Bombay Gymkhana Ltd, Mumbai vs Assessee

सन ु वाई क तार$ख / Date of Hearing :15.1.2015 घोषणा क तार$ख /Date of Pronouncement : 13.3.2015 2 ITA. No.1378/Mum/2011 ITA No.8906/Mum/2010

आदे श / 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 year 2007-08.

2. The assessee is aggrieved by the decision of Ld CIT(A) on the following issues:-

(a) Addition of Rs.1,25,000/- relating to Sponsorship contributions

(b) Addition of Rs.11,87,657/- relating to complimentary liquors received.

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 ITA No.8906/Mum/2010 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 receipts.

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 ITA No.8906/Mum/2010

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 ITA No.8906/Mum/2010 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.

घोषणा खुले यायालय म( )दनांकः 13TH March, 2015 को क गई ।

sd sd

(संजय गग /SANJAY GARG) (बी.आर. बा!करन,/ B.R. BASKARAN) या यक सद य / Judicial Member लेखा सद य/Accountant Member

मुंबई Mumbai:13TH March,2015. व. न.स./ SRL , Sr. PS

आदे श क" #$त&ल'प अ(े'षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु/त(अपील) / The CIT(A)- concerned

4. आयकर आयु/त / CIT concerned

5. 0वभागीय त न2ध, आयकर अपील$य अ2धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील$य अ2धकरण, मुंबई /ITAT, Mumbai