COMMISSIONER OF INCOME-TAX VS NATIONAL SPORTS CLUB OF INDIA (NO. 1)
1999 P T D 3510
[230 I T R 777]
[Delhi High Court (India)]
Before R. C. Lahoti and J. K., Mehra, JJ,
COMMISSIONER OF INCOME-TAX
Versus
NATIONAL SPORTS CLUB OF INDIA (NO. 1)
Income-tax References Nos.282 and 283 of 1979, decided on 07/08/1997.
(a) Income-tax---
----Income---Mutual concern---Rent receipts from members to whom rooms were let out by assessee-club alongwith other facilities---Not taxable as income.
(b) Income-tax---
----Reference---Deduction---Mutual concern---Lawns of club used for social functions and club incurring expenditure---Tribunal allowing expenditure to the extent of 20 percent of income---Is a finding of fact---Court will not disturb in reference---Indian Income Tax Act, 1961, S.256.
(c) Income-tax---
----Business income or income from property---Mutual concern---Income from swimming pool and stadium---No element of rent involved for use of swimming pool and stadium by members and outsiders---Income therefrom is to be assessed as "income from business" and not as "income from house property".
Held, that the rent receipts from members to whom rooms were let out by the assessee-club, which was a mutual concern, alongwith other facilities were not taxable as income.
CIT v. Bankipur Club Ltd. (1997) 226 ITR 97 (SC) fol.
On the question whether there should be a deduction of a portion of the normal overhead expenditure incurred by the assessee against the royalty of Rs.1,16,000:
Held, that from the order of the Tribunal the precise details of the expenditure incurred by the assessee for the earning of the income were not made available. The Tribunal formed an opinion that some expenditure had to be allowed for the earning of the income in question because when the lawns of the club were used for social functions, the club had to incur some expenditure. The Tribunal thought it reasonable to allow an expenditure to the extent of 20 per cent of the income. This was purely a finding of fact and no question of law arose.
On the question whether the Tribunal was right in law in holding that the income from swimming pool and stadium should be taxed under the head "business" and not under the head 'income from house property":
Held, that from the order of the Tribunal it was clear that for the earlier years the earning from swimming pool and the stadium was being taxed under the head "income from business" and not under the head "income from house property". It was for the assessment year in question that the Income-tax Officer thought it fit to assess the income from the swimming pool and the stadium as income from house property. However, from the order of the Tribunal it was not clear if the swimming pool and the stadium were let out as property to outsiders, i.e., persons other than members. On the contrary, the order of the Appellate Assistant Commissioner showed that the income from the swimming pool and the' stadium could not be considered as income from property as there was no element of rent for use of the swimming pool and the stadium by the members and the outsiders. This finding of fact had not been dislodged in the order of the Tribunal. Therefore, the Tribunal was right in holding that the income from the swimming pool and the stadium was rightly taxed under the head "income from business" and not under the head "income from house property?.
R.D. Jolly and Premlata Bansal for the Commissioner.
S.K. Aggarwal and Vinay Vaish for the Assessee.
JUDGMENT
R.C. LAHOTI, J.---These two references under section 256(1) of the Income Tax Act, 1961, arising out of the assessment year 1972-73 made at the instance of the Revenue and the assessee both seek the opinion of the High Court on the following questions of law:
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that rent receipts from the members to whom the rooms were let out by the assessee-club alongwith other facilities were not assessable to income-tax on the doctrine of mutuality?
Whether on the facts and in the circumstances of the case, there should be deduction of a portion of the normal overhead expenditure incurred by the assessee against the royalty of Rs.1,16,000?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income from swimming pool and stadium at Bombay should be taxed under the head 'business' and not under the head 'income from house property?
So far as question No. 1 is concerned, it stands answered by the law laid down by the Supreme Court in the case of CIT v. Bankipur Club Ltd. (1997) 226 ITR 97. In view of the law so laid down, the question is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.
So far as question No.2 is concerned, we find from paragraph 7 of the appellate order of the Tribunal that the precise details of the expenditure incurred by the assessee for earning of the income were not made available. The Tribunal formed an opinion that some expenditure had to be allowed for the earning of the income in question because when the lawns of the club were used for social functions, the club had to incur some expenditure. The Tribunal thought it reasonable to allow an expenditure to the extent of 20 percent of the income. This is purely a finding of fact and no question of law arises therefrom. The question, therefore, need not be answered.
??????????? From the appellate order of the Tribunal, it is clear that for the earlier years the earning from swimming pool and the stadium at Bombay was being taxed under the head "income from business" and not under the head "income from house property". It was for the assessment year in question that the Income-tax Officer thought it fit to assess the income from the pool and the stadium as income from house property. However, from the order of the Tribunal it is not clear if the swimming pool and the stadium were let out as property to outsiders, i.e., other than members. On the contrary, we find from the order of the Appellate Assistant Commissioner that the income from the swimming pool and the stadium at Bombay could not be considered as income from property as there was no element of rent for use of the swimming pool and the stadium by the members and the outsiders. This finding of fact has not been dislodged in the order of the Tribunal. Therefore the Tribunal is right in holding that the income from the swimming pool and the stadium at Bombay was rightly taxed under the head "income from business" and not under the head "income from house property". The question is answered accordingly, i.e., in favour of the assessee and against the Revenue. ?
No order as to costs.
One copy of this order shall be placed on the record of each of the two references.
M . B . A . /3131 /FC????????????????????????????????????????????????????????????? Reference answered.