Income Tax Appellate Tribunal - Ahmedabad
The Gujarat Institute Of Housing And ... vs Dy.Dit, Exemption, , Ahmedabad on 25 November, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ ।
IN THE INCOME TAX APPELLATE TRIBUNAL,
"C" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA.No.1051 to 1056/Ahd/2015
नधा रण वष / Asstt. Year: 2006-07 to 2011-12
The Gujarat Institute of Housing DDIT, Exemption
and Estate Developers Vs. Ahmedabad.
GIHED Bhavan Site Office
GIHED Lane
Nr. Maple County
B/h. Ornet Park
Pakwan-Sindhu Bhavan Road
Shilaj, Ahmedabad.
PAN : AAATT 4761 F
(Applicant) (Responent)
Assessee by : Shri S.N. Soparkar
Revenue by : Shri Prasoon Kabra, Sr.DR
सन
ु वाई क तार ख/ Dateof Hearing : 24/11/2016
घोषणा क तार ख / Date of Pronouncement: 25/11/2016
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Present six appeals are directed at the instance of the assessee against separate orders of even dated i.e. 2.2.2015 passed by the ld.CIT(A) on the respective appeals of the assessee for the Asstt.Years 2006-07 to 2011-12.
2. There are common question of law and facts involved in these appeals. Therefore, we have heard them together and deem it appropriate to dispose of them by this common order. The first common issue is involved in the Asstt.Years 2006-09 to 2009-10, whereby, the assessee has challenged ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 2 reopening of the assessment. It is pertinent to observe that in those assessment years, the ld.AO has passed assessment order on 27.3.2014 under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. However, during the course of hearing, the ld.counsel for the assessee did not press this ground of appeal, and therefore, this ground in all four years is rejected.
3. Next common issue which is involved in all these years is whether the assessee is entitled to compute its income on principle of mutuality or not. The facts on vital points are common in all these assessment years. The ld.representatives have addressed their arguments in the assessment year 2006-07. Therefore, for the facility of reference we are mainly taking up the facts from the Assstt.Year 2006-07, and if we find any changes, then we will make a reference to those facts in particular assessment year.
4. Brief facts of the case are that Gujarat Institute of Housing & Estate Developers ("GIHED") was established in 1980 under Non-Trading Corporation Act of Government of Gujarat. This NTC Act was repealed, therefore, on 1-9-2007, GIHED was registered as non-profit organization as per section 25 of the Companies Act, 1956. Thus, the assessee is a section 25 company. The AO has passed a regular assessment in the Asstt.Year 2010-11 under section 143(3) on 28.3.2013, there he formed an opinion that income of the assessee is taxable, and accordingly recorded reasons for reopening of assessment in Asstt.Year 2006-07 to 2009-10. A notice under section 148 of the Act was issued on 28.3.2013 in the Asstt.Year 2006-07. The assessee has raised objections on the notice, and ultimately filed its return for the Asstt.Year 2006-07 on 7.3.2014 declaring total income of Rs.7,47,319/-. It had paid taxes accordingly. The ld.AO had issued notice under section 143(2) of the Act and ultimately passed assessment order on 27.3.2014. He ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 3 determined taxable income of the assessee at Rs.17,02,700/-. The case of the assessee is that its income is exempt from taxation on the principle of mutuality. This claim of the assessee has been rejected. Appeal to the CIT(A) did not bring any relief to the assessee.
5. With the assistance of the ld.representatives, we have gone through the record carefully. Before embarking upon an inquiry on the facts of the present case, in order to find out whether principle of mutuality is available to the assessee or not, for computing its income, we think it appropriate to bear in mind basic ingredients propounded in various decisions for inferring availability of principle of mutuality. The ld.counsel for the assessee has segregated his proposition in two compartments. In the first compartments, he has referred to the judgments where availability of principle of mutuality was examined by the Hon'ble Court in the cases of clubs, and in the second compartments, he has made reference to the decisions in the case of trade associations. He also relied upon the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Air Cargo Agents Association of India in order to canvas his argument that if a part of income was not covered by the principle of mutuality, then that part would be taxable. He placed on record copies of these decisions. Other decisions relied upon by the ldc.ounsel for the assessee are as under:
i) CIT Vs. Bankipur Club Ltd., 226 ITR 97 (SC);
ii) Chemford Club Vs. CIT, 243 ITR 89 (SC);
iii) Prabhukunj Co-op. Hsg. Society Ltd., 59 taxmann.com 104
iv) Jungadh Ghykhana Vs.ITO, 56 taxmann.com 281 (Guj)
v) Belvedere Estate Tenants Association Vs. ITO, 139 ITD 675
vi) CIT Vs. Cochin Oil Merchants' Association, 168 ITR 240 (Ker) ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 4
vii) CIT Vs. West Godavari Dist. Rice Millers Association, 150 ITR 394 (Andhra Pradesh);
viii) CIT Vs. Indian Paper Mills Association, 209 ITR 28 (Cal.)
6. On the other hand, the ld.DR relied upon the decisions referred to by the ld.CIT(A) on page no.21 of the impugned order.
7. First judgment referred to by the ld.counsel for the assessee is that of the Hon'ble Supreme Court in the case of CIT Vs. Bankipur Club Ltd., has decided a batch of 16 appeals which have been categorized in different groups i.e. 'A' to 'D'. These clubs were registered under section 25 of the Companies Act, 1956 as non-profit companies. They have claimed exemption on their 'surplus receipts' on the ground that they are "clubs" - a species of mutual undertaking and did not carry on any trade or business. They did not earn any profit. The income received by the clubs by extending facilities to non-members was not in issue in this batch of 16 appeals before the Hon'ble Supreme Court. The stand of the Revenue before the Hon'ble Court was that even surplus receipts of the clubs by offering facilities to its members is an income and so taxable. In this background the Hon'ble Supreme Court has taken note of principle of mutuality, and in this connection made reference to commentary in Halsbury Laws of England, 4th Edn., Simon's Taxes, Vol. B, Third Edn. as well as the "Law and Practice of Income Tax", 8th Edn., Vol., 1, 1990 by Kanga & Palkhivala. The Hon'ble Court has noted the concept of mutuality explained in these commentaries extensively. It is pertinent to take note finding of the Hon'ble Supreme Court in this connection. It reads as under:
ITA No.1051/Ahd/2015 (6 Appeals)Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 5 "7. In Halsbury Laws of England, 4th Edition Reissue Volume 23 paras 161 and 162 (pages 130 and 132), the relevant law is stated thus:
"Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and will in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits which are chargeable to tax.
Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise.
**** Members clubs are an example of a mutual undertaking, but, where a club extends facilities to non-members, to that extent the element of mutuality is wanting............. "(Emphasis supplied) Simon's Taxes Vol.B 3rd Edition, paragraphs B 1.218 and B1.222 (pages 159 and 167), formulate the law on the point, thus:
"........ it is settled law that if the persons carrying on a trade do so in such a way that they and the customers are the same persons, no profits or gains are yielded by the trade for tax purposes and therefore no assessment in respect of the trade can be made. Any surplus resulting from this form of trading represents only the extent to which the contribution of the participators have proved to be in excess of requirements. Such a surplus is regarded as their own money and returnable to them. In order that this exempting element of mutuality should exist it is essential that the profits should be capable of coming back at some time and in some form to the persons to whom the goods were sold or the services rendered. ......................."ITA No.1051/Ahd/2015 (6 Appeals)
Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 6 It has been held that a company conducting a members' (and not a proprietary) club, the members of the company and of the club being identical, was not carrying on a trade or business or undertaking of a similar character for purposes of the former corporation profits tax.
A members' club is assessable, however, in respect of profits derived from affording its facilities to non-members. Thus, in Carlisle and Silloth Golf Club v. Smith [1913(3) K. B. 75], where members' golf club admitted non members to play on payment of green fees it was held that it was carrying on a business which could be isolated and defined and the profit of which was assessable to income tax. But there is no liability in respect of profits made from members who avail themselves of the facilities provided for members." (emphasis supplied)"
The said principle which has been laid down in the leading decisions and emphasised in the leading English text books mentioned above, has been explained with reference to Indian decision in "The Law and Practice of Income Tax" (8th edition vol. 1, 1990) by Kanga & Palkhivala at page 113, thus:-
"...... The contributors to the common fund and the participators in the surplus must be an identical body. That does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid. The Madras. Andhra Pradesh and Kerala High Courts have held that the test of mutuality does not require that the contributors to the common fund should willy-nilly distribute the surplus amongst themselves: it is enough if they have a right of disposal over this surplus, and in exercise of that right they may agree that on winding up the surplus will be transferred to a similar association or used for some charitable objects "
8. The crucial issue that arises for consideration in cases where it is claimed that on the basis of the principle of mutuality, the receipts by the "society" or "club" is exempt from taxation, has been succinctly stated by the judicial Committee of the Privy Council in Fletcher v. Income Tax Commissioner [1971 (3) AJI ER 1185 at page 1189], thus:
ITA No.1051/Ahd/2015 (6 Appeals)Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 7 "... ... ... Is the activity, on the one hand, a trades or an adventure in the nature of trade producing a profit, or is it, on the other, a mutual arrangement which, at most, gives rise to a surplus?"
8. On the strength of the above text books and various judgments, the Hon'ble Court has observed that in substance, the arrangement or relationship between the club and its members should be of a non-trading character.
9. The next decision referred to by the ld.counsel for the assessee is also of Hon'ble Supreme Court in the case of Chemsford Club(supra). In this case, the assessee provides recreational and refreshment facilities exclusively to its members and their guests. These facilities are not for non-members. The club was being run on 'no-profit no-loss' basis. The surplus, if any is used for maintenance and development of the club. The club house was owned by the assessee-club and was having used for providing facilities. The issue before the Hon'ble Supreme Court was whether house property income derived by the club on the property itself would also enjoy the benefit of mutuality or not. The Hon'ble Supreme Court has observed that business of assessee's club is being covered by principle of mutuality, and if that be so, then out of deemed income from its property would be covered by said principle of mutuality.
The next case is of Hon'ble jurisdictional High Court in the case of Junagadh Gymkhana(supra). In this case, issue before the Hon'ble High Court was whether the Tribunal was justified in law in upholding the action of the AO of taxing 'card guest income' and 'general guest fee' which are charges paid by the members of the assessee. The Hon'ble Court has ultimately held that just because transactions which are non-mutual in character, would not destroy principle of mutuality. The Hon'ble Court has ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 8 considered the judgment of the Hon'ble Supreme Court in the case of Bangalore Club Vs. CIT and upheld contentions of the assessee that concept of mutuality will be applicable to it. It is imperative upon us to take note of the finding recorded by the Hon'ble Court in this case. It reads as under:
"7. Here, it would not be out of place to mention that there is not a finding of fact that the club receives any amount from non-members, all that the Tribunal has held is that the officer has brought the income from the costs, which is to be paid by the members on behalf of the guests. This itself goes contrary to the facts and the decision of the Apex Court in "BANGALORE CLUB VS. COMMISSIONER OF INCOME TAX & ANR.", 350 ITR 509(SC), on which reliance has been placed by Mr. Desai. In the said case, the Apex Court observed that the first condition to invoke the principle of mutuality requires that there must be a complete identity between the contributors and the participators. However, in the very judgment, the Apex Court spelt out that caution to be exercised while looking to the mutuality or the commercial activity and it is a difficult question of fact. In this case, facts, which is to be seen from factual matrix, shows that neither the ITAT nor CIT come to the conclusion as to who contributed to the funds as non-members. Just because the nonmembers are brought to the club, it would not come out of the mutuality aspect. The decision of this Court in "SPORTS CLUB OF GUJARAT LTD. Vs. CIT", 171 ITR 504, 512 (Guj.), which is sought to be relied upon by the authorities below and Mr. Desai, this Court held that the assessee's income from interest was not from a mutual activity and as such it was exigible to tax, and therefore, the assessee was not entitled to the benefit under Section 44A and that the entire expenditure incurred in all activities was not deductible from the assessee's taxable income. In the said case, this Court further held that the contributors to the common fund are entitled to participate in the surplus, thereby creating an identity between the participants and the contributors. Just because the transactions, which are non-mutual in character, would not destroy the principle of mutuality. Thus, the decision in the case of "BANGALORE CLUB"(Supra) would not apply to the facts of the case on hand, since, in that case the assessee-Club had received income from interest on surplus funds kept in member banks. Hence, these appeals deserve to be allowed. 8. In the result, all the appeals are ALLOWED and the question posed before us is answered in affirmative and in favour of the ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 9 appellant-assessee and against the respondent revenue. No order as to costs."
10. Other judgment referred to by the ld.counsel for the assessee in the case of Cochin Oil Merchants'' Association, West Godavari Dist. Rice Millers Association and M/s.Air Cargo Agents Association are concerned, we do not deem it necessary to recapitulate and recite all these decisions on this legal aspects, but suffice to say that core of these decisions of the Hon'ble High Courts is to the effect that even in the case of assessees, who are trade associations, if the ingredients of mutuality are available, then the concept of mutuality will be applicable in such cases also. It has also been propounded that if segmental transactions are non-mutual in character that would not destroy the principle of mutuality. In this connection, we have taken note of the finding of the Hon'ble Gujarat High Court in the case of Junagadh Gymkhana. We would like to take note of finding of the Bombay High Court in the case of Air Cargo Agents Association. The findings of the Hon'ble High Court read as under:
"7. We find that the contributions made by the members to the respondent -assessee cannot be a subject matter of tax merely because the part of its excess of income over expenditure is invested in mutual funds. It is also not the case of the Revenue that the dividend received from mutual funds have not been offered to tax by the respondent- assessee. The concept of Mutual concerns not being subject to tax is based on the principle of no man can profit out of itself. Therefore the test to be satisfied before an association can be classified as a Mutual concern are complete identity between the members i.e. contributors and the participants, the action of the mutual concern must be in furtherance of its objectives and there must be no scope of profiteering by the contributors from a fund. These tests have in fact been reiterated in Bangalore Club case (supra). However, the facts therein are completely distinguishable. Amongst the members of the Bangalore Club were certain banks. The Bangalore Club have invested its excess funds in member banks as well as non member banks in form ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 10 of fixed deposits atM earned interest thereon. The assessee thereon paid tax on the interest earned on fixed deposit with non member banks. However, so far as interest, earned from member banks was concerned, the assessee therein sought to apply the doctrine of mutuality to contend that the interest on the fixed deposit received from the member banks would not be assessable to tax as the dealing was with members, only, the Apex Court held that no sooner any amount is invested by an association claiming to be mutual concern in a fixed deposit with the banks the complete identity between the contributors and the participants in the fund on the amounts invested in member banks is ruptured. It held that till the surplus funds were generated and was used only amongst the members/contributors, the complete identity between contributors and participants continued. However the moment ' the funds are invested in fixed deposits with the banks and the funds are used for advancing loans etc. by the Bank to its customers, the identity of participants and contributors is sapped. Thus the interest earned on fixed deposits is to be brought to tax. However, it is to be noted that it did not result in the Bangalore Club being taxed on all contributions of its members. The case of the Revenue here is that having invested excess amounts in mutual funds the concept of mutuality would not extend to the contribution made by the members of the association even though the contributions are used to achieve the objectives of the association. In fact as pointed out above the Apex Court in Bangalore Club (supra) did not hold so but only brought to tax the interest earned on fixed deposit with member banks. In this case it is not disputed that the income earned on account of investments made in Mutual Funds has been offered to tax. The respondent has in effect followed the decision of the Apex Court in Bangalore Club (supra). However as held in Bangalore Club (supra), it cannot result in the respondent being charged to tax on the contribution received from its members. In fact: the decision of this Court in Common Effluent (supra) concludes the issue in favour of the respondent - assessee.
8. Accordingly the question as framed does not give rise to any substantial question of law. Thus not entertained."
11. In the light of the above, let us examine the facts of the present case. There is no change in the objects of the assessee when it was incorporated in 1980 as non-trading corporation under Non Trading Corporation Act as well ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 11 as when it was registered as non-profit company as per section 25 of the Companies Act. The objects are contained in clause no.3 of the memorandum of association. We deem it appropriate to take note of clause nos.3 to 5 of its memorandum of association, because clause-5 of memorandum of association contemplates that its income and property whenever derived shall be applied solely for purpose of its objects as set forth in this memorandum and no portion of income or property shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise or by way of profit to a person who at any time or have been member of this institution. These objects read as under:
"3. The objects for which the Institution is established are as under:-
(a) To collaborate with the Departments of Governments, Local Authorities and such other Institutions in the matters concerning and related to the profession of Engineers, housing and estate developers, contractors, etc. with a view to take active interest in the welfare of the community.
(b) To manage, Develop, organize, execute, maintain and carry on all such activities either for research or development in solving housing problems in the state of Gujarat.
(c) To remove the difficulties in the construction of housing.
(d) To look after the progress of all the members in the profession of construction.
(e) To foster goodwill amongst the members by arranging meetings and discussions periodically etc. of common interest.
(f) To protect the interest and rights of members and for the purpose of the said association to make correspondence, presenting applications to such officers or offices as may be necessary and make representations.
(g) To bring the members in contact with each other in order to solve the problem of any members.
(h) To study the orders, resolutions, Rules, Regulations and Policy etc. framed by the Government, Local Bodies, Local Authority, regarding the needful acts in the interest of members.ITA No.1051/Ahd/2015 (6 Appeals)
Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 12
(i) To comprise or to solve any problem by interfering in case of any dispute between/or amongst the members or with others on the re quest of the members of the association.
(j) To collect and accept contributions from members as and when required and determined by the association and to make and create therefrom a fund for office maintenance, salary to employees, provide essential service to the members, and raise a sinking fund for emergency and/or contingency expense.
(k) To carry on activity for the purpose of the education, medical relief to poor and needy, to help in natural calamities and for such other objects for attaining uplift of general public and for those purpose to start and maintain recreation, cultural, educational and medical centers.
(l) To do all such other lawful things as are incidental or conclusive to the above subjects.
Provided that the institution shall not support with its fund or endeavor to impose on or procure to be observed by its members or otherwise any regulations or restrictions which if an object of the institution would make it a trade union."
4. The activity of the Institution shall be confined to the state of Gujarat only.
5. (i) The Income and property whenever derived, shall be applied solely for the promotion of its objects as set forth in this memorandum.
(ii) No portion of income and property aforesaid shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to persons who at any time are/or have been member of the institution or to any one or more of them or to any person claiming through any one or more of them."
12. The ld.CIT(A) while concurring with the AO has basically assigned three reasons, viz. (a) object of the company trust does not spell out that principle of mutuality will be applicable, (b) income of the Trust is being mainly derived from properties show in India or abroad, and (c) the assessee has arranged cricket tournaments. It is very popular game and having huge ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 13 marketing potential. Apart from this three reasons, the ld.CIT(A) has made reference to the decisions of the Hon'ble Supreme Court in the case of CIT Vs. Kumbakonam Mutual Benefit Fund Ltd., 53 ITR 241 (SC), Yum Restaurants (Marketing) P. Ltd. Vs. CIT, 180 TAXMAN 7 (Del), CIT Vs. Royal Western India Turf Club Ltd., 24 ITR 551 (SC) in order to bring point at home that if identity between contributors and participators is not proved then benefit of mutuality was not available. According to the ld.CIT(A), in order to claim principle of mutuality, trust or society should fulfill essential elements viz. (a) it is an association of people called members, there is common cause. Every member makes its contribution and the aim of the activity is not to earn profit or gain. When the ld.CIT(A) has applied this principles on facts of the present case, then arrived at a conclusion that the assessee is not entitled for the benefit of mutuality. On due consideration of the facts and circumstances, and the proposition propounded in various case laws, it emerges out that in order to claim benefit of mutuality basically an assessee has to fulfill three ingredients. First ingredient is that there should be complete identity between classes of contributors and participators. There should be a common cause for the members of the association, and the third condition is that aim of the activity is not to earn profit or loss. Then, how this aspect has been disputed in the present case ? At page no.27 of the paper book, the assessee has compiled details of its receipts and expenditure pertaining to the Asstt.Year 2006-07. Such details read as under:
Particulars Member Non- TOTAL EXPENSES Profit/Loss % Income Member FOR from event Profit/Loss from Non-
EVENT Member
GIHED 120900 107100 228000 387377 -159377 -69.90 -74865
FIESTA
Property 3857150 1520000 5107150 3626607 1480543 28.99 440642
Show
3708050 1627100 5335150 4013984 1321166 365777
ITA No.1051/Ahd/2015 (6 Appeals)
Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 14 Amount Rs. Amount Rs.
Interest 378280
Income
Misc. 2750
Income
Kasar 504
Income 365777 747311
from Non
Members
Say 747320
13. According to the Revenue, the assessee was working for profit because it has held Festa and also cricket matches. The ld.counsel for the assessee has demonstrated that in Festa the assessee has received contribution from the members as well as non-members. These events are organized for the objects of the assessee, because, its members would get interaction and benefit of commercial exposure. The members would be appraised with latest technology in construction activities. Non-members contribution is of those entities who want to participate in this organization viz. (a) bank wants to erect its stall in a property show so that public could be appraised for availing loans on the projects of the members. The assessee has been offering taxes on non-member contribution. It is not claiming benefit of mutuality of non-
member receipts. It has been brought to our notice that the contributions are identifiable. Similarly, participants are identifiable. On the strength of the Hon'ble Gujarat High Court in the case of Junagadh Gymkhana (supra) as well as on the strength of Hon'ble Bombay High Court in the case of Air Cargo Agents Association of India, it was demonstrated before us that if a small part of the receipts are with respect to transactions which are non- mutual in character would not destroy the principle of mutuality. The assessee has pointed out that it has already segregated receipts which are non- mutual and has paid taxes. The next objections of the Revenue is that in the object clause nowhere it has been provided to organize property show, Festa or cricket matches. It is pertinent to observe that these are peripheral and ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 15 ancillary activities to fulfill main objects i.e. to manage, to develop, organize, execute, maintain and carry on activities either for research or development in solving housing problems and look after progress of all members in the profession of construction. If the objects of the assessee are looked into cumulatively, then it would spell out that in order to appraise members about the latest technology in construction activities, market trend, it would not be futile to organize property show. As far as cricket match is concerned, it was not organized on commercial basis, rather participators are mainly from among the members. It is recreational activities. The ld.counsel for the assessee has pointed out that total receipts from these matches have not crossed one and half -lakhs of rupees. Therefore, this is minor contribution from non-members which has been offered for taxation, would not destroy the principle of mutuality. We find that the ld.CIT(A) has made reference to the various case laws, but not examined analytically the facts of the assessee's case. She simply concurred with the proposition laid down in those cases laws, but has not spell out how these propositions are applicable on the facts of the present case. It is pertinent to observe that facts of all other years are identical. Therefore, in view of our discussion, we allow all the appeals of the assessee for statistical purpose. We direct the AO to give benefit of mutuality to the assessee while determining the taxable income. The income from non- members would not be given benefit of mutuality. As far as allocation of expenditure for earning income from members and non-members is concerned, the AO shall reexamine this issue and allocate the expenditure proportionately in the ratio of receipts, i.e. the ld.AO shall work out the total receipts and total expenditure, and thereafter proportionately allocate in the same percentage in which receipts are there from the members and non- members. Needless to say, the AO shall provide due opportunity of hearing ITA No.1051/Ahd/2015 (6 Appeals) Gujarat Institute of Hsg. & Estate Developers Vs. DIT (Exemption) 16 to the assessee while allocating expenditure and determine the receipts from the members and non-members. He will give benefit of mutuality on the receipts from the members and taxes the surplus income from non-members. With the above directions, all the appeals are allowed.
14. In the result, the appeals of the assessee are allowed.
Order pronounced in the Court on 25th November, 2016 at Ahmedabad.
Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER