2024 (10) TMI 738

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.... apparent from the record and AO can authorize and verify as per the direction and pass suitable order. 3. The CIT appeals has erred in not following the order of the Madras High Court in the Assessee's own case. 4. The CIT Appeals is not correct in overlooking the fact that the issue has not become final and the matter is before the larger bench of the Supreme Court on appeal by the Department and various clubs all over India. This information and details are available with the department. 5. On these and other 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....

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....ITA No.747/Mds/2009 for the AY 2005-06) and Hon'ble High Court of Madras (TCA Nos 397 to 404 of 2008) by relying on the decision of the Hon'ble Supreme Court in the case of Bangalore Club (350 ITR 509) that the concept of mutuality is not applicable to the interest income earned. Respectfully following the binding judicial precedents as above, the addition of interest income made by the AO is upheld in principle. 5.3.3 However, at this juncture, the AR of the appellant submitted that the Hon'ble High Court in the case cited supra had observed in Para 30 of the order 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 dep....

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....istake apparent on the face of the record; and also pointed out that the Ld.CIT(A) while passing the original First Appellate order for both the Assessment Orders have not considered the order of the Hon'ble Madras High Court in the assessee's own case, wherein, the Hon'ble High Court has concurred with the decision of the Hon'ble Karnataka High Court in the case of Bangalore Club reported in 234 ITR 308, which decision of the Hon'ble Karnataka High Court has been upheld by the Hon'ble Supreme Court in the case of Bangalore Club reported in [2013] 5 SCC 509. The Ld.CIT(A) while considering the Miscellaneous Application (MA) moved by the 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], w....

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..... The Assessing Officer is directed to give effect to this order accordingly, after obtaining the details from the assessee with respect to Section 57(iii) of the Act. 9. Thus, the miscellaneous petitions filed by the AO for the AYs 2017- 18 and 2016-17 are disposed of accordingly. 7. Aggrieved by the aforesaid order of the Ld.CIT(A), the assessee has raised the grounds noted supra. 8. We have heard both the parties and perused the material available on record. We note that the assessee club has shown gross income of Rs. 9,94,79,235/-, (which included interest income of Rs. 39,33,880/-), which was claimed as not taxable on principles of mutuality. The AO didn't accept the claim of 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, the....

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....ssue, therefore, is whether non-consideration of a decision of jurisdictional court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a "mistake apparent from the record"? In our opinion, both the Tribunal and the High Court-were right in holding that such a mistake can be said to be a "mistake apparent from the record" which could be rectified under section 254(2). [Emphasis given by us] 9. From the aforesaid decision of the Hon'ble Supreme Court, it is crystal clear that non-consideration of the decision of the Hon'ble jurisdictional High Court in the assessee's own case by the Ld.CIT(A) would definitely amount to mistake apparent on the face of the record since the in the assessee's own case for 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 l....

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....nnot satisfy the mutuality concept and therefore, was exigible to tax. The observations made by the Hon'ble High Court at Para Nos. 30 & 36 was in the knowledge of the assessee while the assessment proceedings was going on before the AO in the year 2018, since the Hon'ble Madras High Court order discussed supra was dated 30.07.2009; and it was not the case of the assessee before the AO that the funds which were invested in the form of Fixed Deposits or securities [kept in such deposit] were 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 building or other facilities. Therefore, in the absence of such a claim being made before the AO even after 10 years after the order of the Hon'ble Madras High Court in their own 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 th....