TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 468
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....he Ld. CIT(A) erred in confirming the action of the Assessing Officer in disallowing Rs. 3,27,676/- on account of letting out of property to M/s. Organon India Private Limited. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding Rs. 5,50,000/- received from Tapan Kumar Biswas. 5. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding Rs. 3,03,324/- received from M/s. Sai Media Ventures (P) Ltd. 6. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of the Assessing Officer in adding commission of Rs. 13,76,606/- received from Agarwal Merchandise. 7) That on the facts and in the circumstances of the case, the learned CIT(Appeals) erred in confirming the action of the Assessing Officer in adding sponsorship/advertisement of Rs. 77,90,076 received from various parties. 8) That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the hearing of this appeal." 3. Ground No. 1 is against the action of t....
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....ed areas in the building belonging to the appellant to M/s Reliance Industries Limited, the appellant similarly derived income from letting out the rooms to members for residential accommodation as well as letting out banquet / conference halls to its members for holding functions & meetings. Drawing attention to Page 33 of the paper book, the Ld. AR submitted that in respect of income derived from letting out of part of the premises in the form of club rooms and conference halls, the lower authorities had accepted the appellant's claim for its non-taxability on the principle of mutuality but only in respect of the amount received from corporate member, M/s Reliance Industries Limited, the lower authorities did not accept the appellant's contention that these were not taxable on the same principle. According to him it was improper on the part of the lower authorities to draw artificial distinction between the rent receipts from members for use of club rooms / halls and the rent received from corporate member for use of specified premises as its office. In the alternate the Ld. AR submitted that the in the impugned order the AO assessed the service charges of Rs. 47,95,163/- under t....
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....eration, we are not inclined to depart from the view already taken by this Tribunal in the appellant's case for the latter year. Accordingly we uphold orders of the authorities below denying the benefit of mutuality principle in respect of receipts by way of rent & service charges from M/s Reliance Industries Ltd. 7. We however find merit in the alternate submission of the appellant that the service charges received were nothing but by way of rent received for use of premises. From perusal of the service agreement we note that appellant was under no obligation to provide any service, facility or amenity to M/s Reliance Industries Ltd for earning service charges. Moreover we find that both the agreements were co-terminus and ran concurrently. It was expressly provided that the service agreement will remain valid so long as license agreement was in force. We therefore agree with the Ld. AR's submissions that both rent & service charges were having the same character and both were being charged on per square feet basis without incurring any corresponding expenditure. We therefore find in the Ld AR's submission that both these receipts must be considered to be composite one and charg....
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.... FY 2011-12. He further submitted that since M/s Organon India Ltd continued to remain in adverse possession of the property during the relevant year, deemed notional value of the property was also not assessable to tax in the appellant's hands. He also submitted that ultimately the dispute with M/s Organon India Ltd was settled and the terms of settlement were evidenced in the Deed of Settlement dated 27.04.2018, copy of which was filed in the paper book at Pages 93 to 96. Referring to the said Settlement Deed, the Ld. AR pointed out that the entire arrears towards rent and maintenance charges for the period April 2008 to September 2018 were ultimately paid to the appellant in the FY 2018-19 and therefore it was being offered to tax in the current year. The Ld. AR also submitted that in assessments order passed for subsequent years u/s 143(3), the AOs have accepted this factual position and no property income on notional basis has been assessed in the hands of the appellant. Per contra the Ld. DR relied on the orders of the lower authorities. 11. After considering the rival submissions, we find sufficient force in the Ld. AR's submissions. From Note No. 23.1 of the annual audite....
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....ssed under the head 'Business income'. The Ld. AR submitted that since the nature of receipts in both the cases being identical, the lower authorities be directed to assess the sum of Rs. 3,03,324/- under the head 'House Property' 15. Having considered the submissions of both parties and orders of lower authorities, we find that the appellant had received rent from M/s Tapan Art Centre and M/s. Sai Media Ventures P. Ltd amounting to Rs. 5,50,000/- & Rs. 3,03,324/- for letting out areas within the club premises where they were permitted to display advertisements. Since the advertisements were displayed for viewing by the members during their visit to club premises, the appellant claimed application of mutuality principle to such receipts as well. However at the time of appeal hearing, the ld. AR fairly conceded that on the given facts mutuality principle was not applicable to these receipts and in that view of the matter Ground No. 4 was not pressed. We however find that even though the nature of receipts in both the cases was identical, the lower authorities erred in differently classifying these two amounts under two different heads of income, which in our opinion was not approp....
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....ndise Tie-up Pvt. Ltd operated the shop on commercial principles, it paid license fees calculated at the rate of 5% on the gross revenue/sales made from the shop. The Ld. AR pointed out that since the sale proceeds were realized by M/s. Agarwal Merchandise Tie-up Pvt. Ltd only from the members of the club there was no breakdown on the principle of mutuality between the club and its members because the 5% amount received through M/s. Agarwal Merchandise Tieup Pvt. Ltd originated only from members of the club and not from anyone else. The Ld. AR further submitted that the assessee claimed benefit of mutuality principle in respect of commission income since 1993-94 which was allowed by the Revenue in all the past assessments except for AY 2007-08 and AY 2012-13 i.e. the year under consideration. Taking us through the appellate order of Ld. CIT(A)-XXXII, Kolkata dated 20.06.2014 for AY 2007-08 which is at Pages 68 to 81 of paperbook, the Ld. AR drew our attention to his findings wherein he had allowed the benefit of mutuality principle. He submitted that since in the present case the commission received represented 5% of the sums collected by M/s. Agarwal Merchandise from the members ....
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.... a vendor to operate within the club premises, it is common to charge a percentage of their revenues derived from the members as fees / commission which is then utilized by the club for the benefit of its members. This question whether such commission / fee qualifies for the benefit of mutuality principle in the hands of the club was considered by the coordinate Bench of this Tribunal in the case of ITO Vs Kamala Vihar Sports Club (36 taxmann.com 55) and answered in favour of the assessee. The relevant extracts of the decision is as follows: "12. Considering the facts of the case in the light of the aforementioned two conditions, we find that in the instant case, there is no dispute so far as the identities of the contributors and the participators are concerned. What has been questioned by the Assessing Officer is that the profits of the institution are not fully for the benefits of its members inasmuch as the contributors/participators are deriving profits not only from themselves but also from outsiders. It is the say of the assessee that the banquet hall/ground are given only to the members of the club and their families. Further, only the members of their families and guests....
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....ppeal before us. 23. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the lower authorities have held that the departmental expenses incurred for organizing club events pertained to activities of the club and therefore such expenses could not be considered as being incurred in relation to earning income by way of sponsorship fees / advertisement fees. The Ld. AR however submitted that the sponsorship / advertisement fees were received with the specific understanding that the amounts would be utilized for organizing specified events which are being sponsored by the sponsors or where the advertisements would be displayed at the events. The Ld. AR therefore submitted that there was direct and proximate nexus between the receipt by way of sponsorship / advertisement fees received from parties and corresponding expenses incurred on conducting events. Merely because in the books of accounts maintained the expenses were accounted department-wise, such manner of accounting presentation could not deny the appellant the benefit of deduction of the expenses incurred against the corresponding receipts. The Ld. AR submitted that in the appe....