TaxTMI 
TaxTMI 
TaxTMI 
2013 (6) TMI 552
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....a. All the activities and the proceeds of the permit room are utilized by the members and hence any receipt is not taxable and is covered under the principle of mutuality. (b) The Ld CIT (A) failed to appreciate the fact that what is chargeable to tax is income and not receipt. The expenses incidental to earning of income were not allowed as deduction as permitted by section 57 of the Income Tax Act. (c) The permit room compensation received is a matter of convenience and facility to the members. The compensation received goes to reduce the operating cost of the club and thereby benefit the members in terms of the services at concessional rates. (d) The Ld CIT appeal failed to appreciate the fact that the compensation of Rs. 2,40,000/- r....
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....n Caterers and in accordance with the said deed, assessee received (a) Rs. 40,000/- per month on account of 'Permit Room Compensation' and (b) Rs. 20,000/- per month on account of 'Club Premises' and other facilities. In the return of income, assessee offered the said sum of Rs. 20,000/- per month (Rs. 2.4 lacs per annum) for taxation. However, the compensation received @ 40,000 pm (amounting to Rs 4.8 lakhs pa) on account of permit room was not offered to tax and it was claimed as exempt under the 'principle of mutuality'. AO noticed that both these amounts are similar ie the same contractor M/s. Sadar Caterers, purpose is the same ie use of the premises and other facilities of the club. Therefore, AO find no reason as to why the assessee ....
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....inciple of mutuality'. In this regard, assessee explained that the compensation received goes to reduce the operating cost of the club, thereby benefits the members in terms of the services at concessional rates. Alternatively, the assessee argued if the said amount is considered as a taxable receipt, assessee is entitled to deduction of various expenses out of the said compensation on account of depreciation, repairs and maintenance, salary to staff, electricity charges etc. On hearing the assessee, CIT (A) held that the claim of the assessee cannot be allowed by essentially mentioning that the amount of Rs. 2.4 lacs ( Rs. 20,000/- p.m X 12) when offered to tax, he find no reason why the amount of Rs. 4.8 lacs received from the same contra....
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....ty of the 'principle of mutuality'. He mentioned that the said issue, being legal in nature, can be raised at any time. For this purpose, he relied on the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs Commissioner of Income-tax (SC) 284 ITR 323 and also another judgment of the Apex Court in the case of National Thermal Power Corporation (299 ITR 383)(SC). Further, Shri Subramanian, Ld Counsel for the assessee argued stating that the additional grounds must be admitted in view of its legal nature. Ld Counsel mentioned that the said amount was originally offered in the return of income under bona fide belief that the said income is taxable and while the said income is covered by the 'principle of mutuality'. He a....
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....unds are: (a) if the compensations received from the M/s. Sadan Caterers by the club are covered by the principles of mutuality or not; and (b) if the net amount only is taxable u/s 56 of the Act or gross amount is taxable. 9. The ground no.1 relates to the taxability of amount of Rs. 4.8 lacs as income from other sources. In this regard, Ld Counsel for the assessee essentially reiterated the submissions made before the lower authorities. As per the assessee, this amount goes to benefit the members of the club as the same reduces the operational cost of the assessee thereby providing services at subsidized rates to the members of the club. Ld Counsel also brought to our attention to para 5 of the impugned order and mentioned that the CIT (....
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....ability of Rs. 4.8 lacs on one side and Rs. 2.4 lacs on the other side. There is no dispute on the facts with regard to these receipts. It is also a fact that the there are two amounts ie Rs 4.8 lakhs and Rs 2.4 lakhs received by the Club from the same contractor of course for specified uses of the facilities/premises of the club. It is admitted fact that the assessee originally offered general compensation of Rs. 2.4 lacs, which is now being claimed as exempt. Of course, the sum of Rs 4.8 lakhs is always claimed as exempt in the Return of income and the same is rejected by the AO/CIT(A). CIT(A) rejected the claim essentially on finding homology of the both the receipts. CIT(A) is of the opinion, if one receipt is offered to tax by the asse....