DCIT 1(1)R.NO. 579 AAYAKR BHVNA, MUMBAI V. BOMBAY GYMKHANA LTD, MUMBAI

ITA 8906/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9335 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE HONBLE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG (JM) . . , , ./I.T.A. NO.8906/MUM/2010 ( / ASSESSMENT YEAR : 2007-08) DY.COMMISSIONER OF INCOME TAX -1(1), ROOM NO.579, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S BOMBAY GYMKHANA LTD., MAHATMA GANDHI ROAD, FORT, MUMBAI-400001 ( / APPELLANT) .. ( / RESPONDENT) ./I.T.A. NO.1378/MUM/2011 ( / ASSESSMENT YEAR : 2007-08) M/S BOMBAY GYMKHANA LTD., MAHATMA GANDHI ROAD, FORT, MUMBAI-400001 / VS. DY.COMMISSIONER OF INCOME TAX -1(1), ROOM NO.533, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. : AAACB2122M / REVENUE BY SHRI VIVEK BATRA /ASSESSEE S BY SHRI FARROKH IRANI ! ' #$ / DATE OF HEARING :15.1.2015 %& #$ /DATE OF PRONOUNCEMENT : 13.3.2015 ITA. NO.1378/MUM/2011 ITA NO.8906/MUM/2010 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 30-08- 2010 PASSED BY LD CIT(A)-I, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) ON THE FOLLOWING ISSUES:- (A) ADDITION OF RS.1,25,000/- RELATING TO SPONSORSHIP CONTRIBUTIONS (B) ADDITION OF RS.11,87,657/- RELATING TO COMPLIMENTA RY LIQUORS RECEIVED. 3. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE ASSESSMENT OF INTEREST INCOME OF RS.7,08,931/-. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RE CORD. THE ASSESSEE IS A MUTUAL ASSOCIATION AND IT FILED ITS RETURN OF INC OME DECLARING A TOTAL INCOME OF RS.10,23,460/-. THE AO, DURING THE COURS E OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAS CLAIMED CERTAIN RECEIPTS AS EXEMPT FROM TAXATION UNDER MUTUALITY PRINCIPLES. T HE FIRST ISSUE RELATES TO THE ASSESSMENT OF RS.1,25,000/- RELATING TO THE AMO UNTS RECEIVED BY WAY OF SPONSORSHIP FOR VARIOUS EVENTS ORGANIZED BY THE ASSESSEE. THE AO NOTICED THAT THE FOLLOWING COMPANIES HAVE CONTRIBUT ED TO CERTAIN EVENTS ORGANIZED BY THE ASSESSEE. DIEGO INDIA P LTD (BARNITE EVENT) - RS.35,000/ - MCDOWELL LTD (JAZZNITE EVENT) - RS.40,000/- CENTURION BANK LTD (HOLI EVENT) - RS.50,000/-. SINCE THE CONTRIBUTORS WERE NON-MEMBERS, THE AO TOO K THE VIEW THAT THE ABOVE SAID CONTRIBUTIONS ARE ASSESSABLE AS THE INCO ME OF THE ASSESSEE. ACCORDINGLY HE ASSESSED THE ABOVE SAID RECEIPTS AS INCOME OF THE ASSESSEE AND THE LD CIT(A) ALSO CONFIRMED THE SAME. ITA. NO.1378/MUM/2011 ITA NO.8906/MUM/2010 3 5. THE MAIN SUBMISSION OF LD A.R WAS THAT THE A BOVE SAID COMPANIES HAVE ONLY CONTRIBUTED TO THE CONDUCTING OF EVENTS B Y WAY OF SPONSORSHIP AND THE SAME GOES TO REDUCE THE COST OF EXPENDITURE INCURRED IN RESPECT OF THOSE EVENTS. ACCORDINGLY HE SUBMITTED THAT THERE IS NO INCOME ELEMENT INVOLVED IN THESE RECEIPTS. IN THE ALTERNATIVE, HE SUBMITTED THAT THE CORRESPONDING EXPENDITURE SHOULD BE ALLOWED AS DEDU CTION, IF THE ABOVE SAID RECEIPTS WERE CONSIDERED TO THE INCOME OF THE ASSESSEE. HOWEVER, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS RECEIVED THIS AMOUNT FROM NON-MEMBERS AND HENCE THE CONCEPT OF MUTUALITY WILL NOT APPLY TO THESE RECEIPTS. 6. THERE IS NO DISPUTE THAT THE COMPANIES, CITED A BOVE, ARE NON- MEMBERS. HOWEVER, WE ARE OF THE VIEW THAT ONE HAS TO SEE THE OBJECT BEHIND THE RECEIPT OF THESE CONTRIBUTIONS FROM THE ABOVE SAID COMPANIES. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN ORGA NIZING VARIOUS EVENTS FOR THE MUTUAL BENEFIT OF ITS MEMBERS. THE CONTRIB UTIONS, IF ANY, RECEIVED FROM THE MEMBERS WERE UTILIZED FOR CONDUCTING THE E VENTS AND THE SURPLUS, IF ANY, IS ACCEPTED AS EXEMPT UNDER THE PRINCIPLES OF MUTUALITY. THE ABOVE SAID COMPANIES HAVE PARTLY SPONSORED THE EVENTS, AP PARENTLY AS A PART OF THEIR RESPECTIVE SALES PROMOTION ACTIVITIES. HENCE , THE OBJECTIVE OF THE ASSESSEE IN RECEIVING THESE CONTRIBUTIONS, IN OUR V IEW, CAN ONLY BE CONSIDERED TO BE TO MEET PART OF THE EXPENDITURE IN CURRED IN ORGANIZING THE EVENTS. HENCE, IN OUR VIEW, THERE IS NO INTENTION TO EARN ANY INCOME OUT OF THE ABOVE SAID CONTRIBUTIONS, SINCE IT ONLY GOES TO REDUCE THE EXPENDITURE. HENCE, WE ARE OF THE VIEW THE ABOVE S AID CONTRIBUTION CANNOT BE SUBJECTED TO TAX AS INCOME IN THE HANDS O F THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THIS ADDITION. 7. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RELATE S TO THE VALUE OF COMPLIMENTARY LIQUORS ASSESSED BY THE AO AS INCOME OF THE ASSESSEE. THE ITA. NO.1378/MUM/2011 ITA NO.8906/MUM/2010 4 AO TOOK THE VALUE OF COMPLIMENTARY LIQUORS IS TO BE ASSESSED AS INCOME OF THE ASSESSEE, SINCE THE ASSESSEE HAS FAILED TO FURN ISH THE DETAILS OF PERSONS WHO CONSUMED THE COMPLIMENTARY LIQUOR. HE ALSO TOOK THE VIEW THAT THE COMPLIMENTARY LIQUOR COULD HAVE BEEN USED BY NON-MEMBERS ALSO AND ACCORDINGLY ASSESSED THE SALE VALUE OF COMPLIME NTARY LIQUOR AS INCOME OF THE ASSESSEE. THE LD CIT(A) ALSO CONFIRMED THE SAME. 8. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS SOLD THE COMPLIMENTARY LIQUORS ONLY TO ITS MEMBERS. HE FURTHER SUBMITTED THAT NON-MEMBERS ARE NOT ALLOWED TO UTILIZE THE SERVICES OF THE CLUB. T HE NON-MEMBERS, IF ANY, COME TO THE CLUB ONLY AS GUESTS OF MEMBERS AND HENC E THE SALE OF LIQUOR HAS TO BE CONSIDERED AS SALE TO MEMBERS ONLY. ON T HE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON THE ORDER OF LD CIT(A ). 9. WE FIND MERIT IN THE VIEW TAKEN BY TAX AUTHO RITIES. IT IS AN ACCEPTED FACT THAT THE COMPLIMENTARY LIQUOR HAS BEEN SOLD AT A PRICE, MEANING THEREBY THE INTENTION OF THE ASSESSEE WAS TO MAKE P ROFIT OUT OF SALE OF COMPLIMENTARY LIQUORS. THUS THE ACTION OF THE ASSES SEE WAS COMMERCIAL IN NATURE. IT WAS NOT SHOWN TO THAT THE LIQUOR COMPAN IES, WHO HAVE GIVEN COMPLIMENTARY LIQUORS, ARE MEMBERS OF THE ASSESSEE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD.CIT(A) ON THIS ISSUES. 10. IN THE APPEAL FILED BY THE REVENUE, THE ONLY I SSUE URGED RELATES TO THE ASSESSMENT OF INTEREST INCOME OF RS.7,08,931/-. BOTH THE PARTIES AGREED THAT THIS ISSUE HAS SINCE BEEN DECIDED AGAIN ST THE ASSESSEE BY HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB REPORTED IN 350 ITR 509. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT (A) ON THIS ISSUE AND CONFIRM THE ASSESSMENT OF INTEREST INCOME. ITA. NO.1378/MUM/2011 ITA NO.8906/MUM/2010 5 11. IN THE RESULT, THE APPEAL FILED THE ASSESS EE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT IN THE PRE SENCE OF BOTH THE PARTIES ON 13-03-2015. %& ! ' ( ) * 13 TH MARCH, 2015 & +' , SD SD ( /SANJAY GARG) ( . . ! ,/ B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' ! ' MUMBAI:13TH MARCH,2015. . . ./ SRL , SR. PS ' #$%&' (')% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! /# ( ) / THE CIT(A)- CONCERNED 4. ! /# / CIT CONCERNED 5. 01+ #2 , $ 2 , ' ! ' / DR, ITAT, MUMBAI CONCERNED 6. +3 4' / GUARD FILE. 5 ! / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) $ 2 , ' ! ' /ITAT, MUMBAI