2019 (6) TMI 447 - HC - Income Tax

High Court affirms Income Tax Appeal dismissal, disallowing water charges & club share income, remands Section 14A issue for review.

Pr. Commissioner of Income Tax -1 Versus The Cricket Club of India

The High Court upheld the decisions of the Commissioner (Appeals) and the Tribunal in dismissing the Income Tax Appeal. The court affirmed the ... Disallowance u/s 14A -Tribunal deleted the disallowance confirmed by the CIT(A) and holding that the AO should examine the matter on this issue on the assessee's point of view - HELD THAT:- Tribunal has merely remanded the issue before the Assessing Officer for fresh consideration. We do not find any error. This question is, therefore, not entertained. Addition on account of water charges paid to BMC - Tribunal deleted the disallowance and not upholding the order of CIT(A) confirming the said disallowance, on the ground that the said expenditure was allowable u/s 23(1) being incurred for conducting specific event - HELD THAT:- Expenditure was towards water charges paid by the assessee to the Bombay Municipal Corporation in relation to rented premises. The Assessing Officer was of the view that this did not form the part of the Corporation charges and therefore was to be disallowed. Section 128A of the Maharashtra Municipal Corporation Act inter alia provides that property tax leviable on buildings and lands under the Act shall include water tax, sewerage tax etc. Thus, statutorily water tax was a component of the property tax to be paid to BMC. The Commissioner (Appeals) and the Tribunal, therefore, committed no error in disallowing the claim. Addition on account of club share income of assessee from caterer - whether the same was exempt under principle of mutuality? - CIT(A) deleted the addition - HELD THAT:- CIT, while deleting such disallowance came to the conclusion that the club had collected money from the members for food and refreshment out of which a sum of ₹ 9.20 Lakhas was retained while releasing the payment in favour of the caterer. This was, thus, a sum collected from the members on the principle of mutuality. This amount was, therefore, not taxed. While making payment to the caterer from the amount collected from the members, the club had retained a small portion to meet with its administrative expenses. We find no error in the view of the Commissioner as upheld by the Tribunal. - Revenue appeal dismissed. Issues:1. Disallowance under Section 14A of the Income Tax Act, 1961.2. Disallowance of water charges paid to BMC.3. Addition made on account of club share income of assessee from caterer.Analysis:Issue 1: Disallowance under Section 14AThe Tribunal remanded the issue to the Assessing Officer for fresh consideration. The High Court found no error in this decision and did not entertain this question, thereby upholding the Tribunal's decision.Issue 2: Disallowance of water charges paid to BMCThe dispute was regarding the disallowance of Rs. 7.98 Lakhs claimed as expenditure by the assessee for water charges paid to the Bombay Municipal Corporation (BMC). The Assessing Officer contended that this expenditure was not part of the Corporation charges and should be disallowed. However, the Maharashtra Municipal Corporation Act states that property tax includes water tax. Therefore, the Commissioner (Appeals) and the Tribunal were correct in disallowing the claim as water tax was a component of property tax to be paid to BMC.Issue 3: Addition made on account of club share incomeThe Assessing Officer added Rs. 9.20 Lakhs as income received by the assessee from a caterer. The Commissioner of Income Tax deleted this disallowance, considering it as a sum collected from club members on the principle of mutuality. The club had retained a portion for administrative expenses while paying the caterer. The High Court agreed with the Commissioner's decision, stating that this amount was not taxable as it was collected on the principle of mutuality.In conclusion, the High Court dismissed the Income Tax Appeal, upholding the decisions of the Commissioner (Appeals) and the Tribunal on all three issues presented for consideration.