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These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

03-06-2019, The Saturday Club, Section 25, 23, 24, Tribunal Kolkata

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2 weeks 18 hours ago #9648 by amit
Section - 25, 23, 24
Order Date - 03-06-2019
Favouring - Assessee Partly
Court - Tribunal Kolkata
Appellant - The Saturday Club Limited
Respondent - DCIT
Justice - A. T. Varkey, JM & Dr. A. L. Saini, AM
Citation - 619Taxpundit64
Appeal No. - I.T.A. No. 2491/Kol/2017
Asstt. Year - 2012-13

Order

PER : A.T.Varkey, JM

This appeal filed by assessee is against the order of Ld. CIT(A) -3, Kolkata dated 20.09.2017 for AY 2012-13.

2. The following grounds of appeal has been raised by the assessee:

“1) That on the facts and circumstances of the case, the learned CIT(Appeals) erred in confirming the action of the Assessing Officer in disallowing a sum of Rs.67,84,258/- on account of letting out of property to M/s. Reliance Industries Limited (being corporate member).

2) That on the facts and circumstances of the case, the learned CIT(Appeals) erred in confirming the action of the Assessing Officer in disallowing a sum of Rs.47,95,163/- on account of service fees from M/s. Reliance Industries Limited (being corporate member).

3) That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in disallowing Rs.3,27,676/- on account of letting out of property to M/s. Organon India Private Limited.

4. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding Rs.5,50,000/- received from Tapan Kumar Biswas.

5. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding Rs.3,03,324/- received from M/s. Sai Media Ventures (P) Ltd.

6. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding commission of Rs.13,76,606/- received from Agarwal Merchandise.

7) That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the action of the Assessing Officer in adding sponsorship/advertisement of Rs. 77,90,076 received from various parties.

8) That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the hearing of this appeal.”

3. Ground No. 1 is against the action of the Ld. CIT(A) in confirming the action of AO in assessing sum of Rs.67,84,258/- on account of letting out of property to M/s. Reliance Industries Ltd. a corporate member of the appellant-club and Ground no. 2 is against the action of the Ld. CIT(A) in confirming the action of the AO in assessing a sum of Rs.47,95,163/- on account of service fees received from M/s. Reliance Industries Ltd as appellant’s income chargeable under the head ‘Other Sources’ which did not qualify for application of principal of mutuality.

4. Brief facts of the case are that the assessee is a company registered under Section 25 of the Companies Act, 1956 and which claims that its income is not taxable on the basis of the principle of mutuality, since its members are the contributors as well as users of the services rendered by the appellant-club and is therefore not a profit making body. In the assessment order the AO had considered the sum of Rs.67,84,258/- & Rs.47,95,163/- received on account of letting out of the property and service charges respectively from M/s. Reliance Industries Ltd. as income chargeable under the head ‘Other Sources’. The AO was of the opinion that even though the rent was received from the corporate member of the appellant club yet the principle of mutuality was not applicable in respect of such receipts because the premises let out to the corporate member were used by it exclusively for carrying out its commercial operations and therefore the principle of mutuality could not be extended to use of the property by a corporate member for its business purposes. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of the AO. Aggrieved, the assessee is in appeal before us.

5. We have heard rival submissions and gone through the facts and circumstances of the case. It was the submission of the Ld. AR that the appellant during the relevant year had received Rs.67,84,258/- being rent received and Rs.47,95,163/- being service charges from M/s Reliance Industries Limited which was its corporate member. The Ld. AR submitted that in order to avail the principle of mutuality all that assessee is required to demonstrate is that the contributor and the user are same set of persons and the transactions are between the same set of members/ persons. The Ld. AR submitted that just as the appellant-club had let out certain specified areas in the building belonging to the appellant to M/s Reliance Industries Limited, the appellant similarly derived income from letting out the rooms to members for residential accommodation as well as letting out banquet / conference halls to its members for holding functions & meetings. Drawing attention to Page 33 of the paper book, the Ld. AR submitted that in respect of income derived from letting out of part of the premises in the form of club rooms and conference halls, the lower authorities had accepted the appellant’s claim for its non-taxability on the principle of mutuality but only in respect of the amount received from corporate member, M/s Reliance Industries Limited, the lower authorities did not accept the appellant’s contention that these were not taxable on the same principle. According to him it was improper on the part of the lower authorities to draw artificial distinction between the rent receipts from members for use of club rooms / halls and the rent received from corporate member for use of specified premises as its office. In the alternate the Ld AR submitted that the in the impugned order the AO assessed the service charges of Rs.47,95,163/- under the head ‘Other Sources’ whereas suchincome
should have been assessed under the head ‘House Property’ because in terms of the agreement with M/s Reliance Industries Ltd, the appellant was not obliged to render any separate service or provide any specified amenities. The Ld. AR pointed out that under the agreement the gross rent of Rs.60/- per sq.ft. was bifurcated between Rs.36/- towards rent and Rs.24/-towards service charges. The Ld. AR also pointed out that as per clause (3) of the service agreement, the same was co-terminus with the license agreement under which the premises were given on rent to M/s Reliance Industries Ltd. He therefore submitted that since service charges was also paid at specified rate on per sq ft basis and there being no obligation on the appellant to render any service there against, in substance the amount was chargeable by way of rent and assessed under the head ‘House Property’. He also drew our

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