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Income Tax Appellate Tribunal, CHANDIGARH
Before: SMT. DIVA SINGH, JM & Dr. B.R.R.KUMAR, AM
आदेश/ORDER PER DIVA SINGH The present appeal has been filed by the Revenue assailing the correctness of the order dated 15.02.2018 of CIT(A) Panchkula pertaining to 2014–15 assessment year on the following grounds : 1. Whether on the facts & circumstances of the case the Ld. CIT(A) has erred in law in treating the assessee as mutual concern and allowing the appeal of assessee by deleting the addition of Rs. 1,07,89,229/- made by the AO oh account of members contribution. 2. Whether on the facts & circumstances of the case the Ld. CIT(A) has erred in law in treating the assessee as mutual concern and allowing the appeal of assessee and deleting the addition of Rs. 34,55,110/- made by the AO on account of temporary members/non-members contribution. 3. Whether on the facts & circumstances of the case the Ld. CIT(A) has erred in law in treating the assessee as mutual concern and allowing the appeal of assessee and deleting the addition of Rs. 10,19,510/- made by the AO on account of rental income. 2. At the time of hearing no one was present on behalf the respondent. However on considering the material available on record and after hearing the Ld. Sr.DR it was deemed appropriate to proceed with the present appeal ex-parte qua the assessee respondent on merits. The Ld. Sr. DR relies upon the assessment order. 3. The relevant facts of the case as found discussed in the assessment order are that the assessee assessee’s claim that from 2008–09 assessment
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year the assessee had been assessed as a mutual concern was not accepted by the Department and the issue had been challenged before the Hon’ble High Court. It is a matter of record that the appeal of the revenue was dismissed as withdrawn on the grounds of monetary limit fixed by the CBDT. The following extract from the order dated 01/03/2016 in ITA 436 of 2015 (O&M) which has been extracted in the assessment order reads as under : " Learned counsel for the appellant revenue states that the tax effect involved in the present case is 10,95,740/-. He submitted that keeping in view the circular No 21/2015, dated 10.12.2015 issued by C B D T, New Delhi, the present appeal may be dismissed as withdrawn. However, liberty be granted to th4 revenue to file an application for revival of the appeal in case something survives therein. 4. In the said background the assessing officer relying upon the decisions of the apex court in the case of Chelmsford Club Vs CIT (2000) 243 ITR 89 (S.C) and CIT Vs Bankipur Club 226 ITR 971 held that the three tests of mutuality were not fulfilled; namely, (i) the identity between contributors as a beneficiary; b) the objectives of mutual benefit; and c) the actual activities resulting in either mutual benefit or return of the contributions to the contributors. Accordingly, it was held that the assessee does not fulfill these requirements. The assessee was required to address the said position. After considering the submissions, the assessing officer concluded the issue in the following manner: (a) The assessee has shown receipts of Rs, 1,07,89,229/- and no income tax has been paid on it. The assessee was show caused vide note sheet dated 5.9.2016 as why the amount of receipt be taxed; for which no reply was received except the discussion on the status of the case at different stages. Hence the mutual concept is not acceptable as mentioned above that the body is governed by the present Govt of Haryana officers. As such, the amount of receipt is added back to the income of the assessee. I am satisfied that the assessee has concealed the particulars of income/furnished inaccurate particulars of income and as such, the penalty proceedings u/s 271(l)(c ) of the IT Act, 1961 are initiated and notice is being sent separately. (b) The assessee vide submission dated 2.9.2016 showed receipts of Rs. 34.55,110/- from temporary members/non members. No tax has been paid on it. The assessee vide note sheet dated 5.9.2016 was show caused as why the receipts should not be taxed. No reply was received except the reply dated 2.9.2016 before show cause and the show cause was given after detailed discussion on the reply dt 2.9.2016. Hence, the income above said amount is found concealed and the same is added back to the income of the assessee. 1 am satisfied that the assessee has concealed the particulars of income/furnished inaccurate particulars of income and as such, the penalty proceedings u/s 271(l)(c ) of the IT Act. 1961 are initiated and notice is being sent separately. (c ) The assessee has shown interest on earned on FDRs and savings bank accounts at Rs. 90,35,070/-. The same has no: been shown in the income tax return and no tax has been paid on it. The interest amount has no concept of mutual concern and has to be taxed. The assessee was show cause vide note sheet dated 5.9.2016 for which no explanation was received. Hence, the same is added back to the income of the assessee. I am satisfied that the assessee has concealed the particulars of
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income/furnished inaccurate particulars of income and as such, the penalty proceedings u/s 271(l)(c ) of the IT Act, 1961 are initiated and notice is being sent separately. (d) The assessee has shown Rs. 10,19,510/- as rental income receipts. The same is not found reflected in the return of income and no tax has been paid on this. The assessee vide note sheet dated 5.9.2016 was show caused for making addition and no reply is received. Hence, the same is added back to the income of the assessee. I am satisfied that the assessee has concealed the particulars of income/furnished inaccurate particulars of income and as such, the penalty proceedings u/s 271(l)(c ) of the IT Act, 1961 are initiated and notice is being sent separately. 5. Aggrieved by this the assessee went in appeal before the CIT(A). Addressing the additions made in para 2(a)&(b), the assessee’s submissions have been addressed in para 5.1. Considering the same, the CIT(A) relying upon the ITAT order dated 01/09/2016 in 2010–11 assessment year allowed relief to the assessee in paras 5.2 and 5.3. Though a ground has been raised, however, no contrary fact, submission or distinction was brought to the notice of the Bench by the ld. Sr.DR. Nothing was placed before the Bench to show that the said order had been upset by a higher forum. We find that the issue has been considered by this CIT(A) in the following manner : 5. Grounds No. l & 2 are directed against the additions of Rs. 1,07,89,229/- and Rs.34,55,110/- on account of members' and temporary members contribution. During the assessment proceedings, the AO asked the assessee to explain the claim about the club as a mutual concern. After considering the assessee's reply, the AO noted that the club is not a mutual concern as its governing body comprises of Chief Secretary, Government of Haryana as President, Principal Secretary to Chief Ministry Secretary, Government of Haryana as Sr. Vice President, Financial Commissioner, Towrn Country Planning, Government of Haryana as a vice president and Chief Administrator, HUDA as member and the other members are also nominated by the President. This indicates that the management & control over the assessee club was with the State Government. The club was not assessed as mutual concern in A.Y. 2007-08 as it failed to fulfill the three tests of mutuality as laid down by the Hon'ble Supreme Court in Chelmsford Club Vs. CIT 243 ITR 89 and in CIT Vs. Bankipur Club Ltd. 226 ITR 97. The claim of the assessee as a mutual concern was also not accepted as the assessee in the income tax return has no where stated that Panchkula Golf Club is a mutual concern. The Form used to . file income tax return was not applicable in this case. Further, AO noted that the sum of Rs. 1,07,89,229/- and Rs. 34,55, 110/- as one time entrance fee contribution from the members and temporary members respectively is a revenue receipt whereas the assessee has taken same as capital receipt on the basis of mutuality. Since, the objective of mutual benefit is not fulfilled, therefore, contribution of Rs. 1,07,89,229/- and Rs.34,55,110/- received by the assessee club from the members during the year was held to be the taxable income of the assessee. 6. It is seen that considering the submissions on behalf of the assessee which are extracted in the impugned order, we note that largely the assessee relies upon the view taken in 2008-09 assessment year in ITA 813/2013 the relevant extract the submissions is reproduced hereunder : 5.3 Considering the facts and circumstances of the case, legal provisions and judicial pronouncements, I hold that the ratio laid by Hon'ble ITAT in appellant's own case for the A.Y. 2008-09 (supra) is applicable to the facts of the present appeal. Respectfully following the decision of Hon'ble ITAT, the addition of addition of Rs. 1,07,89,229/- and Rs.3g55,UO/- made by the AO on account of on account of members'
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contribution and temporary members contribution is deleted. These grounds of appeal are allowed. Even otherwise the member receipts are already credited in the income and expenditure amount where the net effect is a loss for the year as has been rightly submitted by the appellant in its submissions. 7. We find on a reading of the finding arrived at by the CIT(A) in para 5.2 that the said view was followed in 2010–11 assessment year also. In the absence of any change in facts, circumstances and position of law, we find no good reason to vary the conclusion arrived at. The relevant finding of the CIT(A) is extracted hereunder : 5.2 I have gone through the facts of the case and written submission filed by the appellant. This issue is decided by my predecessor in the appellant's own case for the A.Y. 2010-11 in Appeal No. 32/PKL/13-14 dated 01.09.2016. The findings is reproduced as under :- "9. I have gone though the facts of the case and written submission filed by the appellant. It is noted that the AO has held the appellant club as non mutual concern on the ground that the appellant has not stated about being a mutual concern in its return of income which was filed in the form not applicable in the case of the appellant. Further, the AO has considered the decision in appellant's own case for A.Y. 2007-08 where it was not considered as mutual concern by applying the judgments of Hon'ble Supreme Court. Accordingly, the AO considered the contribution of Rs.84,65,816/- from members as income of the appellant. However, in the appellant's own case for A.Y. 2008-09, the Hon 'ble ITAT, Chandigarh after considering the facts of the case gave the following decision :- "13. Though we have clearly held above that assessee is entitled to exemption under the concept of mutuality and the entrance fee has to be treated as capital fee but at the same time we find that it is not clear from record the nature of receipts received by the assessee whether the same is from members or not and these facts have not been examined by the Assessing Officer or the CIT(A), therefore, we set aside the order of Ld. CIT(A) and remit the matter back to the file of the Assessing Officer with a direction to verify the nature of receipt and if same is from the members then allow the exemption under the concept of mutuality otherwise the case be decided in accordance with law." 9.1 Therefore, in view of the decision of Hon'ble IT AT, the appellant is entitled to exemption under the concept of mutuality and the entrance fee has to be treated as capital fee and the receipts from members have been allowed for exemption under the concept of mutuality. The AO has considered the contribution from members of Rs. 84,65,816/- as taxable income. However, as per the decision in the appellant's own case, the contributionfrom members is exempted under the concept of mutuality. Therefore, the grounds of appeal are allowed. " 8. Accordingly, the departmental ground is dismissed.
The next addition assailed by the Revenue in the present proceedings has been summed up by the CIT(A) in para 6 of his order wherein considering the submissions advanced in para 6.1, relief has been granted in para 6.2. For ready reference the relevant paras are extracted hereunder: 6.1 During appellant proceedings, the counsel for the appellant submitted as under :-
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"During the year under consideration, the assessee had declared total receipt of Rs.2,32,79,409/- as per income & expenditure account, which also include the rental income of Rs.10,19,510/-. Since, the amount of Rs.10,19,510/- is already included in the addition made vide ground No. 2, therefore, question of separate addition of Rs.10,19,510/- on account of rental income does not arise at all and addition of Rs.10,19,510/- may please be deleted. Without prejudice to above, it is further submitted that the said rental receipts -were already credited in the income & expenditure account filed by the assessee and net effect of income & expenditure account is loss and not an income. Also as evident from the assessment order, the books of accounts were never rejected by the Ld. AO. By making an addition of the income already recognized in the books of accounts, without rejecting the books of account, would actually lead to double taxation of the same income. Further, it is settled issue that same income cannot be taxed twice in the hands of the assessee. However, Ld. AO ignoring the basic of taxability of transaction imposed the tax on the same amount of Rs.10,19,510/- by making addition to the returned income. The justifies that the addition was made without making application of mind, as same income cannot taxed twice in the hands of the same assessee. " 6.2 I have gone through the facts of the case and written submission filed by the appellant and the copy of income and expenditure account alongwith schedules. It is noted from the assessment order that addition was made because the AR of the appellant did not respond to the show cause given by the AO in this respect. It is observed that restaurant/Bar/Practice Range/Caddy rent received from temporary members and others was at Rs. 10,19,510/- and these receipts were forming a part of temporary members receipts at Rs.34,55,110/- and thus included in the total income of Rs.2,32,79,409/- as per schedule 5 of audited accounts. Further, the income and expenditure account shows a net deficit being excess of expenditure over income. Therefore, I find that the contention made by the appellant in its submission is correct and accordingly the addition made on account of rent receipts is ordered to be deleted. This ground of appeal is allowed.” 10. The ld. Sr.DR relies on the assessment order. However, the facts taken into consideration by the CIT(A) for arriving at the decision were not assailed. 11. We have heard the rival submissions and perused the material on record. In the facts as they stand, we find no good reason to vary the conclusion arrived at. Being satisfied by the reasoning and finding, departmental ground in the absence of any rebuttal on facts is dismissed. 12. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 03.10. 2018.
Sd/- Sd/-
( डा. बी.आर.आर. कुमार) (�दवा �संह ) (Dr. B.R.R. KUMAR) (DIVA SINGH) लेखा सद�य/ Accountant Member �याय�क सद�य/Judicial Member “पूनम” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant - 1. ��यथ�/ The Respondent - 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar