9911796707
TMI Blog2013 (12) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 839 - ITAT MUMBAI] - The appellant is holding a valid registration under section 12A - None of the terms of the registration is violated – The assessee is entitled for exemption in respect of donation, annual subscription and entrance fees from the members under the provisions of sections 11 to 13 subject to compliance of other requirements – Decided against Revenue. Disallowance of provision for expenses – The assessee has made provision of Rs.77,209/- for payment of expenses – Held that:- The provision was made on the basis of actual liability and not on the estimation of unascertained liability – The assessee has also produced the ledger accounts and vouchers clearly showing that the expenses of Rs. 74,509/- has actually been paid in next month – Disallowance was restricted to Rs. 2700 - Decided against Revenue. - ITA. No. 5351/Mum/2010 and ITA. No. 5384/Mum/2011 - - - Dated:- 16-1-2013 - N. K. Billaiya (Accountant Member).- Both these appeals by the Revenue are preferred against two separate orders of the learned Commissioner of Income-tax (Appeals)-1, Mumbai dated March 31, 2010 and April 5, 2011 pertaining to the assessment years 2007-08 and 2008-09, respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act were issued and served upon the assessee. While scrutinising the return, the Assessing Officer observed that the assessee has stated that the income of Rs.19,18,355 as per the income and expenditure account is exempt on the principle of mutuality. Since according to the assessee, the entire income represents contribution received from the members as fees. The Assessing Officer further noted that the hon'ble Bombay City Civil Court, vide its order dated November 19, 2009 for deciding the appeal filed by the assessee against the eviction order dated May 29, 2005 of the Brihamumbai Mahanagar Palika, Mumbai has held that the assessee committed breach of agreement by starting and operating the club by charging fees from members and allowing third party to operate yoga and karate classes in the premises and that this amounted to commercial activity. On further investigation through enquiry by the Ward Inspector, the Assessing Officer found that the hall (basement), open ground, etc., were being given to private parties other than members of the club for holding marriages/parties for which various charges received on account of rent, decoration, catering etc., which also go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the contractor/professionals and therefore rejected the plea of the assessee that the amount collected at the rate of 20 per cent. are directly enjoyed by the members of the club. The Assessing Officer was of the opinion that in order to get the benefit of the principle of mutuality the assessee should confine its activities only between the members. If an assessee allows third party, by extending its amenities to members of the public, then the sums realised on such extension would be outside the surplus attributable to mutual activities. The Assessing Officer went on to reject the claim of the assessee that its income is exempt on the ground of principle of mutuality and concluded that the total receipts of the assessee are treated as income from business activities and taxed accordingly. 4. The assessee carried the matter before the learned Commissioner of Income-tax (Appeals) and explained the modus operandi and reiterated its stand that the income of the club deserves to be exempt on the principles of mutuality as all the benefits derived, directly or indirectly, were for the benefits of the members and their families. It was explained that the receipts of the club are mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of the contributors and the participators are concerned. What has been questioned by the Assessing Officer is that the profits of the institution are not fully for the benefits of its members inasmuch as the contributors/participators are deriving profits not only from themselves but also from outsiders. It is the say of the assessee that the banquet hall/ground are given only to the members of the club and their families. Further, only the members of their families and guests are allowed to participate in the club activities. These facts have not been disputed by the Assessing Officer simply because some professionals/contractors are engaged in organising the club activities from whom the club derives royalty/commission at fixed rate 20 per cent. on total receipts, it cannot be said that the club is not eligible for exemption on the principles of mutuality. The hon'ble Supreme Court in the case of CIT v. Bankipur Club Ltd. [1997] 226 ITR 97 (SC) has held that (headnote) : "in the light of the findings of fact the receipts for the various facilities extended by the clubs to its members, as part of the usual privileges, advantages and conveniences, attached to the membership o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai Tribunal has discussed applicability of the provisions of sections 11 to 13 of the Act to clubs and had given its decision that clubs are entitled to exemption under the provisions of sections 11 to 13 of the Act." 13. As no distinguishing facts have been brought on record by the learned Departmental representative, we do not find any error or infirmity in the finding of the learned Commissioner of Income-tax (Appeals). Ground No.2 is accordingly dismissed. 14. Ground No. 3 is consequential to the decision of ground No. 1. On that note ground No. 3 is dismissed. 15. Ground No. 4 relates to the disallowance out of liability shown as provision for expenses at Rs. 77,209. The Assessing Officer has added this amount on the ground that the provision for expenses is not allowable. 16. Before the learned Commissioner of Income-tax (Appeals), it was explained that the provision of Rs. 77,209 is a provision for actual liability and not on estimated basis for unascertained liability. To substantiate its claim, the assessee filed copies of ledger accounts, vouchers for the subsequent month, i.e., April, 2007 showing that the said amounts have actually been paid by the club in Ap ..... 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