TMI Blog2022 (3) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... ok. On perusal of these factual aspects discussed above, We find there is a technical error/mistake in computer package which cannot be ruled out. We find the Ld.AR submissions are realistic and duly supported with material evidences in the paper book is appreciated. Accordingly, we direct the Assessing officer to delete the addition of tax free interest on securities-bonds as it pertains to F.Y 2014-15 and the assessee is eligible for exemption u/s 10(15)(iv) of the Act and allow the ground of appeal in favour of the assessee. Addition of donation expenses - AR submitted that the assessee has not claimed deduction in respect of donation while preparing the computation of income and though donation expenses included under head Miscellaneous income was debited to the Audited income and expenditure account but for the purpose of exemption under the provisions of Sec.11 of the Act, the assessee has not claimed it as deduction - HELD THAT:- AR demonstrated the computation statement of income - we find that the assessee on applying the principles of mutuality has considered only the bank interest, interest on income tax refund, scrap sales and rent from hospital chargeable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the said interest did not pertain to F.Y 2014-15 inspite of the fact that the said interest was from tax free Govt bonds and in fact pertained to the F.Y 2014-15 only. ii. Upholding the disallowance of ₹ 18,01,500 on account of donation given by the appellant in spite of the fact that the said donation was not claimed by way of deduction by the appellant while computing the income of the appellant and the said amount was just debited to income and expenditure account and hence the order dated 24.12.2021 passed by the CIT(A)-53 upholding the addition of tax free intrest of ₹ 1,22,81,315/- as also the disallowance of donation to the tune of ₹ 18,01,500/- needs to be set aside to the extent. 2. The brief facts of the case are that, the assessee trust is registered u/s 12A of the Income Tax Act and operating swimming pool and bath club in Mumbai. A notice u/s 148 of the Act was issued on the assessee after recording reasons and the survey operations u/sec133A of the Act conducted at the office premises and further the assessee has not filed the return of income for the A.Y 2015-16. The Assessing officer (A.O.) has reason to believe that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estoring registration u/s 12AA was challenged by revenue before the Hon ble Bombay High Court, which vide order bearing No. ITA No. 600 of 2015 dated 19.09.2017 dismissed the appeal of Revenue Holding absence of Question of Law as the power to withdraw exemption of Director of Income Tax (Exmp) was granted in terms of amendment introduced by Finance Act, 2010 with effect from 01.06.2010 and that CBDT Circular No. 1/2011 dated 06.04.2011 explains why this amendment will apply for the A.Y 2011-12 and subsequent years. 3. The A.O. has observed that the assessee cannot claim exemption u/s 11 and 12 of the Act if the return of income is not filed under provisions of Sec. 139 of the Act along with the Audit Report in form 10B. In response to show cause notice, the assessee has filed a letter dated 25-03-2018 mentioning that as per the income and expenditure account, the assessee has disclosed a deficit of ₹ 3,11,74,716/- and whereas set off of income has been claimed as per the principle of mutuality. The A.O observed that the assessee is catering only to the members of the club and on perusal of the computation of income, the assessee has disclosed the bank inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like to state that some of the donations were eligible for deduction u/s. 80G of the I. T. Act, 1961 ( 50%), donation to PMNR fund was eligible for deduction u/s. 80G (@ 100%) and donation to Om Creations Trust was eligible for 100% deduction u/s. 80GGA(2) though not claimed in the return of income by the assessee. The assessee may be allowed to take this ground though not specified in the grounds of appeal by exercising your honour's power u/s. 250(5) of Income Tax Act. 1961. as the assessee was in fact entitled for these deductions which had nothing to do with the principle of mutuality. As such, these deductions may be allowed. (subject to verification by the AO). The xerox copies of the deductible donations made are enclosed. 6. The CIT(A) however was not convinced with the submissions, whereas, the assessee has the filed the return of income in response to notice u/s 148 of the Act and has not claimed deduction u/s 80-G of the Act and dismissed this ground of appeal and partly allowed the assessee s appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon ble Tribunal. 7. At the time of hearing, the Ld. AR submitted that the CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on bonds to the extent of ₹ 1,22,81,315/- falls in the F.Y 2014-15 relevant to current assessment year and entitled for exemption u/s 10(15)(iv) of the Act. The Ld. AR submitted that the interest income component was aggregated in the bank account and referred to the bank statements at page 9 to 12 of the paper book. On perusal of these factual aspects discussed above, We find there is a technical error/mistake in computer package which cannot be ruled out. We find the Ld.AR submissions are realistic and duly supported with material evidences in the paper book is appreciated. Accordingly, we direct the Assessing officer to delete the addition of tax free interest on securities-bonds as it pertains to F.Y 2014-15 and the assessee is eligible for exemption u/s 10(15)(iv) of the Act and allow the ground of appeal in favour of the assessee. 9. The second disputed issue is with respect to sustaining addition of donation expenses. The Ld. AR submitted that the assessee has not claimed deduction in respect of donation while preparing the computation of income. The Ld. AR emphasized that though donation expenses of ₹ 18,01,500/- included under head Miscellaneous in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice u/sec148 of the Act was issued. The reasons were recorded that as per the information with the department, in the ITS details the assessee was engaged in acquiring/selling of shares, invested in infrastructure bonds and collected Tax (TCS). The assessee has not filed the return of income in compliance to notice. Since the assessee has not filed return of income nor any reply to the letters issued by the department, a survey u/sec133A of the Act was conducted on 1/08/2018. The assessee has filed a letter on 04.09.2018 explaining the dispute within the trustees and committee members. The A.O dealt on submissions and the provisions at Para 5 to 9 of the assessment order. The A.O is of the opinion that the assessee is not eligible for exemption u/s 11 of the Act. Hence the A,O, based on the information available on record has made Best judgment assessment u/s 144 of the Act and calculated the income assessable as per trial balance, tally back up data for the F.Y 2013-14 and allowed the expenses claimed on activities and calculated surplus as per unaudited income and expenditure account and assessed the total income u/s 144 r.w.s 147 of the Act of ₹ 23,97,12,960/- and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled. This resulted in the assessment being completed u/s. 144 rws 147 of the I.T. Act, 1961. The accounts have now been audited and signed on 22.10.2019. In this scenario, the assessee would humbly request your honour to allow them to place all the details enclosed herewith on the record of your honour during the hearing of the appellate proceedings before your honour (in terms of Rule 46A(1)(c) of IT. Rules, 1962) since they go to the root of the appeal and would further request your honour to consider the same. 2. As mentioned above, though the assessee is registered under the Bombay Public Trust Act, 1950, it is in fact a Members Club hence, the assessee's income needs to be computed by applying the principle of mutuality. 3. Under the principle of Mutuality, the income from the members cannot be considered to be taxable income as no entity can make prof it out of itself. Thus. while computing the income in the present case, assessee has excluded income from the members as also the expenditure incurred. 4. . The concept of mutuality and consequential exemption of income from the members has been reiterated recently by the Supreme Court of India in the casde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. In the case of the appellant, it has not filed the Return of income u/s. 139(1) of the Act. Even in response to notice u/s. 148 of the Act, the appellant did not file the Return of income. Therefore, the AG has passed the assessment order u/s. 144 of the Act. It is noted by the AG that the appellant had complied to Service Tax, GST and VAT Act and filed respective returns but the appellant did not comply to the provisions of the I.T. Act and has not filed the Return of Income. The AG has allowed the expenses which were incurred on members' activities and has worked out the surplus amount of ₹ 23,97,12,960!-. Therefore, the assessee's argument that the AG has not applied the principles of mutuality is not correct. However, the surplus of ₹ 23,97,12,960!- also include the interest income of Rs. _3,13,28,690/-which is earned from tax-free bonds. The details of such interest have been given during the appellate proceedings. The AG is directed to verify the tax-free interest received from Government bonds and allow interest which is exempt u/s. 10(15)(iv) of the Act. Accordingly, the addition of ₹ 20,83,84,270/- made by the AO is confirmed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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