PR COMMISSIONER OF I T-1 JAIPUR vs. M/S JAIPUR CLUB LTD

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D. B. Income Tax Appeal No. 133/2016 Principal Commissioner of Income Tax-1, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Petitioner Versus M/s. Jaipur Club Ltd, Jacob Road, Civil Lines, Jaipur ----Respondent Connected With D. B. Income Tax Appeal No. 153/2016 Principal Commissioner of Income Tax-1, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Petitioner Versus M/s. Jaipur Club Ltd, Jacob Road, Civil Lines, Jaipur ----Respondent _____________________________________________________ For Petitioner(s) : Mr. Anuroop Singhi with Mr. Aditiya Vijay For Respondent(s) : Mr. Anant Kasliwal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 20/11/2017 1. In both these appeals since identical questions of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellants have challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department. 3. This court while admitting the appeals inadvertently framed the following question of law wrongly:-

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“Whether the interest which has been earned on earlier assessment year will be taxable under the Income Tax Act or not?” 3.1 The question which has been wrongly framed is now reframed as under and the appeals be treated as admitted on these questions and are decided accordingly: 1. D.B. Income Tax Appeal No. 133/ 2016 “Whether the Tribunal was justified in holding that the income earned by the assessee-club from non- members of Rs. 30,54,177/- is exempted, ignoring the principle of mutuality as per which only the income earned from members is exempted and that from non- members is liable to be taxed?” 2. D.B. Income Tax Appeal No. 153/ 2016 “Whether the Tribunal was justified in holding that the income earned by the assessee-club even from non-members is exempted, ignoring the principle of mutuality as per which only the income earned from members exempted and that from non-members is liable to be taxed?” Whether the Tribunal was justified in exempting the receipts of Rs. 72,06,960/-, Rs. 19,34,146/-, Rs. 3,34,005/- and Rs. 6,286/- towards room, guest, lawn and annexe charges, respectively, admittedly when the same was earned from non- members?” 4. However, the issue is now squarely covered by the decision of this Court in case of Principal Commissioner of Income-Tax V/s M/s Jaipur Club Ltd., (D. B. Income Tax Appeal No. 25/2017) decided on 31.01.2017 wherein it has been held as under:- “ 3. Brief facts of the case are that the assessee club is registered as a non trading company. It operates as a club where members are allowed to enter and they are served food, liquor, refreshments etc. Facilities for various outdoor and indoor games

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and swimming, Gym etc. are provided to the members. The club considers itself a mutual organization, and hence considers it’s income as outside the purview of taxability. On perusal of the Income and Expenditure Account statement, it is seen that income/receipt consists of the charges received by the assessee on supply of various kinds of services to the members as well as to the non members. The club on several occasions interacts with outsiders i.e. non members and income is generated on account of transactions with non members. The A/R of the assessee was asked to explain as to why the income generated due to transactions with non members may not be considered as taxable. 4. In view of the decision of this Court, the issue is squarely covered against the department in favour of the assessee. 5. We are in complete agreement with the view taken by the Tribunal, more particularly, the observations which are made in para 7 which reads as under:- “7.We have heard rival contentions and perused the material available on record. The Coordinate Bench of the Tribunal in assessee’s own case in ITA Nos. 592 & 418/JP/2013 for A.Y. 2007-08 and 2008-09 vide order dated 01.01.2016 has held as under:- “5. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has not issued any bill in the name of outsider. If any service has been provided to the guest by the club, the bills has been issued in the name of members only. The Id Assessing Officer had not specifically pointed out the receipts received from non members. He simply made disallowance on estimate basis. The assessee has produced complete books of account during the assessment proceedings. Therefore, principle laid down by the Hon’ble Supreme Court in the case of Bankipur Club Limited (supra) is squarely applicable on principle of mutuality wherein it has been held that “in any mutual organization, there is an element of altruism, since the benefit availed by a member may not always be commensurate with his contribution. It was for this reason that even where there is no return on the contribution, as in the case of an association formed for the purpose of general public utility, mutuality may not be lost.” The Full Bench of the Hon’ble Patna High Court in the case of CIT Vs. Ranchi Club Ltd. (supra) has also held that “merely

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because the assessee company had entered into transactions with non members and earned profits out of transactions held with them its right to claim exemption on the principle of mutuality in respect of transactions held by it with its members was not lost. The assessee was a mutual concern, the income derived by it from its house property let to its members and their guests and from the sale of liquor etc. to its members and their guests was not taxable in its hands.” The above principle is squarely applicable in the case of assessee, therefore, we uphold the order of the Id CIT (A) for both the assessment years.” By respectfully following the decision on similar facts, we uphold the order of Id. CIT(A).” 5. In view of the above, the issue is required to be answered in favour of the assessee and against the department. 6. Both the appeals stand dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. B.M.G./Gourav68-69