENCE THAT THE CONTRIBUTORS TO THE EVENT WERE PA RTICIPANTS IN THE EVENT AND THAT NON-MEMBERS DID NOT PARTICIPATE IN THE EVE NT, THE ASSESSEE WOULD SATISFY THE PRINCIPLES OF MUTUALITY AND THE AO SHAL L REFRAIN FROM TAXING THE SURPLUS ARISING FROM THE MADHURA SAMMILANA EVENT AS BUSINESS INCOME. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JUNE, 2016. SD/- SD/- ( INTURI RAMA RAO ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 30 TH JUNE, 2016. /D S/ ITA NO.853/BANG/2015 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.