Poona Club Limited Vs ACIT (ITAT Pune)
SEO Title: ITAT Pune Allows Poona Club Appeal, Sustains Profit Element and Remands Section 14A Issue
SEO Description: ITAT Pune partly allows Poona Club appeal, taxes only profit element on non-member receipts, deletes interest disallowance and remands Section 14A issue.
Summary: The ITAT Pune partly allowed the assessee’s appeal for A.Y. 2017-18 against the order of CIT(A)/NFAC dated 15.09.2025 arising from the assessment framed on 28.12.2019. Following earlier decisions in the assessee’s own cases, the Tribunal restricted the additions relating to venue charges of ₹28,89,280 and dinner receipts of ₹10,72,762 from non-members and guests to the profit element at 20%, sustaining ₹5,77,856 and ₹2,14,552 respectively and deleting the balance amounts. In relation to cricket-ground charges of ₹13,47,250, the Tribunal stated that it was following the earlier decision applying a 15% rate and sustained ₹2,69,450 while deleting ₹10,77,800; the supplied editorial analysis notes that the sustained amount mathematically represents 20% of the gross receipt rather than 15%. The Tribunal deleted the entire disallowance of ₹21,36,296 relating to expenses claimed at 7.5% for earning interest on fixed deposits, following earlier decisions in the assessee’s own cases. With respect to the disallowance of ₹32,49,651 under Section 14A read with Rule 8D, the Tribunal found that the assessee’s interest-free funds substantially exceeded its investments and held that no interest disallowance was warranted, while restoring the issue to the Jurisdictional Assessing Officer for limited computation of disallowance with reference to investments yielding exempt income, subject to the directions in the order. The Tribunal also deleted the addition of ₹16,83,500 towards entrance fees from corporate members, treating the amount as a capital receipt covered by the principle of mutuality, notwithstanding the seven-year corporate membership period. Grounds 7 and 8 were general in nature, and the appeal was ultimately partly allowed for statistical purposes as per the terms indicated in the order.
Poona Club Secures Major Relief: Only Profit Element Taxable on Non-Member Receipts; Entrance Fees Held Capital
The Pune ITAT granted substantial relief to The Poona Club Limited by following its earlier orders in the assessee’s own cases.
Regarding receipts from non-members and guests, the Tribunal held that only the profit element, and not the entire gross receipts, could be taxed. Accordingly, from venue charges of ₹28,89,280, only ₹5,77,856 (20%) was sustained and ₹23,11,424 deleted. Similarly, from dinner receipts of ₹10,72,762, only ₹2,14,552 (20%) was sustained and ₹8,58,210 deleted.
In respect of cricket-ground charges of ₹13,47,250, the Tribunal purported to apply the rate of 15%, but sustained ₹2,69,450 and deleted ₹10,77,800. Notably, the amount sustained mathematically works out to 20% rather than 15%, indicating an apparent computational inconsistency in the order.
The disallowance of ₹21,36,296, representing expenses calculated at 7.5% for earning interest on fixed deposits, was entirely deleted in accordance with earlier decisions in the club’s own cases.
The disallowance of ₹32,49,651 under Section 14A read with Rule 8D was restored to the AO for limited recomputation. The Tribunal held that no interest disallowance was warranted because the club’s interest-free funds substantially exceeded its investments. The AO was directed to calculate the prescribed disallowance only with reference to investments yielding exempt income, subject to the directions contained in the order.
The ₹16,83,500 entrance fees received from corporate members was held to be a capital receipt covered by the principle of mutuality, notwithstanding that corporate membership was valid for only seven years. The entire addition was therefore deleted.
List of Cases Discussed / Relied Upon
- Poona Club Ltd. Vs. ACIT,ITA No.625/PN/1998, A.Y. 1994-95 — earlier decision followed by the Tribunal in relation to venue charges from non-members and guests and the treatment of receipts from guests.
- Poona Club Ltd. Vs. ACIT,ITA No.894/2017, A.Y. 2011-12 — earlier decision followed in relation to cricket-ground charges from non-members and guests.
- Poona Club Ltd. Vs. ACIT,ITA No.6/1995, A.Y. 1991-92 — earlier decision followed in relation to expenses claimed at 7.5% for earning interest income on fixed deposits.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed at the instance of assessee is directed against the order of Ld. CIT(A)/NFAC dated 15.09.2025 which is arising out of the assessment order for Assessment Year 2017-18 framed on 28.12.2019 by the ACIT, Circle-7, Pune.
2. Brief facts of the case are that the assessee is a company limited by guarantee and is a club providing sports and entertainment facilities to its members and incidentally providing food, beverages, etc. to members and their guests. Additionally, the club also provide venues to members and their guests for organizing their private functions. Return of income for A.Y. 2017-18 e-filed on 01.03.2018 declaring income of Rs.2,75,74,730/-. Case selected for scrutiny under CASS, for carrying out complete scrutiny followed by validly serving statutory notices u/s 143(2) and 142(1) of the Act. Various submissions were filed by the assessee which have been duly considered by Ld. Assessing Officer and concluded the assessment making various additions totalling to Rs.1,23,78,739/- and assessing the total income at Rs.3,99,53,469/-.
3. Aggrieved with these additions, the assessee preferred an appeal before Ld. CIT(A)/NFAC but failed to succeed. Now, the assessee is in appeal before this Tribunal.
4. At the outset, Ld. Counsel for the assessee submitted that major issues raised in the instant appeal are covered by the decision of this Hon’ble Tribunal rendered in assessee’s own case in the past. Reference made to a chart depicting all these details. Reference made to the copies of decisions of this Tribunal. Reference also made to the documents filed in the paper book containing of 182 pages which includes the submission filed before Ld. CIT(A)/NFAC.
5. On the other hand, Ld. DR vehemently argued supporting the order of Ld. CIT(A)/NFAC and also submitted that Ld. CIT(A)/NFAC rightly affirmed the action of the Assessing Officer.
6. We have heard rival contentions and perused the record placed before us. We have carefully gone through the decision of this Tribunal rendered in assessee’s own case.
7. Ground no.1 is raised against the addition of Rs.28,89,280/- on account of venue charges from non-members and guests. We observe that the similar issue came for adjudication in the case of the assessee for A.Y. 1994-95 vide ITA No.625/1998 which has been subsequently followed by this Tribunal for A.Y. 2010-11 in the case of assessee in ITA No.1481/PUN/2016 dated 26.09.2018 consistently holding to apply net profit at the rate of 20% on the alleged receipt of venue charges from non-members and guests. In absence of any binding precedent in favour of revenue referred by Ld. DR, we hereby set-aside the finding of Ld. CIT(A)/NFAC, sustain the addition of Rs.5,77,856/- for net profit and delete the remaining addition of Rs.23,11,424/- and partly allow ground no.1.
8. Ground no.2 is raised against the addition of Rs.10,72,762/- on account of dinner receipts from non-members and guests. We note that the similar issue also came for adjudication in the past in assessee’s own case and as held in ground no.1 (supra) wherein we have referred to the decision of this Tribunal for A.Y. 1994-95 and 2010-11, we take consistent view and sustain the addition at the rate of 20% of this alleged receipt i.e. the profit element of Rs.2,14,552/- and delete the remaining addition of Rs.8,58,210/-. The finding of Ld. CIT(A)/NFAC is set-aside and ground no.2 raised by the assessee is partly allowed.
9. Ground no.3 is raised against the addition of Rs.13,47,250/- on account of cricket ground charges from non-members and guests. We take note of the similar issue which came for adjudication in assessee’s own case for A.Y. 2011-12 in ITA No.894/2017 wherein 15% addition has been confirmed on the gross receipts from cricket ground charges from non-members and guests. Respectfully following the same, the addition of Rs.2,69,450/- towards net profit @ 15% is confirmed and remaining addition of Rs.10,77,800/- is deleted. The finding of Ld. CIT(A)/NFAC is set-aside and ground no.3 raised by the assessee is partly allowed.
10. Ground no.4 is raised against the addition of Rs.21,36,296/- on account of disallowance of interest expenses claimed by the assessee at the rate of 7.5% for earning interest income on fixed deposits. We observe that the assessee has claimed 7.5% expenses at Rs.21,36,296/- on various investments in fixed deposits held with the bank, but Ld. Assessing Officer disallowed the said claim. We however note that the similar issue came before this Tribunal in assessee’s own case for A.Y. 1991-92 vide ITA No.6/1995 dated 11.07.2001 and subsequently followed by this Tribunal in the case of the assessee for A.Y. 2011-12 consistently allowing the assessee’s claim on expenses at the rate of 7.5% for earning the interest income. In absence of any binding precedent in favour of the Revenue, we hereby delete the alleged disallowance of Rs.21,36,296/-. The finding of Ld. CIT(A)/NFAC is reversed and ground no.4 raised by the assessee is allowed.
11. Ground no.5 is raised against the disallowance u/s 14A r.w. Rule 8D(2)(ii) of Rs.32,49,651/- calculated at the rate of 1% of the average monthly investments held by the assessee. We observe that the assessee has not made any suo motto disallowance u/s 14A in its computation of income. The assessee has earned exempt income of Rs.2,47,37,397/-. Ld. Assessing Officer asked the assessee to furnish cash flow statement to show the interest free funds available with the assessee which was used for the purpose of investments for earning exempt income. The assessee furnished working of proportionate income before Ld. Assessing Officer elaborating expenses incurred against the income from tax free bonds and claimed as per the said working, that the assessee has deficit of allocation of expenses amounting to Rs.18,82,125/-. However, as per the Assessing Officer, the assessee failed to prove that no expenses were incurred to earn the exempt income. We note that as per Rule 8D, there are to limbs, firstly the expenses directly incurred to earn the exempt income and secondly 1% of the monthly average investments. We observe that the assessee is claiming that no expenses were incurred to earn the exempt income amounting to Rs.2.47 crore (approx). We also note that as per the audited balance sheet, the reserve and surplus as on 31.03.2016 and 31.03.2017 are shown at 81.79 crore and 95.83 crore respectively whereas the investments fetching the exempt income are much lower to the interest free funds available with the assessee. Therefore, certainly no interest disallowance is called for. The investments held by the assessee which furnished in Annexure A-5 and A-6 of the audited balance sheet. We note that it comprises fixed deposits at Rs.19.24 crore and mutual/dynamic bond funds at Rs.14.86 crore, certainly interest from FD is taxable, therefore, such investments need not to be considered. So far as the investments in mutual/dynamic bond are concerned, in absence of any specific details about the charges, if any, charged by the mutual fund company to the assessee for maintaining the funds and also considering the fact that no expenses suo moto offered by the assessee for disallowance, we under given facts and circumstances deem it appropriate to restore this issue to the file of Jurisdictional Assessing Officer for the limited purpose of calculating disallowance u/s 14A r.w. rule 8D(2)(ii) @ 1% of the monthly average investments fetching exempt income with rider to exclude those investments for which the assessee has to pay the charges to the mutual fund company managing the investments/portfolio of the assessee club. Needless to mention here that fair and proper opportunity shall be granted to the assessee to file these details. Accordingly, the finding of Ld. CIT(A)/NFAC is set-aside and ground no.5 raised by the assessee is allowed for statistical purposes.
12. Ground no.6 is raised against the addition of Rs.16,83,500/- on account of entrance fees collected from corporate members. We note that in the books of accounts, the assessee has considered entrance fees for corporate members as capital receipt, however, the Assessing Office treated it revenue receipt by observing that the entrance fees charged from life members and permanent members is for entire life whereas the entrance fees charged from corporate members is only for 7 years. We find that this Tribunal in the case of the assessee for A.Y. 1985-86 to 1990-91 which has been subsequently followed for A.Y. 1995-96 and in A.Y. 2011-12 has been consistently holding that the receipts of entrance fees for perspective members and covered by the principle of mutuality and therefore, treated as capital receipts and not revenue receipts. Respectfully following the same, we reverse the finding of Ld. CIT(A)/NFAC and delete the impugned addition for entrance fees for corporate members at Rs.16,83,500/- treating them as capital receipt. Ground no.6 raised by the assessee is allowed.
13. Ground no.7 and 8 are general in nature which requires no adjudication.
14. In the result the appeal filed by the assessee is partly allowed for statistical purposes as per term indicated hereinabove.
Order pronounced on 25th day of August, 2026.
