TMI Blog2016 (4) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... w Delhi for the Assessment Year 2009-10. 2. The revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in accepting the assessee's claim of principle of mutuality lo income earned as interest from bank. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has failed to appreciate that acceptance of applicability of mutuality clause to hank interest income on deposits made out of the funds contributed by members of society is in contravention of the first principle of mutuality i.e. The identity of the contributors to the fund and the recipients from the funds which has also been held to be the first condition for applicability of mutuality clause by the Apex Court in her decision rendered in the case of Chelmsford Club (2000) 243 ITR 89 and the Bank is neither a member contributor to the funds nor has am rights in the funds or assets of the society in the instant case. 3. Brief facts of the case is that assessee is an association of person which is registered u/s 12A of the Income Tax Act and also registered u/s 80G of the Act. Assessee is purportedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .); CIT Vs. Karnataka Urban Infrastructure, Development and Finance Corporation, 315 ITR 301 (Karn) and that CIT Vs. Arbindo Memorial Fund Society, 247 ITR 93 (Mad),the AO concluded that receipts or income which were attributable to outside or third parties, were not covered by the principle of mutuality and accordingly, brought to tax the entire amount of interest of ₹ 39,72,025/- received from bank. 3. On appeal, the ld. CIT(A), following the decision of Hon ble jurisdictional High Court in the case of CIT Vs. Delhi Gymkhana Club (2011) TIOL-41-High Court-DEL-IT, allowed the claim of the assessee while holding that the principle of mutuality will apply to the interest income amounting to ₹ 39,72,025/-. 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decision followed by the learned CIT(A). We find that Hon'ble Delhi High Court in their judgment in the case of DIT v. All India Oriental Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on 7.7.2010. The decision in SCOPE(supra) was followed by a co-ordinate Bench in another decision dated 16.10.2009 in Wellington Estate Condominium in ITA No. 2846/Del/07 for the A.Y. 2003-04 . 5.2 We find that the Hon ble Jurisdictional High Court in their aforesaid decision in Delhi Gymkhana Club Ltd. (supra) concluded as under:- 2. After hearing the learned counsel for both the parties at length, we are of the opinion that the aforesaid finding of the Tribunal is correct on facts and in law, which does not call for any interference. The issue, in fact, stands covered by at least three judgments of this Court, which are as under: (i) The Director of Income Tax Vs. All India Oriental Bank of Commerce Welfare Society [2003] 130 Taxman 575 (Delhi). In this case, the members of the welfare society, who were the employees of the Oriental Bank of Commerce had earned interest income on deposits made out of contribution from the members of the society, i.e., the contributions which were given by the members of the society, were kept in the bank and interest was earned therefrom. The Revenue had contented that as far as this interest income is concerned, the principle of mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety and its preliminary activity was to collect money from their members for construction of flats/houses and subsequently allot the same to them. There was no issue that on these contributions from the members, no tax was payable and principles of mutuality would be applicable. However, it was found by the Assessing Officer that certain income was derived from other than construction activities, viz., equalization charges from new members, maintenance fund and entry fee from power of attorney holders, interest on delayed payments and more significantly (which would be relevant for our purposes) interests from bank from FDRs. All these were not treated as taxable income by the AO. This order of the AO was upheld by the CIT(A), but the Tribunal reversed the aforesaid orders after applying the principle of mutuality and deleted the additions made by the AO. The Department filed an appeal against the order of the Tribunal in the Court, which was dismissed. Insofar as the income generated from bank deposits as well as FDRs is concerned, this Court relied upon the judgment in the case of All India Oriental Bank of Commerce Welfare Society (supra) and held that the principle of mutuality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take note of the judgment of Gujarat High Court in the case of Sports Club of Gujarat Vs. CIT where the Court held that the principle of mutuality is not destroyed by the presence of transaction, which are non mutual in character. This principle can, in such case, be confined to transactions with members. The two activities, in appropriate case be supported and the profits derived from non-members, can be brought to tax. 19. In the present case, as already noted above, the respondent is incorporated as a society and the main objective is to improve the purpose of public enterprises. The membership of the society is open to public sector enterprises of Central/State Governments. It is, thus, performed for the benefit of its members, which are public sector enterprises. It is not indulging in any commercial activities in traditional sense, but is catering to the needs of its members. In its building at Lodhi Road, New Delhi, it has convention centre which is normally given to its members for functions. Likewise, other part of the premises are available to the members for their use. Of course, for using convention centre as well as other parts of the building, these members pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner, Service Tax Cell, 2006 (3) STR 311. Though it was a case where mandap_ facilities were provided by the club to its members and the question of service tax had arisen, the Calcutta High Court applied the principle of mutuality holding that the aforesaid facilities provided by the club to its members for such functions cannot be termed as commercial activity. Following observations are to be noted in this behalf: The principle of mutuality in this case is also squarely applicable, as going by the definitions of mandap, mandap keeper and the taxable service, in this case the facility of use of the premises to the members by its club cannot be termed to be a letting out nor the members of the club using the facility of any portion of the premises for any function can be termed to be a client. The services rendered by any person to his client presupposes the element of commerciality and obviously this transaction must be involved with the third parties, as opposed to the members of the club. Similar question was answered in the case of Saturday Club Ltd. Vs. Asstt. Commissioner, Service Tax Cell, (2006) 3 STR 305 in the following manner: So far as the merit is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two sides. 'Members' and 'club' both are same entity. One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. Hence, I do not find it is prudent to say that members' club is liable to pay service tax in allowing its members to use its space as 'mandap'. 3. Hence, in view of the aforesaid judgment of this High Court which binds us, we are of the opinion that no question of law arises for consideration. 4. This appeal is accordingly dismissed. 7. We have carefully perused the decision and we are of the view that this issue is covered by the decision of coordinate bench in the case of the assessee. No other decision contrary to the above decision was cited by the ld DR before us. Therefore respectfully following the order of the coordinate bench we dismiss the grounds of the appeal of the revenue. 8. Further on perusal of the order of the ld CIT(A) it is found that he has allowed all the grounds of the appeal of the assessee wherein Ground No. 1 to 3 were against the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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