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TMI Blog2024 (10) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... r the order of the Hon ble Madras High Court in their own case [ 2009 (7) TMI 68 - MADRAS HIGH COURT] , setting up such a case before Ld CIT(A) during the first round was an afterthought because no material was kept before Ld CIT(A) to make such a claim. We came to such a conclusion after perusal of records, which doesn t reveal that assessee filed any additional evidence before the Ld.CIT(A) [in the first round] to prove its assertion that its case would fall in the case-scenario as stated at Para Nos.30 36 of the Hon ble High Court Bangalore Club [ 2006 (7) TMI 146 - KARNATAKA HIGH COURT] . And even if for argument sake it is assumed that such a claim was set up before the Ld.CIT(A), who enjoyed co-terminus power as that of AO, then he could have very well examined the relevant facts and ascertained as to whether the assessee has made out a prima facie case that the funds were invested in the form of Fixed Deposits or securities which were kept in such a deposit with a definite idea of using the same in a specific project for further development of the infrastructural facilities of the Club in the form of building or other facilities. Even before us, the assessee has neither file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds that may be adduced at or before the time of hearing, it is submitted that the order of the CIT Appeals u/s. 154 be set aside and the appeal of the Assessee be allowed as per the decision of the Madras High Court in the Assessee's own case. 3. Both sides agree that the issues involved in both the appeals are similar/identical, therefore, decision in one of the appeals would decide the fate of the other. Therefore, we take up the appeal for AY 2016-17 as lead case, the decision of which will be followed for the other appeal for AY 2017-18. 4. The main grievance of the assessee is against the action of the Ld.CIT(A) passing the impugned order u/s. 154 of the Income Tax Act, 1961 (hereinafter in short the Act ) on 16.12.2022, whereby, he exercised suo-moto his power of rectification of his own earlier order passed on 20.05.2019 for AY 2016-17; dated 23.03.2022 for AY 2017- 18. 5. The brief facts of the case are that the assessee is a society registered under the Societies Registration Act and established for the promotion of sports and services to its members. The AO noted that the assessee had filed return of income on 17.10.2016 declaring total income of Rs. NIL on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder that when the interest income and deposits are utilized towards infrastructural development, it will be within the ambit of the concept of mutuality and hence will not be liable to tax. The relevant extracts of the observations of Hon'ble Madras High Court are reproduced as under for ready reference. Extract from the decision of the Hon'ble Madras High Court in Tax case (Appeal) Nos.397 to 404 of 2008 in appellant's own case; 30. It is not the case of the assessee clubs that the funds which were invested in the form of fixed deposits or securities were kept in such deposit with a definite idea of using the same in any specific projects for the further development of the infrastructural facilities of the club in the form of buildings or other facilities. On the other hand while the assessee clubs were able to generate substantial amount by way of contribution, donation etc., it had no corresponding plans or schemes to improve its infrastructure facilities or that such surplus funds were earmarked for any particular developmental activity in the interest of all the members of the assessee clubs and that since incurring of the expenses for such activities can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO (supra) gave notice to the assessee and after rebutting the objection raised by the assessee regarding the maintainability of MA held that non-consideration of a ratio decidendi/decision of the Hon ble Supreme Court/jurisdictional High Court would amount to mistake apparent on the face of the record by relying upon the decision of the Hon ble Supreme Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd., reported in 305 ITR 227 (SC), [ though, in the context of the power of rectification of the Tribunal order u/s. 254(2) of the Act ], which we note is pari materia with that of sec.154 of the Act, which provision of law, we are concerned in the present appeals. The Ld.CIT(A) after hearing the assessee rectified his impugned order dated 20.05.2019 for AY 2016-17 by holding as under: 8. A similar miscellaneous petition was preferred by the AO on the CIT(A)'s order dated 20.05.2019 for the AY 2016-17 also on the similar lines. An opportunity of being heard was provided to the assessee; the reply given by the assessee is identical to that of the submission made by the assessee for the AY 2017-18 except that of the following additional point submitted for the AY 2016-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that the interest income from investment/bank wouldn t be taxable and after giving deduction of 10% ( income spent for administrative other expenses ) computed Rs. 35,40,842/- as taxable income. On appeal, the Ld.CIT(A) disposed off the appeal by passing the first appellate order dated 20.05.2019, wherein, he has taken note of certain observations made by the Hon ble High Court of Madras in the assessee s own case for AY 1997-98 i.e. especially Para No.36, wherein, their Lordships observed as under: 5.3.4 Further the Hon'ble High Court has also held in para 36 of the same order as under: 36. Therefore, what is relevant is to see as to how the funds generated by way of contribution, donation etc., from the members as well as the outsiders are expended and that utilization of such funds were with a view of fulfill the object of providing various recreational and other facilities to the members and then alone it can be held that the principle of identity between the contributor and the participator is fulfilled which is the basic requirement in the concept of mutuality of the enterprise. And directed the AO to find out as to whether the interest income and deposits we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 1996-97 the question of law framed by the Hon ble High Court was as under: 2. The common question of law involved in these appeals are as to 'whether the Tribunal was right in holding that the interest income of the assessee clubs received from its corporate members, on the investment of surplus funds as Fixed Deposits with them, is not exempted from tax on the concept of Mutuality. In some appeals, a further question of law as to 'whether the Tribunal is right in holding that the re-opening of the assessment under section 147 of the Income-tax Act was valid in respect of the assessee clubs. 10. And the Hon ble Madras High Court held at Para Nos.34-35 as under: 34. As far as the Division Bench judgment of the Karnataka High Court in the case of Bangalore Club (supra) is concerned, the facts are identical and the assessee in that case is also a club having identical nature of membership and activities. The various reasoning adduced in the said judgment squarely applies to the facts of this case and, therefore, we adopt the said reasoning also to support our conclusions. 35. . 36. Therefore, what is relevant is to see as to how the funds generated by way of contribution, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case, setting up such a case before Ld CIT(A) during the first round was an afterthought because no material was kept before Ld CIT(A) to make such a claim. We came to such a conclusion after perusal of records, which doesn t reveal that assessee filed any additional evidence before the Ld.CIT(A) [in the first round] to prove its assertion that its case would fall in the case-scenario as stated at Para Nos.30 36 of the Hon ble High Court (supra). And even if for argument sake it is assumed that such a claim was set up before the Ld.CIT(A), who enjoyed co-terminus power as that of AO, then he could have very well examined the relevant facts and ascertained as to whether the assessee has made out a prima facie case that the funds were invested in the form of Fixed Deposits or securities which were kept in such a deposit with a definite idea of using the same in a specific project for further development of the infrastructural facilities of the Club in the form of building or other facilities . Even before us, the assessee has neither filed any material to show that such a claim was raised before the AO at the first instance nor before the Ld.CIT(A) or before us to show the bonafide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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