The Coimbatore Cosmopolitan Club v. Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 22.12.2009Coram :THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESHTax Case (Appeal)Nos.2156 of 2006, 214, 1024 and 1025 of 2007The Coimbatore Cosmopolitan Club# 200, Race CourseCoimbatore – 641 037. Appellant in all TCsv.The Assistant Commissioner of Income TaxCity Circle – IRace CourseCoimbatore – 641 018. Respondent in all TCsTax Case Appeals in T.C.A.Nos.2156 of 2006, 214, 1024 and1025 of 2007 are filed under section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal, Madras'D' Bench, Chennai, dated 25.11.2005 in I.T.A.Nos.1548, 1550, 1549and 1551/Mds/2002 for the assessment years 1994-95, 1996-97, 1995-96 and 1997-98 respectively.Prayer in TC No.2156/2006:Against the common order of the Commissioner of Income Tax(Appeals-I, Coimbatore in ITA Nos.835/95-96, 1087/96-97, 625/98-99,for the Assessment years 1994-95 to 1996 to 97 dated 9.7.02.against the order of the Assistant Commissioner of Income TaxCompany Circle-I, Coimbatore u/s 143/3 dated 29.1.96 made in PANGIR No.CV-0916/Co.I/CBE dated 24.7.98 in PAN/GIR NO.49-512-CV-0916;dated 7.3.97 in PAN/GIR No.CV-0916/CO.I respectively in TC(A)Nos.2156/06 ,214 & 1024/07.Prayer in TC No.1025/07:Against the Common order of the commissioner of Income Tax(Appeals)-1, Coimbatore in I.T.A.Nos.44 to 47/2000 and dated23.7.02 and against the order of Assistant Commissioner of IncomeTax, Company Circle-I, Coimbatore-1 u/s 143/3, dated 7.3.2000 madein PAN GIR NO.CV-0916-Co.II, for the Assessment year 1997-98.For appellant :Mr.M.P.SenthilkumarFor Respondent: Mr.J.Naresh Kumar,Sr.S.C. for Income-tax Dept. https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.)The Tax Case Appeals in T.C.A.Nos.2156 of 2006, 214, 1024and 1025 of 2007 are filed under section 260A of the Income TaxAct, 1961 against the order of the Income Tax Appellate Tribunal,Madras 'D' Bench, Chennai, dated 25.11.2005 in I.T.A.Nos.1548,1550, 1549 and 1551/Mds/2002 for the assessment years 1994-95,1996-97, 1995-96 and 1997-98 respectively. The appeals are admittedon the following questions of law in respect of T.C.A.Nos.2156 of2006 and 214 and 1024 of 2007 and on only question of law No.1 inrespect of T.C.A.No.1025 of 2007: "1. Whether on the facts and in thecircumstances of the case,the Income-tax AppellateTribunal was right in law in holding that theinterest income of the appellant club was not exempton the principles of mutuality?2. Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal was right in law in holding that themiscellaneous income viz., hall charges, guestcharges, mike charges, etc., of the appellant clubwas not exempt on the principles of mutuality?" 2. The facts of the case in brief are as follows:(a) T.C.A.No.2156 of 2006:The appellant club is a company registered under Section 25of the Companies Act, 1956. The appellant filed its return ofincome admitting deficit of Rs.13,26,288/-. The assessing officerwhile completing the assessment arrived at net surplus ofRs.2,06,372/- and allowed the same to be accumulated under Section11 of the Income Tax Act. Aggrieved by the assessment order, theappellant filed an appeal before the Commissioner of Income Tax(Appeals) claiming that the interest income from fixed deposits andmiscellaneous income consisting of charges received from memberstowards hall charges for dinner, guest charges, mike charges,telephone calls recovery charges,etc., are not chargeable to taxsince appellant company is a mutual concern and claimed exemptionunder section 11 in the alternative. The Commissioner of Income-tax(Appeals) had dismissed the appeal in common order for assessmentyears 1994-95 to 1996-97.Aggrieved by the order the appellant filedappeal before the Income Tax Appellate Tribunal and the Tribunaldismissed the appeals. Aggrieved by the same, the present appeal isfiled. (b) T.C.A.No.214 of 2007:The appellant club is a company registered under Section 25of the Companies Act, 1956. The assessing officer had while https://hcservices.ecourts.gov.in/hcservices/ completing the assessment under Section 143(3) held that theconcept of mutuality will not be applicable in respect ofmiscellaneous income amounting to Rs.1,53,452/- and interest oninvestment amounting to Rs.1,86,365/- by observing that the samewere received from non-members and assessed the same to tax.Aggrieved by the assessment order, the appellant filed an appealbefore the Commissioner of Income Tax (Appeals) claiming that theinterest income from fixed deposits and miscellaneous incomeconsisting of charges received from members towards hall chargesfor dinner, guest charges, mike charges, telephone calls recoverycharges,etc., are not chargeable to tax since appellant company isa mutual concern and claimed exemption under section 11 in thealternative. The Commissioner of Income-tax (Appeals) had dismissedthe appeal in common order for assessment years 1994-95 to 1996-97.Aggrieved by the order the appellant filed appeal before theIncome Tax Appellate Tribunal and the Tribunal dismissed theappeal. Aggrieved by the same, the present appeal is filed. (c) T.C.A.No.1024 of 2007:The appellant club is a company registered under Section 25of the Companies Act, 1956. The appellant filed its return ofincome declaring deficit of Rs.11,73,612/-. The return wasprocessed under Section 143(1)(a) on 15.2.1996. Subsequently, theassessing officer had while completing the assessment under Section143(3) held that the concept of mutuality will not be applicable inrespect of interest on investment and miscellaneous income receivedfrom non-members amounting to Rs.2,91,490/- and assessed the sameto tax. Aggrieved by the assessment order, the appellant filed anappeal before the Commissioner of Income Tax (Appeals) claimingthat the interest income from fixed deposits and miscellaneousincome consisting of charges received from members towards hallcharges for dinner, electricity charges, guest charges, mikecharges, telephone calls recovery charges,etc., are not chargeableto tax since appellant company is a mutual concern and claimedexemption under section 11 in the alternative. The Commissioner ofIncome-tax (Appeals) had dismissed the appeal in common order forassessment years 1994-95 to 1996-97.Aggrieved by the order theappellant filed appeal before the Income Tax Appellate Tribunal andthe Tribunal dismissed the appeal. Aggrieved by the same, thepresent appeal is filed. (d) T.C.A.No.1025 of 2007:The appellant club is a company registered under Section 25of the Companies Act, 1956. The assessing officer had whilecompleting the assessment under Section 143(3) held that theconcept of mutuality will not be applicable in respect of scrapsales out of miscellaneous income amounting to Rs.3,828/- andinterest on investment amounting to Rs.3,06,031/- by observing thatthe same were received from non-members and assessed the same totax. Aggrieved by the assessment order, the appellant filed anappeal before the Commissioner of Income Tax (Appeals) claimingthat the interest income from fixed deposits and miscellaneous https://hcservices.ecourts.gov.in/hcservices/ income consisting of charges received from members towards hallcharges for dinner, electricity charges, guest charges, mikecharges, telephone calls recovery charges,etc., are not chargeableto tax since appellant company is a mutual concern and claimedexemption under section 11 in the alternative. The Commissioner ofIncome-tax (Appeals) had dismissed the appeal in common order forassessment years 1994-95 to 1996-97.Aggrieved by the order theappellant filed appeal before the Income Tax Appellate Tribunal andthe Tribunal dismissed the appeal. Aggrieved by the same, thepresent appeal is filed. 3. Learned counsel appearing on either side submitted thatthe first question of law in the first three appeals inT.C.A.Nos.2156 of 2006 and 214 and 1024 of 2007 and the question oflaw in T.C.A.No.1025 of 2007 are decided by the Division Bench ofthis Court in the case of MADRAS GYMKHANA CLUB VS. DEPUTYCOMMISSIONER OF INCOME-TAX reported in (2009) 226 CTR 179 = (2009)28 DTR (Mad) 9 and held against the assessee. 4. In respect of the second question of law, learnedcounsel appearing for the assessee submitted that the issue hasbeen considered and decided by the Supreme Court in the case ofCOMMISSIONER OF INCOME TAX VS. BANKIPURCLUB LIMITED reported in 226ITR 97 at page Nos.97 and 109. However on a reading of the orderof the Tribunal, there is no finding available as to themiscellaneous income, hall charges, guest charges, mike charges,etc., Hence, we are of the view that the issue has to be remittedback to the Tribunal to consider the same in the light of thejudgment of the Supreme Court in the case of COMMISSIONER OF INCOMETAX VS. BANKIPURCLUB LIMITED reported in 226 ITR 97 at page Nos.97and 109. 5. In view of the above reasoning, the first question oflaw in the first three appeals in T.C.A.Nos.2156 of 2006, 214 and1024 of 2007 and the question of law in T.C.A.No.1025 of 2007 areanswered against the assessee and in favour of the revenue byfollowing the Division Bench of judgment this Court in the case ofMADRAS GYMKHANA CLUB VS. DEPUTY COMMISSIONER OF INCOME-TAX reportedin (2009) 226 CTR 179 and the second question of law in the firstthree appeals has not been answered by this Court and the matter isremitted back to the Tribunal for deciding the issue in the lightof the judgment of the Supreme Court in the case of COMMISSIONER OFINCOME TAX VS. BANKIPURCLUB LIMITED reported in 226 ITR 97 at pageNos.97 and 109. Accordingly, T.C.A.Nos.2156 of 2006, 214 and 1024 of 2007are disposed of and T.C.A.No.1025 of 2007 is dismissed.Sd/-Asst. Registrar//true copy//Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ uskTo 1. The Asst. Commissioner of Income Tax Company Circle I, Coimbatore2.The Commissioner of Income-tax (Appeals)-ICoimbatore.3.The Assistant Registrar, Income Tax Appellate Tribunal, Chennai D Bench, Rajaji Bhavan, Besant Nagar, Chennai-90.4.The Asst.Commissioner of Income Tax, City Circle-I, Race Course, Coimbatore-641 018.2 cc to Mr.Philip George, Advocate, Sr.No.707222 cc to Mr.J.Naresh Kumar, Senior Standing Counsel, Sr.No.71009, 71010T.C.(A)Nos.2156 of 2006 etc.,batchJP {CO}TP/18.1.2010.