ITO, WARD 22(2), KOLKATA, KOLKATA vs. THE CALCUTTA SWIMMING CLUB, KOLKATA

It is important to mention here that A/R did not raise any objection in condoning the delay. On the facts as narrated above, there is no delay in filing the appeal.

The brief facts of the case of assessee are that the assessee being the Calcutta Swimming Club, filed its return of income for AY 2017-18 declaring total income of Rs. 76,46,760/-. The case of the assessee was selected for scrutiny, a statutory notices u/s 143(2) of the Act issued and subsequently notice u/s 142(1) of the Act has also been issued. The assessee in response to the notices, filed a detailed submission and documents before the AO, and the AO after going through the documents and submissions made by the assessee added Rs. 12,10,620/- u/s 14A of the Act and also made an addition of Rs. 3,11,15,451/- u/s 69C read with Section 115BBE of the Act.

The said order has been challenged by the assessee before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed as the addition of Rs. 3,11,15,451/- made by the AO have been deleted but he confirmed the addition of Rs. 12,10,620/- u/s 14A of the Act.

The Ld. Sr. Dr. appeared on behalf of the department has challenged the impugned order, thereby submitting that the Ld. CIT(A) has erred in deleting the addition of Rs. 3,11,15,451/- made by the AO ignoring the reality that the facts and circumstances of the case go to show that the assessee has other sources of income apart Assessment Year: 2017-18 The Calcutta Swimming Club from membership fee from hiring of club premises and fee from guests of members as recorded in the bye-laws which is beyond the purview of the principle of mutuality and a violation of it.

Contrary to that the Ld. A.R supports the impugned order of Ld. CIT(A).

Upon hearing the rival submissions of the Counsel of respective parties, the only points for determination are whether the case of the assessee is covered by the principle of mutuality and addition of Rs. 3,11,15,451/- as made by the AO deleted by the Ld. CIT(A) is justified.

In this context, we have perused the case of the assessee and found the following facts:

As per the Byelaws of association there are various categories of person who may be allowed to use the club. These person may be defined in the category of permanent members, resident members, corporate members, honorary members, courtesy members and associate members, however, it is only the permanent members who are deemed to be members of the club thereby meaning that the permanent members are those who have a right to elect the executive committee of the club, They are those who provide their personal guarantee with regards to the debts and liabilities of the club.

That the service provided to the club can be exclusively to the said categories of the members of the club and is not open for outside usage.

That the club and members of the club are not distinct entity.

The permanent members of the club are mutual to the club.

We have also gone through the judgement cited by the assessee reported in [2023] 7 TMI 466 (Cal-HC) passed in the case of The Saturday Club Ltd. vs. Principal Commissioner of Income Tax, Kolkata. The Hon’ble Calcutta High Court has held as under:

The present facts of the case reveal that the assessee club was established for non-profit motive and the club and its members were distinct/ distinguishable and they do not have right in any surplus, if generated by the assessee club and none of the activities of the club could be tainted with commerciality. Any reserve held by the club are also used for the purpose of furtherance of the activities of the club and cannot be used by any member for its own benefit. The Ld. CIT(A) in its order has considered the facts of the case of the assessee, considered the bye-laws of the club established the point no. 30 and point no. 9 and discussed the assessement order is as follows:

The learned CIT(A) has further given reason in Para 5.1 to 5.3 to arrive in conclusion that the activities are governed by the principle of mutuality. Going over the Assessment Year: 2017-18 The Calcutta Swimming Club facts of the case, order passed by the Ld. CIT(A) and the judgment in this context, we do not find any merit in the submission of the Ld. D.R. It is clear that activities of the Assessee are covered by principle of mutuality. Accordingly, the appeal of the department is hereby dismissed.