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2022 (2) TMI 1028 - AT - Income TaxAddition of Guest fees/Income from hire of rooms/Hire charges in respect of club properties / Housie participation fees - temporary members are not eligible to share surplus on any dissolution of club and principal of mutuality is not acceptable for such members - HELD THAT - Issue covered in favour of assessee and against the Revenue by the orders of the Tribunal passed in assessee s own case for the several earlier years, wherein a consistent stand was taken by the Tribunal right from the beginning that the addition made by the Assessing Officer on account of Guests fees from member, Hire charges, Income from rooms and Housie participation fees cannot be sustained as the principle of mutuality is applicable in the assessee s case. Since the Ld.CIT(A) has followed the consistent view taken by the Tribunal in assessee s own case for the earlier years and the Ld.DR has not been able to point out anything to the contrary, we find no infirmity in the impugned order of the Ld.CIT(A) giving relief to the assessee on this issue and upholding the same, ground No.1 of Revenue s appeal is dismissed. Disallowance of expenses u/s.57(iii) - HELD THAT - This issue is also covered in favour of assessee by the consistent view taken by the Tribunal in assessee s own case for the several earlier years and since the Ld.CIT(A) has followed the view of the Tribunal, we find no justifiable reason to interfere with the order of the ld.CIT(A), wherein he has given relief to the assessee on this issue. The same is upheld and ground No.2 of Revenue s appeal is dismissed.
Issues Involved:
1. Deletion of addition on account of Guest fees/Income from hire of rooms/Hire charges in respect of club properties/Housie participation fees. 2. Deletion of disallowance of expenses under section 57(iii) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Guest Fees/Income from Hire of Rooms/Hire Charges in Respect of Club Properties/Housie Participation Fees: The Revenue challenged the deletion of the addition of ?2,09,81,941/- for AY 2014-15 and ?2,10,73,529/- for AY 2015-16, arguing that these receipts from temporary members and outsiders do not fall under the principle of mutuality. The Assessing Officer (AO) had treated these receipts as taxable income, as they were not from permanent members eligible for benefits upon the club's dissolution. The CIT(A) deleted these additions, referencing previous decisions by the Hon'ble ITAT, Ahmedabad, which consistently held that such receipts are not taxable under the principle of mutuality. The CIT(A) noted that similar additions for previous assessment years (2003-04 to 2013-14) were deleted by the ITAT and CIT(A) in the assessee's favor. The CIT(A) followed these precedents, finding no change in facts or reasoning to justify a different conclusion. The Tribunal upheld the CIT(A)'s decision, noting that the issues were squarely covered by the ITAT's consistent rulings in the assessee's favor for several earlier years. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this ground for both assessment years. 2. Deletion of Disallowance of Expenses Under Section 57(iii) of the Income Tax Act, 1961: The Revenue also contested the deletion of disallowance of expenses amounting to ?7,46,000/- for AY 2014-15 and ?7,89,314/- for AY 2015-16, which the assessee claimed under section 57(iii) as deductions from income from other sources. The AO had disallowed these expenses, arguing they were not directly related to earning interest income. The CIT(A) allowed the deduction, citing the ITAT's and CIT(A)'s previous rulings in the assessee's favor for earlier years (1966-67 to 2012-13). The CIT(A) followed these precedents, directing the AO to allow 10% of the interest income as deductible expenses, subject to verification. The Tribunal upheld the CIT(A)'s decision, confirming that the issue was consistently decided in the assessee's favor in earlier years. The Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the Revenue's appeal on this ground for both assessment years. Cross Objections by the Assessee: The assessee filed Cross Objections for both assessment years, supporting the CIT(A)'s orders. Since the Tribunal dismissed the Revenue's appeals, the Cross Objections became infructuous and were dismissed as agreed by the assessee's counsel. Conclusion: In conclusion, the Tribunal dismissed both the Revenue's appeals and the assessee's Cross Objections for AY 2014-15 and AY 2015-16, upholding the CIT(A)'s deletion of additions and disallowances. The Tribunal's decisions were based on consistent precedents favoring the assessee in earlier years. Order Pronounced: The order was pronounced in the Court on 21st February, 2022, at Ahmedabad.
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