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TMI Blog2024 (1) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... 15), wherein for several years this issue had been examined by the Assessing Officer and claim of deduction was allowed to the assessee under Section 57(iii) of the Act. Fourthly, on identical set of facts, in the case of [ 2016 (10) TMI 1351 - ITAT AHMEDABAD ] has allowed this issue in favour of the assessee. Since this stand taken by the assessee with respect to claiming 10% deduction against income from other sources have been accepted by the Department in the past years, looking into the facts of the instant case, we are of the considered view that the order passed by the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of the Revenue under Section 263 of the Act - Appeal of assessee allowed. - SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER For the Appellant : Shri Biren Shah Shri G. M. Thakor, A.Rs. For the Respondent : Dr. Darsi Suman Ratnam, CITDR ORDER PER SIDDHARTHA NAUTIYAL, JM: Both the appeals have been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax-3, (in short Ld. PCIT ), Ahmedabad vide order dated 31.03.2021passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain as to why the above income should not be taxed in the hands of assessee as the same is not governed by the concept of mutuality. Accordingly, the Assessing Officer held that such receipts from Lawn booking and Hall booking facilities by non-members are not covered under the concept of mutuality and therefore, the same cannot be treated as exempt for purposes of taxation. Accordingly, Ld. Assessing Officer made addition of Rs. 60,38,990/- to the income of the assessee. 5. On scrutiny of assessment records, the Ld. PCIT observed that assessee has claimed deduction of Rs. 65,46,611/- @ 10% under Section 57(iii) of the Act out of income from other sources shown at Rs. 6,54,66,110/-. The PCIT observed that the assessee did not submit details and documentary evidences to prove the nexus that such expenses had been incurred wholly and exclusively for the purpose of earning income from other sources and the Assessing Officer had also not verified this issue by calling for relevant details / documents and conducting enquiries. Accordingly, the PCIT initiated proceedings under Section 263 of the Act against the assessee. Before the PCIT, the assessee was asked to explain as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company and not for earning dividend. That being so, the expenditure incurred by way of interest on the loan taken by the assessee for the said purpose cannot be held to be an expenditure incurred wholly and exclusively for the purpose of earning income by way of dividends. From the nature of transaction, it is clear that the expenditure was not for the purpose of earning income by way of dividends but for the purpose of acquiring controlling interest in the company and, therefore, it would not be allowable as a deduction under section 57(iii) of the Act. We are supported in our opinion by the decision of the Gujarat High Court in the case of Sarabhai Sons (P.) Ltd. v. CIT [1993] 201 ITR 464. in that case, it was held that if the dominant purpose for which the expenditure was incurred was not to earn the income, the expenditure incurred in that behalf would fall outside the purview of section 57(iii) of the Act. We are also supported in our above conclusion by the decision of this court in Chinai and Co. Pvt. Ltd. v. CIT [1994] 206 ITR 616. in that case, there was a dispute in regard to deduction of expenditure under section 37 of the Act. The expenditure was incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the order is passed without considering the legal provisions and hence it has made the assessment order passed not only erroneous but also prejudicial to the interest of revenue. Accordingly, the impugned assessment order is set aside with a direction to the Assessing Officer to make requisite inquiries and proper verification with regard to the issues mentioned above and redo the assessment de-novo after due consideration of the facts and law in this regard. The assessee is at liberty to adduce the facts as deemed relevant before the assessing officer at the time of assessment proceedings in consequence to this order and the Assessing Officer shall allow the assessee adequate opportunity of being heard and to make relevant submissions. It may be ensured that the fresh assessment order is passed within the prescribed time as stipulated under section 153(3) of the Act. 6. The assessee is in appeal before us against the aforesaid order passed by Ld. PCIT. Before us, the assessee submitted that the assessee has been consistently claiming expenditure @ 10% out of income disclosed under the head income from other sources as deduction under Section 57(iii) of the Act from A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Revenue. 8. We have heard the rival contentions and perused the material available on record. 9. For an order to be revised under Section 263 of the Act, both the conditions have to be satisfied i.e. it should erroneous as well as prejudicial to the interest of the Revenue. In the instant case, certain facts are noteworthy. Firstly, this issue was examined by the Assessing Officer during the course of assessment proceedings and therefore, it is not the allegation of the Department that the Ld. AO had failed to apply his mind to the issue under consideration. Secondly, it is also an admitted fact that the assessee has been consistently following the practice of claiming 10% deduction against income from other sources on a consistent basis for A.Y. 1994-95 onwards. This fact is also not in dispute. Thirdly, similar claim has been allowed to the assessee in the past assessment year after carrying out due verification by the concerned Assessing Officers during the course of assessment proceedings. The Counsel for the assessee has produced before us copies of assessment orders passed by Assessing Officers for various assessment years (From A.Ys. 2008-09 to A.Ys. 2014- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier years, held that the assessee was entitled for the benefit on the basis of doctrine of mutuality. We further find that the Coordinate Bench of Tribunal in assessee s own case for AY 2006-07 vide order dated 11/01/2013 had decided the issue in favour of assessee by holding as under:- 2. The only ground in this appeal is against the disallowance of Rs. 52,95,900/-made by the A.O. on account of guest fees, room charges and hire charges in respect of club lawn collection from non-members, by holding that the income earned from the persons who were not regular members of the club was not offered though it was out of purview of mutuality. Ld. CIT(A) has deleted this addition by observing as under:- I have carefully considered the facts of the case and the submissions of the A.R. along with the case laws as relied upon, I am inclined to accept the contention of the appellant supported by various decisions in favour of appellant in earlier years by various appellant authorities on the same issue. Even by submission dated 13-11-09, appellant submitted latest decision of the Hon'ble ITAT 'B' Bench Ahmedabad in the case of appellant itself for A.Y. 2003-04 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, ld. Assessing Officer observed that assessee has claimed 10% of interest income at Rs. 6,10,847/- as deduction u/s 57(iii) of the Act. When Assessing Officer raised question for this deduction assessee replied that they have been consistently allowed 10% as deduction out of taxable income which is not arising on principles of mutual consent. This has been established and allowed by the Tribunal since Asst. Year 1966-67 onwards. However, the ld. AO denied this claim. 12. We observe that in appeal before ld. CIT(A) the issue has been decided in favour of assessee by ld. CIT(A) observing as below :- 3.3 Decision : I have carefully perused the assessment order and the submissions given by the appellant. The last controversy on this topic had arisen in A.Y. 1987-88. The same issue was decided by CIT(A)-111, Ahmedabad vide order dated 17/06/1991 which reads as under:- The alternative plea of the appellant that 10% of the income .. should be allowed as expenses is accepted few view of a notice under section 263 dt. 04/09/1986 for assessment year 1985-86 --- where it has been proposed that the income from bank deposit should be included after allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is also dismissed. 15. Other grounds of the appeal are of general nature, which need no adjudication. 16. Cross Objection by the assessee has not been pressed and therefore, the same is dismissed as not pressed. 17. In the result, appeal of the Revenue and the C.O. by assessee both are dismissed. 11. Accordingly, we observe that on similar set of facts, this issue has been decided by ITAT Ahmedabad in favour of the assessee in the case of DCIT vs. Sports Club of Gujarat in ITA No. 2166/Ahd/2014 along with C.O. No. 21/Ahd/2014 . In the case of CIT vs. Excel Industries Ld. 38 taxmann.com 100 (SC), the Hon'ble Supreme Court held that once a consistent view has been taken in favour of the assessee for past assessment years, there is no reason to take a different view unless there are very convincing reasons. The Hon ble Supreme Court observed that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further. That being so, the Revenue cannot be allowed to flip flop on the same issue and ought to, let the matter rest rather than spent the tax payer s money in pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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