TMI Blog2003 (8) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... ning was taken as an additional ground. In all the appeals, the ground of status is taken as an additional ground. The learned counsel for the assessee relied on the judgment of the Supreme Court in the case of NTPC Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) and submitted that the grounds are legal grounds and that they can be taken at any time. He further submitted that he has reasonable and sufficient cause for not taking these grounds and that non-admission of these grounds would cause irreparable loss and hardship to the assessee-club. The reasonable cause for taking these additional grounds is stated as wrong advice from the counsel. Admission and consideration of these grounds by the Tribunal, he argued, would result in correct assessment of tax liability of the club and hence it should be admitted. 4. The learned Departmental Representative, on the other hand, vehemently opposed the admission of these grounds. On the question of status, he submitted that the assessee has filed its returns of income for these assessment years in the status of AOP. He relied on the decision of the Supreme Court in the case of Manji Dana vs. CIT (1966) 60 ITR 582 (SC) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of India in the case of CIT vs. Cawnpore Club Ltd. He further relied on the judgment of the Delhi High Court in the case of Director of IT vs. All India Oriental Bank of Commerce Welfare Society (2003) 175 Taxation 147 (Del) wherein the Hon ble Delhi High Court had followed the judgment of the Supreme Court in the case of Chelmsford Club vs. CIT (2000) 159 CTR (SC) 235 : (2000) 109 Taxman 215 (SC). He submitted that the first question that was considered by the Hon ble High Court is the same as the question before this Bench and that following the Hon ble Supreme Court judgment, the matter was decided in favour of the assessee. 7. The learned counsel for the assessee further relied on the jurisdictional High Court s order in the case of CIT vs. Nataraj Finance Corpn. (1988) 69 CTR (AP) 15 : (1988) 169 ITR 732 (AP) and submitted that the interest received on outstanding dues from a former partner and also on moneys deposited in a savings account with Canara Bank are not taxable on the principle of mutuality. The jurisdictional High Court he argued, had taken support from the view of the same High Court in the case of Addl. CIT vs. Secunderabad Club (1984) 150 ITR 401 (AP). He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e over income on transactions having dealings with outsiders. 8. Coming to the issue of reopening, he contended that the reopening is done on mere change of opinion consequent to the decision of the Hyderabad Bench of the Tribunal in the case of Nizam Club. He submitted that this is not permissible and for the same he relied on the judgment of the Gujarat High Court in Sarabhai M. Lakhani vs. ITO (1998) 145 CTR (Guj) 110 : (1998) 231 ITR 779 (Guj). 9. As regards the third ground of appeal i.e., taxability of receipts from members of affiliated clubs, he submitted that the issue is covered in favour of the assessee by the judgment of the Tribunal, Hyderabad Bench in the assessee s own case which is ITO vs. Fathe Maidan Club (1986) 17 ITD 1086 (Hyd). 10. On the issue of status, he submitted that as the persons are not associated themselves in an income-producing activity, they cannot become an AOP. For this proposition he relied on the judgment of the jurisdictional High Court in the case of Deccan Wine General Stores vs. CIT (1977) 106 ITR 111 (AP). He drew the attention of the Bench that the jurisdictional High Court had followed the judgment of the apex Court in CIT vs. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del) as well as a judgment of the Madras High Court in the case of Sri Krishna Mahal vs. Asstt. CIT (2001) 169 CTR (Mad) 228 : (2001) 250 ITR 333 (Mad) and submitted that all reopening of assessments are in accordance with law, and have to be upheld. On the issue of taxability of receipts from members of affiliated clubs he submitted that the issue is covered in favour of the assessee. 13. Coming to the issue of taxability of interest received of fixed deposits, he submitted a paper book consisting of six judgments. He first referred to the judgment of this Bench of the Tribunal in the case of Secunderabad Club vs. Asstt. CIT in ITA No. 819/Hyd/1994 and 820/Hyd/1994 dt. 5th March, 2002, and submitted that interest income on investments is includible in the total income and cannot be exempted by the principle of mutuality. He submitted that the interest is governed by a separate contractual relationship between the assessee-club and the banking company. He relied on yet another judgment of this Bench of the Tribunal in the case of Secunderabad Club vs. Asst. CIT in ITAs 1072 1073/Hyd/1993 and submitted that what can be exempted on the ground of mutuality is the income from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice that both the issues raised in this case, namely, income from residential chambers and interest and dividend income have to be exempt as there was concept of mutuality. The first appellate authority placed reliance on the orders of the Tribunal, Allahabad Bench in the asst. yrs. 1979-80 and 1980-81, copies of which were filed before the first appellate authority. The first appellate authority has followed the decision of the Tribunal. In this view of the matter and respectfully following the decision of the Tribunal, we find that the order of the CIT(A) calls for no interference from us. The facts and the reasons given by the Tribunal in the asst. yrs. 1978-79 and 1980-81 will apply mutatis mutandis for this year also. Therefore, they have not been repeated here, but the order of the first appellate authority stand upheld by us." In R.A. No. 413/All/1992 (in ITA No. 2433/All/1990) the questions referred to the High Court of Judicature at Allahabad are as follows: (1) "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the income of the club from letting out of the rooms was not assessable as income from house proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t followed its earlier decision. The Department preferred an appeal to the Supreme Court from the later decision of the High Court. The Department was unable to explain what was the fate of the appeal filed against the decision in Pradip Ramanlal Sheth vs. Union of India, if filed, or why no appeal was filed against that decision. The Supreme Court dismissed this appeal holding that it was not open to the Revenue to accept the earlier judgment in the case of one assessee and challenge its correctness without just cause in the case of other assessees." To the same effect is the decision of the apex Court in the case of Union of India vs. Satish Panalal Shah (2001) 168 CTR (SC) 1 : (2001) 249 ITR 221 (SC). Thus, it is not open for the Revenue to accept the judgment in the case of one assessee and challenge its correctness on the same issue in the case of other assessees. Even otherwise the Hon ble High Court in the case of Director of IT vs. All India Oriental Bank of Commerce Welfare Society had followed the apex Court s judgment in the case of Chelmsford Club vs. CIT (2000) 159 CTR (SC) 235 : (2000) 243 ITR 89 (SC) and held that interest income derived from the assessee cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to its notice. Thus, respectfully following the judgment of the Hon ble Supreme Court in the case of CIT vs. Cawnpore Club Ltd. as well as the judgment of the jurisdictional High Court in the case of Natraj Finance Corporation we hold that interest earned on fixed deposits is incidental and does not amount to carrying on of any commercial activity and hence it is not taxable on the principle of mutuality. We, therefore, allow this ground of the assessee. 19. The learned counsel for the assessee had submitted that if the first ground of the assessee is allowed the grounds on the issue of reopening under s. 148 and on the issues of status taken by the assessee need not be gone into by this Tribunal. As we have allowed the first ground on taxability of interest received on fixed deposits in favour of the assessee, we do not go into the grounds of reopening of the assessment and assessability of the assessee as AOP. 20. The only other ground that remains is whether receipts from members of affiliated clubs is taxable or not on the doctrine or mutuality. 21. As both the parties have agreed that the issue is covered in favour of the assessee and against the Revenue by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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