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TMI Blog2022 (8) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion in the case of CIT vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] . Thus, we are of the considered opinion that the Assessing Officer had failed to satisfy necessary ingredients before invoking the jurisdiction u/s 147 of the Act and, therefore, the reassessment proceedings are not valid in law. Accordingly, we quash the reassessment proceedings. Expenditure at the rate of 7.5% of the interest income claimed - HELD THAT:- Admittedly, there is no specific expenditure incurred to earn the interest income. However, incurring of sum indirect expenditure cannot be ruled out. It is trite law that what can be taxed is only real income not hypothetical income, when the specific expenditure cannot be identified, it is appropriate to estimate certain amount of expenditure. We allow 7.5% of the interest income as allowable expenditure. The ratio of the decision of the Hon ble Supreme Court in the case of Bangalore Club [ 2013 (1) TMI 343 - SUPREME COURT] has no application in deciding the issue of allowability of expenditure. The issue in the said decision is in relation to the taxability of interest income received from corporate members invoking the principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MBER Assessee by: Shri Neelesh Khandelwal Revenue by: Shri M. G. Jasnani ORDER PER BENCH : These are the cross appeals filed by the assessee as well as by the Revenue directed against the respective orders of ld. Commissioner of Income Tax (Appeals)- 2/3, Pune [ CIT(A) for short] for the assessment years 2006-07 to 2014-15. 2. Since the identical facts and issues are involved in all above captioned cross appeals, we proceed to dispose of the same by this common order. 3. For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.890/PUN/2017 for the assessment year 2006-07 are stated herein. ITA No.890/PUN/2017, A.Y. 2006-07 By Assessee : 4. Briefly, the facts of the case are that the appellant is a Recreational Club. The return of income for the assessment year 2006-07 was originally filed on 29.11.2006 disclosing total income of Rs.25,35,019/-. The said return of income was processed u/s 143(1) of the Income Tax Act, 1961 ( the Act ) on 06.10.2007 accepting the returned income. Subsequently, the Dy. Commissioner of Income Tax, Circle- 4, Pune ( the Assessing Officer ) issued a notice u/s 148 dated 19.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, inasmuch as, there was no fresh tangible information which had come into possession of the Assessing Officer enabling him to form the opinion that the income had escaped assessment to tax. It is further submitted that there is no reasons to believe that the income escaped assessment, inasmuch as, the disallowances which are made by the Assessing Officer are already subject-matter of appeal before the Tribunal for the assessment year 1994-95 in assessee s own case and the claim made by the assessee are in line with the decision of the Hon ble ITAT for assessment year 1994-95 in assessee s own case which is accepted by both the assessee as well as the Department. 9. On the other hand, ld. CIT-DR placing reliance on the order of the ld. CIT(A) prayed that the validity of the reassessment should be upheld. 10. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal no.1 relates to the validity of the reassessment proceedings. The admitted facts of the case are that the appellant club had filed the return of income claiming certain percentage of the interest received from bank. Receipts from venue charges from members gue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied. Therefore, an assessment completed u/s 143(1) cannot be reopened unless new or fresh tangible information/material had come into possession of the Assessing Officer subsequent to completion of the assessment u/s 143(1) and there should exist reasons to believe that the income chargeable to tax had escaped assessment. Reference can be made in this regard to the decision of the Hon ble Gujarat High Court in the case of Ami Ashish Shah vs. ITO, 440 ITR 417 (Guj.-HC), wherein, the Hon ble Gujarat High Court reiterated the above position after referring to the following decisions :- (i) Ratna Trayi Reality Service (P.) Ltd. v. ITO, 356 ITR 493 (Guj.). (ii) CIT v. Orient Craft Ltd., 354 ITR 536 (Delhi). (iii) Indivest Pte. Ltd. v. Addl. DIT, 350 ITR 120 (Bom.). 12. In the present case, from the reasons recorded it would be clear that the premises on which the Assessing Officer formed an opinion that the income had escaped assessment is the decision of the Hon ble Supreme Court in the case of Bangalore Club (supra), which is subsequent to the completion of the assessment u/s 143(1) of the Act. But the return of income filed by the assessee is in consonance with the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 2008-09 2009-10 in ITA Nos.892 893/PUN/2017 for the reasons mentioned therein, we had quashed the reassessment proceedings. Hence, the cross appeals filed by the Revenue do not survive. 16. In the result, the cross appeals of the Revenue in ITA Nos.1235 1236/PUN/2017, A.Y. 2008-09 2009-10 stand dismissed. ITA No.894/PUN/2017, A.Y. 2011-12 By Assessee : ITA No.1237/PUN/2017, A.Y. 2011-12 By Revenue : 17. Briefly, the facts of the case are that the assessee is a Recreational Club. The return of income for the assessment year 2011-12 was filed on 30.09.2011 declaring total income of Rs.9,95,710/-. The said return of income was processed u/s 143(1) of the Act on 12.03.2013 accepting the returned income. Subsequently, the case was converted into scrutiny assessment and the assessment was completed by the Assessing Officer vide order dated 29.03.2014 passed u/s 143(3) of the Act at a total income of Rs.3,77,14,049/- by disallowing the claim of expenditure on account of venue charges from members guest, dinner receipts from members guest, receipts from cricket ground books from members guest etc. by holding that the principle of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of hearing of the appeal and the same are dismissed as not pressed. 22. Ground of appeal no.3 challenges the decision of the ld. CIT(A) disallowing the expenditure claim @ 7.5% of the interest income. It is submitted that this issue raised in the present ground of appeal is decided in assessee s own case for the assessment year 1994-95. This decision attained the finality as the Revenue is not in further appeal. Therefore, it is submitted that following the decision of the Tribunal, the ld. CIT(A) ought not to have disallowed the expenditure at the rate of 7.5% of interest income as deduction. 23. On the other hand, ld. CIT-DR supported the order of the ld. CIT(A). 24. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal no.3 relates to the allowance of expenditure at the rate of 7.5% of the interest income claimed. Admittedly, there is no specific expenditure incurred to earn the interest income. However, incurring of sum indirect expenditure cannot be ruled out. It is trite law that what can be taxed is only real income not hypothetical income, when the specific expenditure cannot be identified, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and law warranting different view, no authority of the quasi judicial or judicial can generally be permitted to take a different view. This position is laid down by the Hon ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. vs. Union of India, 282 ITR 273 (SC). The Hon ble Bombay High Court in the case of PCIT vs. Quest Investment Advisors (P.) Ltd., 409 ITR 545 (Bom.-HC) after extracting the observation made by the Hon ble Supreme Court in the case Bharat Sanchar Nigam Ltd. (supra) made in para 20 held as follows :- 8. However, subsequently the Apex Court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 has after referring to the decision of Radhasoami Satsang (supra) has observed as under :- 20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no argument was advanced to establish that the said decision of the Tribunal was erroneous, the decision cannot be assailed by the Revenue in the subsequent years. Therefore, we do not see any reason to deviate from the decision of the Hon ble ITAT for earlier years in assessee s own case and, accordingly, we allow 7.5% of the interest income as allowable expenditure. 27. The ratio of the decision of the Hon ble Supreme Court in the case of Bangalore Club (supra) has no application in deciding the issue of allowability of expenditure. The issue in the said decision is in relation to the taxability of interest income received from corporate members invoking the principle of mutuality, whereas, in the present case, it is a question of allowability of expenditure against the interest income, therefore, the decision of Hon ble Supreme Court in the case of Bangalore Club (supra) has no application to the instant case. Accordingly, the ground of appeal no.3 raised by the assessee stands allowed. 28. Ground of appeal no.4 not pressed at the time of hearing of the appeal and the same is dismissed as not pressed. 29. In the result, the appeal filed by the assessee in ITA No.894/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the ITAT, Ahmedabad Bench in the case of ACIT vs. Karnavati Club Ltd., 4 ITR 174. 34. The issue whether the entrance fee is as revenue account or capital account is no more res-integra as the issue was decided by the Hon ble Bombay High Court in the case of CIT vs. W.I.A.A. Club Ltd., 136 ITR 569 (Bom.-HC) wherein it held as follows :- Now, it is important to bear in mind that though entrance fee is received by the assessee from time to time, it is received from different persons and it is not one of those payments which are made by the same person by virtue of any recurring liability. Entrance fee is paid by a member only once and it is this payment which has to be considered whether it is in the nature of income or a capital receipt. If we look at the articles of association of the assessee-club, it is clear that in order to avail of the rights of a member and the facilities and the services provided by the assessee-club, it is not enough for a person merely to pay the annual subscription. As a matter of fact a person cannot exercise the rights and privileges of a member merely by volunteering to pay the annual subscription. What a member has to acquire firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of W.I.A.A. Club Ltd. (supra), the Tribunal was right in ordering deletion of Rs. 4,08,950 made by the Assessing Officer on account of non-refundable entrance fees. 36. The fact that the members have voting rights or not have no bearing to decide the issue whether the receipts is a capital nature or revenue nature. Therefore, respectfully following the decision of the Hon ble Jurisdictional High Court in the case of W.I.A.A. Club Ltd. (supra), we hold that the entrance fee received from the corporate members is capital in nature and uphold the order of the ld. CIT(A). The decision relied upon by the Assessing Officer have no application to the issue. Hence, the ground of appeal no.5 and 6 raised by the Revenue stands dismissed. 37. In the result, the appeal filed by the Revenue in ITA No.1237/PUN/2017 for the assessment year 2011-12 stands dismissed. ITA Nos.895, 1653 2242/PUN/2017, A.Ys. 2012-13, 2013-14 2014-15 By Assessee : 38. Since the facts and issues involved in all the above captioned appeals are identical, therefore, our decision in ITA No.894/PUN/2017 for A.Y. 2011-12 shall apply mutatis mutandis to the remaining appeals of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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