TaxTMI 
TaxTMI 
2022 (2) TMI 1028
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....A No.1809/Ahd/2019 in which the following grounds are raised by the Revenue: 1. Whether the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,09,81,941/- on account of Guest fees/Income from hire of rooms/Hire charges in respect of club properties / Housie participation fees on the ground that temporary members are not eligible to share surplus on any dissolution of club and principal of mutuality is not acceptable for such members. 2. Whether the Ld.CIT(A) has erred in law and on facts in deleting the disallowance of expenses of Rs. 7,46,000/- u/s.57(iii) of the income Tax Act, 1961. 3. The assessee, in the present case, is a company which is engaged in providing various services to the members and their guests through Club as mutual association. The return of income for the AY 2014-15 was filed by it on 29/09/2014 declaring a total income of Rs. 71,05,140/-. In the assessment completed u/s.143(3) of the Income Tax Act, 1961 ("the Act") vide an order dated 26/07/2016, the total income of the assessee was determined by the Assessing Officer at Rs. 3,07,01,980/- after making inter alia addition of Rs. 2,09,81,491/- on account of Guests fees from member, ....
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..... 2,25,08,392/- received from outsider/not regular members or temporary members. The A.O. after considering the submission of the assessee held that since these outside parties/temporary members are not eligible to share surplus on dissolution of the club, the principle of mutuality is not applicable. The A. O. also rejected assessee's contention that on same issue and on similar facts & contention, Hon'ble ITAT Ahmedabad in appellant's own case for A.Y. 03-04 to A.Y. 07-08 directed the revenue to delete the .addition. During the appeal proceedings the AR of the appellant submitted as under: "2. We respectfully submit that this issue is covered in our favour in our own case in earlier assessment years 2003-04 to A.Y. 2012-13. We enclose orders of Hon. ITAT, Ahmedabad for A.Y. 2003-04, 2004-05, 2005-06, 2006-07 and 2007- 08 and also orders of Hon. CIT (A) for AY 2008-09, 2009-10, 2011-12 & 2012-13 in our own case deciding the identical issue in our favour. 3. We therefore request your Honour to delete the additions of Rs. 2,25,08,392/- made by the AO and oblige." It is noted that Hon'ble Ahmedabad 'B' Bench in appellant's own case for A.Y. 03- 04,....
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....terest income. AO has discussed the issue in para 7 of the order. Briefly, the facts of the case are that appellant claimed these expenses u/s. 57 of the Act from out of income from other sources. AO noted that since, these expenses are not directly related to the earning of interest and hence/disallowed the same. In the course of appellate proceedings appellant contended that this is recurring issue in their case and in the earlier years right from A.Y. 1996-67 to 1969-70 Hon'ble ITAT has allowed their appeal in the issue and in A.Y 2013-14 CIT(A) has allowed their appeal on the same issue by holding the following: "4.2 The 3rd ground of appeal is against the disallowance of Rs. 6,55,980/- being, expenses deductible against interest income. During the assessment proceedings the AO noted that, (i) "The assessee in the computation of income claimed deduction of Rs. 6,55,980/-from income from other sources. Accordingly the assessee was asked vide order sheet noting dated 17.07.2015 to justify the claim of deduction u/s. 57 of the act". (ii) "The assessee vide letter dated 05.08.2015 furnished the following reply. " We lastly refer to your proposal of disallowing expenses u/....
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....ctfully submit that this issue is also covered in our favour in earlier assessment; years in our own case, since A.Y. 1966-67 to A.Y. 2012-13. We also enclose for your ready reference orders of Hon. ITAT in our own case for A.Ys. 1966-67 to 1969-70 and Hon CIT(A) in our own case for A.Ys. 1986-87, 1988-89 and a/so in A.Y. 2012-13 (pages 51 to 64), deciding the identical issue in our favour. 3. In light of the issue being fully covered in our favour; we request your Honour to grant deduction of Rs. 6,55,980/- which is disallowed by the A.O." The submissions are considered. Ground No.3 is against the disallowance of Rs. 6,55,980/- being expenses against interest income. The A.O. held that 10% of total interest receipt as claimed by appellant as expenses is not allowable as per provision of section 57(iii) of the Act because the same is not incurred wholly and exclusively to earn such interest income. The A.O. rejected appellant's contention that Hon'ble ITAT in appellant's own case for A.Y. 66-67 to 69-70 and my predecessor i.e. CIT(A) in A.Y. 86-87, 88-89 and also in A.Y. 10-11 & 2011-12 allowed such expenses. I have also followed the view taken by my predecessor in th....