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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Amit Shukla, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. Commissioner of Income Tax(Appeals), Mumbai-7, {(in short ‘CIT(A)’}, dated 16.12.2013 passed against assessment order u/s 143(3) dated 30.12.2009 for Assessment Year 2007- 08 on the following Grounds: “1. Learned CIT(A) erred in confirming disallowance of Rs. 38632/- under section 14A r.w.s. 8D. Appellant 2 Wodehouse Gymkhana L. prays to delete disallowance of Rs. 38,632/- u/s. 14A.
2. Learned CIT(A) erred in confirming interest on Bank Deposits Rs. 169456/- and interest on Bank Fixed Deposit Rs. 76603/- as taxable without giving speaking order. Appellant prays to allow same as Bank Deposits are kept against contingent liability of Rs. 37501254/- on account of Lease Rent payable hence interest earned is in interest of members, hence falls in principal of mutuality hence exempt.
3. Learned CIT(A) erred in confirming interest from members amounting to Rs.41323/- without considering any facts at all and without any speaking order. Appellant prays to delete same as it falls under principal of mutuality hence exempt.
4. Learned CIT(A) erred in holding that compensation receivable of Rs. 848323/- is taxable on the Ground of following mercantile system of Accounting without giving speaking order to Allow Lease Rent of Rs. 1072564/- payable against said income, Appellant prays to allow Lease Rent payable Rs. 1072564/- against compensation receivable of Rs.8483 23/-.
5. Learned CIT(A) erred in confirming taxability of compensation of Rs. 848323/- without considering the fact that Lease Rent of 1072564/- is allowed in regular Assessment in A.Y. 2004-05. 2005-06, 2006-07 & 2009-10 and taking income as NIL. Appellant prays to allow Lease Rent payable against this income.
Learned CIT(A) erred in not giving speaking order with regard to Additional Grounds of Appeal
to claim of Ground Rent payable of Rs.1072564/- against compensation receivable of Rs. 848322/- included under income from other sources. Appellant prays to allow Ground Rent payable and also consider A.O. Orders for A.Y. 2004-05, 2005-06, 2006-07 & 2009-10 where Ground Rent is allowed against compensation receivable.
7. Ld CIT(A) erred in taking NIL income against Loss of Rs. 3890845/- without giving any reasoning in 3 Wodehouse Gymkhana L. Assessment Order. Appellant prays to give specific order, how Returned Loss of Rs.3890845/- was made NIL. During the course of hearing, the assessee submitted following additional grounds also: “Appellant prays that sum of Rs.848323/- being compensation receivable for plot shown as income on mercantile basis be deleted as income on the basis of Real Income Theory as matter is in dispute in court and income not received from 1996 onward.”
During the course of hearing, arguments were made by Shri Jeevraj P. Jain, Authorised Representatives (AR) on behalf of the Assessee and by Shri Prakash R. Mane, Departmental Representative (DR) on behalf of the Revenue.
During the course of hearing it has been submitted in detail by the Ld. Counsel of the assessee that in this case assessment was passed by the Assessing Officer disregarding the provisions of law and without taking into account all the facts of the case and return of income filed by the assessee. It was submitted that the AO did not consider the return of income filed by the assessee wherein income was declared at loss of Rs.38,90,845/-. The AO brought to tax income from non-members for Rs.6,07,5,97/- and income from other sources aggregating to Rs.11,92,313/- without giving any benefit of the loss claimed in the return filed by the assessee and that too without making any discussion in the assessment order. It is further submitted that Ld. CIT(A) also did not give proper relief and order has been passed by the Ld. CIT(A) in a 4 Wodehouse Gymkhana L. highly non speaking manner and without considering the arguments of the assessee. 3.1. Per contra, Ld. DR submitted that after the passing of order by both the authorities, there have been legal development in the sense that Hon’ble Supreme Court passed one judgment in the case of Banglore Club v. CIT 29 taxmann.com 29 wherein it was held that interest earned by the assessee on fixed deposit from its member banks would not be exempt from tax on the basis of Doctrine of Mutuality and therefore, in this case no relief would be given to the assessee. 3.2. Per contra, Ld. Counsel of the assessee submitted that if properly analyzed, the aforesaid judgment of Hon’ble Supreme Court case is in favour of the assessee and various types of income earned by the assessee would fall into the category of exempt income, even after applying the aforesaid judgment of Hon’ble Supreme Court. But, he fairly submitted that this case may be sent back to the file of the AO for proper examination of the facts. 3.3. We have gone through the orders passed by both the lower authorities. It is noted that both the authorities have passed the order in a non-speaking manner. The income was assessed by the AO disregarding income tax return filed by the assessee and without making any discussion in the assessment order as to why return filed by the assessee (wherein ‘Loss’ was claimed by the assessee) was totally ignored by the AO while computing taxable income of the assessee in the assessment order. Further, Ld. CIT(A) did not 5 Wodehouse Gymkhana L. pass the speaking and well reasoned order. It was informed that Hon’ble Supreme Court has recently clarified law on taxability of interest and its exemption on the basis of Doctrine of Mutuality. Both the parties simultaneously claimed that the aforesaid judgment was in their favour. Thus, taking into account all the facts and circumstances of the case, we find it appropriate to send this case back to the file of the AO for proper examination of the facts and passing a well reasoned order after considering all the facts and circumstances of the case and claim made by the assessee in the return of income. The assessee shall submit its pleadings on applicability of judgment of Hon’ble Supreme Court in the case of Banglore Club (supra) and shall be free to raise all the legal and factual issues as may arise during the course of assessment proceedings. The AO shall give adequate opportunity of hearing and shall consider all the submissions and documentary evidences as may be placed by the assessee before passing fresh assessment order. With these directions all the aforesaid grounds (including additional ground) are sent back to the file of the AO for de novo adjudication.
In the result, the appeal filed by the assessee may be treated as allowed for statistical purposes. Order was pronounced in the open court at the conclusion of hearing.