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ITAT Delhi in the case of Sports & Cultural Club (Regd.) versus Joint Commissioner of Income Tax in ITA Nos. 1897 to 1901/Del/2016 dated 23.09.2016

·         In this case, the AO made addition to the income of the assessee on the ground that the assessee was not entitled for exemption u/s 11 in respect of interest income and rental income. While taking this view, the AO relied upon the decision of Hon’ble Apex Court in the case of Bangalore Club vs. CIT [2013] 350 ITR 509.

·         The CIT(A), however, enhanced the income of the assessee holding that the gross receipts as well as the contribution to corpus fund both will be taxable. The CIT(A) also denied the benefit of doctrine of mutuality stating that the assessee was not liable for the same.

·         The Hon’ble Tribunal held that the fact that the assessee was a mutual benefit organisation was also observed by the AO. However, the addition in respect of interest income and rental income was made on the ground that the said receipts were from third parties.

·         The Tribunal, after considering the orders passed by the Hon’ble Apex Court in the case of Bankipur Club Ltd. and Chelmsford Club, held that the receipts, other than the interest income and rental income, being earned from the members of the club, would fall in the ambit of mutuality.

·         In so far as interest income and rental income were concerned, the same were held not to be governed by the concept of mutuality because the receipts were not from the members of the club.

 

For further reading, refer the attachment.

  Further Reading
Posted on: 24-09-2016