ADIT (E), New Delhi v. India Habitat Centre, New Delhi

ITA 4771/DEL/2011 | 2008-2009
Pronouncement Date: 17-02-2012 | Result: Dismissed

Appeal Details

RSA Number 477120114 RSA 2011
Assessee PAN AAATI0499M
Bench Delhi
Appeal Number ITA 4771/DEL/2011
Duration Of Justice 3 month(s) 15 day(s)
Appellant ADIT (E), New Delhi
Respondent India Habitat Centre, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 17-02-2012
Date Of Final Hearing 14-02-2012
Next Hearing Date 14-02-2012
Assessment Year 2008-2009
Appeal Filed On 02-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI R.P. TOLANI JM & SHRI A.N. PAHUJA AM ITA NO.4771/DEL/2011 ASSESSMENT YEAR:2008-09 ADDL. DIRECTOR OF INCOME- TAX (E) NEW DELHI V/S . INDIA HABITAT CENTRE LODHI ROAD NEW DELHI [PAN : AAATI 0499 M] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SURESH ANANTHARAMAN AR REVENUE BY MS.RENUKA JAIN GUPTA DR DATE OF HEARING 14-02-2012 DATE OF PRONOUNCEMENT 17-02-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 2ND NOVEMBER 2011 BY THE REVE NUE AGAINST AN ORDER DATED 9 TH AUGUST 2011 OF THE LEARNED CIT(A)-XXI NEW DELHI RAISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE TAXABILITY OF INTEREST EARNED ON BANK DEPOSIT BY APPLYING THE PRINCIPLE OF MUTUALITY BY FOLLOWING THE DECISION OF DELHI HIGH COURT IN THE CASE OF DELHI GYMKHANA CLUB. 2. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D ANY GROUND OF THE APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE TH AT RETURN DECLARING NIL INCOME FILED ON 29.09.2008 BY THE ASSESSEE A SOCIE TY REGISTERED U/S 12A OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS SELECTED FOR ITA NO.4771/DEL./2011 2 SCRUTINY WITH THE SERVICE OF NOTICE U/S 143(2) OF T HE ACT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS AFTER ANALYZING THE PRIMARY AIMS AND OBJECTS OF THE SOCIETY AS ALSO ACTIVITIES UNDERTAKEN BY IT THE A SSESSING OFFICER (A.O. IN SHORT) REJECTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/ S 11 & 12 READ WITH SECTION 2(15) OF THE ACT. AS REGARDS ASSESSEES CLAIM FOR EXEMPTION OF ITS INTEREST INCOME UNDER THE PRINCIPLE OF MUTUALITY IN THE LIGH T OF DECISIONS IN THE CASE OF DIT VS. ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOC IETY 130 TAXMAN 575 (DEL.); CIT VS. KARNATAKA URBAN INFRASTRUCTURE DE VELOPMENT AND FINANCE CORPORATION 315 ITR 301 (KARN) AND THAT CIT VS. AR BINDO MEMORIAL FUND SOCIETY 247 ITR 93 (MAD) THE AO CONCLUDED THAT REC EIPTS OR INCOME WHICH WERE ATTRIBUTABLE TO OUTSIDE OR THIRD PARTIES WERE NOT COVERED BY THE PRINCIPLE OF MUTUALITY AND ACCORDINGLY BROUGHT TO TAX THE ENTIR E AMOUNT OF INTEREST OF ` `39 72 025/- RECEIVED FROM BANK. 3. ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DE LHI 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 INTER EST 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 T HE ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED UPON THE FINDIN GS 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 C ASE OF DIT V. ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY [2003] 184 CTR (DE LHI) 274 HELD THAT PRINCIPLE OF MUTUALITY APPLIES TO INTEREST INCOME R ECEIVED FROM THE DEPOSITS MADE OUT OF CONTRIBUTION BY THE MEMBERS. IN TAKING THIS VIEW THE HONBLE DELHI HIGH COURT TOOK A CUE FROM THE DECISION OF THE HONBLE S UPREME COURT IN CHELMSFORD CLUB V. CIT 243 ITR 89 WHEREIN THE HONBLE SUPREME COURT HAD LAID DOWN THE ITA NO.4771/DEL./2011 3 PRINCIPLE THAT WHERE A NUMBER OF PERSONS COMBINE TO GETHER TO A COMMON FUND FOR FINANCING OF SOME VENTURE OR OBJECT AND IN THIS RES PECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTSIDE BODY THEN ANY SURPLUS G ENERATED CANNOT IN ANY SENSE BE REGARDED AS PROFITS CHARGEABLE TO TAX. THE DECIS ION OF HONBLE DELHI HIGH COURT IN ALL INDIA ORIENTAL BANK OF COMMERCE WELFAR E SOCIETY (SUPRA) WAS FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT I N THEIR DECISION DATED 11.5.2007 IN THE CASE OF COUNTRY CLUB . HONBLE KA RNATAKA HIGH COURT IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FU ND V. DY. CIT 308 ITR 202 (KAR.) HELD THAT . 2.8 TAKING INTO CONSIDERATION THE OBJECTS OF THE A SSESSEE THE SOURCE OF FUNDS DURING THE RELEVANT YEARS AND THE APPLICABILITY OF THE FUNDS FOR THE BENEFIT OF ITS MEMBERS AND KEEPING IN MIND THE INTEREST ON INVEST MENTS AND DIVIDEND EARNED ON SHARES WAS ONLY A SMALL PORTION OF THE TOTAL EAR NED BY INVESTMENT OF THE SURPLUS FUNDS WHOLLY CONTRIBUTED BY THE MEMBERS OF THE ASSESSEE THE KARNATAKA HIGH COURT HELD THAT THE INTEREST EARNED ON INVESTM ENT AND DIVIDEND RECEIVED ON SHARES WAS DEEMED INCOME FROM THE PROPERTY OF THE A SSESSEE CONTRIBUTED BY ITS MEMBERS AND WAS GOVERNED BY THE PRINCIPLE OF MUTUA LITY AND WAS THEREFORE EXEMPT. 5.1 IN THE CASE OF CIT VS. STANDING CONFERENCE OF PUBLIC ENTERPRISES 319 ITR 179(DEL.) THE AO DECLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT PRINCIPLE OF MUTUALITY WAS APPLICABLE INTER ALIA TO INTERES T INCOME. THE TRIBUNAL HOWEVER ACCEPTED THAT PRINCIPLE OF MUTUALITY WOULD APPLY. ON APPEAL BY THE REVENUE REGARDING APPLICABILITY OF PRINCIPLE OF MUTUALITY T O RECEIPT FROM MEMBERS AND INTEREST EARNED FROM SURPLUS FUNDS DEPOSITED WITH T HE BANKS THE HONBLE JURISDICTIONAL HIGH COURT FOLLOWING THE VIEW TAKEN IN BANKIPUR CLUB LTD. (SUPRA) CHELMSFORD CLUB VS. CIT 243 ITR 89 (SC) AND DALHOU SIE INSTITUTE VS. AC SERVICE TAX 3 STR 311 (CAL.) REJECTED THE APPEAL OF THE REVENUE. THE HONBLE SC ALSO DISMISSED THE SLP FILED BY THE DEPARTMENT 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 . ITA NO.4771/DEL./2011 4 5.2 WE FIND THAT THE HONBLE JURISDICTIONAL H IGH COURT IN THEIR AFORESAID DECISION IN DELHI GYMKHANA CLUB LTD. (SUPRA) CONCLU DED AS UNDER:- 2. AFTER HEARING THE LEARNED COUNSEL FOR BO TH THE PARTIES AT LENGTH WE ARE OF THE OPINION THAT THE AFORESAID F INDING OF THE TRIBUNAL IS CORRECT ON FACTS AND IN LAW WHI CH DOES NOT CALL FOR ANY INTERFERENCE. THE ISSUE IN FACT STA NDS COVERED BY AT LEAST THREE JUDGMENTS OF THIS COURT WHICH ARE AS UNDER: (I) THE DIRECTOR OF INCOME TAX VS. ALL INDIA ORIEN TAL BANK OF COMMERCE WELFARE SOCIETY [2003] 130 TAXMAN 575 (DELHI). IN THIS CASE THE MEMBERS OF THE WELFARE SOCI ETY WHO WERE THE EMPLOYEES OF THE ORIENTAL BANK OF COMMERCE HAD EARNED INTEREST INCOME ON DEPOSITS MADE OUT OF CONTRIBUTI ON FROM THE MEMBERS OF THE SOCIETY I.E. THE CONTRIBUTIONS W HICH 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 PRI NCIPLE OF MUTUALITY WOULD NOT BE ATTRACTED AND THAT INCOME WOULD BE EXI GIBLE TO TAX. THE TRIBUNAL HAD NEGATIVED THE AFORESAID CONTENTION OF THE REVENUE RELYING UPON THE JUDGMENT OF THE SUP REME COURT IN THE CASE OF CHELMSFORD CLUB VS. COMMISSIONER OF IN COME TAX [(2010) 109 TAXMAN 215. THIS COURT IN THE AFORE SAID JUDGMENT HAD DISMISSED THE APPEAL OF THE REVENUE THEREB Y AFFIRMING THE DECISION OF THE TRIBUNAL. THE FOLLOWING PARA FROM THE SAID JUDGMENT BRINGS OUT THE RATIO OF THE CASE: 3. THE ISSUE WITH REGARD TO THE CONCEPT AN D PRINCIPLE OF MUTUALITY HAS BEEN ELABORATELY EXAMINED BY THE APEX COURT IN CHEMSFORD CLUB V. CIT [2000] 243 ITR 89. THEIR LORDSHIPS HAVE HELD THAT WHERE A NUMBER OF PERSONS COMBINE TOGETHER CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE OR OBJECT A ND IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTSIDE BODY TH EN ANY SURPLUS GENERATED CANNOT IN ANY SENSE BE REGARDED AS PROFIT S CHARGEABLE TO TAX. IT HAS BEEN OBSERVED THAT WHAT IS REQUIRED TO B E SEEN IS WHETHER THERE IS COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND PART ICIPATORS. ONCE THE IDENTITY OF THE CONTRIBUTOR TO THE FUND OF TH E RECIPIENTS OF THE FUNDS; THE TREATMENT OF THE COMPANY THOUGH INCORPORA TED AS A MERE ENTITY FOR THE CONVENIENCE OF THE MEMBERS IN OTHER WORDS AS AN INSTRUMENTS OBTAINED TO THEIR MANDATE; AND THE IMPOSSIBILITY THAT THE CONTRIBUTORS SHOULD DERIVE PROFITS FROM CONTRIB UTIONS MADE BY THEMSELVES TO A FUND WHICH COULD ONLY BE EXPE NDED OR RETURNED TO THEMSELVES IS ESTABLISHED THE DOCTRINE OF MUTUALI TY IS ESTABLISHED. ITA NO.4771/DEL./2011 5 THERE ARE THREE CONDITIONS FOR APPLICABILITY OF THE PRINCIPLE OF MUTUALITY WHICH ARE DISCERNED FROM THE AFORE SAID ARE AS FOLLOWS: A) WHERE A NUMBER OF PERSONS COMBINE TOGETHER CONTR IBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE O R OBJECT; B) THEY HAVE NO DEALINGS OR RELATION WITH ANY OUTS IDE BODY; AND C) SURPLUS GENERATED ARE NOT SPENT FOR ANY OTHER PURPOSE ACCEPTING FOR THE WELFARE OF THE PRINCIPLES. ON THIS BASIS THE COURT CLEARLY HELD THAT EVEN IF THERE WAS AN IN COME EARNED BY THE SOCIETY IN THE FORM OF INTEREST BY KEEPING THE FUNDS GENERATED FROM THE MEMBERS IN THE BANK SUCH INTERE ST WILL NOT BE TREATED AS INCOME ALLOWABLE FOR TAX. (II) COMMISSIONER OF INCOME TAX VS. TALANGANG CO-OPERATIVE GROUP HOUSING SOCIETY LTD. [210) 195 TAXMAN 11 0 (DELHI). IN THIS CASE THE ASSESSEE WAS A CO- OPERATIVE HOUSING SOCIETY AND ITS PRELIMINARY ACTIVITY WAS TO COLLECT MONEY FROM T HEIR MEMBERS FOR CONSTRUCTION OF FLATS/HOUSES AND SUBSEQUENTLY A LLOT THE SAME TO THEM. THERE WAS NO ISSUE THAT ON THESE CONT RIBUTIONS FROM THE MEMBERS NO TAX WAS PAYABLE AND PRINCIPLE S 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 P OWER OF ATTORNEY HOLDERS INTEREST ON DELAYED PAYMENTS AND MORE SIGNIFICANTLY (WHICH WOULD BE RELEVANT FOR OU R PURPOSES) INTERESTS FROM BANK FROM FDRS. ALL THESE W ERE NOT TREATED AS TAXABLE INCOME BY THE AO. THIS ORDER OF THE AO W AS 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 T HE CASE OF ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIET Y (SUPRA) AND HELD THAT THE PRINCIPLE OF MUTUALITY WOULD GE T ATTRACTED. IT WAS ALSO OBSERVED THAT THERE WAS NOTHING ON RECO RD TO SHOW THAT THE AMOUNT COLLECTED BY THE ASSESSEE HAD BEEN DI VERTED FOR ANY OTHER PURPOSE. III) COMMISSIONER OF INCOME TAX DELHI XI VS. STANDING CONFERENCE OF PUBLIC ENTERPRISES (SCOPE) [2010 ] 186 TAXMAN ITA NO.4771/DEL./2011 6 142 (DELHI). IN THIS CASE AGAIN APART FROM INCOM E GENERATED BY THE SCOPE FROM ITS MEMBERS IT WAS ALSO FOUND TH AT THE ASSESSEE HAD INCOME IN THE FORM OF DEPOSITS WITH BA NKS AND ALSO IN THE FORM OF RENT FROM HOUSE OF CONVENTION CENTRE AN D FROM LETTING OUT OF THE PART OF THE PREMISES OF THE BUILDING OC CUPIED BY IT. QUESTION AROSE AS TO WHETHER THE TAX IS PAYABLE ON THE AFORESAID INCOME OR THAT WOULD BE EXEMPTED ON THE APPLICATION OF PRINCIPLE OF MUTUALITY. THE COURT HELD T HAT THE PRINCIPLE OF MUTUALITY WOULD BE ATTRACTED AND NO TAX WAS PAYABLE EVEN ON THE INCOME ACCRUED TO THE ASSESSEE IN THE FORM OF I NTEREST FROM DEPOSIT WITH BANK OR RENT CHARGED FROM HOUSE OF CON VENTION CENTRE OR FROM LETTING OUT ON PART OF THE PREMISES . IN THE PROCESS THIS COURT RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CHEMSFORD CLUB (SUPRA) AND ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY (SUPRA). IN ADDITION NUMBER OF OTHER JUDGMENTS WERE REFERRED TO AND THE PRINCIPL E OF MUTUALITY WAS DISCUSSED AND EXPLAINED IN DEPTH. FOLLOWIN G DISCUSSION FROM THAT JUDGMENT IS QUOTED HEREIN: 17. IN CHELMSFORD CLUB [2000] 243 ITR 89 TH E SUPREME COURT CLARIFIED THAT EVEN IF SUCH A ASSOCIATION IS AN INCORPORATED COMPANY THAT WOULD BE IMMATERIAL IF THERE IS IDENTITY IN CHARACTER OF THOSE WHO CONTRIBUTE AND THOSE WHO PARTICIPATE IN SURPLUS. THE CAN BE TRACED OUT FROM THE FOLLOWING OBSERVATIONS: WHERE THERE IS IDENTITY IN THE CHARACTER OF THOSE WHO CONTRIBUTE AND OF THOSE WHO PARTICIPATE IN THE SURPLUS THE FACT OF INCORPORATION MAY BE IMMATERIAL AND THE INCORPORATED COMPANY MAY WELL BE REGARDED AS A MERE INSTRUMENT A CONVENIENT AGENT FOR CARRYING OUT WHAT THE MEMBERS MIGHT MORE LABORIOUSLY DO FOR THEMSELVE S. THEIR LORDSHIPS HAVE LAID DOWN THE THREE TEST BEFORE THE PRI NCIPLE OF MUTUALITY CAN BE APPLIED. IN A NUTSHELL THESE TEST ARE: 1. THE IDENTITY OF THE CONTRIBUTORS TO THE FUND AND THE RECIPIENTS FROM THE FUND. 2. THE ORGANIZATION EXISTS ONLY FOR MUTUAL BENEFIT. 3. THE FUNDS CAN BE EXPENDED FOR MUTUAL BE NEFIT OR RETURNED TO THE CONTRIBUTORS. 18. AT THIS STAGE WE MAY ALSO TAKE NOTE OF THE J UDGMENT OF GUJARAT HIGH COURT IN THE CASE OF SPORTS CLUB OF GU JARAT VS. CIT WHERE THE COURT HELD THAT THE PRINCIPLE OF MUTUALITY IS NO T DESTROYED BY THE PRESENCE OF TRANSACTION WHICH ARE NON MUTUAL IN CHARACTER. THIS PRINCIPLE CAN IN SUCH CASE BE CONFINED TO TRAN SACTIONS WITH MEMBERS. ITA NO.4771/DEL./2011 7 THE TWO ACTIVITIES IN APPROPRIATE CASE BE SU PPORTED 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 OBJECTI VE IS TO IMPROVE THE PURPOSE OF PUBLIC ENTERPRISES. THE MEMBERSHIP O F THE SOCIETY IS OPEN TO PUBLIC SECTOR ENTERPRISES OF CENTRAL/STATE GOVER NMENTS. IT IS THUS PERFORMED FOR THE BENEFIT OF ITS MEMBERS WHI CH ARE PUBLIC SECTOR ENTERPRISES. IT IS NOT INDULGING IN ANY COMMERCI AL ACTIVITIES IN TRADITIONAL SENSE BUT IS CATERING TO THE NEEDS OF ITS MEMBERS. IN ITS BUILDING AT LODHI ROAD NEW DELHI IT HAS CONVEN TION CENTRE WHICH IS NORMALLY GIVEN TO ITS MEMBERS FOR FUNCTIONS. LIKEW ISE 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 BU ILDING THESE MEMBERS PAY SOME CHARGES WHICH BECOMES ADDITIONAL SOUR CE OF INCOME. THAT BY ITSELF CANNOT BE TREATED AS COMMERCIAL ACTIVITY OF THE ASSESSEE. IN BANKIPUR CLUB (SUPRA) THE SUPREME COURT HELD TH AT IF THE DEALINGS AS A WHOLE DISCLOSE THE PROFIT EARNING MOTIVES AND AR E ALIKE TAINTED WITH COMMERCIALITY ONLY THEN PRINCIPLE OF MUTUALIT Y WOULD CEASE TO APPLY. THE PRINCIPLE IN THIS BEHALF WAS DISCERNED AS UND ER: WE UNDERSTAND THESE DECISIONS TO LAY DOWN T HE BROAD PROPOSITION - THAT IF THE OBJECT OF THE ASSESSEE COMPANY CLAIMI NG TO BE A 'MUTUAL CONCERN' OR 'CLUB' IS TO CARRY ON A PARTICULAR BU SINESS AND MONEY IS REALISED BOTH FROM THE MEMBERS AND FROM NON- MEMBERS FOR THE SAME CONSIDERATION BY GIVING THE SAME OR SIMIL AR FACILITIES TO ALL ALIKE IN RESPECT OF THE ONE AND THE SAME BUSINESS CARRI ED ON BY IT THE DEALINGS AS A WHOLE DISCLOSE THE SAME PROFIT EARNIN G MOTIVE AND ARE ALIKE TAINTED WITH COMMERCIALITY. IN OTHER WORDS THE ACTIVITY CARRIED ON BY THE ASSESSEE IN SUCH CASES CLAIMING TO BE A 'MUTUAL CONCERN' OR MEMBERS' CLUB' IS A TRADE OR AN ADVENTURE I N THE NATURE OF TRADE AND THE TRANSACTIONS ENTERED INTO WITH THE ME MBERS OR NON-MEMBERS ALIKE IS A TRADE/BUSINESS/TRANSACTION AND THE RESULTANT SURPLUS IS CERTAINLY PROFIT - INCOME LIABLE TO TAX. 20. THUS SUCH COMPANY CLAIMING TO BE MUTUAL CON CERN OR CLUB WHOSE OBJECT IS TO CARRY ON PARTICULAR BUSINESS OR WHERE THE INCOME IS GENERATED FROM MEMBERS AND NON-MEMBERS THROUGH T HE BUSINESS CARRIED ON BY IT THEN ONLY IT WOULD BE TREATED AS TAINTED WITH COMMERCIALITY. PROFIT EARNING HAS TO BE THE PRIME MOTIVE BEHIND SUCH ACTIVITIES WHICH ARE BUSINESS LIKE ACTIVITIES. OBVIOUSLY IN THE PRESENT CASE THIS CANNOT BE ATTRIBUTED TO THE ASSES SEE. THE AO GOT INFLUENCED BY THE FACT THAT THE ASSESSEE HAD LE T OUT PART OF THE PREMISES TO ITS MEMBERS AND WAS RECEIVING REN TS AND ALSO GIVING THE ITA NO.4771/DEL./2011 8 CONVENTION CENTRE TO NON-MEMBERS. THAT IS NOT SU FFICIENT TO CLOTHE THE ACTIVITY OF THE ASSESSEE AS COMMERCIAL ACTIVIT Y WHICH IS NOT THE OBJECT WITH WHICH THE ASSESSEE SOCIETY IS FORMED. PRE-DOMINANT OBJECT IS TO RENDER APPROPRIATE ASSISTANCE AND HELP TO I TS MEMBERS FOR IMPROVING THEIR PERFORMANCE AND ROLE. THUS ALL THE THREE INGREDIENTS LAID DOWN BY THE SUPREME COURT IN CHELMSFORD CL UB WOULD BE APPLICABLE IN THE PRESENT CASE. 21. WE MAY ALSO REFER TO THE JUDGMENT OF T HE CALCUTTA HIGH COURT IN THE CASE OF DALHOUSIE INSTITUTE VS. ASSTT. COMMISSI ONER SERVICE TAX CELL 2006 (3) STR 311. THOUGH IT WAS A CASE WHE RE MANDAP FACILITIES WERE PROVIDED BY THE CLUB TO ITS MEMBERS AND TH E QUESTION OF SERVICE TAX HAD ARISEN THE CALCUTTA HIGH COURT APPL IED THE PRINCIPLE OF MUTUALITY HOLDING THAT T HE AFORESAID FACILITIES PROVIDED BY THE CLUB TO ITS MEMBERS FOR SUC H FUNCTIONS CANNOT BE TERMED AS COMMERCIAL ACTIVITY. FOLLOWING OBSERVA TIONS 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 KE EPER 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 LET TING OUT NOR THE MEMBERS OF THE CLUB USING THE FACILITY OF ANY P ORTION OF THE PREMISES FOR ANY FUNCTION CAN BE TERMED TO BE A CLIENT. THE SERVICES RENDERED BY ANY PERSON TO HIS CLIENT PRESUPPOSES THE E LEMENT 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 SATURD AY CLUB LTD. VS. ASSTT. COMMISSIONER SERVICE TAX CELL (200 6) 3 STR 305 IN THE FOLLOWING MANNER: SO FAR AS THE MERIT IS CONCERNED LAW IS WELL SETTLED BY NOW THAT IN BETWEEN THE PRINCIPAL AND AGENT WHEN THERE IS NO TRANSFER OF PROPERTY AVAILABLE QUESTION OF IMPOSITION OF S ERVICE TAX CANNOT BE MADE AVAILABLE. IT IS TRUE TO SAY THAT THE RE IS A CLEAR DISTINCTION BETWEEN THE MEMBERS CLUB AND PROPRIETARY CLUB . NO ARGUMENT HAS BEEN PUT FORWARD BY THE RESPONDENTS TO INDICATE THA T THE CLUB IS A PROPRIETARY CLUB. THEREFORE IF THE CLUB SPA CE IS ALLOWED TO BE OCCUPIED BY ANY MEMBER OR HIS FAMILY MEMBERS OR BY HIS GUEST FOR A FUNCTION BY CONSTRUCTING A MANDAP THE CLUB CANNOT BE CALLED AS MANDAP KEEPER BECAUSE THE CLUB IS ALLOWING HIS OWN ME MBER TO DO SO WHO IS ITA NO.4771/DEL./2011 9 BY VIRTUE OF HIS POSITION PRINCIPAL OF THE CLUB. IF ANY OUTSIDE AGENCY IS CALLED UPON TO DO THE NEEDFUL IT MAY RAISE A BILL A LONG WITH THE SERVICE TAX UPON THE CLUB AND THE CLUB AS AN AGENT OF THE MEM BERS IS SUPPOSED TO PAY THE SAME. THE AUTHORITY CANNOT IMPOSE SER VICE TAX TWICE ONCE UPON THE PEOPLE CARRYING OUT THE BUSINESS OF 'MA NDAP KEEPER' AS WELL AS THE MEMBERS' CLUB FOR THE PURPOSE OF USING THE SPACE FOR CONSTRUCTING OR USING IT AS 'MANDAP'. THEREFORE APART FROM ANY OTHER QUESTION POSSIBILITY OF DOUBLE TAXATION CANNOT BE RULED OUT. IF I EXPLAIN MY FIRST QUERY AS ABOVE IT WILL BE CRYSTAL CLEAR THAT IF A PERSON BEING AN OWNER OF THE HOUSE ALLOWS ANOTHER TO OCCUPY THE HOUSE FOR THE PURPOSE OF CARRYING OUT ANY FUNCTION IN THAT HOU SE IT WILL NOT BE CONSTRUED AS TRANSFER OF PROPERTY. BUT IF SUC H PERSON CALLS UPON A THIRD PARTY 'MANDAP KEEPER' TO CONSTRUCT A 'MAND AP' IN SUCH HOUSE THEN IN THAT CASE SUCH 'MANDAP KEEPER' CAN BE A BLE TO RAISE BILL UPON THE USER OF THE PREMISES ALONG WITH THE SERV ICE TAX. THEREFORE I CANNOT HOLD IT GOOD THAT MEMBERS' CLUB IS COVERED B Y THE FINANCE ACT 1994 FOR IMPOSITION OF SERVICE TAX TO USE ITS SPACE AS 'MANDAP'. SO FAR AS THE OTHER POINT IS CONCERNED WHETHER THE RATIO O F THE JUDGMENTS CAN BE ACCEPTABLE HEREIN OR NOT I LIKE TO SAY ' YES IT IS APPLICABLE'. INCOME-TAX IS APPLICABLE IF THERE IS AN INCOM E. SALES TAX IS APPLICABLE IF THERE IS A SALE. SERVICE TAX IS APPLICABL E IF THERE IS A SERVICE. ALL THREE WILL BE APPLICABLE IN A CASE OF TRANSA CTION BETWEEN TWO PARTIES. THEREFORE PRINCIPALLY THERE SHOULD B E EXISTENCE OF TWO SIDES/ENTITIES FOR HAVING TRANSACTION AS AGAINST CONSIDERATION. IN A MEMBERS' CLUB THERE IS NO QUESTION OF TWO SI DES. 'MEMBERS' AND 'CLUB' BOTH ARE SAME ENTITY. ONE MAY BE CALLED AS PRINCIPA L WHEN THE OTHER MAY BE CALLED AS AGENT THEREFORE SUCH TRANSACTION I N BETWEEN THEMSELVES CANNOT BE RECORDED AS INCOME SALE OR SERVIC E AS PER APPLICABILITY OF THE REVENUE TAX OF THE COUNTRY. HENCE I DO N OT FIND IT IS PRUDENT TO SAY THAT MEMBERS' CLUB IS LIABLE TO PAY SERV ICE TAX IN ALLOWING ITS MEMBERS TO USE ITS SPACE AS 'MANDAP'. 3. HENCE IN VIEW OF THE AFORESAID JUDGMENT OF THI S HIGH COURT WHICH BINDS US WE ARE OF THE OPINION THAT NO QUE STION OF LAW ARISES FOR CONSIDERATION. 4. THIS APPEAL IS ACCORDINGLY DISMISSED. 6. IN THE LIGHT OF VIEW TAKEN BY THE HONBLE JUR ISDICTIONAL HIGH COURT IN THEIR AFORESAID DECISION IN ALL INDIA ORIENTAL BANK OF COMMERCE WELFARE SOCIETY(SUPRA) FOLLOWED IN DELHI GYMKHANA CLUB LTD. (SUPRA) AND OTHER DECISIONS MENTIONED ABOVE WE HAVE NO ALTERNATIVE BUT TO UPH OLD THE FINDINGS OF THE LD. CIT(A) CONCLUDING THAT THE PRINCIPLE OF MUTUALITY A PPLIES TO INTEREST INCOME ITA NO.4771/DEL./2011 10 DERIVED BY THE ASSESSEE FROM DEPOSITS MADE OUT OF C ONTRIBUTIONS MADE BY MEMBERS OF THE SOCIETY. THEREFORE GROUND NO.1 RAIS ED BY THE REVENUE IN RELATION TO APPLICABILITY OF PRINCIPLE OF MUTUALITY TO INTEREST INCOME IS DISMISSED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFOR E US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL ACCORDINGLY THIS GROUND IS DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 9. IN THE RESULT APPEAL IS DISMISSED. SD/- SD/- (R.P. TOLANI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. INDIA HABITAT CENTRE LODHI ROAD NEW DELH I 2. ADDL. DIRECTOR OF INCOME-TAX (E) NEW DELHI 3. DIT(E) NEW DELHI CONCERNED. 4. DR ITAT C BENCH NEW DELHI 5. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT DELHI ORDER PRONOUNCED IN OPEN COURT