TMI Blog2015 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... lity for the year under appeal. - Decided in favour of assessee. Exemption from payment of income tax on interest earned - Decided against assessee as per the decisions of Banglore Club case [2013 (1) TMI 343 - SUPREME COURT] Allowance of carry forward of short term and long term capital losses to the subsequent assessment years - Held that:- We find that the assessee made a request to the FAA for admitting fresh evidence,that the FAA had admitted the same and had decided the issue in favour of the assessee without calling for a remand report from the AO.In our opinion,he should have called for a report from the AO in this regard. We are of the opinion that in the interest of justice,the matter should be restored back the file of the AO for fresh adjudication and verification of the documents produced by the assessee before the FAA - Decided in favour of revenue for statistical purposes. Allowance of loss on sale of fixed assets - Held that:- We find that the figure of loss claimed on sale of depreciable asset is different from the disallowance made by the AO.In our opinion it needs further verification.Therefore, in the interest of justice we are remitting back the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue : Shri Mallikarjun Utture--DR PER RAJENDRA, AM Challenging the orders of Commissioners of Income tax appeal the Assessing Officers(AO.s) and the assessee have filed cross-appeals/cross objections(CO.s)raising following Grounds of Appeal for various Assessment Years(AY.s): ITA/517/Mum/2010-AY.2005-06: 1 0 Re.: Enhancement of income by the Commissioner of Income-tax (Appeals): 1 1 The Commissioner of Income-tax (Appeals) has erred in enhancing the Appellant's total income for the year under consideration by ₹ 47,22,382/-. 1 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the enhancement made by the Commissioner of Income-tax (Appeals) is in excess of the powers prescribed u/s. 251 (1) of the Income-tax Act, 1961. 1 3 The Appellant submits that the enhancement made by the Commissioner of Income-tax (Appeals) be struck down as illegal, invalid and in excess of jurisdiction and the Assessing Officer be directed to recompute the Appellant' s total income ignoring the same. Without prejudice to the foregoing: 2: 0 Re.: Treating the Appellant as a 'mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7): 1 0 Re.: Enhancement of income by ₹ 1,69,07.816/- by the Commissioner of Income-tax (Appeals): 1 1 The Commissioner of Income-tax (Appeals) has earned in enhancing the total income of the Appellant by ₹ 1,69,07,816/- for the year under consideration. 1 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the enhancement made by the Commissioner of Income-tax (Appeals) is in excess of the powers available to him u/s. 251 (1) of the Income-tax Act, 1961. 1 3 The Appellant submits that the enhancement made by the Commissioner of Income-tax (Appeals) be struck down as illegal, invalid and in excess of jurisdiction and the Assessing Officer be directed to recompute the Appellant's total income ignoring the same. Without prejudice to the foregoing: 2 0 Re.: Treatin2 the Appellant as a 'mutual concern': 2: 1 The Commissioner of Income-tax (Appeals) has erred in holding that the Appellant is a 'mutual concern' and hence its income for the year needs to be computed by applying the principles of mutuality. 2 2 The Appellant submits that conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Jurisdictional High Court decided the said issue in favour of the revenue for earlier years in assessee s own case? The appellant prays that the order of the ld. Commissioner of Income tax(Appeals) be set aside and the order of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary. ITA No.803/M/10 (05-06) 1.On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the short term capital loss and carry forward of loss to the subsequent years for adjustment. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the long term capital loss and carry forward of loss to the subsequent years for adjustment. 3. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in allowing the loss of sale of fixed assets. 4.On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of ₹ 2,95, 171/-. 5. The appellant prays that the order of the Ld. CIT(A) be set aside and the order of the A.O. be restored as the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative of both the sides agreed that the order passed by the First Appellate Authority (FAA) for the AY 2005-06 was the lead year.Therefore,first,we will decide the cross appeals for that year. ITA/517/Mum/2010-AY.2005-06: Assessee company filed its return of income 28.10.2005 declaring loss at ₹ 1.50 crores. The AO completed the assessment on 14.12 2007 u/s. 144 of the Act declaring the income at Rs.(-) 1.46 crores. 2. First Ground of appeal is about enhancement of income by the FAA amounting to ₹ 47.22 lacs.During the course of appellate proceedings, the FAA observed that the assessee was providing services to its members,that those facilities were not available to outside members,that it was species of mutual understanding,that it was providing facilities to its members who were also entitled to participate in the surplus of funds, that it had received certain payments which were not covered by the concept of mutuality namely interest received from banks(Rs.40.46 lacs),dividend on shares (Rs.65.55 lacs) and interest on TDS refunds (Rs.6.76 lacs).He further observed that the assessee being a mutual concern was not entitled to set off its loss against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, that it did not file evidence to prove that it was providing services to members and non-members of commercial basis,that it had not made out any case that it was still a trading concerns,that it was a members club providing facilities to its members only,that outsiders were no entitled to avail the facility of the assessee company without becoming a member,that it failed to prove that it was conducting a business, that it was immaterial whether a concern was trading or non trading if principle of mutuality were applicable, that there was a complete identity between contributors and participators in the fund/common fund that the activities of the assessee were covered by the concept of mutuality, that even if in the earlier years the assessee was treated as trading concern the facts of the year under consideration are to be looked in to,that if it had earned any income from mutual activities/or had suffered any loss from mutual activity such income/loss was not taxable, that while computing the taxable income for the year under appeal such income or loss was to be ignored, that he had not considered any new item of income,that the enhancement was proposed about a source that ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard the rival submissions and perused the material before us.We find that the AO had completed the assessment u/s.144 of the Act for the year under appeal,that he had not discussed anything about mutuality,that the FAA had held that the assessee was not carrying out business activities,that he further held that the profit earned or loss suffered by the assessee out of the mutual had to be ignored,that the interest received by the assessee was not covered by the principles of mutuality and that same was taxable.We find that the assessee had opposed the enhancement proposed by the FAA on the ground that he could not tax income from a new source of income and that rule of consistency stipulated that income for the year had to be taxed under the income business income.First we would like to discuss the principle of consistencyone of the precedents followed by in judicial proceedings. Rule of consistency is not new. As early as 1956,the rule of consistency was deliberated at length by the Hon ble Bombay High Court in the case of H.A. Shah and Co.(30ITR618)as under: As a general rule the principle of res judicata is not applicable to decision of Income-tax Authorities. An assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY.1973-74. Assessment was completed under section 143(3) of the Act,on March 31.03.1976. It was found by the AO that the assessee had deposited ₹ 1,58,400 with the Bank of India, Netaji Subhash Road Branch, Calcutta, on 05.04. 1972,through the assessee's son, D, that the assessee stayed in Tinsukia, that on 04.04.1972 the assessee had no sufficient opening cash balance and had to borrow from other firms on that day and in such a circumstance D could not have reached Calcutta on the 5th before noon.Therefore, the amount of ₹ 90,000 was treated as the assessee's income from undisclosed sources. The assessee had explained that D had travelled by air but later stated that D had travelled by car and the AO did not accept this as true.On appeal, the assessee contended that the assessment proceedings had started some years after the event and he did not remember the mode of transport correctly.For the AY.1972-73,the Tribunal accepted this explanation but rejected it for the AY.1973-74.When the matter travelled to the Hon ble High Cout it was held that the totality of the circumstances and their combined effect were to be taken into consideration while deciding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the income of the assessee was made by him by following the principle of mutuality. As stated earlier,the AO had not discussed anything about mutuality in his order.The assessee had demonstrated that the contributor to the fund the ultimate beneficiaries of the fund were different.But,the FAA treated the members of the club as a class and ignored the basic facts that the members were of different types and every member was not entitled to the benefits in case of winding up of the company.In short,it can be safely be said that the contributors and beneficiaries were not same and that the principles of mutuality was not applicable to the facts of the case under consideration.In the case of Rai Bahadur Hardutroy Motilal Chamaria (supra),the Hon ble Apex Court had held that FAA for enhancing the income during appellate proceedings, the FAA should not travel outside the record, i.e., the return made by the assessee or the assessment order of the AO,that the power of enhancement was restricted to the sources of income which have been the subject-matter of consideration by the AO from the point of view of taxability,that consideration did not mean incidental or collateral examinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY.2005-06: 4. First two grounds of appeal,filed by the AO for the year under appel deal with allowance of carry forward of short term and long term capital losses to the subsequent assessment years. While passing the assessment order the AO had found that the assessee had claimed long term capital loss of ₹ 2,00,84,224/-and short term capital loss of ₹ 30.10 lakhs. As the details of the both kind of losses were not filed,so he disallowed the carry forward of both the sums.During the appellate proceedings,the assessee filed additional evidences before the FAA and allowed the appeal of the assessee. 4.1 Before us,the DR stated that the AO had passed order u/s.144 of the Act,that no details were filed by the assessee before him,that the FAA did not afford any opportunity to the AO to verify the correctness of the claim made by the assessee.The AR stated that the assessee had filed additional evidences before the FAA during the appellate proceedings. 4.2 We find that the assessee made a request to the FAA for admitting fresh evidence,that the FAA had admitted the same and had decided the issue in favour of the assessee without calling for a remand report fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 2.95 lacs. During the assessment proceedings the AO found that the assessee had claimed TDS of ₹ 7.68 lacs, that TDS covered income of ₹ 39.25 lacs, that it had declared income of ₹ 36.25 lacs relating to the TDS certificates.He held that income declared by the assessee was short by ₹ 3,00,541/-. As the assessee did not reconcile the difference, so he brought the said amount to tax and added it back to the total income of the assessee. 6.1. Before the FAA the assessee contended that it had filed details of deduction of TDS vide its letter dt.28.9.2007,that the difference between income credited to the P L account and the income shown in TDS certificates was on account of TDS certificates of Maharashtra State Road Development Corporation Ltd. and Union Bank of India, and it had earned interest income from the above mentioned two parties,that part of the income was offered for tax in the earlier years, that interest of ₹ 2.87 lacs from MSRDC and interest of ₹ 7,671/- from Union Bank of India was offered for taxation in the preceding year, that interest of ₹ 5,370/- was not offered for tax. After considering the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant has filed detail submissions on this issue vide letter dated 28.04.2009. The submissions of the Appellant have been placed on record. 1.3 The only dispute in appeal is what portion of the entrance fee received by the Appellant from persons at the time of admitting them as life members are taxable receipts. The issue has been settled by the Bombay High Court in its own case in assessment year 1963-64 and assessment year 1964-65(136 ITR 569).Bombay High Court held that the entrance fee paid by the life members equivalent to the amount collected from ordinary members is a capital receipts not liable to tax and the balance amount is in fact compounded payment, in lieu of annual subscriptions and therefore these are revenue receipts. Thus it will be seen that Bombay High Court has not laid down any ratio for the purpose of splitting entrance fee between revenue and capital receipt. Therefore, the Assessing Officer was wrong in splitting the fee received from life members into capital and revenue receipts in 20:80 ratio. That part of the entrance fee collected from life members, which collected from ordinary members, is to be treated as capital receipts and over and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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