Sarvodaya Mutual Benefit Trust, Perrnamallur, Vandavasi v. ITO, Vellore

ITA 1438/CHNY/2016 | 2009-2010
Pronouncement Date: 02-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 143821714 RSA 2016
Assessee PAN AAETS2748F
Bench Chennai
Appeal Number ITA 1438/CHNY/2016
Duration Of Justice 1 year(s) 5 month(s) 10 day(s)
Appellant Sarvodaya Mutual Benefit Trust, Perrnamallur, Vandavasi
Respondent ITO, Vellore
Appeal Type Income Tax Appeal
Pronouncement Date 02-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 02-11-2017
Date Of Final Hearing 12-07-2017
Next Hearing Date 12-07-2017
First Hearing Date 12-07-2017
Assessment Year 2009-2010
Appeal Filed On 23-05-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI ! ' . #$ % &' ( BEFORE SHRI SANJAY ARORA ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY JUDICIAL MEMBER ./ITA NO.1437/MDS/2016 % ) *) / ASSESSMENT YEAR : 2009-10 SARVODAYA MUTUAL BENEFIT TRUST THELLAR NO.10 REDDIYAR STREET THELLAR VILLAGE POST THIRUVANNAMALAI 604 406. [PAN: AAETS 2748F] VS. INCOME TAX OFFICER WARD-I(5) VELLORE 632 001. ( /APPELLANT ) ( / RESPONDENT ) ./ITA NO.1438/MDS/2016 % ) *) / ASSESSMENT YEAR : 2009-10 SARVODAYA MUTUAL BENEFIT TRUST PERNAMALLUR NO.77 CHETPET ROAD MAZHIYUR VILLAGE MAZHIYUR 604 505 VANDAVASI TK. [PAN: AAETS 5150R] VS. INCOME TAX OFFICER WARD-I(5) VELLORE 632 001. + . / / APPELLANT BY : SHRI K.VENKATESH PRABU CA 01+ . / / RESPONDENT BY : SHRI V.SREENIVASAN JT. CIT . 2 / DATE OF HEARING : 04.08.2017 3* . 2 / DATE OF PRONOUNCEMENT : 02.11.2017 /O R D E R PER SANJAY ARORA AM : THIS IS A SET OF TWO APPEALS BY TWO SEPARATE ASSES SEES DIRECTED AGAINST THE RESPECTIVE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-13 CHENNAI 2 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO (CIT(A) FOR SHORT) DATED 23.02.2016 & 29.03.2016 DISMISSING THEIR APPEALS CONTESTING THEIR RESPECTIVE ASSESSMENTS U/S. 143(3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) FOR ASSESSMENT YEAR (AY) 20 09-10 VIDE ORDERS OF EVEN DATE I.E. 26.12.2011. AS THE APPEALS RAISE COMMON ISSUES THESE WERE POSTED FOR HEARING AND ACCORDINGLY HEARD TOGETHER AND ARE B EING DISPOSED OF BY A COMMON CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2. THE BACKGROUND FACTS THE ASSESSEE/S IS A PRIVATE BENEFICIARY TRUST SETT LED BY AN INDIVIDUAL REPRESENTING THE ASSOCIATION FOR SARVA SEVA FIRMS (ASSEFA) A SO CIETY REGISTERED UNDER THE TAMIL NADU SOCIETIES REGISTRATION ACT 1975 AND ENG AGED IN RURAL DEVELOPMENT AND UPLIFTMENT OF THE RURAL POOR ACROSS INDIA BY PROVIDING RESOURCES; TECHNICAL ASSISTANCE ETC. VIDE TRUST DEED/S EXECUTED ON 13/ 2/2003. THE ASSESSEE TRUST/S IS CONSTITUTED FOR THE BENEFIT OF SELF-HELP GROUPS OPE RATING IN THE AREA OF THELLAR OR AS THE CASE MAY BE PERNAMALLUR TAMIL NADU (WHICH THUS ALSO EXPLAINS THEIR RESPECTIVE NAMES). THE OVERALL OBJEC TIVE WITH WHICH THE TRUST/S IS FORMED IS TO PROMOTE AND MAKE POSSIBLE SAVINGS AND CREDIT ACTIVITIES AMONG POOR WOMEN JOINTLY TOGETHER IN THE FORM OF THE SELF -HELP GROUPS; TO HELP IMPROVE THE ECONOMIC AND SOCIAL CONDITIONS PARTICU LARLY OF RURAL POOR WOMEN. A SELF-HELP GROUP (SHG) IS DEFINED UNDER CLAUSE 3(F ) OF THE TRUST DEED/S TO MEAN A WOMENS GROUP FORMED WITH THE OBJECT OF SOCI O-ECONOMIC DEVELOPMENT OF WOMEN LIVING IN THE NEIGHBOR-HOOD ENGAGED IN TH RIFT AND CREDIT ACTIVITY FOR MUTUAL BENEFIT. THE APPEALS RAISE COMMON ISSUES TWO IN NUMBER I. E. THE ASSESSEES STATUS AND EX CONSEQUENTI THE INCOME ASSESSABLE IN ITS HANDS AND TWO THE APPLICATION OF S. 40(A)(IA) IN VIEW OF THE ADMITTED DEFAULT IN NOT DEDUCTING TAX AT SOURCE U/S. 194A ON THE INTEREST PAID BY IT TO SARVODAYA NANO F INANCE LTD. (SNFL) FROM WHICH IT DERIVES FINANCIAL RESOURCES BY WAY OF UNSE CURED LOANS. THE ASSESSEES OPERATIONAL MODEL IS THAT IT SOURCES FUNDS IN THE M AIN FROM SNFL WHICH FOR THE 3 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO CURRENT YEAR IS AT 12 PER CENT. PER ANNUM ON REDUCI NG BALANCE. THE SAME ARE RE- LENT TO MEMBER SELF HELP GROUPS (SHGS) AT 12 PER CENT. PER ANNUM FLAT. THUS WHILE THE ASSESSEE OBTAINS BENEFIT (OF INTEREST) ON THE REDUCTION IN THE LOAN AMOUNT OVER TIME THE SAME IS NOT PASSED OVER TO TH E BORROWER SHGS. THIS IS THE PRIMARY SOURCE OF REVENUE FOR THE ASSESSEE WHOSE A CCOUNTS DISCLOSE A SURPLUS OF . 3 28 968/- ( .3 40 480/-) FOR THE CURRENT YEAR. THE ASSESSEE HO WEVER RETURNED ONLY . 32 897/- ( .34 048/-) AS AS PER ITS BYELAWS 90 PER CENT. OF THE SURPLUS IS TO BE DISTRIBUTED AMONGST THE MEMBER SHG S WHOSE SAVING ACCOUNTS MAINTAINED WITH IT ARE ACCORDINGLY CREDITED TO THE EXTENT OF THE SAID 90 PER CENT. (ALLOCATING THE SAME ON THE BASIS OF THE AVERAGE BA LANCE OUTSTANDING IN THEIR CONTRIBUTION ACCOUNTS) RETAINING THE BALANCE 10 PE R CENT. (OF THE SURPLUS) FOR CAPITAL EXPENDITURE TRANSFERRING IT TO THE CAPITAL FUND. WHY THE REPAYMENT OF THE BORROWING FROM SNFL WHICH ONLY WOULD LEAD TO A SURPLUS IN THE HANDS OF THE ASSESSEE IN VIEW OF THE DIFFERENTIAL MANNER OF CHARGING INTEREST WOULD BE PRINCIPALLY FROM THE RETAINED FUNDS (SURPLUS). IN T HE VIEW OF THE ASSESSING OFFICER (AO) SINCE ENDORSED BY THE LD. CIT(A) THE SHARES OF THE INDIVIDUAL SHGS ARE NOT DETERMINATE SO THAT THE SAME IS TO BE TAXED IN THE HANDS OF THE ASSESSEE TRUST AT THE MAXIMUM MARGINAL RATE TREATI NG IT AS AN ASSOCIATION OF PERSONS (AOP) UNDER WHICH STATUS IT WAS ASSESSED. THERE IS IN FACT NO PHYSICAL DISTRIBUTION OF THE SURPLUS. IN THE ABSENCE OF ACTU AL DISTRIBUTION THE ASSESSEES CONTENTION THAT UPON CREDIT (TO THE ACCOUNTS OF TH E SHGS) THE FUNDS ARE BEING HELD BY IT IN A FIDUCIARY CAPACITY CANNOT BE ACCEP TED. THESE THEN CONSTITUTE THE FIRST CONTROVERSY ARISING IN THE PRESENT CASE. THE SECOND AS AFORE-STATED IS THE QUA THE APPLICATION OF S. 40(A)(IA) INVOKED AS THE ASS ESSEE DID NOT ADMITTEDLY DEDUCT TAX AT SOURCE U/S. 194A ON THE INTEREST PAID /CREDITED TO SNFL. THE ASSESSEE-TRUST BEING AN AOP IT WAS NOT EXCEPTED U/ S. 194A AND ACCORDINGLY LIABLE FOR TAX DEDUCTION AT SOURCE. THIS IS THE REV ENUES BASIS FOR DISALLOWANCE OF INTEREST U/S. 40(A)(IA) THE SECOND ISSUE. 4 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO THE APPELLANTS CASE : 3. THE CASE OF THE ASSESSEE/S WHICH HAS IN FACT FO UND FAVOUR WITH THE TRIBUNAL IN THE CASE OF SIMILAR TRUSTS (IN ITA NOS. 1098 & 1100 TO 1104/MDS/2012 DATED 05.12.2013) IS THAT THE SHARE S OF THE MEMBER SHGS ARE DETERMINATE. THE ASSESSEE IS ONLY A REPRESENTATIVE ASSESSEE THEREFOR U/S. 160(1)(IV) AND LIABLE TO TAX ONLY ON THE SURPLUS R ETAINED (10 PER CENT.) BY IT WHICH STANDS DULY RETURNED. THE QUESTION OF THE BAL ANCE 90 PER CENT. BEING TAXED IN THE ASSESSEES HANDS AND FURTHER AT THE MAXIMU M MARGINAL RATE (MMR) U/S. 164(1) DOES NOT ARISE. THE APPELLANT TRUST/S IS IN FACT GOVERNED BY THE PRINCIPLE OF MUTUALITY THE SURPLUS BEING NOTHING BUT THE INC OME OF THE SHGS THEMSELVES WITH THE ASSESSEE-TRUST BEING ONLY A FACILITATOR. T HE SHGS ARE THEMSELVES MUTUAL CONCERNS AND THE INTEREST BURDEN IS ULTIMATELY BOR NE BY THE INDIVIDUAL MEMBERS OF THE SHGS. THEREFORE CONSIDERING DE FACTO THE INTEREST EXPENDITURE IS PAID BY THESE INDIVIDUAL MEMBERS OF THE SHGS. IN-AS-MUCH AS THEIR ACCOUNTS ARE NOT SUBJECT TO AUDIT U/S. 44AB THE PROVISION OF S. 194 A IS NOT APPLICABLE TO THEM AND THEREFORE ON THE INTEREST PAID TO SNFL. THIS SUMS UP THE ASSESSEE/S CASE QUA BOTH THE ISSUES. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. FINDINGS THE ASSESSEE-TRUSTS ARE NOT REGISTERED U/S. 12A OF THE ACT. THE FIRST THING THEREFORE RELEVANT TO DETERMINE IS IF THE ASSESSEE/ S RETURNING ITS INCOME AS AN AOP IS A REPRESENTATIVE ASSESSEE (U/S. 160(1)(IV) OF THE ACT) FOR THE SHGS OR NOT? WE MAY THEREFORE TO BEGIN WITH REPRODUCE TH E RELEVANT PROVISIONS OF THE ACT: REPRESENTATIVE ASSESSEE. 160. (1) FOR THE PURPOSES OF THIS ACT REPRESENTATIVE ASSESSEE MEANS ( I ) TO ( III ) ( IV ) IN RESPECT OF INCOME WHICH A TRUSTEE APPOINTED UN DER A TRUST DECLARED BY A DULY EXECUTED INSTRUMENT IN WRITING W HETHER TESTAMENTARY OR OTHERWISE [INCLUDING ANY WAKF DEED WHICH IS VALID 5 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO UNDER THE MUSSALMAN WAKF VALIDATING ACT 1913 (6 OF 1913)] RECEIVES OR IS ENTITLED TO RECEIVE ON BEHALF OR FOR THE BENEFIT OF ANY PERSON SUCH TRUSTEE OR TRUSTEES; ( V ) IN RESPECT OF INCOME WHICH A TRUSTEE APPOINTED UN DER AN ORAL TRUST RECEIVES OR IS ENTITLED TO RECEIVE ON BEHALF OR FOR THE BENEFIT OF ANY PERSON SUCH TRUSTEE OR TRUSTEES. EXPLANATION 1 . - A TRUST WHICH IS NOT DECLARED BY A DULY EXECUTED INSTRUMENT IN WRITING [INCLUDING ANY WAKF DEED WHIC H IS VALID UNDER THE MUSSALMAN WAKF VALIDATING ACT 1913 (6 OF 1913)] S HALL BE DEEMED FOR THE PURPOSES OF CLAUSE (IV) TO BE A TRUST DECLARED BY A DULY EXECUTED INSTRUMENT IN WRITING IF A STATEMENT IN WRITING SI GNED BY THE TRUSTEE OR TRUSTEES SETTING OUT THE PURPOSE OR PURPOSES OF TH E TRUST PARTICULARS AS TO THE TRUSTEE OR TRUSTEES THE BENEFICIARY OR BENEFIC IARIES AND THE TRUST PROPERTY IS FORWARDED TO THE ASSESSING OFFICER (I) WHERE THE TRUST HAS BEEN DECLARED BEFORE THE 1S T DAY OF JUNE 1981 WITHIN A PERIOD OF THREE MONTHS FROM THAT DAY; AND (II) IN ANY OTHER CASE WITHIN THREE MONTHS FROM TH E DATE OF DECLARATION OF THE TRUST. EXPLANATION 2. FOR THE PURPOSES OF CLAUSE (V) ORAL TRUST MEANS A TRUST WHICH IS NOT DECLARED BY A DULY EXECUTED INSTRUMENT IN WRITING [INCLUDING ANY WAKF DEED WHICH IS VALID UNDER THE MUSSALMAN WA KF VALIDATING ACT 1913 (6 OF 1913)] AND WHICH IS NOT DEEMED UNDER EX PLANATION 1 TO BE A TRUST DECLARED BY A DULY EXECUTED INSTRUMENT IN WRI TING. (2) EVERY REPRESENTATIVE ASSESSEE SHALL BE DEEMED T O BE AN ASSESSEE FOR THE PURPOSES OF THIS ACT. LIABILITY OF REPRESENTATIVE ASSESSEE. 161. (1) EVERY REPRESENTATIVE ASSESSEE AS REGARDS THE INCOME IN RESPECT OF WHICH HE IS A REPRESENTATIVE ASSESSEE SHALL BE SUBJECT TO THE SAME DUTIES RESPONSIBILITIES AND LIABILITIES AS IF THE INCOME WERE INCOME RECEIVED BY OR ACCRUING TO OR IN FAVOUR OF HIM BENE FICIALLY AND SHALL BE LIABLE TO ASSESSMENT IN HIS OWN NAME IN RESPECT OF THAT INCOME; BUT ANY SUCH ASSESSMENT SHALL BE DEEMED TO BE MADE UPON HIM IN HIS REPRESENTATIVE CAPACITY ONLY AND THE TAX SHALL SU BJECT TO THE OTHER PROVISIONS CONTAINED IN THIS CHAPTER BE LEVIED UPO N AND RECOVERED FROM HIM IN LIKE MANNER AND TO THE SAME EXTENT AS IT WOU LD BE LEVIABLE UPON AND RECOVERABLE FROM THE PERSON REPRESENTED BY HIM. (1A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1) WHERE ANY INCOME IN RESPECT OF WHICH THE PERSON MENTIONED IN CLAUSE (IV) OF SUB- SECTION (1) OF SECTION 160 IS LIABLE AS REPRESENTAT IVE ASSESSEE CONSISTS OF OR INCLUDES PROFITS AND GAINS OF BUSINESS TAX SHA LL BE CHARGED ON THE WHOLE OF THE INCOME IN RESPECT OF WHICH SUCH PERSON IS SO LIABLE AT THE MAXIMUM MARGINAL RATE: PROVIDED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL NOT APPLY WHERE SUCH PROFITS AND GAINS ARE RECEIVABLE UNDER A TRUST DECLARED BY ANY PERSON 6 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO BY WILL EXCLUSIVELY FOR THE BENEFIT OF ANY RELATIVE DEPENDENT ON HIM FOR SUPPORT AND MAINTENANCE AND SUCH TRUST IS THE ONLY TRUST SO DECLARED BY HIM. (2) WHERE ANY PERSON IS IN RESPECT OF ANY INCOME ASSESSABLE UNDER THIS CHAPTER IN THE CAPACITY OF A REPRESENTATIVE ASSESSE E HE SHALL NOT IN RESPECT OF THAT INCOME BE ASSESSED UNDER ANY OTHER PROVISION OF THIS ACT. CHARGE OF TAX WHERE SHARE OF BENEFICIARIES UNKNOWN . 164. (1) SUBJECT TO THE PROVISIONS OF SUB-SECTIONS (2) A ND (3) WHERE ANY INCOME IN RESPECT OF WHICH THE PERSONS MENTIONED IN CLAUSES (III) AND (IV) OF SUB-SECTION (1) OF SECTION 160 ARE LIABLE AS REP RESENTATIVE ASSESSEES OR ANY PART THEREOF IS NOT SPECIFICALLY RECEIVABLE ON BEHALF OR FOR THE BENEFIT OF ANY ONE PERSON OR WHERE THE INDIVIDUAL SHARES OF THE PERSONS ON WHOSE BEHALF OR FOR WHOSE BENEFIT SUCH INCOME OR SUCH PAR T THEREOF IS RECEIVABLE ARE INDETERMINATE OR UNKNOWN (SUCH INCOME SUCH PAR T OF THE INCOME AND SUCH PERSONS BEING HEREAFTER IN THIS SECTION REFERR ED TO AS RELEVANT INCOME PART OF RELEVANT INCOME AND BENEFICIARI ES RESPECTIVELY) TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE: PROVIDED THAT IN A CASE WHERE (I) NONE OF THE BENEFICIARIES HAS ANY OTHER INCOME CHAR GEABLE UNDER THIS ACT EXCEEDING THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX IN THE CASE OF AN ASSOCIATION OF PERSONS OR IS A BENEFICIARY UN DER ANY OTHER TRUST; OR (II) THE RELEVANT INCOME OR PART OF RELEVANT INCOME IS R ECEIVABLE UNDER A TRUST DECLARED BY ANY PERSON BY WILL AND SUCH TRUST IS THE ONLY TRUST SO DECLARED BY HIM; OR (III) THE RELEVANT INCOME OR PART OF RELEVANT INCOME IS R ECEIVABLE UNDER A TRUST CREATED BEFORE THE 1ST DAY OF MARCH 1970 BY A NON-TESTAMENTARY INSTRUMENT AND THE ASSESSING OFFICER IS SATISFIED HAVING REGARD TO ALL THE CIRCUMSTANCES EXISTING AT THE RELEVANT TIME TH AT THE TRUST WAS CREATED BONA FIDE EXCLUSIVELY FOR THE BENEFIT OF THE RELATIVES OF TH E SETTLOR OR WHERE THE SETTLOR IS A HINDU UNDIVIDED FAMILY EXCLUSIVELY FOR THE BENEFIT OF THE MEMBERS OF SUCH FAMILY IN CIRCU MSTANCES WHERE SUCH RELATIVES OR MEMBERS WERE MAINLY DEPENDENT ON THE S ETTLOR FOR THEIR SUPPORT AND MAINTENANCE; OR (IV) THE RELEVANT INCOME IS RECEIVABLE BY THE TRUSTEES ON BEHALF OF A PROVIDENT FUND SUPERANNUATION FUND GRATUITY FUND PENSION F UND OR ANY OTHER FUND CREATED BONA FIDE BY A PERSON CARRYING ON A BUSINESS OR PROFESSION EXCLUSIVELY FOR THE BENEFIT OF PERSONS EMPLOYED IN SUCH BUSINESS OR PROFESSION TAX SHALL BE CHARGED ON THE RELEVANT IN COME OR PART OF RELEVANT INCOME AS IF IT WERE THE TOTAL INCOME OF A N ASSOCIATION OF PERSONS: 7 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO PROVIDED FURTHER THAT WHERE ANY INCOME IN RESPECT OF WHICH THE PERSON MENTIONED IN CLAUSE (IV) OF SUB-SECTION (1) OF SECT ION 160 IS LIABLE AS REPRESENTATIVE ASSESSEE CONSISTS OF OR INCLUDES P ROFITS AND GAINS OF BUSINESS THE PRECEDING PROVISO SHALL APPLY ONLY IF SUCH PROFITS AND GAINS ARE RECEIVABLE UNDER A TRUST DECLARED BY ANY PERSON BY WILL EXCLUSIVELY FOR THE BENEFIT OF ANY RELATIVE DEPENDENT ON HIM FO R SUPPORT AND MAINTENANCE AND SUCH TRUST IS THE ONLY TRUST SO DE CLARED BY HIM. (2).... (3).... EXPLANATION 1. FOR THE PURPOSES OF THIS SECTION (I) ANY INCOME IN RESPECT OF WHICH THE PERSONS MENTIONE D IN CLAUSE (III) AND CLAUSE (IV) OF SUB-SECTION (1) OF SECTION 160 ARE L IABLE AS REPRESENTATIVE ASSESSEE OR ANY PART THEREOF SHALL BE DEEMED AS BEI NG NOT SPECIFICALLY RECEIVABLE ON BEHALF OR FOR THE BENEFIT OF ANY ONE PERSON UNLESS THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT SUCH IN COME OR SUCH PART THEREOF IS RECEIVABLE DURING THE PREVIOUS YEAR IS E XPRESSLY STATED IN THE ORDER OF THE COURT OR THE INSTRUMENT OF TRUST OR WA KF DEED AS THE CASE MAY BE AND IS IDENTIFIABLE AS SUCH ON THE DATE OF SUCH ORDER INSTRUMENT OR DEED; (II) THE INDIVIDUAL SHARES OF THE PERSONS ON WHOSE BEHAL F OR FOR WHOSE BENEFIT SUCH INCOME OR SUCH PART THEREOF IS RECEIVED SHALL BE DEEMED TO BE INDETERMINATE OR UNKNOWN UNLESS THE INDIVIDUAL SHAR ES OF THE PERSONS ON WHOSE BEHALF OR FOR WHOSE BENEFIT SUCH INCOME OR SU CH PART THEREOF IS RECEIVABLE ARE EXPRESSLY STATED IN THE ORDER OF TH E COURT OR THE INSTRUMENT OF TRUST OR WAKF DEED AS THE CASE MAY BE AND ARE ASCERTAINABLE AS SUCH ON THE DATE OF SUCH ORDER INSTRUMENT OR DEED. A REPRESENTATIVE ASSESSEE COULD ONLY BE FOR A PERS ON A TERM DEFINED U/S. 2(31). THE SAME INCLUDES AN ASSOCIATION OF PERSONS (OR BOD Y OF INDIVIDUALS) WHETHER INCORPORATED OR NOT. THE SHGS ARE APPARENTLY ONLY A OPS AND THEREFORE THE ASSESSEE COULD BE REGARDED AS A REPRESENTATIVE ASSE SSEE FOR THE DIFFERENT SHGS TO WHICH THE FUNDS ARE LENT AND THE SURPLUS CREDITE D BY IT. HERE IT MAY BE RELEVANT TO MENTION THAT IT IS NOT NECESSARY FOR A N AOP TO BE REGARDED AS A PERSON TO BE FORMED FOR DERIVING INCOME PROFIT OR GAINS (REFER EXPLANATION TO S. 2(31)). SO REGARDED I.E. AS A REPRESENTATIVE A SSESSEE IT IS THE ENTIRE INCOME ARISING TO IT THAT WOULD STAND TO FALL TO THE SHARE OF THE BENEFICIARY SHGS AND FOR WHICH IT SHALL BE REGARDED AS A REPRESENTATIVE ASSE SSEE AND NOT A PART OF IT I.E. AS CREDITED TO THE ACCOUNT OF THE SHGS AND WHICH A S PER THE EXTANT REGULATIONS IS AT 90 PER CENT. OF THE SURPLUS. THIS IS AS THE T RUST DEED THE CONSTITUTING 8 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO DOCUMENT DOES NOT SPECIFY ANY PART OF THE INCOME O F THE TRUST AS NOT FOR THE BENEFIT OF THE SHGS AND CORRESPONDINGLY AS ALSO T HEREFORE FOR THE BENEFIT OF ANY OTHER. THE PART (10 PER CENT.) THUS RETAINED IS AGAIN ONLY THAT RECEIVED FOR AND ON BEHALF OF SHGS AND WHICH IS CONSIDERED PROP ER AND EXPEDIENT BY THE BOARD OF TRUSTEES (BOT) FOR THE TIME BEING TO BE RE TAINED FOR CAPITAL EXPENDITURE OR FOR THE EFFECTIVE FUNCTIONING OF THE TRUST WHICH EXISTS ONLY FOR THE SHGS. THE BYELAWS OR THE ADMINISTRATIVE RULES IT M AY BE APPRECIATED CANNOT OPERATE TO ALTER THE INTENT OF THE SETTLOR IN SETTL ING THE AMOUNT ( . 1 000 FOR BOTH THE TRUSTS UNDER REFERENCE) IN ESTABLISHING THE TRU ST A LEGAL OBLIGATION BY DEFINITION WHILE THE RETENTION PERCENTAGE WOULD BE IN ITS WISDOM AS DEEMED PROPER OR ALTERNATIVELY AS DEEMED EXPEDIENT BY TH E BOT FROM TIME TO TIME. WHY THE SAME IS AT 95 PER CENT. FOR THE SIMILAR TR USTS REFERENCE TO APPEALS IN WHOSE CASES STANDS MADE BY US EARLIER. IT WOULD HAV E BEEN A DIFFERENT MATTER WE MAY CLARIFY WHERE THE TRUST DEED ITSELF PROVIDES F OR A PART OF THE SURPLUS TO BE RETAINED AS DEEMED FIT BY THE BOT (SUBJECT TO A CA P) FOR THE EFFECTIVE MANAGEMENT OF THE TRUST ALSO INDICATING THE MANNER IN WHICH THE SAID SURPLUS AS OBTAINING AT THE TIME OF ITS DISSOLUTION IS TO BE APPORTIONED OR AS TO THE SHARE IF ANY OF THE DIFFERENT BENEFICIARIES IN THE SAID SURPLUS. OF COURSE THIS ARRANGEMENT WOULD AGAIN HAVE TO BE EXAMINED WITH RE FERENCE TO THE APPLICABLE PROVISIONS AND OUR LIMITED POINT IN STATING SO I S THAT THE ENTIRE INCOME IN THE CASE OF THE ASSESSEE TRUSTS IS FOR THE BENEFIT OF THE SHGS AND NOT EXCLUDING THAT RETAINED BY THE TRUST. THERE IS UNDER THE CIRCUMST ANCES NO SCOPE FOR CONSIDERING THE ASSESSEE-TRUST AS AN AOP FOR 10 PER CENT. OF TH E SURPLUS ARISING TO IT AND AS A REPRESENTATIVE ASSESSEE FOR THE DIFFERENT SHGS FOR THE BALANCE 90 PER CENT. THE NEXT QUESTION IN THE MATTER IS WHETHER THE SHA RES OF THE INDIVIDUAL SHGS ARE DETERMINATE OR KNOWN. WITHOUT DOUBT THERE IS NO SPECIFICATION OF THE SHARES IN THE TRUST DEED WHICH WE HAVE PERUSED IN ITS ENTIRETY. THESE SHARES HAVE TO BE DECIDED/SPECIFIED ONLY BY THE SETTLOR OF THE TRUST. IT COULD NOT BUT BE 9 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO OTHERWISE WHERE THE ASSESSEE TRUST/S IS AS CONTEN DED CONSTITUTED FOR THE BENEFIT OF THESE SELF-HELP GROUPS. THE INCOME IN THE PRESEN T CASE INSTEAD OF BEING RECEIVED FOR AND ON BEHALF OF OR FOR THE BENEFIT O F THE DEFINED (SPECIFIC) SHGS I.E. AT THE TIME OF THE EXECUTION OF THE TRUST DEE D (AS REQUIRED BY LAW REFER EXPLANATION 1 TO S. 164) IS ALLOCATED TO THE SHGS REGISTERED WI TH THE ASSESSEE- TRUST FOR THE TIME BEING. THESE SHGS ARE SUBJECT TO CHANGE FROM TIME TO TIME AS ONE GROUP MAY BECOME DYSFUNCTIONAL OVER TIME OR OTH ERWISE BREAKUP IN TIME. THE WHOLE PURPOSE IS TO ENABLE ACCESS TO RESOURCES AND PROVIDING OTHER ASSISTANCE TO THE WOMEN OF THE AREA WHO MAY ORGANI ZE THEMSELVES INTO ANOTHER GROUP OR THAT APART ANOTHER SUCH GROUP MAY SIMILA RLY SEEK ASSISTANCE OR GET ITSELF ENLISTED WITH THE TRUST. THE IDENTITY OF THE BENEFICIARY SHGS IS NOT CONSTANT OVER TIME MUCH LESS CRYSTALLIZED AS ON THE DATE OF THE TRUST DEED AS ALSO THEIR RESPECTIVE SHARES WHICH IN THE PRESENT CASE ARE BE ING DEFINED ON THE BASIS OF THE BALANCE OUTSTANDING (FOR THE RELEVANT YEAR). NOT ON LY ARE THE SHARES THUS NOT DEFINED AT THE TIME OF EXECUTION OF THE TRUST DEED I.E. THE FORMATION OF THE TRUST THE SAME ARE LIABLE TO CHANGE FROM TIME TO TIME ON THE BASIS OF THE PERFORMANCE OF THE INDIVIDUAL SHGS PARTICIPATING FOR THE TIME B EING. WHY THE SAID FORMULA NOT FORMING A PART OF THE TRUST DEED IS ITSELF SUB JECT TO CHANGE OVER TIME. THE INDIVIDUAL SHARES OF THE BENEFICIARY SHGS AS IN FA CT THE SHGS THEMSELVES CANNOT THEREFORE BE REGARDED IN THE FACTS OF THE C ASE AS INDEED IN LAW AS DETERMINATE OR KNOWN. EX CONSEQUENTI THE ENTIRE IN COME OF THE TRUST IS ASSESSABLE IN ITS HANDS AT THE MAXIMUM MARGINAL RAT E AS ASSESSED BY THE REVENUE. WE IN OUR THIS VIEW OF THE MATTER DO NOT CONSIDER IT NECESSARY TO DWELL ON THE OTHER OBJECTION RAISED BY THE REVENUE IN THE MATTER I.E. THAT THERE IS NO REAL DISTRIBUTION OF THE SURPLUS TO THE RESPE CTIVE SHGS FOR IT TO BE REGARDED AS RECEIVED ON THEIR BEHALF OR FOR THEIR BENEFIT. T HOUGH A CREDIT TO THE ACCOUNT IS AN APPROPRIATION OF THE SAID AMOUNT THERETO THE QU ESTION IN THIS REGARD THAT IS RELEVANT AND NEEDS TO BE ANSWERED IS HOW WOULD TH E SHGS WITHDRAW THE FUNDS 10 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO OR HOW WOULD THE DISTRIBUTION OF FUNDS TAKE PLACE. THE SHGS ARE NOT INCORPORATED BODIES SO THAT THEY CANNOT HAVE A BAN K ACCOUNT TO WHICH FUNDS COULD BE TRANSFERRED. IT IS THE SHGS ON WHOM THE DE CISION TO WITHDRAW THE FUNDS CREDITED TO THEIR ACCOUNT SHOULD TO BE RELEVANT L IE WHILE THEY MAY NOT EVEN BE AWARE OF THE FUNDS LYING TO THEIR CREDIT AND IN AN Y CASE THE EXTENT OF CREDIT IS AS DECIDED BY THE BOT. THE FUNDS CREDITED TO THE ACCOU NTS OF THE SHGS ARE THUS ONLY RETAINED BY THE TRUST AND THEREFORE UNLESS W ITHDRAWN DEPLOYED BY IT FOR ITS PURPOSES AS FOR MEETING EXPENDITURE OR EVEN REPAYI NG THE BORROWINGS. WE HAVE ALREADY NOTED THAT IT IS THIS REPAYMENT THAT LEADS TO A REDUCTION IN THE INTEREST CHARGEABLE TO THE ASSESSEE TRUST ENABLING THE SURP LUS. THE SURPLUS FUNDS IN CASE OF SUCH REPAYMENT WOULD IN FACT NOT BE AVAILABLE FO R BEING WITHDRAWN BY OR FOR DISTRIBUTION TO THE SHGS. WHILE THIS MAY BE BY ITSE LF OF LITTLE CONSEQUENCE; THE CREDIT (TO THEIR ACCOUNT) RESERVING THEIR RIGHT OF THE RESPECTIVE SHGS TO WITHDRAW THE SAME THERE IS NOTHING TO EXHIBIT OR SUGGEST TH AT THE NON WITHDRAWAL BY THEM IS ON ACCOUNT OF A CONSCIOUS DECISION ON THEIR PART WITH WE FURTHER OBSERVING THEM AS BEING UNINCORPORATED AND THEREFORE IF UNA BLE TO CONTRACT CANNOT MAINTAIN A BANK ACCOUNT. THE FOREGOING NOTWITHSTAND ING WE HAVE ALREADY FOUND THAT CONSIDERING THE ASSESSEES TO BE REPRESENTATIVE ASSESSEES FOR THE RESPECTIVE SHGS U/S. 160(1)(IV) I.E. AS CONTENDED DOES NOT HELP THE ASSESSEES CASE AND THEY ARE NEVERTHELESS LIABLE TO BE TAXED AT MMR O N THEIR ENTIRE SURPLUS. WITHOUT PREJUDICE IN OUR VIEW THE ASSESSEE-TRUST S ARE NOT THE REPRESENTATIVE ASSESSEES FOR THE RESPECTIVE SHGS. T HIS IN FACT WOULD BE APPARENT FROM THE NON IDENTIFICATION OF THE SHGS O R THEIR RESPECTIVE SHARES IN THE TRUST DEED. THE ASSESSEE-TRUST/S IS ONLY AN ASS OCIATION OF PERSONS (AOP) CONSTITUTED BY THE MEMBER SHGS . THIS WOULD BE APPARENT FROM THE INTENT AND PURPOSE OF THE SETTLOR FROM THE TRUST DEED THE REL EVANT PART OF WHICH WE REPRODUCE FOR REFERENCE AS UNDER: WHEREAS NOW IT IS THOUGHT FIT TO WIDEN THE SCOPE OF ACTIVITIES OF THE TRUST TO ENABLE IT TO BETTER MANAGE THE FINANCES A CCESS A HIGHER AMOUNT 11 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO OF CREDIT FROM OTHER FINANCIAL INSTITUTIONS AND TO PROVIDE OTHER FINANCIAL SERVICES SUCH AS INSURANCE AND TECHNICAL ASSISTANC E AND SUPPORT SERVICES FOR PROMOTING LIVELIHOODS FOR THE POOR WOMEN MEMBER S OF THE SELF-HELP GROUPS CONSTITUTING THE MEMBERSHIP OF THIS TRUST. THIS IS ALSO THE UNEQUIVOCAL VIEW THAT ARISES FROM A HOLISTIC READING OF THE TRUST DEED READ AS A WHOLE WHICH ENVISAGES A GENERAL BO DY WHICH IS ALBEIT INDIRECTLY THE ULTIMATE AUTHORITY OVER THE AFFAIRS OF THE TRUST INCLUDING SELECTION OF MEMBERS OF THE BOT. THE SHGS ARE THUS THE MEMB ERS OF THE ASSESSEE-AOP. THIS ALSO EXPLAINS OR PROVIDES SCOPE FOR VARYING MEMBERSHIP OVER TIME AS INDEED IT IS IN PRACTICE AND FURTHER NON-SPECIFIC ATION OF THE RESPECTIVE SHARES I.E. IN THE TRUST DEED WHICH IN FACT ALSO FLOWS F ROM THE FORMER. THE SURPLUS GENERATED BY THE ASSESSEE-TRUST IS THEREFORE ONLY THE INCOME OF THE MEMBER SHGS WHO AS AFORE-STATED ARE THEMSELVES AOPS. TH E PERFORMANCE CRITERIA LAID DOWN BY THE BOARD OF THE TRUSTEES MANAGING THE TRUS T AS DECIDING THE SHARE OF EACH SHG FOR A PARTICULAR YEAR MAY BE A VALID BASI S FOR DEFINING THE SAID SHARE. COULD HOWEVER THE BOT DECIDE ON THE SAID SHARES. WE SAY SO AS THE BOT STANDS AUTHORIZED UNDER CLAUSE 13 OF THE TRUST DEED ONLY TO MAKE BYE-LAWS RULES ETC. FOR THE FUNCTIONING OF THE TRUST. THE SHARES O F THE MEMBERS OF THE AOP AS REFERRED TO AND CONTEMPLATED UNDER THE ACT IS AS DEFINED/SPECIFIED AT THE TIME OF ITS FORMATION WHILE IN THE PRESENT CASE THE MEMBER SHGS CONSTIT UTING IT ARE ALSO NOT DEFINED AND BESIDES SUBJECT TO CHANGE IN TIME . A CHANGE IN THE CONSTITUTING SHGS (MEMBERS) IMPLIES A DIFFERENT AOP WHICH IS ON LY DEFINED BY AND IN TERMS OF ITS CONSTITUENT MEMBERS. FURTHER BOT IS ONLY CHARGED WITH THE MANAGEMENT OF THE TRUST AND CANNOT DECIDE ON THE ME MBERSHIP OR THE SHARE OF THE CONSTITUTING MEMBERS . EVEN GRANTING SO AS THE BOT IN THE PRESENT CASE IS A REPRESENTATIVE BODY OF THE PARTICIPATING SHGS IT W OULD NOT IN ANY CASE IMPLY THAT THE SHARES OF THE MEMBER SHGS ARE EITHER DETER MINATE OR KNOWN AND AT ANY RATE AT THE VERY INCEPTION I.E. THE DATE OF THE TRUST DEED OR THE FORMATION OF THE 12 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO ASSOCIATION AS THE LAW MANDATES (S. 167-B) WHICH SECTION WE MAY REPRODUCE AS UNDER: CHARGE OF TAX WHERE SHARES OF MEMBERS IN ASSOCIATI ON OF PERSONS OR BODY OF INDIVIDUALS UNKNOWN ETC. 167B. (1) WHERE THE INDIVIDUAL SHARES OF THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (OTHER THAN A COM PANY OR A CO- OPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDI NG TO THAT ACT IN FORCE IN ANY PART OF INDIA) IN THE WHOLE OR ANY PAR T OF THE INCOME OF SUCH ASSOCIATION OR BODY ARE INDETERMINATE OR UNKNOWN T AX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT T HE MAXIMUM MARGINAL RATE: PROVIDED THAT WHERE THE TOTAL INCOME OF ANY MEMBER OF SUCH ASSOCIATION OR BODY IS CHARGEABLE TO TAX AT A RATE WHICH IS HIG HER THAN THE MAXIMUM MARGINAL RATE TAX SHALL BE CHARGED ON THE TOTAL IN COME OF THE ASSOCIATION OR BODY AT SUCH HIGHER RATE. (2) WHERE IN THE CASE OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS AS AFORESAID [NOT BEING A CASE FALLING UNDER SUB-SE CTION (1)] (I) THE TOTAL INCOME OF ANY MEMBER THEREOF FOR THE PREV IOUS YEAR (EXCLUDING HIS SHARE FROM SUCH ASSOCIATION OR BODY) EXCEEDS TH E MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX IN THE CASE OF THAT MEMBER UNDER THE FINANCE ACT OF THE RELEVANT YEAR TAX SHALL BE CHAR GED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT THE MAXIMUM MARGINAL RATE; (II) ANY MEMBER OR MEMBERS THEREOF IS OR ARE CHARGEABLE TO TAX AT A RATE OR RATES WHICH IS OR ARE HIGHER THAN THE MAXIMUM MARGI NAL RATE TAX SHALL BE CHARGED ON THAT PORTION OR PORTIONS OF THE TOTAL IN COME OF THE ASSOCIATION OR BODY WHICH IS OR ARE RELATABLE TO THE SHARE OR S HARES OF SUCH MEMBER OR MEMBERS AT SUCH HIGHER RATE OR RATES AS THE CASE M AY BE AND THE BALANCE OF THE TOTAL INCOME OF THE ASSOCIATION OR BODY SHAL L BE TAXED AT THE MAXIMUM MARGINAL RATE. EXPLANATION.FOR THE PURPOSES OF THIS SECTION THE INDIVIDUAL SHARES OF THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IN THE WHOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIATION OR BODY SHALL BE DEEMED TO BE INDETERMINATE OR UNKNOWN IF SUCH SHARE S (IN RELATION TO THE WHOLE OR ANY PART OF INCOME) ARE INDETERMINATE OR U NKNOWN ON THE DATE OF FORMATION OF SUCH ASSOCIATION OR BODY OR AT ANY TIME THEREAFTER. WHY NOT ONLY THE SHARES WOULD BE DIFFERENT FOR EAC H MEMBER FOR EACH YEAR THE SAME CRYSTALLIZE ONLY AT THE END OF THE RELEVANT YE AR (ON THE BASIS OF RELEVANT PERFORMANCE OVER THE YEARS WHICH IS WHAT GETS REFL ECTED IN THE AVERAGE BALANCE OUTSTANDING IN THEIR CONTRIBUTION ACCOUNTS) WITH I N FACT THE MEMBERSHIP (OF THE ASSESSEE-TRUST) ITSELF SUBJECT TO CHANGE OVER TIME. THERE ARE IN FACT SPECIFIC 13 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO PROVISIONS IN THE RULES AND REGULATIONS OF THE TRUS T FOR TERMINATION (BY BOT) OF THE MEMBERSHIP OF A SHG OR IT WITHDRAWING FROM THE TRUST. IN FACT TO CONTINUE FURTHER THE GENERAL BODY IS ITSELF COMPRISED OF ME MBER SELF-HELP GROUPS FOR THE TIME BEING. IT IS THE GENERAL BODY WHICH ELECTS THE TRUSTEES AND ACCEPTS THE NOMINE TRUSTEES WHICH COMPRISE THE BOT WHICH IS F URTHER CHARGED WITH THE OVERALL RESPONSIBILITY OVER THE AFFAIRS OF THE TRUS T. IN OTHER WORDS THE BENEFICIARY SHGS ARE THEMSELVES THROUGH THEIR REPRESENTATIVES CHARGED WITH THE MANAGEMENT OF THE TRUST. THE SHGS ARE THUS ONLY MEMBERS OF THE ASSESSEE-AOP AS INDEED THE TRUST DEED (THE DEFINING DOCUMENT) MA KES CLEAR . SEC. 167-B SHALL ACCORDINGLY APPLY AND THE INCOME OF THE ASSESSEE- TRUST IS ASSESSABLE IN ITS HANDS AT THE MAXIMUM MARGINAL RATE OR AS THE CASE MAY BE A HIGHER RATE (REFER PROVISO TO S. 167B(1)). IT MAY BE ARGUED THAT THE SHGS ARE THEMSELVES UN-I NCORPORATED AOPS WITH THEIR INCOME (SHARES OF SURPLUS) BEING ITSELF EARNED OR RECEIVED FOR THE BENEFIT OF THEIR INDIVIDUAL MEMBERS. THE ARGUMENT ATTRACTIVE ON ITS FACE IS WITHOUT SUBSTANCE. WE HAVE ALREADY CLARIFIED THAT A N AOP EVEN IF UN- INCORPORATED SO THAT IT IS NOT A LEGAL PERSON IS A PERSON UNDER THE ACT. A READY EXAMPLE TO CLARIFY FURTHER IS OF A PARTNERSHIP FI RM WHICH AGAIN REPRESENTS A CONTRACTUAL RELATIONSHIP BETWEEN THE PARTNERS CONST ITUTING IT FOR THE TIME BEING AND THEREFORE THOUGH NOT A LEGAL ENTITY YET FOR T HE PURPOSES OF THE ACT IS A DIFFERENT PERSON SEPARATE AND DISTINCT FROM ITS PA RTNERS WHO ARE THEMSELVES PERSONS LIABLE TO TAX ON THEIR INCOME UNDER THE PR OVISIONS OF THE ACT. THE AOP IS SIMILARLY NOT A REPRESENTATIVE ASSESSEE FOR ITS MEMBERS AS BEING CONTENDED BUT A DIFFERENT PERSON SEPARATE AND DISTINCT FROM ITS MEMBERS (FOR THE TIME BEING). ITS INCOME ASSESSABLE UNDER THE ACT AS FO R ANY OTHER ENTITY IS TO BE COMPUTED HAVING REGARD TO THE GENERAL AND SPECIFIC PROVISIONS VIZ. S. 40(BA) S. 167B S. 174A S. 177. SECTIONS 67A AND 86 PROVIDE THE MANNER OF COMPUTATION OF THE INCOME OF A MEMBER OF THE AOP (OR BODY OF IN DIVIDUALS) AND INCOME TAX 14 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO THEREON. THAT THEREFORE THE INCOME OF AN AOP IS A LLOCABLE TO ITS MEMBERS IS NO GROUND FOR HOLDING IT TO BE NOT ASSESSABLE IN ITS HANDS. AS A READING OF S. 167B SHALL SHOW THE SHARE OF THE MEMBERS OF AN AOP BEIN G INDETERMINATE OR UNKNOWN IN WHOLE OR ANY PART OF THE INCOME OF THE SAID AOP SHALL ONLY IMPACT THE RATE/S AT WHICH ITS (TOTAL) INCOME IS TO BE TAX ED AND DOES NOT OPERATE TO EXCLUDE THE INCOME SHARE IN RESPECT OF WHICH IS N OT SPECIFIED FROM BEING TAXED IN ITS HANDS . THE SHARE OF THE INCOME OF A MEMBER OF AN AOP TH OUGH FORMING PART OF HIS TOTAL INCOME (EXCEPT WHERE THE INCOME O F THE AOP IS TAXABLE AT MMR OR HIGHER) NO TAX IS PAYABLE THEREON SAVE WHE RE NO TAX IS CHARGEABLE ON THE TOTAL INCOME OF THE AOP (S. 86). IN THE PRESENT CASE THE ASSESSEE ITSELF ADMITS TO ITS INCOME BEING CHARGEABLE TO TAX THE O NLY QUESTION IS OF ITS QUANTUM CLAIMING THAT FALLING TO THE SHARE OF THE SHGS AS N OT FORMING PART OF THE TOTAL INCOME OF THE ASSESSEE-TRUST. WE FIND NO LEGAL BASI S FOR THE SAME; THE ENTIRE INCOME OF THE ASSESSEE/S WHETHER CREDITED TO ITS C APITAL ACCOUNT OR TO THAT OF ITS MEMBER SHGS BEING ONLY ITS INCOME ASSESSABLE IN I TS HANDS THOUGH LEGALLY BELONGS TO ITS MEMBERS AS IN THE CASE OF A PARTNER SHIP AND EVEN WHERE THE SAME IS NOT CREDITED TO THEIR RESPECTIVE ACCOUNTS BUT TO THE CAPITAL ACCOUNT (SAY) AND WHICH PROPORTION MAY VARY FROM TIME TO TIME AS IN FACT THE FORMULA ADOPTED FOR THE PURPOSE ACTUALLY YIELDS AND WHICH FORMULA MAY ITSELF CHANGE OVER TIME. FURTHER ON THAT THE MEMBERS ARE THEMSELVES AOPS A S THE SHGS ARE STATED TO BE IS AGAIN OF NO MOMENT; AN AOP BEING A SEPARATE PERSON UNDER THE ACT. THE NEXT QUESTION IS IF MUTUALITY GOVERNS THE RELA TIONSHIP BETWEEN THE ASSESSEE AND ITS MEMBER SHGS IN WHICH CASE NO PART OF THE INCOME INCLUDING THAT RETURNED WOULD BE LIABLE TO TAX IN-AS-MUCH AS THERE CAN BE NO INCOME IN CASE OF A MUTUAL ARRANGEMENT. THAT IS INCOME AND MUTUALITY ARE MUTUALLY CONTRADICTORY AND INASMUCH AS INCOME IS ADMITTED WHICH ONLY FORMS PART OF THE LARGER INCOME ACCRUING IN THE PRESENT CASE THE ISSUE OF MUTUALITY GETS OUSTED AT THE THRESHOLD. CONTINUING FURTHER INCOME ARISES TO THE ASSESSEE ON ACCOUNT OF 15 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO AN EFFECTIVE DIFFERENTIAL RATE OF INTEREST AT WHICH FUNDS ARE BORROWED (SAY X%) AND AT WHICH THEY STAND FURTHER RELENT (AT Y% SAY) BY IT. THE ASSESSEE THUS ENTERS INTO TWO SEPARATE CONTRACTS. THE FIRST IS WI TH SNFL FROM WHICH BORROWINGS ARE MADE AS UNSECURED LOANS. THE SECOND IS WITH THE SHGS TO WHOM FUNDS ARE AGAIN RE-LENT ON UNSECURED BASIS A LBEIT AT A HIGHER EFFECTIVE RATE OF INTEREST RESULTING IN A SURPLUS TO THE ASS ESSEE-TRUST. THERE IS NO PRIVITY OF CONTRACT BETWEEN SNFL AND SHGS. SNFL THEREFORE SH ALL HAVE NO RECOURSE TO A SHG OR ITS INDIVIDUAL MEMBERS IN CASE OF A DEFAULT. IT MAY BE STATED THAT SHGS ARE ALSO AOPS AND BEING NOT LEGAL PERSONS INCOMPE TENT TO CONTRACT. THAT IS ENTER INTO A LEGALLY ENFORCEABLE CONTRACT. THERE IS NOTHING ON RECORD TO SHOW THAT THE SHGS ARE IN FACT AOPS. THERE COULD FOR ALL W E KNOW BE A CONTRACT (EVEN IF ORAL) AMONGST THE INDIVIDUALS COMPRISING THE SHG TO HONOUR THE COMMITMENT/OBLIGATION OF THE SHG FOR WHICH IT MAY ACTING THROUGH A REPRESENTATIVE BE REQUIRED TO ISSUE AN UNDERTAKING ETC. TO THE ASSESSEE-TRUST. SUCH AN UNDERSTANDING EVEN IF INFORMAL HAS THE EL EMENTS OF A CONTRACT WHICH MAY NOT NECESSARILY BE IN WRITING; THE (PRINCIPAL) TERMS BEING IN FACT BORNE OUT BY CONDUCT. THE SHGS ARE SELF REGULATING BODIES AN D WOULD IN THEIR OWN INTEREST AS ELSE THEIR MEMBERSHIP IS LIABLE TO BE TERMINATED STAND TO THEIR COMMITMENT. CLAUSE 3(F) OF THE TRUST DEED CLEARLY P ROVIDES THAT A SELF-HELP GROUP SHALL BE DEEMED VALID ONLY IF ITS MEMBERS HAV E SIGNED AN INTER SE AGREEMENT AS PRESCRIBED. CLAUSE 5(C) AGAIN PROVIDES FOR THE DEPOSIT OF A COPY OF THE SAID INTER SE AGREEMENT DULY EXECUTED BY THE SHG WITH THE TRUS T ON ITS ADMISSION AS A MEMBER OF THE LATTER. WHY THE MONIE S WITHDRAWN FROM OR DEPOSITED WITH THE ASSESSEE BY THE SHG WOULD ONLY B E THROUGH THE AGENCY OF A REPRESENTATIVE. WITHOUT GOING INTO THE QUESTION OF THE EXACT STATUS OF THE SHGS CLEARLY A CONTRACTUAL RELATIONSHIP UNDERPINS THE T RANSACTIONS BETWEEN THE ASSESSEE AND THE SHGS ACTING UNDERSTANDABLY THROUG H AUTHORIZED PERSONS. MERELY BECAUSE THE SHGS ARE MEMBERS OF THE ASSESSEE -AOP DOES NOT IMPLY THAT 16 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO IT COULD NOT BE I.E. THE TWO CANNOT HAVE A CONTRA CTUAL RELATIONSHIP WHICH RATHER FORMS THE VERY BASIS OF THEIR FINANCIAL TRA NSACTIONS. TO SUGGEST SO WOULD BE THE SAME AS STATING THAT A COMPANY CANNOT TRANSA CT BUSINESS WITH ITS MEMBERS OR FOR THAT MATTER A FIRM WITH ITS PARTNE RS. IN CASE OF A DEFAULT BY A SHG IT IS THE ASSESSEE AS OPPOSED TO EITHER SNFL OR ALL OTHER MEMBER SHGS THAT SHALL BEAR THE LOSS OR HAVE LEGAL RECOURSE THE RE-AGAINST. WHY THE SHARING AMONGST THE SHGS COULD AGAIN ONLY BE ON THE BASIS O F A CONTRACT. THE INTER SE AGREEMENT MAY WELL PROVIDE FOR THE LOSS TO BE BORNE BY THE INDIVIDUAL MEMBERS WITH A VIEW TO PREVENT A DEFAULT BY THE GROUP. THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE SHGS RATHER THAN A MUTUAL ARRANGE MENT IS ONLY ONE OF BUSINESS/TRADING RELATIONSHIP I.E. CONTRACTUAL IN NATURE. AS AFORE-STATED THERE COULD BE NO INCOME OR BASIS THEREFOR OTHERWISE. THAT THE SURPLUS OF SUCH BUSINESS IS LIABLE TO THE SHARED IN SOME RATIO BE TWEEN THE SHGS COMPRISING THE ASSESSEE-AOP FOR THE TIME BEING WOULD NOT MAKE IT ANY LESS A BUSINESS OR THE SURPLUS ARISING THERE-FROM TO THE ASSESSEE AS NOT I NCOME. IN FACT IT IS THE SHG WHICH DRAWS MORE FUNDS THAT CONTRIBUTES MORE TO THE SURPLUS (OF THE TRUST) WHICH ARISES ON ACCOUNT OF THE DIFFERENTIAL RATE OF INTEREST WHILE THE ALLOCATION CRITERIA OF THE SURPLUS IS THE AVERAGE OUTSTANDING IN ITS SAVING ACCOUNT SO THAT THE ALLOCATION OF THE SURPLUS IS APPARENTLY SKEWED IN FAVOUR OF THE SHG THAT DRAWS LESS. AGAIN THE ALLOCATION IS NOT WITHOUT LOGIC AS IT IS THE HIGHER RETENTION AS WHERE THE SHARE IN SURPLUS IS NOT WITHDRAWN THAT P ROVIDES FUNDS WITH THE ASSESSEE TO REPAY SNFL REDUCING ITS LOAN LIABILITY THERETO AND THUS A SAVING IN THE COST OF FUNDS WHICH IS PEGGED TO THE AVERAGE B ALANCE IN-AS-MUCH AS IT IS ON THE REDUCING BALANCE. CONTINUING FURTHER THE FUNDS FOR LENDING TO THE SHGS EMANATE NOT FROM THE SHGS THEMSELVES AS A SET OF C ONTRIBUTORS BUT FROM OUTSIDE SOURCES AS A LOAN FROM SNFL WHICH IS TO BE REPAID AND F URTHER CARRIES A COST AND FOR WHICH THE BORROWER TRUST IS CONTRAC TUALLY BOUND. AGAIN AS IT APPEARS IT IS THE MEMBERS OF A SHG WHO PER AN INTER SE AGREEMENT SEEK TO 17 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO PREVENT LOSS CONTRIBUTING THERETO AND SURELY NOT THE OTHER SHGS. FURTHER THE FUNDS ARE UTILIZED BY THE SHG NOT FOR ANY COMMON PU RPOSE OF THE GROUP ITSELF BUT FOR THEIR INDIVIDUAL PURPOSES BY THE MEMBERS (F OR THE TIME BEING) OF THE GROUP. THESE PURPOSES MAY BE BOTH PERSONAL AND/OR I NCOME GENERATING VIZ. SETTING UP OR OPERATIONALIZING AN UNDERTAKING ETC. THE LIABILITY OF EACH INDIVIDUAL MEMBER IS DEFINED ON THE BASIS OF HIS WI THDRAWAL. THAT IS THOUGH IT IS THE GROUP THAT TRANSACTS WITH THE ASSESSEE TRUST A ND IS LIABLE TO PAY INTEREST AND PRINCIPAL THERETO THE INTER SE ARRANGEMENT BINDS ITS INDIVIDUAL MEMBERS TO REPAY THE LOAN CONTRACTED AS WELL AS INTEREST THEREON AS ALSO TO AS IT APPEARS NOT TO BY WAY OF FINANCIAL DISCIPLINE BORROW FROM OUTSIDE SO URCES. AGAIN A CONTRACTUAL ARRANGEMENT BINDS THE INDIVIDUAL MEMBERS WHO DRAW RESOURCES TO GENERATE INCOME FOR THEMSELVES IN THE MAIN . IT IS THIS INCOME GENERATED THROUGH PERSONAL ENTERPRISE THAT ENABLES THEM NOT ONLY TO EARN THEI R LIVELIHOOD BUT ALSO TO REPAY THE LOAN AS WELL AS MEET THE COST OF BORROWING. THA T THERE COULD ALSO BE A COLLECTIVE ENTERPRISE (BY ALL OR SOME OF THE MEMBER S OF A SELF-HELP GROUP) WOULD NOT IN ANY MANNER DETRACT FROM THE BASIC PREMISE THAT THE SHGS ARE INDEPENDENT AND SEPARATE ENTITIES AND THAT A CONTR ACTUAL RELATIONSHIP DEFINES THEIR TRANSACTIONS WITH THE ASSESSEE-AOP. THE MONEY BORROWED IS REPAID ALONG WITH INTEREST THROUGH THE TRUST TO SNFL ENABLING IT TO RECYCLE THOSE FUNDS I.E. LENDING TO OTHER SUCH TRUSTS OR FOR ANY OTHER PURP OSE DEEMED PROPER BY ITS MANAGEMENT FOR ITS DEFINED OBJECTIVES. THAT IS THE MONEY GOES OUT OF THE SYSTEM WITH IN FACT EACH SHG CONSTITUTING A SEPARA TE ECOSYSTEM WHOSE MEMBERS WOULD ON THE BASIS OF THEIR EFFORTS EARN IN COME ON A PERSONAL OR COLLECTIVE BASIS USING FUNDS EXTENDED TO THEM. HOW DOES THIS WE WONDER BE REGARDED AS A MUTUAL ARRANGEMENT WHICH REQUIRES A S A PRE-REQUISITE SATISFACTION OF THE THREE ESSENTIAL CONDITIONS AS LISTED ONCE AGAIN BY THE HON'BLE APEX COURT IN BANGALORE CLUB V. CIT [2013] 350 ITR 509 (SC) AS FOLLOWS: 18 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO A) COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIP ANTS (OF COURSE RECKONED AS A CLASS); B) THE ACTIONS OF THE PARTICIPANTS MUST BE IN FURTHERA NCE OF THE MANDATE OF THE SOCIETY WHICH IS A MATTER OF FACT TO BE DETE RMINED FROM THE MEMORANDUM AND ARTICLES OF ASSOCIATION RULES OF TH E MEMBERSHIP RULES OF ORGANIZATION ETC.; AND C) THERE MUST BE NO SCOPE OF PROFITEERING BY THE CONTR IBUTORS FROM THE FUND MADE BY THEM WHICH COULD ONLY BE EXPENDED ON OR RE TURNED TO THEM. IN FACT THE FACTS OF THE CASE IN BANGALORE CLUB (SUPRA) ARE ONLY ALSO STRIKINGLY SIMILAR WHERE INTEREST ACCRUES ON THE SURPLUS DEPO SITED BY THE CLUB LIKE IN THE CASE ANY OTHER DEPOSIT MADE BY AN ACCOUNT HOLDER WI TH THE BANK. IT MAY BE NOTED THAT EARNING OF INTEREST IS SIMILAR OR PARI MATERIA TO SAVING OF INTEREST (ON BORROWING) AS IN THE PRESENT CASE BY DEPLOYMENT OF FUNDS IN REPAYING THE LOAN TO SNFL INASMUCH AS IT IS THIS THAT HAS THE EFFECT OF ENLARGING THE DIFFERENCE BETWEEN THE INTEREST RECEIVED AND PAID AND THUS R ESULTS IN A SURPLUS (INCOME) TO THE ASSESSEE. IN FACT THE HON'BLE COURT HAD EARLIE R IN CIT V. KUMBAKONAM MUTUAL BENEFIT FUND LTD. [1964] 53 ITR 241 (SC) HELD THAT WHERE AN ENTITY W AS FOUND TO BE SET UP FOR TRADING PURPOSES AS FOR BAN KING ACTIVITY BEING PURSUED BY THE ASSESSEE-COMPANY AS ITS OBJECT IT WOULD NOT IM BUE IT WITH A MUTUAL CHARACTER EVEN WHERE LIMITED TO ITS MEMBERS ONLY IN -AS-MUCH AS THE ARRANGEMENT WAS ESSENTIALLY A PROFIT MAKING ARRANGE MENT. IT IS THIS SIMILARITY OF FACTS THAT PROMPTED THE HON'BLE COURT IN BANGALORE CLUB (SUPRA) TO REFER TO ITS EARLIER DECISION IN KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA). WE MAY TO CLARIFY THE POINT FURTHER AND WITH PROFIT EXTRACT FROM THE DECISION IN THOMAS V. RICHARD EVANS & CO. [1927] 11 TC 790 (HL) (AT PGS. 822-823) REPRODUCED IN THIS CONTEXT BY THE APEX COURT IN BANGALORE CLUB (SUPRA) WHILE REFERRING TO THE THIRD CONDITION OF MUTUALITY WHICH IT EXPLAINS AS ELUCIDATED IN STYLE V. NEW YORK LIFE INSURANCE CO . [1889] 2 TC 460 (HL) AND KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA) AS UNDER (AT PG. 525): BUT A COMPANY CAN MAKE A PROFIT OUT OF ITS MEMBERS AS CUSTOMERS ALTHOUGH ITS RANGE OF CUSTOMERS IS LIMITED TO ITS S HAREHOLDERS. IF A 19 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO RAILWAY COMPANY MAKES A PROFIT BY CARRYING ITS SHAR EHOLDERS OR IF A TRADING COMPANY BY TRADING WITH THE SHAREHOLDERS - EVEN IF IT LIMITED TO TRADING WITH THEM - MAKES A PROFIT THAT PROFIT BEL ONGS TO THE SHAREHOLDERS IN A SENSE BUT IT BELONGS TO THEM QU A SHAREHOLDERS. IT DOES NOT COME BACK TO THEM AS PURCHASERS OR CUSTOMERS. I T COMES BACK TO THEM AS SHAREHOLDERS UPON THEIR SHARES . WHERE ALL THAT A COMPANY DOES IS TO COLLECT MONEY FROM A CERTAIN NUMBER OF PEOPLE - IT DOES NOT MATTER WHETHER THEY ARE CALLED MEMBERS OF THE COMPANY OR PARTICIPATING POLICY HOLDERS - AND APPLY IT FOR THE BENEFIT OF THOSE SAM E PEOPLE NOT AS SHAREHOLDERS IN THE COMPANY BUT AS THE PEOPLE WHO SUBSCRIBED IT THEN AS I UNDERSTAND THE NEW YORK CASE THERE IS NO PROF IT. IF THE PEOPLE WERE TO DO THE THING FOR THEMSELVES THERE WOULD BE NO P ROFIT AND THE FACT THAT THEY INCORPORATE A LEGAL ENTITY TO DO IT FOR THEM M AKES NO DIFFERENCE THERE IS STILL NO PROFIT. THIS IS NOT BECAUSE THE E NTITY OF THE COMPANY IS TO BE DISREGARDED IT IS BECAUSE THERE IS NO PROFIT T HE MONEY BEING SIMPLY COLLECTED FROM THOSE PEOPLE AND HANDED BACK TO THEM NOT IN THE CHARACTER OF SHAREHOLDERS BUT IN THE CHARACTER OF THOSE WHO HAVE PAID IT. THAT AS I UNDERSTAND IT IS THE EFFECT OF THE DECI SION IN THE NEW YORK CASE. (EMPHASIS SUPPLIED) FURTHER WE ARE CONSCIOUS THAT A COMPANY THE ASSES SEE IN KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA) IS A SEPARATE LEGAL ENTITY DISTINCT AND SEPARATE FROM ITS MEMBERS WHILE THE ASSESSEE/S IN THE PRESENT CASE I S AN AOP WHICH IS ONLY DEFINED BY ITS CONSTITUENT MEMBERS (FOR THE TIME BE ING). WE HAVE IN THIS REGARD ALREADY EXPLAINED THAT EVEN SO AN AOP EVEN IF UN INCORPORATED IS A SEPARATE PERSON UNDER THE ACT I.E. FROM ITS MEMBERS AND S UBJECT TO TAX ON ITS INCOME. THIS ASPECT WOULD THEREFORE BE OF LITTLE SIGNIFICAN CE/RELEVANCE. NOT ONLY DOES THE ASSESSEE EARN A SURPLUS FROM ITS TRANSACTIONS WITH SNFL AND THE SHGS SO DO THE INDIVIDUAL MEMBERS OF THE S HGS BY DRAWING FUNDS MADE AVAILABLE TO THE SHGS OF WHICH THEY ARE A PAR T EARNING INCOME LIVELIHOOD THERE-FROM. WE ARE FOR THE FOREGOING R EASONS CLEARLY UNABLE TO SUBSCRIBE TO THE VIEW THAT THE RELATIONSHIP BETWEEN THE ASSESSEE-AOP AND ITS MEMBER SHGS IS A MUTUAL ARRANGEMENT. IT WOULD BE C ONTINUING FURTHER THEREFORE INCORRECT TO SAY THAT IT IS NOT THE ASSE SSEE BUT THE INDIVIDUAL MEMBERS OF THE SHGS WHO ARE RESPONSIBLE FOR PAYING INTERES T TO SNFL I.E. U/S. 194A AND THAT THEREFORE THE APPLICATION OF THE SAID SECT ION IS TO BE EXAMINED WITH 20 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO REFERENCE TO THEM. AND FURTHER IT IS THEY WHO ARE ENTITLED TO THE DEDUCTION IN RESPECT OF THE SAID INTEREST THOUGH S. 40(A)(IA) S HALL NOT APPLY AS THEY ARE OUTSIDE THE AMBIT OF S. 194A IN VIEW OF THE NON AUDIT OF TH EIR ACCOUNTS U/S. 44AB. IT IS CLEARLY THE ASSESSEE WHO IS RESPONSIBLE FOR PAYING INTEREST TO SNFL AND CLAIMS THE SAME IN THE COMPUTATION OF ITS INCOME. ACCESSIN G AND PROVIDING FUNDS ON A SYSTEMATIC ORGANIZED AND CONTINUING BASIS IF NOT OTHER TECHNICAL ASSISTANCE ETC. TO OTHERS FOR THEIR PURPOSES PREDOMINANTLY E CONOMIC ACTIVITY IS ONLY A BUSINESS AND THE INCOME ARISING THERE-FROM BUSINES S INCOME. SECTION 40(A)(IA) HAS HOWEVER WITNESSED AMENDMENTS SINCE AND WHICH HAVE BEEN HELD BY THE HON'BLE COURTS AS IN CIT V. ANSAL LAND MARK TOWNSHIP (P.) LTD. [2015] 377 ITR 635 (DEL) AS RETROSPECTIVE. THE RELEVANT AMEND MENT (PER SECOND PROVISO TO S. 40(A)(IA) - INSERTED BY FINANCE ACT 2012 W.E.F. 01.04.2013) PROVIDES THAT THE ASSESSEE SHALL NOT DEEMED TO BE IN DEFAULT WHERE TH E RESIDENT PAYEE (SNFL IN THE INSTANT CASE) HAS TAKEN THE RELEVANT INCOME (IN TEREST) INTO ACCOUNT IN COMPUTING HIS INCOME AND HAS PAID TAX ON THE INCOM E SO RETURNED AND TO WHICH EFFECT THE ASSESSEE-PAYER FURNISHES A CERTIFI CATE IN THE FORM AS PRESCRIBED. AND CONSEQUENTLY THE PROVISION TO S. 40(A)(IA) SH ALL NOT APPLY INASMUCH AS IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX DEDUCTIBLE AT SOURCE ON SUCH INCOME (INTEREST) ON THE DATE OF FUR NISHING OF HIS RETURN OF INCOME BY THE RESIDENT-PAYEE. WE ACCORDINGLY ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER TO ENABLE AN OPPORTUNITY TO THE AS SESSEE TO PRESENT ITS CASE WITH REFERENCE TO THE SECOND PROVISO OF S. 40(A)(IA) BE RESTORED TO THE FILE OF THE AO WHO SHALL AFTER ALLOWING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE IN THE MATTER ADJUDICATE PER A SPEAKING ORDER ON THE BASIS OF THE MATERIAL ON RECORD. CONCLUSION : 5. IN VIEW OF THE FOREGOING IN OUR CLEAR VIEW THE ASSESSEE HAS BEEN RIGHTLY ASSESSED AS AN AOP IN WHICH STATUS IN FACT IT HAS RETURNED ITS INCOME QUA ITS 21 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO ENTIRE INCOME (SURPLUS) TAXING THE SAME AT THE MAX IMUM MARGINAL RATE. FURTHER INTEREST TO SNFL IS PAID BY THE ASSESSEE AND NOT TH E INDIVIDUAL MEMBERS OF ITS MEMBER SHGS SO THAT THERE HAS BEEN WITHOUT DOUBT CONTRAVENTION OF S. 194A. THE ASSESSEE IS HOWEVER ENTITLED TO THE SAVING OF THE SECOND PROVISO TO S. 40(A)(IA) INASMUCH AS THE SAME HAS BEEN HELD AS CUR ATIVE AND THUS RETROSPECTIVE BY THE HON'BLE COURTS. THIS IN FACT HAS ALSO BEEN T HE UNIFORM AND UNEQUIVOCAL VIEW OF THE TRIBUNAL. THE SAID ISSUE ACCORDINGLY STANDS RESTORED TO THE FILE OF THE AO FOR ADJUDICATION IN LIGHT THEREOF AFTER ALLO WING THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE. WE ARE CONSCIOUS THAT OUR VIEW IS AT VARIANCE WITH THAT BY THE TRIBUNAL WHICH ENDORSES THE ASSES SEES CASE (REFER PARA 3 OF THE ORDER). THE OTHER TWO ORDERS BY THE TRIBUNAL ALSO REFERRED TO BY THE ASSESSEE (ENCLOSED IN THE PAPER-BOOK) ONLY FOLLOW THIS ORDE R AND DO NOT ISSUE ANY INDEPENDENT FINDING. AS REGARDS THE PARENT ORDER T HE SAME DOES NOT WITH RESPECT REFER TO THE TERMS OF THE TRUST DEED; THE MANAGEMENT OF THE TRUST; OR EVEN TO THE RELEVANT STATUTORY PROVISIONS WITH REFERENC E TO (ALL OF) WHICH ONLY THE ISSUE/S ARISING IS TO BE DECIDED. SECTION 164 PROVI DES THAT THE BENEFICIARY/S IS TO BE SPECIFIED PER THE INSTRUMENT OF TRUST AND IS TO BE IDENTIFIABLE AS ON THE DATE OF SUCH INSTRUMENT AS ALSO HIS (RESPECTIVE) SHARE ( EXPLANATION 1 TO S. 164). THAT IS CONDITIONS WHICH ARE ADMITTEDLY NOT MET IN THE PRES ENT CASE. AGAIN THE SECOND PROVISO TO S. 164(1) CARVES A SPECIFIC CONSIDERATION WHERE THE INCOME ARISING TO THE REPRESENTATIVE ASSESSEE CONSISTS OF OR INCLUDE S PROFIT AND GAINS OF BUSINESS. THERE IS NO REFERENCE TO OR DISCUSSION IN THE ORDER BY THE TRIBUNAL AS TO WHY THE SURPLUS ARISING TO THE ASSESSEE WHICH IS A RESULT OF A SYSTEMATIC AND ORGANIZED ACTIVITY UNDERTAKEN ON A CONTINUOUS BASIS WITH EL ABORATE PROVISIONS FOR MANAGING THE TRUST IS NOT TO BE REGARDED AS A BUSI NESS INCOME. THE ASSESSEES ACTIVITY IS IN FACT AKIN TO THAT OF A BANK. INVOLVI NG THE REPRESENTATIVES OF THE PERSONS NEEDING FINANCIAL ASSISTANCE IN THE MANAGEM ENT OF THE TRUST IT THUS ENSURES BETTER TARGETING INCLUDING ATTENDING TO MI CRO LEVEL NEEDS BESIDES 22 ITA NOS. 1437 & 1438/MDS/2016 (AY 2009 -10) SARVODAYA MUTUAL BEN EFIT TRUST THELLAR PERNAMALLUR V. ITO METING OUT TECHNICAL OR OTHER ASSISTANCE SO THAT I TS ACTIVITIES ARE RATHER MORE COMPREHENSIVE AND PENETRATIVE THAN OF A BANK. SECTI ON 161(1A) IS ALSO RELEVANT IN THIS REGARD TO WHICH AGAIN THERE HAS BEEN NO RE FERENCE. THE FINDING AS TO MUTUALITY IS AGAIN WITHOUT ANY DISCUSSION ON THE ESSENTIAL CONDITIONS OF MUTUALITY AS WELL AS TO THE PRECEDENTS. WE WERE TH EREFORE WITH RESPECT CONSTRAINED NOT TO FOLLOW THE SAID ORDER AND ACCOR DINGLY PROCEEDED WITH OUR INDEPENDENT EXAMINATION OF THE ISSUES ARISING. BEFORE PARTING WITH OUR ORDER WE FIND THAT THE IN COME ADDED BY THE AO I.E. EXCLUDING DISALLOWANCE U/S. 40(A)(IA) IS TEN TIMES THAT RETURNED. THIS APPEARS TO BE BY WAY OF A MISTAKE AS THE ASSESSEE H AS ADMITTEDLY RETURNED 1/10 TH OF THE SURPLUS SO THAT THE ADDITION OUGHT TO BE FO R THE BALANCE 9/10 TH . THE AO SHALL LOOK INTO THIS ASPECT AS WELL MAKING NECESSA RY RECTIFICATION/S WHERE REQUIRED. WE DECIDE ACCORDINGLY. 6. IN THE RESULT THE ASSESSEES APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON NOVEMBER 02 2017 AT CHENNAI SD/- SD/- ( ! ' . #$ ) (DUVVURU RL REDDY) % /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI 4 /DATED NOVEMBER 02 2017. 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