Dy.Commissioner of Income Tax -1(1), Room No.579, Aayakar Bhavan, M.K.Road, Mumbai-400020 Vs. M/s Bombay Gymkhana Ltd., Mahatma Gandhi Road, Fort, Mumbai-400001
March, 17th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL" B" BENCH, MUMBAI
BEFORE HON'BLE S/SHRI B.R.BASKARAN (AM) and SANJAY GARG (JM)
.. , ,
( / Assessment Year : 2007-08)
Dy.Commissioner of Income / M/s Bombay Gymkhana Ltd.,
Tax -1(1), Vs. Mahatma Gandhi Road,
Room No.579, Fort,
Aayakar Bhavan, Mumbai-400001
( /Appellant) .. ( / Respondent)
( / Assessment Year : 2007-08)
M/s Bombay Gymkhana Ltd., / Dy.Commissioner of Income Tax
Mahatma Gandhi Road, Vs. -1(1),
Fort, Room No.533, 5th floor,
Mumbai-400001 Aayakar Bhavan,
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. : AAACB2122M
/ Revenue by Shri Vivek Batra
/Assessees by Shri Farrokh Irani
/ Date of Hearing
/Date of Pronouncement : 13.3.2015
2 ITA. No.1378/Mum/2011
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
These cross appeals are directed against the order dated 30-08-
2010 passed by ld CIT(A)-I, Mumbai and they relate to the assessment
2. The assessee is aggrieved by the decision of Ld CIT(A) on the
(a) Addition of Rs.1,25,000/- relating to Sponsorship contributions
(b) Addition of Rs.11,87,657/- relating to complimentary liquors
3. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the
assessment of interest income of Rs.7,08,931/-.
4. We have heard the parties and perused the record. The assessee is
a mutual association and it filed its return of income declaring a total
income of Rs.10,23,460/-. The AO, during the course of assessment
proceedings, noticed that the assessee has claimed certain receipts as
exempt from taxation under mutuality principles. The first issue relates to
the assessment of Rs.1,25,000/- relating to the amounts received by way
of sponsorship for various events organized by the assessee. The AO
noticed that the following companies have contributed to certain events
organized by the assessee.
Diego India P Ltd (Barnite event) - Rs.35,000/-
McDowell Ltd (Jazznite event) - Rs.40,000/-
Centurion Bank Ltd (Holi event) - Rs.50,000/-.
Since the contributors were non-members, the AO took the view that the
above said contributions are assessable as the income of the assessee.
Accordingly he assessed the above said receipts as income of the assessee
and the Ld CIT(A) also confirmed the same.
3 ITA. No.1378/Mum/2011
5. The main submission of Ld A.R was that the above said companies
have only contributed to the conducting of events by way of sponsorship
and the same goes to reduce the cost of expenditure incurred in respect of
those events. Accordingly he submitted that there is no income element
involved in these receipts. In the alternative, he submitted that the
corresponding expenditure should be allowed as deduction, if the above
said receipts were considered to the income of the assessee. However,
the Ld D.R submitted that the assessee has received this amount from
non-members and hence the concept of mutuality will not apply to these
6. There is no dispute that the companies, cited above, are non-
members. However, we are of the view that one has to see the object
behind the receipt of these contributions from the above said companies.
There is no dispute that the assessee has been organizing various events
for the mutual benefit of its members. The contributions, if any, received
from the members were utilized for conducting the events and the surplus,
if any, is accepted as exempt under the principles of mutuality. The above
said companies have partly sponsored the events, apparently as a part of
their respective sales promotion activities. Hence, the objective of the
assessee in receiving these contributions, in our view, can only be
considered to be to meet part of the expenditure incurred in organizing the
events. Hence, in our view, there is no intention to earn any income out
of the above said contributions, since it only goes to reduce the
expenditure. Hence, we are of the view the above said contribution
cannot be subjected to tax as income in the hands of the assessee.
Accordingly, we set aside the order of Ld CIT(A) on this issue and direct
the AO to delete this addition.
7. The next issue contested by the assessee relates to the value of
complimentary liquors assessed by the AO as income of the assessee. The
4 ITA. No.1378/Mum/2011
AO took the value of complimentary liquors is to be assessed as income of
the assessee, since the assessee has failed to furnish the details of
persons who consumed the complimentary liquor. He also took the view
that the complimentary liquor could have been used by non-members also
and accordingly assessed the sale value of complimentary liquor as income
of the assessee. The Ld CIT(A) also confirmed the same.
8. The Ld A.R submitted that the assessee has sold the complimentary
liquors only to its members. He further submitted that non-members are
not allowed to utilize the services of the club. The non-members, if any,
come to the club only as guests of members and hence the sale of liquor
has to be considered as sale to members only. On the contrary, the Ld
D.R placed strong reliance on the order of Ld CIT(A).
9. We find merit in the view taken by tax authorities. It is an accepted
fact that the complimentary liquor has been sold at a price, meaning
thereby the intention of the assessee was to make profit out of sale of
complimentary liquors. Thus the action of the assessee was commercial in
nature. It was not shown to that the liquor companies, who have given
complimentary liquors, are members of the assessee. Hence, we do not
find any infirmity in the decision of the ld.CIT(A) on this issues.
10. In the appeal filed by the revenue, the only issue urged relates to
the assessment of interest income of Rs.7,08,931/-. Both the parties
agreed that this issue has since been decided against the assessee by
Hon'ble Supreme Court in the case of Bangalore Club reported in 350 ITR
509. Accordingly, we set aside the order of Ld CIT(A) on this issue and
confirm the assessment of interest income.
5 ITA. No.1378/Mum/2011
11. In the result, the appeal filed the assessee is partly allowed and the
appeal of the revenue is dismissed.
Pronounced accordingly in the open court in the presence of both the
parties on 13-03-2015.
13TH March, 2015
( /SANJAY GARG) (.. ,/ B.R. BASKARAN)
/ Judicial Member /Accountant Member
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
, /ITAT, Mumbai