2018 (12) TMI 1317 - AT - Income Tax

Exemption being the surplus income after deducting personal expenses declared under the head Income from Other Sources - doctrine of mutuality - Held that - Fund was contributed by the members for providing financial assistance to the members and only surplus fund which were not required for the time being were kept in the bank for safe custody mainly and not for earning interest income. In the present case, the facts are totally different. The income in dispute in the present case are 1) Pay & Park Charges, 2) Rent from Vodafone tower, 3) Rent from BSNL tower, 4) Rent from Idea Tower and 5) interest on Fixed Deposit. The first four incomes i.e. Pay & Park Charges and rent from Vodafone, BSNL and Idea towers cannot be considered to be covered by doctrine of mutuality. Regarding interest on Fixed Deposit also, this is not the claim of the assessee that the fund which was used for earning such interest income on Fixed Deposit was mainly for the purpose of providing financial assistance to the members and only surplus fund kept with bank for safe custody and not for earning interest income and earning of interest income is incidental. Hence in the facts of present case, this judgement of Hon ble Karnataka High Court is also not applicable. Hence in my considered opinion this judgement of Hon ble Karnataka High Court rendered in the case of Canara Bank Golden Jubilee Staff Welfare Fund Vs. DCIT (2008 (7) TMI 239 - KARNATAKA HIGH COURT) is not applicable in the facts of present case. The judgement of Hon ble Apex Court rendered in the case of Bangalore Club Vs. CIT 2013 (1) TMI 343 - SUPREME COURT is squarely applicable in the present case and as per this judgement of Hon ble Apex Court, the issue is covered against the assessee and the judgement of Hon ble Karnataka High Court rendered in the case of Canara Bank Golden Jubilee Staff Welfare Fund Vs. DCIT (supra) is not applicable in the present case and hence, by respectfully following the judgement of Hon ble Apex Court rendered in the case of Bangalore Club Vs. CIT (supra), I decline to interfere in the order of CIT(A). - decided against assessee

Summary

Issues:
- Applicability of the doctrine of mutuality to the income streams of the assessee
- Justification of rejecting assessee's appeal by CIT(A)
- Sustainability of CIT(A)'s order rejecting the submission of the assessee
- Classification of personal expense under the correct section
- Dismissal of CIT(A)'s order without proper justification
- Upholding of gross income without allowing any expenses

Analysis:
1. Applicability of Doctrine of Mutuality:
- The appeal questioned the non-applicability of the doctrine of mutuality to the income streams of the assessee. The CIT(A) held that the incomes received were not governed by the concept of mutuality, citing various decisions supporting this view. The assessee argued against this decision, referencing judgments like Bangalore Club Vs. CIT and Canara Bank Golden Jubilee Staff Welfare Fund Vs. DCIT. The Tribunal found that the incomes earned by the assessee from non-members were not in the course of providing facilities to its members, aligning with the Bangalore Club judgment's stance against the assessee.

2. Justification of CIT(A)'s Decision:
- The CIT(A) rejected most of the grounds raised by the assessee, as they were not pressed during the hearing. However, the first ground regarding the applicability of the doctrine of mutuality was deliberated upon. The Tribunal considered the arguments presented by both parties and concluded that the judgment in the Bangalore Club case was directly relevant to the present case, leading to the dismissal of the appeal.

3. Sustainability of CIT(A)'s Order:
- The Tribunal scrutinized the grounds of appeal rejected by the CIT(A) and focused on the first ground concerning the doctrine of mutuality. By analyzing the facts and legal precedents, the Tribunal found that the CIT(A)'s decision was justified based on the application of relevant judgments and the nature of the incomes earned by the assessee.

4. Classification of Personal Expense:
- The assessee contested the classification of personal expenses under a specific section, highlighting discrepancies in the CIT(A)'s order. However, since this ground was not pressed during the hearing, it was rejected by the Tribunal.

5. Dismissal of CIT(A)'s Order Without Justification:
- The Tribunal addressed the concerns raised by the assessee regarding the dismissal of certain grounds by the CIT(A). While the assessee argued against the CIT(A)'s decision, the Tribunal found that the CIT(A)'s reliance on relevant judgments and legal principles was sufficient to uphold the order.

6. Upholding Gross Income Without Allowing Expenses:
- The Tribunal examined the issue of upholding gross income without allowing any expenses, emphasizing the mandate to tax net income only. Despite the assessee's contentions, the Tribunal found that the CIT(A)'s decision was in line with legal requirements and declined to interfere with the order.

In conclusion, the Tribunal dismissed the appeal filed by the assessee based on the application of relevant legal judgments and the nature of the incomes earned, affirming the CIT(A)'s decision regarding the doctrine of mutuality and other related issues.