CRICKET CLUB OF INDIA P.LTD,MUMBAI vs. ACIT 1(1), MUMBAI

The assessee is a company registered u/s 25 of the Companies Act as non-profit organization and is also registered as a charitable institution u/s 12A of the Act. The assessee claimed certain income as exempt under the principles of mutuality. The assessing officer completed the assessment by making various additions. The Ld CIT(A) enhanced the total income of the assessee and dismissed the appeal also. Aggrieved, the assessee has filed this appeal before us.

The Ld A.R did not press the ground No.1(a) relating to royalty receipts, as the assessee itself has offered the same in the revised return of income filed for second time. Hence the said ground is dismissed as not pressed.

The Ground No.1(b) relates to the claim for deduction of proportionate expenditure relating to royalty income. The Ld A.R submitted that identical claim was made by the assessee before Ld CIT(A) in AY 2007-08 and the Ld CIT(A) has restored the matter to the file of the AO, vide its order dated 18-03- 2011 passed in Appeal No.CIT(A)-1/IT/619/09-10. Accordingly he prayed that this issue may be restored to the file of the AO with similar directions.

We heard Ld D.R and also perused the order passed by Ld CIT(A) in AY 2007-08 (supra). We notice that, in paragraph 5.4 of the order, the Ld CIT(A) has restored the matter to the file of the AO for examining the claim of the assessee. Accordingly we restore this issue to the file of the AO for examining the claim of the assessee in accordance with the law.

The Ground No.2 relates to the taxability of catering revenue of Rs.10.62 lakhs. The auditor of the assessee had attached a note to his report, wherein it was stated that the catering revenue includes a sum of Rs.10,62,005/-, being the assessee’s share given by vegetarian catering service providers. The assessee had claimed exemption of its catering revenue under the principles of mutuality. The assessee treated the above said amount of Rs.10,62,005/- as part of its catering revenue. The AO accepted the claim of the assessee with regard to other catering revenue, but took the view that the share of revenue received from outside caterers cannot be exempted under the principles of mutuality, since it has received the amount as a direct payment. Accordingly the AO assessed the above said amount and the Ld CIT(A) also confirmed the same.

We notice that an identical issue was considered by the co-ordinate bench in the assessee’s own case relating to AY 2007-08 in and the Tribunal, vide its order dated 21-03-2016, has deleted this addition by following the decision rendered by another bench in the case of MIG Club Vs. ACIT (ITA No.3104-3107/Mum/2011). In the case of MIG Club, it was held that the amount retained by the assessee from the bills raised by the caterers

Ground No. 3 relates to interest income of ` 51.69 lakhs earned by the assessee from UTI and GOI tax free bonds. The Learned AR submitted that the assessee had received aggregate interest income of ` 2.84 crores, out of which a sum of ` 51.69 lakhs was earned from Unit Trust of India and Government of India Tax Free Bonds. He submitted that the Assessing Officer had assessed the entire amount of interest income, by holding that principles of mutuality would not apply to the same. The learned CIT(A) also confirmed the order passed by the AO on this issue. The Learned AR submitted that the above said interest income of ` 51.69 lakhs would be exempt u/s. 10(15) of the Act and hence the tax authorities are not justified in assessing the same as income of the assessee.

We heard learned Departmental Representative and perused the record. It is well settled proposition that the AO is not entitled to assess an income, which is otherwise exempt under the Act, since the AO is required to determine the total income in accordance with the law. Since the assessee claims that the above said interest income of ` 51.69 lakhs would be exempt u/s. 10(15) of the Act, we are of the view that the same requires examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the 4 M/s. Cricket Club of India Pvt. Limited Assessing Officer with the direction to examine the claim for exemption u/s. 10(15) of the Act and take appropriate decision in accordance with law.

Ground No. 4 relates to addition of interest income of ` 233.03 lakhs. The claim of the assessee is that it has been added by the Assessing Officer without taking notice of the fact that the assessee itself has offered the same as its income in its original return of income and it has resulted in double taxation of same income. The Ld A.R submitted that this aspect was brought to the notice of Ld CIT(A) in the written submissions given by the assessee, but the Ld CIT(A) has also failed to take note of the same. Since double taxation of same income is not permitted under the Act, we are of the view that this claim of the assessee also requires verification at the end of the AO. Accordingly we restore this issue to the file of the Assessing Officer.

Ground No. 5.1(a) relates to determination of annual value of the property. The Assessing Officer made addition of 10% to the annual value reported by the assessee while computing income under the head income from house property and the same was confirmed by the learned CIT(A).

Learned AR submitted that the identical addition has been made by the Assessing Officer in A.Y. 2006-07. However, the Tribunal has restored the same back to the file of the Assessing Officer with the direction to verify the applicability of provisions of Maharashtra Rent Control Act, 1999 to the assessee’s premises. He further submitted that identical addition made in A.Y. 2008-09 was deleted by the learned CIT(A) and the Department has accepted the decision of the learned CIT(A) by not filing appeal before the ITAT.

We have heard learned Departmental Representative and perused the record. Learned AR submitted that the Tribunal has restored the identical matter to the file of the Assessing Officer in A.Y. 2006-07. Accordingly, consistent with the view taken by the Tribunal in A.Y. 2006-07, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with similar directions given by the Tribunal.

Ground No. 5.1(b) relates to disallowance of payment of water charges made to BMC claimed by the assessee as part of municipal tax. The AO, by following his predecessor’s order, took the view that the water charges cannot be form part of municipal tax. Accordingly he disallowed the claim of water charges. The Ld CIT(A) also confirmed the same. The Learned AR submitted that the Tribunal has allowed an identical claim in its order passed for A.Y. 2008-09 in ITA No. 5935/Mum/2012.

We have gone through the order dated 21.3.2016 passed in A.Y. 2008-09 and the Tribunal, in para No. 28 of the order has deleted the addition under the principles of consistency as explained in the case of CIT Vs. Dalmia Promoters Developers Pvt. Ltd. (281 ITR 346). The Tribunal noticed the fact that the assessee is in need of water to maintain the ground and other collateral purposes and accordingly, concluded that the expenditure incurred on water charges is necessary one and allowable under the provisions of section 23(1) of the Act. Since a particular view has already been taken by the co-ordinate bench on this issue, consistent with the view so taken, we set aside the order passed by Ld CIT(A) on this issue and direct the Assessing Officer to allow deduction of water charges/tax paid to BMC u/s. 23(1) of the Act.

The Ground No.5.1(c) relates to the disallowance made u/s 14A of the Act. The Learned AR submitted that the Coordinate Bench of the Tribunal had deleted an identical addition made in the A.Y. 2001-02 & 2002-03. He also submitted that the Coordinate Bench has, however, restored the matter to the file of the Assessing Officer in the order passed for A.Ys. 2006-07, 2007-08 & 2008-09. He submitted that the claim of the assessee is that it did not incur any expenditure in relation to earning exempt income and hence no disallowance u/s 14A is called for.

We heard learned Departmental Representative and perused the record. Since the Coordinate Benches have restored this matter to the file of the 6 M/s. Cricket Club of India Pvt. Limited Assessing Officer in A.Y. 2006-07 & 2008-09, consistent with the view taken therein, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for examining it afresh in accordance with law.

Next ground urged in Ground No. 5.1(d)(i) relates to applicability of MAT provisions to the assessee. The learned AR fairly admitted that this issue has been decided against the assessee by the Tribunal, vide its order dated 21.3.2016 passed in & 4759/Mum/2011 & 5935/Mum/2012 relating to A.Y. 2004-05, 2007-08 & 2008-09. Consistent with the view taken by the Coordinate Bench, we uphold the order passed by the learned CIT(A) on this issue.

Next issue urged in ground No. 5.1(d)(ii) relates to claim for MAT credit of ` 109.11 lakhs u/s. 115JAA. Learned AR submitted that the assessee paid a sum of ` 109.11 lakhs u/s. 115JB in A.Y. 2008-09 and it is eligible for credit u/s. 115JAA of the Act. Since the Tribunal has confirmed the applicability of provisions of sec. 115JB, the Ld A.R submitted that the assessee cannot be denied the benefit of MAT credit allowable as per the provisions of the Act.

We heard learned Departmental Representative and perused the record. We find merit in the submissions of the assessee. Accordingly, we restore this issue to the file of the Assessing Officer with the direction to allow MAT credit as per the relevant provisions of the Act.

Next ground urged in 5.1(e) relates to claim of depreciation on the addition of ` 185.31 lakhs made in A.Y. 2007-08 by treating the revenue expenditure claimed by the assessee as capital expenditure. The Learned AR submitted that the Assessing Officer had incurred expenses for hosting ICC Champions Trophy 2006 to the tune of ` 185.31 lakhs in A.Y. 2007-08 and claimed the same as revenue expenditure. However the AO disallowed the above said claim by treating the same as capital in nature. However he allowed

We heard Ld D.R on this issue and are of the view that the prayer of the assessee is consequential in nature and has to be considered by the Assessing Officer in accordance with law. Accordingly we restore this issue to the file of the AO with the direction to decide the same after the receipt of order of Hon’ble High Court.

In ground No. 6.1 & 6.2, the assessee is challenging decision of the learned CIT(A) in enhancing income of the assessee to ` 1562.22 lakhs as against assessed income of ` 1118.21 lakhs by holding that the assessee is not eligible for exemption under the principles of mutuality. The Learned AR submitted that the learned CIT(A) issued notice of enhancement dated 22.8.2014 and the same was received by the assessee on 26.8.2014. The assessee was directed to file its reply by 28.8.2014 by Ld CIT(A). In view of the short notice, the assessee could not prepare reply and accordingly sought an adjournment on 27.8.2014. However the adjournment request was rejected by the learned CIT(A). Thereafter, the assessee filed a detailed written submissions, vide its letter dated 5.9.2014, in reply to the notice issue by Ld CIT(A). However, it was not considered by the learned CIT(A) and accordingly the Ld CIT(A) passed the order enhancing the income of the assessee by rejecting the claim for exemption under the principles of mutuality. The Ld A.R submitted that the income generated from the members have been exempted under the principles of mutuality all along and hence the learned

We heard learned Departmental Representative and perused the record. Since the learned CIT(A) has taken his decision on this issue without considering the written submissions of the assessee, in the interest of natural justice, we are of the view this issue needs fresh examination at the end of the learned CIT(A). Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the learned CIT(A) with the direction to decide the same afresh after affording adequate opportunity of being heard to the assessee.

Ground No. 7 consisting of ground No. 7.1 to 7.3 are alternative grounds to ground No. 6. The Ld A.R submitted that these grounds have been taken to claim deductions, if the rejection of principles of mutuality was affirmed by the Tribunal. Since we have restored ground No. 6 to the file of the learned CIT(A), the alternative contentions raised in ground No. 7 also need to be set aside to his file. Accordingly, we restore ground No. 7 consisting of 7.1 to 7.3 to the file of the learned CIT(A) for adjudicating them after providing adequate opportunity of being heard to the assessee.

Learned AR did not press ground Nos. 8 to 10 and accordingly the said grounds are dismissed as not pressed.

In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes.