ADIT, New Delhi v. Hologram Manufactures Association of India, New Delhi

ITA 3383/DEL/2009 | 2005-2006
Pronouncement Date: 09-09-2011 | Result: Dismissed

Appeal Details

RSA Number 338320114 RSA 2009
Assessee PAN AABCH7353K
Bench Delhi
Appeal Number ITA 3383/DEL/2009
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant ADIT, New Delhi
Respondent Hologram Manufactures Association of India, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-09-2011
Date Of Final Hearing 05-09-2011
Next Hearing Date 05-09-2011
Assessment Year 2005-2006
Appeal Filed On 29-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO.3383/DEL/2009 ASSESSMENT YEAR : 2005-06 ASSISTANT DIRECTOR OF INCOME TAX (E) TRUST CIRCLE II NEW DELHI. VS. HOLOGRAM MANUFACTURERS ASSOCIATION 50 ADHCHINI SRI AUROBINDO MARG NEW DELHI 110 017. PAN : AABCH7353K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. YADAV ADVOCATE & SHRI RAJESH JAIN FCA REVENUE BY : SHRI SALIL MISHRA SR.DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 1 ST MAY 2009 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED IN CONSIDERING AND CONSE QUENTLY HOLDING THAT THE STATUS OF THE SOCIETY IS THAT OF A MUTUAL ASSOCIATION WHEN IN THE FIRST PLACE THE ASSESSEE HAD CLAIMED ITSELF TO BE A CHARITABLE ORGANIZATION WITH ITS OBJECTIVE S BEING FOR CHARITABLE PURPOSES AND IN THE EVENT OF CLAIM HAVING B EEN FOUND TO BE UNTRUE THE ALTERNATIVE PLEA TAKEN FOR CONSIDERING TH E SOCIETY AS A MUTUAL ASSOCIATION SHOULD NOT HAVE BEEN CO NSIDERED AT ALL. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITIONS IN RESPECT OF C ORPUS DONATION AT RS.6 18 750/- AND EXCESS OF INCOME OVER ITA NO.3383/DEL/2009 2 EXPENDITURE AT RS.3 29 919/- BECAUSE THE SAME WERE DUL Y TAXABLE IN VIEW OF THE FACT THAT REGISTRATION U/S 12A WAS NOT AVAILABLE TO THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND (S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. THE ASSESSEE IS A SOCIETY REGISTERED AT SL. NO. S-33947 OF 1998 BY THE CERTIFICATE OF REGISTRATION GRANTED BY REGISTR AR OF SOCIETIES GOVERNMENT OF NCT DELHI DATED 1 ST DECEMBER 1998. COPY OF CERTIFICATE IS FILED AT PAGE 11 OF THE PAPER BOOK. COPY OF MEMORANDUM OF ASSOCIATION AND RULES AND REGULATIONS ARE FILED AT P AGES 12-24 OF THE PAPER BOOK. THE ACTIVITIES OF THE SOCIETY ARE STA TED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER AS UNDER:- THE SOCIETY IS AN ASSOCIATION OF HOLOGRAM INDUSTRIES AND WORKING FOR ANTI PIRACY IN SECURITY HOLOGRAMS ORGANI ZING SEMINAR FOR FACILITATION OF HOLOGRAM INDUSTRIES AND OTHER RELATE D ACTIVITIES. 3. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN SURPLUS OF INCOME AND EXPENDITURE AT ` 3 29 919/-. T HE RECEIPTS AND EXPENSES OF THE ASSESSEE ARE AS UNDER:- EXPENDITURE AMOUNT INCOME AMOUNT EXHIBITIONS & SEMINARS 3 703 ANNUAL MEMBERSHIP FEE RECEIVED 582 500 MEETINGS & CONFERENCE EXPENSES 58 922 RECEIPTS FOR HP HP PRAGUE 2004 842 552 EXPENSES ON HP HP PRAGUE 2004 815 998 INTEREST RECEIVED ON BANK FDRS 118 633 ADVERTISEMENT 26 700 HOMAI AWARD FEE RECD. 29 138 AFFILIATION FEE 5 000 COMPUTER EXPENSES 4 836 OFFICE EXPENSES 84 998 TELEPHONE POSTAGE & COURIERS 27 033 PRINTING & STATIONERY 2 682 SECRETARIAL & ADMIN. CHARGES 180 000 AUDITORS HONORARIUM 10 000 BANK CHARGES 3 528 TRAVELLING & CONVEYANCE 17 906 WEB SITE EXPENSES 1 598 SURPLUS 329 919 ITA NO.3383/DEL/2009 3 4. COPY OF COMPUTATION OF INCOME HAS BEEN FILED AT P AGE 54 OF THE PAPER BOOK WHICH HAS SHOWN NET TAXABLE INCOME AT ` 94 000/-. THE COMPUTATION OF INCOME IN THE SAID COMPUTATION IS AS UN DER:- COMPUTATION OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFITS AND GAINS OF BUSINESS OR PROFITS AND GAINS OF BUSINESS OR PROFITS AND GAINS OF BUSINESS OR PROFESSION PROFESSION PROFESSION PROFESSION EXCESS OF INCOME OVER EXPENDITURE 0.00 INCOME FROM OTHER SOURCES INCOME FROM OTHER SOURCES INCOME FROM OTHER SOURCES INCOME FROM OTHER SOURCES INTEREST BANK INTEREST FDR INTEREST 118633.00 118633.00 VOLUNTARY CONTRIBUTIONS/DONATIONS DONATION TOWARDS CORPUS FUND 618570.00 HOMAI ENTRY FEE RECD. 29138.00 RECEIPTS FOR CONFERENCE AT PRAGUE 842552.00 ANNUAL MEMBERSHIP FEE RECD. 582500.00 2072940.00 2191573.00 LESS : DEDUCTIONS OTHERS CORPUS FUND ELIGIBLE U/S 11 (1)(D) 618750.00 618750.00 618750.00 1572823.00 1572823.00 1572823.00 GROSS TOTAL INCOME GROSS TOTAL INCOME GROSS TOTAL INCOME GROSS TOTAL INCOME TOTAL INCOME TOTAL INCOME TOTAL INCOME TOTAL INCOME ROUNDED OFF AS PER SECTION 288A ROUNDED OFF AS PER SECTION 288A ROUNDED OFF AS PER SECTION 288A ROUNDED OFF AS PER SECTION 288A 1572823.00 1572823.00 ======= LESS: EXEMPTIONS U/S 11 SET APART FOR THE FUTURE 235923.45 AMOUNT APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES 1242904.00 1478827.45 NET TAXABLE INCOME 94000.00 5. IT MAY BE MENTIONED HERE THAT ANOTHER COPY OF CO MPUTATION OF INCOME IS ALSO FILED BY THE ASSESSEE AT PAGE 6 OF THE PAP ER BOOK SHOWING INCOME THEREIN AT ` 1 18 633/- WHICH IS INTER EST RECEIVED ON FDR AND IN THAT COMPUTATION THE ASSESSEE HAD CLAIMED TH E BENEFIT OF SECTION 44A BUT THE SAID COMPUTATION HAS NOT BEEN DESC RIBED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND IT MAY HAVE B EEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 6. THE ASSESSING OFFICER INITIATED ASSESSMENT PROCEEDINGS AG AINST THE AFOREMENTIONED RETURN FILED BY THE ASSESSEE AND HAS MENTIONED THE FACT THAT CLAIM OF THE ASSESSEE REGARDING REGISTRATI ON U/S 12AA WAS REJECTED BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) VIDE THE ORDER DATED 8 TH MAY 2007. HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY T HE CORPUS DONATION OF ` 6 18 650/- SHOULD NOT BE TREATED AS INCOME BEING ITA NO.3383/DEL/2009 4 VOLUNTARY CONTRIBUTIONS U/S 2 (24) (IIA) OF THE ACT. IN RESPONSE IT WAS SUBMITTED THAT THE SAID AMOUNT RELATES TO MEMBERSHIP GR ANTED TO THE MEMBERS IN TERMS OF CLAUSE 12 OF THE RULES AND REGULATI ONS AND THIS REPRESENT VARIOUS CATEGORIES OF MEMBERS AND THIS REPRESEN T CORPUS FUND AS PER TERMS OF CLAUSE 14.2 OF THE ASSOCIATION. IT WAS CLAIMED THAT THE ASSOCIATION IS GOVERNED BY SECTION 44A OF THE ACT THEREFORE ITS INCOME IS NOT TAXABLE. THE ASSESSING OFFICER DID NOT ACCEPT SUCH CLAIM OF THE ASSESSEE AS ACCORDING TO THE ASSESSING OFFICER THE AMOUNT RECEIVED BY THE ASSESSEE REPRESENT RECEIPTS U/S 28( III) OF THE INCOME-TAX ACT HENCE ARE TAXABLE. HE THEREFORE TREATED THE AMOUNT OF ` 6 18 750/- BEING THE AMOUNT RECEIVED BY THE ASSE SSEE FROM ITS MEMBERS IN RESPECT OF MEMBERSHIP FEE AND ALSO THE SURPLU S AMOUNT OF ` 3 29 919/- AS INCOME OF THE ASSESSEE AND IN THIS MANNE R HE HAS ASSESSED THE INCOME OF THE ASSESSEE AT ` 9 48 669/- BEING A GGREGATE SUM OF AFOREMENTIONED TWO AMOUNTS. 7. BEFORE CIT (A) IT WAS CLAIMED THAT THE ASSESSMENT MA DE BY THE ASSESSING OFFICER WAS NOT CALLED FOR AS THE AMOUNT OF MEM BERSHIP FEE RECEIVED BY THE ASSESSEE COULD NOT BE TAXED AS PER PRINC IPLE OF MUTUALITY AND SO WAS THE CASE WITH THE INTEREST EARNED ON FDRS WHICH IS AMOUNTING TO ` 1 18 633/-. IT WAS EXPLAINED THAT THE AMOUNT OF ` 8 42 552/- WAS RECEIVED BY THE ASSESSEE FOR A CONFERENCE (HOTOPACK HOLOPRINT 2004) AT PRAGUE CZECHOSLOVAKIA DURING 16 TH TO 18 TH NOVEMBER 2004 AND THE SAID CONFERENCE WAS ORGANIZED AT INTERNATIONAL LEVEL FOR THE PROMOTION OF HOLOGRAM I NDUSTRY. SINCE THE ASSESSEE WAS WORKING FOR THE DEVELOPMENT OF HOLOGRAM IND USTRY IN INDIA IT INVITED ALL MEMBERS BY E-MAIL AND TELEPHONI CALLY TO PARTICIPATE IN THE CONFERENCE AT PRAGUE AND IT IS BECAUSE OF THAT IN RESPECT OF THE MEMBERS VISITED THE CONFERENCE THE AMOUNT WAS RECEIVED WHICH WAS AN AGGREGATE SUM OF ` 8 42 542/- AGAINST WHICH THE EX PENDITURE WAS MADE AT ` 8 15 998/- GIVING A SURPLUS OF ` 26 554/-. SO FAR AS IT RELATES ITA NO.3383/DEL/2009 5 TO APPLICABILITY OF SECTION 28(III) IT WAS SUBMITTED THAT NONE OF THE AMOUNTS WAS EARNED BY THE ASSESSEE BY WAY OF SPECIFIC SERVI CES EXTENDED TO ITS MEMBERS THEREFORE SECTION 28(III) H AD NO APPLICATION. THE ASSESSEE CLAIMED THAT THE AMOUNTS RECEIVED BY THE ASSE SSEE WERE NEITHER TAXABLE U/S 28(III) OF THE ACT NOR U/S 2(24)( IIA) OF THE ACT. IT WAS SUBMITTED THAT THE CASE OF THE ASSESSEE IS GOVERNED BY THE PRINCIPLE OF MUTUALITY AS SUCH NO PART OF THE INCOME OF THE ASSESSEE COULD BE ASSESSED. AFTER CONSIDERING ALL THESE SUBMISSIONS LEARNED C IT (A) HAD DELETED BOTH THE ADDITIONS NAMELY OF INCOME EXCESS O VER EXPENDITURE OF ` 3 29 919/- AND THE CORPUS DONATION IN THE SHAPE OF MEMBERSHIP OF ` 6 18 750/-. THE REVENUE IS AGGRIEVED HENCE IN AP PEAL AND HAS RAISED THE AFOREMENTIONED GROUNDS OF APPEAL. 8. AFTER NARRATING THE FACTS IT WAS VEHEMENTLY PLEAD ED BY THE LEARNED DR THAT THE LEARNED CIT (A) WAS WRONG IN CON SIDERING THE ALTERNATIVE CLAIM OF THE ASSESSEE REGARDING PRINCIPAL O F MUTUALITY AND ON THAT BASIS HE WAS TOTALLY WRONG IN GRANTING THE REL IEF TO THE ASSESSEE AS ON THAT BASIS EVEN THE INCOME RETURNED BY TH E ASSESSEE HAS NOT BEEN LOOKED INTO. HE SUBMITTED THAT THE CASE OF THE ASSESSING OFFICER REST UPON THE PROVISIONS OF SECTION 28(III). H E SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM ITS MEMBER WAS W ITH REGARD TO SPECIFIC SERVICES RENDERED HENCE THE SAME WILL FAL L WITHIN THE AMBIT OF SECTION 28(III). HE SUBMITTED THAT THE ASSESSEE ALSO COULD NOT CLAIM THE BENEFIT OF SECTION 44A. THE ASSESSEE ALSO WAS HELD N OT ENTITLED FOR THE BENEFIT OF REGISTRATION U/S 12AA OF THE ACT. THE REFORE HE PLEADED THAT THE ASSESSEE WAS TO BE ASSESSED UNDER THE NORMAL PROVISI ONS OF THE ACT AND THEREFORE THE ASSESSING OFFICER WAS RIGHT IN MAKING THE ASSESSMENT AND LEARNED CIT (A) HAS WRONGLY DELETED THE A DDITION. 9. ON THE OTHER HAND RELYING UPON THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT (A) AND ALSO THE FINDINGS R ECORDED BY THE LEARNED CIT (A) IT IS THE CASE OF THE ASSESSEE THAT THE RELIEF HAS RIGHTLY ITA NO.3383/DEL/2009 6 BEEN GIVEN TO THE ASSESSEE THEREFORE THE ORDER OF THE CIT (A) SHOULD BE UPHELD. 10. IT MAY ALSO BE MENTIONED HERE THAT AT THE FOREMO ST THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT TAX EFFECT OF THE P RESENT APPEAL IS LESS THAN ` 3 LAC THEREFORE THE DEPARTMENTAL APPE AL SHOULD NOT BE ADMITTED IN VIEW OF THE RECENT CIRCULAR ISSUED BY THE CBDT WHICH IS DATED 9 TH FEBRUARY 2011 REPORTED IN 332 ITR 1 (ST.). 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS UNDISPUTED THAT THE ASSESSEE HAS NOT BEEN REGISTERED U/S 12A OF THE ACT AND THEREFORE IT CANNOT BE CONSIDERED ELIGIBLE FOR THE BENEFIT GRANTED BY SECTI ON 11 OF THE ACT. THE ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED THAT BE NEFIT ONLY. THEREFORE THE CLAIM OF THE ASSESSEE HAS TO BE CONSIDERED DE HORS THE CLAIM MADE BY IT U/S 11 OF THE ACT. 12. BEFORE THE ASSESSING OFFICER IT WAS THE CLAIM OF TH E ASSESSEE THAT ITS INCOME SHOULD NOT BE CONSIDERED TO BE TAXABLE IN VIEW OF SECTION 44A OF THE ACT. TO PROPERLY APPRECIATE SUCH CONTENTION OF THE ASSESSEE IT WILL BE NECESSARY TO REPRODUCE SECTION 44A O F THE ACT:- SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRA DE PROFESSIONAL SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRA DE PROFESSIONAL SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRA DE PROFESSIONAL SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRA DE PROFESSIONAL OR SIMILAR ASSOCIATION. OR SIMILAR ASSOCIATION. OR SIMILAR ASSOCIATION. OR SIMILAR ASSOCIATION. 44A. 44A. 44A. 44A. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT WHERE THE AMOUNT RECEIVED DURING A PREVIOUS Y EAR BY ANY TRADE PROFESSIONAL OR SIMILAR ASSOCIATION (OTHER THAN AN ASSOCIATION OR INSTITUTION REFERRED TO IN CLAUSE ( 23A ) OF SECTION 10 )] FROM ITS MEMBERS WHETHER BY WAY OF SUBSCRIPTION OR OTHERWISE (NOT BEING REMUNERATION RECEIVED FOR RENDERI NG ANY SPECIFIC SERVICES TO SUCH MEMBERS) FALLS SHORT OF THE EXPENDITURE INCURRED BY SUCH ASSOCIATION DURING THAT PREVIOUS YEAR (NOT BEING EXPENDITURE DEDUCTIBLE IN COMPUTING THE INCOME UN DER ANY OTHER PROVISION OF THIS ACT AND NOT BEING IN THE NATU RE OF CAPITAL EXPENDITURE) SOLELY FOR THE PURPOSES OF PROTECTI ON OR ADVANCEMENT OF THE COMMON INTERESTS OF ITS MEMBERS THE AMOUNT SO FALLEN SHORT (HEREINAFTER REFERRED TO AS DEFI CIENCY) SHALL SUBJECT TO THE PROVISIONS OF THIS SECTION BE ALL OWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE ASSOCIATION ITA NO.3383/DEL/2009 7 ASSESSABLE FOR THE RELEVANT ASSESSMENT YEAR UNDER THE H EAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IF THERE IS NO INCOME ASSESSABLE UNDER THAT HEAD OR THE DEFICIENCY AL LOWABLE EXCEEDS SUCH INCOME THE WHOLE OR THE BALANCE OF THE DEFICIENCY AS THE CASE MAY BE SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE ASSOCIATION ASSESSABLE F OR THE RELEVANT ASSESSMENT YEAR UNDER ANY OTHER HEAD. (2) IN COMPUTING THE INCOME OF THE ASSOCIATION FOR THE R ELEVANT ASSESSMENT YEAR UNDER SUB-SECTION (1) EFFECT SHALL F IRST BE GIVEN TO ANY OTHER PROVISION OF THIS ACT UNDER WHICH ANY ALLO WANCE OR LOSS IN RESPECT OF ANY EARLIER ASSESSMENT YEAR IS CAR RIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE RELEVANT ASSESSME NT YEAR. (3) THE AMOUNT OF DEFICIENCY TO BE ALLOWED AS A DEDUC TION UNDER THIS SECTION SHALL IN NO CASE EXCEED ONE-HALF OF THE TO TAL INCOME OF THE ASSOCIATION AS COMPUTED BEFORE MAKING ANY ALLOW ANCE UNDER THIS SECTION. (4) THIS SECTION APPLIES ONLY TO THAT TRADE PROFESSIONA L OR SIMILAR ASSOCIATION THE INCOME OF WHICH OR ANY PART THEREOF IS NOT DISTRIBUTED TO ITS MEMBERS EXCEPT AS GRANTS TO ANY ASSOCIA TION OR INSTITUTION AFFILIATED TO IT.] 13. SECTION 44A IS THE SPECIAL PROVISION FOR GRANT OF DEDUCTION IN THE CASE OF TRADE PROFESSIONAL OR SIMILAR ASSOCIATION. IT ST ARTS WITH NON- OBSTANTE CLAUSE . THEREFORE IT IS A NON-OBSTANTE PROVISION AND HAS TO BE CONSIDERED INDEPENDENT FROM THE OTHER PROVISIONS OF THE ACT. IT APPLIES TO THE TRADE PROFESSIONAL OR SIMILAR ASSOCIATION S WHICH ARE OTHER THAN THE ASSOCIATION OR INSTITUTIONS REFERRED TO IN CLAUSE (23A) OF SECTION 10. IF SUCH ELIGIBLE ASSOCIATION RECEIVE AMOU NT FROM ITS MEMBERS WHETHER BY WAY OF SUBSCRIPTION OR OTHERWISE (N OT BEING REMUNERATION RECEIVED FOR RENDERING ANY SPECIFIC SERV ICE TO SUCH MEMBERS) AND THAT AMOUNT FALLS SHORT OF EXPENDITURE IN CURRED BY SUCH ASSOCIATION DURING THAT PREVIOUS YEAR (NOT BEING THE E XPENDITURE DEDUCTIBLE IN COMPUTING THE INCOME UNDER ANY OTHER PROVISIONS OF THIS ACT AND NOT BEING IN THE NATURE OF CAPITAL EXPENDIT URE) SOLELY FOR THE PURPOSE OF PROTECTION OR ADVANCEMENT OF THE COMMON I NTEREST TO ITS MEMBERS THE AMOUNTS SO FALLEN SHORT (DEFICIENCY) SHALL SUBJECT TO THE ITA NO.3383/DEL/2009 8 PROVISIONS OF THIS SECTION BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE ASSOCIATION ASSESSABLE FOR THE RELEVANT ASSESSM ENT YEAR UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PRO FESSION. THEREFORE TO COMPUTE THE INCOME OF THE ASSESSEE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION THE AMOUNT RECEIVED BY THE ASSESSEE FROM ITS MEMBERS WHETHER THE SAME IS BY WAY OF SUBSC RIPTION OR OTHERWISE HAS TO FIRST MEET THE EXPENDITURE INCURR ED BY THE ASSOCIATION DURING THE RELEVANT PREVIOUS YEAR IRRESPECT IVE OF THE FACT THAT THE SAID EXPENDITURE IS DEDUCTIBLE IN COMPUTING THE INCOME UNDER ANY OTHER PROVISIONS OF THIS ACT AND IT SHOULD NOT BE I N THE NATURE OF CAPITAL EXPENDITURE. IN OTHER WORDS IF THE ASSOCIATI ON DOES NOT FALL WITHIN THE CLAUSE 23A OF SECTION 10 AND IT IS AN ASSOCI ATION RELATED TO TRADE PROFESSIONAL OR SIMILAR ASSOCIATION THEN THE AM OUNT RECEIVED BY IT FROM ITS MEMBERS BY WAY OF SUBSCRIPTION OR OTHERWISE ARE NOT DIRECTLY TAXABLE BUT THEY HAVE TO BE DEDUCED BY T HE AMOUNT EXPENDED BY THE ASSESSEE SOLELY FOR THE PURPOSE OF PROTEC TION OR ADVANCEMENT OF THE COMMON INTEREST OF ITS MEMBERS PROV IDED THE SAME IS NOT ALLOWABLE UNDER ANY OTHER PROVISIONS OF THE ACT AND IT IS NOT IN THE NATURE OF CAPITAL EXPENDITURE. 14. THEREFORE IT HAS TO BE EXAMINED THAT WHETHER PR OVISIONS OF SECTION 44A ARE APPLICABLE TO THE CASE OF THE ASSESSEE. FIRSTLY IT IS AN ASSOCIATION RELATED TO TRADE AND THEREFORE IT IS NOT OUTSIDE THE SCOPE OF SECTION 44A OF THE ACT. SECONDLY IT IS AN ADMIT TED FACT THAT THE ASSESSEE IS NOT AN ASSOCIATION OR INSTITUTION REFERRED TO I N CLAUSE 23A OF SECTION 10 AS THE SAID CLAUSE OF SECTION 10 GOVERNS THE INSTITUTION SPECIFIED BY THE CENTRAL GOVERNMENT BY NOTIFICATION IN THE OFFICIAL GAZETTE AND IT IS NOT EVEN THE CASE OF THE DEPARTMENT THAT THE ASSESSEE FALLS WITHIN THE AMBIT OF SECTION 10 (23A). TH E CAREFUL PERUSAL OF RECEIPT AND EXPENDITURE OF THE ASSESSEE WILL REVEAL THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE NOT IN THE NATURE O F CAPITAL ITA NO.3383/DEL/2009 9 EXPENDITURE. THE DETAILS OF EXPENDITURE WILL REVEAL THAT THEY HAVE BEEN INCURRED SOLELY FOR THE PURPOSE OF PROTECTION OR ADVANCEMENT OF COMMON INTEREST OF ITS MEMBERS AS IT IS NOT THE CASE OF T HE ASSESSING OFFICER THAT THE EXPENSES SHOWN BY THE ASSESSEE HAVE BEEN INCURRED FOR ANY PURPOSE OTHER THAN IN THE ADVANCEMENT OF ITS OBJECT. IF IT IS SO THEN THE AMOUNT EXPENDED BY THE ASSESSEE FOR THE PURPO SE OF PROTECTION OR ADVANCEMENT OF THE COMMON INTEREST OF ITS MEMBER WILL BE ALLOWABLE AS DEDUCTION. THEREFORE THE CLAIM OF THE DEPARTMENT CAN ONLY BE RESTRICTED TO THE AMOUNT OF ` 3 29 919/- WHI CH ALSO COMPRISE AN AMOUNT OF ` 1 18 633/- REPRESENTING INTEREST EARNED B Y THE ASSESSEE ON FDRS. 15. IN THIS VIEW OF THE SITUATION WE SEE NO JUSTIFICAT ION IN THE ADDITION MADE BY THE ASSESSING OFFICER VIDE WHICH AN AM OUNT OF ` 6 18 750/- RECEIVED BY THE ASSESSEE FROM ITS MEMBERS HAS B EEN CONSIDERED TAXABLE. THEREFORE WE HOLD THAT THE SAID AMOUNT HAS WRONGLY BEEN TAXED BY THE ASSESSING OFFICER AND LEARNED CIT (A) WAS RIGHT IN HOLDING THAT THE AMOUNT RECEIVED BY THE ASSE SSEE AS ANNUAL MEMBERSHIP FEE COULD NOT BE TAXED THOUGH FOR DIFFERE NT REASON THAT IT CANNOT BE TAXED U/S 44A OF THE ACT. 16. HOWEVER IT CAN BE THE CASE OF THE DEPARTMENT TH AT AMOUNT RECEIVED BY THE ASSESSEE FROM ITS MEMBERS IF IT IS NOT EX PENDED FOR THE PURPOSE OF PROTECTION AND ADVANCEMENT OF THE COM MON INTEREST OF ITS MEMBERS HAS NOT BEEN GRANTED EXEMPTION U/S 44A OF T HE ACT. THAT SITUATION WILL BE TAKEN CARE OF BY THE ADDITION OF ` 3 29 919/- WHICH REPRESENT SURPLUS OF INCOME OVER EXPENDITURE. FOR THA T WE WILL EXAMINE THE CASE WHETHER THE SAID ADDITION HAS ALSO RIG HTLY BEEN DELETED OR NOT. 17. NOW COMING TO THE OTHER ADDITION OF ` 3 29 919 /- LEARNED CIT (A) HAS HELD THAT THE SAID AMOUNT CANNOT BE TAXED U/S 28(I II) OF THE ACT AND ITA NO.3383/DEL/2009 10 IT ALSO CANNOT BE TAXED U/S 2 (24) (IIA) OF THE ACT. SECTION 28 (III) READ AS UNDER:- PROFITS AND GAINS OF BUSINESS OR PROFESSION. PROFITS AND GAINS OF BUSINESS OR PROFESSION. PROFITS AND GAINS OF BUSINESS OR PROFESSION. PROFITS AND GAINS OF BUSINESS OR PROFESSION. 28. 28. 28. 28. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INC OME-TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROF ESSION (I) (II) (III) INCOME DERIVED BY A TRADE PROFESSIONAL OR SIMILAR ASSOCIATION FROM SPECIFIC SERVICES PERFORMED FOR ITS MEMBERS ; 18. AS PER THE PROVISIONS OF SECTION 28(III) WHAT IS T AXABLE AS PROFIT AND GAINS OF THE PROFESSION IS AN INCOME DERIVED BY A TRADE PROFESSIONAL OR SIMILAR ASSOCIATION FROM SPECIFIC SERVICES PERFORMED FOR ITS MEMBERS. IT HAS BEEN THE CASE OF THE ASSESSEE THAT THE AMOUNT RECEIVED BY IT DOES NOT ARISE FROM SPECIFIC SERVICES REN DERED TO ITS MEMBERS. THE ANNUAL SUBSCRIPTION RECEIVED BY IT IS IN ACCORDANCE WITH THE CLAUSES OF MEMORANDUM OF ASSOCIATION AND RULES AND R EGULATIONS AND THE AMOUNT RECEIVED BY IT IN RESPECT OF INTERNAT IONAL CONFERENCE WAS IN RESPECT OF INTERESTED MEMBERS AND IT IS NOT WITH RESPECT TO ANY SPECIFIC SERVICES PROVIDED TO THE MEMBERS ON THE BASIS OF SOME COST. NO MATERIAL WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT ANY OF THE AMOUNT COLLECTED BY IT FROM ITS MEMBER WAS IN RESPECT OF SPECIFIC SERVICES PERFORMED BY THE ASSESSEE FOR ITS MEMBERS. THE WORDS PERFORMING SPECIFIC SERVICES WAS AL SO FOUND PLACE IN SECTION 10(6) OF 1922 ACT (CORRESPONDING PR OVISIONS WAS CONSIDERED BY HONBLE SUPREME COURT IN THE CASE OF CI T VS. CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. 36 ITR 222) AND THE R ELEVANT OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECISION AR E AS UNDER:- THE WORDS PERFORMING SPECIFIC SERVICES [IN SECTIO N 10(6)] IN OUR OPINION MEAN IN THE CONTEXT CONFERRING PARTICU LAR BENEFITS ON THE MEMBERS. THE WORD SERVICES IS A TE RM OF A VERY WIDE IMPORT BUT IN THE CONTEXT OF SECTION 10 OF THE ACT ITS USE EXCLUDES ITS THEOLOGICAL OR ARTISTIC USAGE. WITH R EFERENCE TO ITA NO.3383/DEL/2009 11 A TRADE PROFESSIONAL OR SIMILAR ASSOCIATION THE PER FORMING OF SPECIFIC SERVICES MUST MEAN CONFERRING ON ITS MEMBERS SOME TANGIBLE BENEFIT WHICH OTHERWISE WOULD NOT BE AVAILABLE TO THEM AS SUCH EXCEPT FOR PAYMENT RECEIVED BY THE ASSOCIATION IN RESPECT OF THOSE SERVICES. 19. IF THE AFOREMENTIONED OBSERVATIONS OF THEIR LORDSH IPS ARE KEPT IN MIND THEN IT WILL BE CLEAR THAT SECTION 28(III) C OULD NOT BE INVOKED FOR THE PURPOSE OF TAXING THE ANNUAL SUBSCRIPTION RECEIVED BY THE ASSESSEE FROM ITS MEMBERS WHICH IS AS PER ITS MEMORANDUM OF ASSOCIA TION AND RULES AND REGULATIONS AND RECEIPTS RELATING TO SUBSCRIPT ION ON ACCOUNT OF INTERNATIONAL CONFERENCE ALSO COULD NOT BE TAXED UNDER THE PROVISIONS OF SECTION 28(III) OF THE ACT. 20. NOW WE COME TO THE PROVISIONS OF SECTION 2 (24) (IIA) OF THE ACT WHICH READ AS UNDER:- 2 (24 ) INCOME INCLUDES ( I ) PROFITS AND GAINS; ( II ) DIVIDEND ; ( IIA ) VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST CREATED WHOLLY OR PARTLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED WHOLLY OR PARTLY FOR SUCH PURPOS ES [OR BY AN ASSOCIATION OR INSTITUTION REFERRED TO IN CLAUSE ( 21 ) OR CLAUSE ( 23 ) OR BY A FUND OR TRUST OR INSTITUTION REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) [OR BY ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( IIIAD ) OR SUB- CLAUSE ( VI ) OR BY ANY HOSPITAL OR OTHER INSTITUTION REFERRED TO IN SUB-CLAUSE ( IIIAE ) OR SUB-CLAUSE ( VIA )] OF CLAUSE ( 23C ) OF SECTION 10 [OR BY AN ELECTORAL TRUST. EXPLANATION. FOR THE PURPOSES OF THIS SUB-CLAUSE TRUST INCLUDES ANY OTHER LEGAL OBLIGATION ; 21. IN VIEW OF THE FACT THAT THE ASSESSEE HAS NOT BEEN G RANTED THE BENEFIT OF SECTION 11 AND IT IS ALSO NOT AN INSTITUTI ON REFERRED TO IN CLAUSE (21) OR CLAUSE (23) OR CLAUSE (23C) OF SECTION 10. THEREFORE THERE IS NO QUESTION OF APPLICATION OF SECTION 2 (24) (IIA). 22. THE AFOREMENTIONED FINDINGS WILL LEAD TO THE SITU ATION THAT SECTION 28(III) AND SECTION 2 (24) (IIA) ARE NOT A PPLICABLE. ITA NO.3383/DEL/2009 12 23. NOW THE QUESTION WILL REMAIN THAT WHETHER SURPLU S ARRIVED AT BY THE ASSESSEE OF ` 3 29 919/- IS TAXABLE OR NOT. THIS HAS BEEN HELD TO BE EXEMPTED BY LEARNED CIT (A) ON THE APPLICABILITY OF PRINCIPLE OF MUTUALITY. AS POINTED OUT EARLIER IT HAS NOT BEEN T HE CASE OF THE ASSESSEE THAT ITS INCOME IS EXEMPT AS PER THE PRINCIPLE OF MUTUALITY AS IN THE RETURN OF INCOME IT DID NOT CLAIM SO. THE CO MPUTATION OF INCOME FILED BY THE ASSESSEE WAS ON THE BASIS OF CLAIM OF CHARITA BLE INSTITUTION. THE SAID CLAIM OF CHARITABLE INSTITUTION HAS BEEN REJE CTED BY THE DEPARTMENT THEREFORE THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED AS PER THE OTHER PROVISIONS OF THE ACT WHICH INCLUDE S ECTION 44A AND IF THE DEPARTMENT WANTS TO ASSESS THE RESULTANT INCOME THEN IT HAS TO BE COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT. OUT OF SURPLUS OF ` 3 29 999/- THE AMOUNT EARNED BY THE ASSESSEE ON FDRS OF ` 1 18 633/- IS TO BE REMOVED AS THE SAME AS PER THE PRO VISIONS OF INCOME-TAX ACT IS ASSESSABLE UNDER THE HEAD INCOME FRO M OTHER SOURCES AND THIS HAS SO BEEN DONE BY THE ASSESSEE IN THE CO MPUTATION PURPORTED TO BE FILED BEFORE THE ASSESSING OFFICER THE COPY OF WHICH HAS BEEN PLACED AT PAGE 6 OF THE PAPER BOOK WHEREIN TAXABLE INCOME HAS BEEN SHOWN AT ` 1 18 630/-. THE REST OF THE AMOUNT HAS BEEN CLAIMED BY THE ASSESSEE U/S 44A OF THE ACT. IN OUR OPIN ION SECTION 44A DOES NOT GRANT THE EXEMPTION TO THE ASSESSEE WITH RE GARD TO THE SURPLUS SHOWN BY IT BEING RECEIPT EXCESS OF EXPENDITURE. IT ONLY DESCRIBE THAT IF SUCH RECEIPTS FALL SHORT OF EXPENDITUR E THEN DEDUCTION REGARDING EXPENDITURE HAS TO BE ALLOWED. BUT IN TH E PRESENT CASE THERE IS A SURPLUS IN THE ACCOUNT OF THE ASSESSEE WHICH EX CEED THE EXPENDITURE. THEREFORE IF THERE IS A SURPLUS WHICH C ANNOT BE CLAIMED UNDER THE PROVISIONS OF SECTION 44A OF THE ACT. HOWE VER THE RESULTANT SURPLUS IS ALLOWABLE ON THE BASIS OF PRINCIPLE OF MUTUAL ITY AS NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFF ICER TO SHOW THAT ANY OF THE RECEIPT OF THE ASSESSEE PERTAINS TO NON- MEMBERS. LEARNED CIT (A) HAS DELETED THE ADDITION ON ACCOUNT OF APPLICABILITY OF ITA NO.3383/DEL/2009 13 PRINCIPLE OF MUTUALITY AND IN THE ABSENCE OF ANY MAT ERIAL HAVING BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT ANY OF THE RECEIPTS OF THE ASSESSEE HAD ARISEN FROM NON-MEMBERS WE SEE NO JUSTIF ICATION IN INTERFERING IN THE FINDING RECORDED BY LEARNED CIT (A). ACCORDING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. DELHI GYMKHANA CLUB LTD. (2011) 53 DTR 330 INTEREST ON FDR S HAS ALSO BEEN HELD TO BE COVERED BY THE DOCTRINE OF MUTUALITY. T HEREFORE LOOKING FROM ANY ANGLE WE FIND NO INFIRMITY IN THE ORDER O F THE CIT (A) VIDE WHICH IT HAS BEEN HELD THAT NO PART OF THE INCOME OF THE ASSESSEE IS EXIGIBLE TO TAX ON THE PRINCIPLE OF MUTUALITY. FIN DING NO FORCE IN THE DEPARTMENTAL APPEAL THE SAME IS DISMISSED. 24. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09.09.20 11. SD/- SD/- [SHAMIM YAHYA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 09.09.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES