Case Law Details
ITO Vs. Gymkhana Club (ITAT Chandigarh)
The above captioned appeals have been restored back by the Hon’ble High Court of Punjab & Haryana for decisions afresh vide separate orders dated 30.11.2015 passed in ITA Nos. 690 of 2005 (O&M), 70 of 2006 (O&M), ITA No. 243 to 246 of 2006, 420 of 2006, 553 of 2008 (O&M), 883 of 2008(O&M) and dated 5.1.22015in ITA Nos. 277 &278 of 2011(O&M). The Hon’ble High Court has directed to adjudicate the issue as per directions given in the decision of the Hon’ble High Court passed in ITA No. 690 of 2005 (O&M) dated 30.1 1.20 15.
2. The common issue in all the appeals involved is as to whether the ‘principle of mutuality’ would be applicable in the case of assessee or not.
3. This is the second round of appeal before us. The brief facts relevant to the issue have been taken from ITA No. 1084/Chd/2009 for assessment year 2006-07. The assessee, Gymkhana Club, Sector 6, Panchkula has been incorporated as a society registered under the Societies Registration Act, 1860 on 17.1.1994 by the Registrar of Societies, Haryana. The assessee club filed its return of income for assessment year 2006-07 on 31.10.2006 returning nil income on the ground that it was a mutual concern. The cases was picked up for scrutiny by the Assessing Officer. The Assessing Officer perused the tax audit report for assessment year 2006-07 filed by the assessee and noticed that there was surplus of income over expenditure at 35,72,08 1/- including interest income amounting to Rs.21 ,95,943/-. He also examined the claim of the assessee that it was a mutual concern and, therefore, exempt from tax. He scrutinized the Memorandum of Association and the by-laws of the society and noticed that the management and control of the assessee was wholly and exclusively vested in HUDA (Haryana Urban Development Authority) and, therefore, it was de-facto an extended arm of HUDA. He noticed that the assessee had made substantial investments in the form of FDRs in bank over which the members had no control and that it was HUDA which actually had control over the funds including FDRs. He also noticed that the contributors to the funds were neither entitled to participate in the surplus nor otherwise had any say in the management including finances/funds of the club. He also noticed that the Club facilities were being extend to certain non-members against payments made by them and thus Club is also involved in profit making activities from third parties. Taking into account the totality of facts and circumstances of the case as narrated in detail in the assessment order, the Assessing Officer held that there was no identity between the contributors and the participants and, therefore, he rejected the claim of the assessee that it was a mutual concern. In support of his decision, the Assessing Officer relied upon several decisions including those of the Hon’ble Jurisdictional High Court. In this view of the matter the entire surplus shown by the assessee in its account including interest income was brought to tax by the Assessing Officer.
4. Aggrieved by the order of the Assessing Officer the assessee filed appeal before the Commissioner of Income-tax (A) who, following the order of this Tribunal in assessee’s own case for assessment year 2004-05, allowed the claim of the assessee.
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