M/s. Standing Conference of Public Enterprises (SCOPE), New Delhi v. ITO, New Delhi

ITA 4305/DEL/2009 | 2003-2004
Pronouncement Date: 22-01-2010 | Result: Allowed

Appeal Details

RSA Number 430520114 RSA 2009
Bench Delhi
Appeal Number ITA 4305/DEL/2009
Duration Of Justice 2 month(s) 12 day(s)
Appellant M/s. Standing Conference of Public Enterprises (SCOPE), New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 22-01-2010
Assessment Year 2003-2004
Appeal Filed On 10-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI A.D. JAIN AND SHRI K.D. RANJAN ITA NO. 4305(DEL)09 ASSESSMENT YEAR: 2003-04 M/S. STANDING CONFERENCE OF PUBLIC INC OME TAX OFFICER ENTERPRISES (SCOPE)7-LODHI ROAD V. WARD 3 1(1) N. DELHI. CORE NO. 8 NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VED JAIN& MS. RANO JAIN CA RESPONDENT BY: SHRI B. KISHORE DR ORDER PER A.D. JAIN J.M . THE ASSESSEE IS IN APPEAL FOR THE ASSESSMENT YEAR 2 003-04 CHALLENGING THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE LEVY OF PENALTY OF RS. 71 71 324/- ON THE ASSESSEE U/S 271(1)(C) OF THE I. T. ACT. 2. THE ASSESSEE SOCIETY IS A SOCIETY REGISTERED UND ER THE SOCIETIES REGISTRATION ACT 1860. IT COMPRISES OF PUBLIC SEC TOR UNDERTAKINGS AS ITS MEMBERS. IT FILED A NIL RETURN OF INCOME TREATING THE RECEIPT FROM ITS MEMBERS IN RESPECT OF THE PREMISES LET OUT TO THEM AND ALSO THE INTEREST INCOME AS EXEMPT ON THE BASIS OF THE PRINCIPLE OF MUTUALITY. THE AO HOWEVER HOLDING THE PRINCIPLE OF MUTUALITY TO BE N OT APPLICABLE IN THE ITA 4305(DEL)09 2 ASSESSEES CASE BROUGHT TO TAX THE INCOME IN THE N ATURE OF RENT RECEIPT BY THE ASSESSEE FROM ITS MEMBERS AND NON MEMBERS AS INCOM E FROM HOUSE PROPERTY. THE LD. CIT(A) ON APPEAL UPHELD THE ASSESSMENT ORDER. ON FURTHER APPEAL BY THE ASSESSEE THE TRIBUNAL VIDE ORDER DATED 29.8.2008 IN ITA NO. 1506(DEL)07 FOR ASSESSMENT YEAR 2003-04 (C OPY PLACED ON RECORD) APPLYING THE DECISIONS IN BANKIPUR CLUB LTD. 226 ITR 97(SC) AND CHELMSFORD CLUB 243 ITR 89 (KER) HELD INTER AL IA THAT THOUGH THE ENTIRE RENTAL INCOME OF THE ASSESSEE FROM ITS MEMBERS SHAL L REMAIN EXEMPT ON THE PRINCIPLE OF MUTUALITY INCOME FROM NON MEMBERS FRO M USE OF CONVENTION CENTRE WOULD BE TAXABLE. THE TRIBUNAL HOWEVER D IRECTED THAT ONLY THE NET INCOME BE TAXED AFTER EXCLUDING THE EXPENSES INCURR ED IN RELATION TO THE EARNING OF THE RENTAL INCOME. 3. IN THE PENALTY PROCEEDINGS IT WAS SEEN THAT THE INCOME OF THE ASSESSEE HAD BEEN DETERMINED AT RS. 2 39 91 080/- AGAINST NI L INCOME RETURNED; THAT THE AO HAD DETERMINED THE RENTAL INCOME OF THE ASSE SSEE AT RS. 83 62 934/-; THAT THE FIRST APPEAL OF THE ASSESSEE HAD BEEN DISM ISSED; THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME; AND THA T THE DEFAULT OF THE ASSESSEE HAD BEEN ESTABLISHED BEYOND DOUBT AND WAS LIABLE FOR PENALTY. THIS WAS HOW THE PENALTY IN QUESTION CAME TO BE LEV IED. ITA 4305(DEL)09 3 4. BY VIRTUE OF THE IMPUGNED ORDER THE LD. CIT(A) OBSERVED INTER ALIA THAT THE ASSESSEE HAD PROVIDED A BREAK UP OF THE EX PENSES INCURRED IN RELATION TO THE OPERATION OF ITS CONVENTION CENTRE; THAT THI S BREAK UP SHOWED THAT THE ASSESSEE HAD INCURRED AN AMOUNT OF RS. 26.63 LAKHS IN MAINTAINING THE EXPENDITURE OF THE CONVENTION CENTRE; THAT IF THE E XPENDITURE WAS APPORTIONED PRO-RATA TO THE DATE OF THE CONVENTION CENTRE THE NET INCOME TAXABLE FROM THE USE OF THE CONVENTION CENTRE AS A RISING FROM NON MEMBERS INCLUDING GOVERNMENT DEPARTMENTS WOULD BE MUCH LESS; THAT THE ASSESSEES SUBMISSIONS THAT THE ENTIRE EXPENDITURE BE APPORTIONED PRO-RATA ON THE BASIS OF THE AMOUNT OF RECEIPTS FROM THE MEMBER S VIS--VIS NON-MEMBERS WAS NOT TAXABLE AS THE RECEIPTS FROM THE MEMBERS WA S HIGHLY SUBSIDIZED AND THEREFORE THE MAJOR PORTION OF THE LOSS WOULD BE O N ACCOUNT OF THE MEMBERS RATHER THAN NON-MEMBERS; THAT THE POSITION OF LAW R EGARDING TAXABILITY OF RECEIPT FROM NON-MEMBERS WAS CLEAR IN VIEW OF BANK IPUR CLUB (SUPRA) AND CHELMSFORD CLUB (SUPRA); AND THAT THEREFORE TO THE EXTENT OF NOT REPORTING THE INCOME FROM ITS NON-MEMBERS FOR USE O F THE CONVENTION CENTRE THE ASSESSEE HAS FURNISHED INACCURATE PARTI CULARS. 5. BEFORE US CHALLENGING THE IMPUGNED ORDER THE L EARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE AUTHORITIES BELOW H AD FAILED TO CONSIDER THAT ITA 4305(DEL)09 4 AFTER THE TRIBUNAL ORDER DATED 29.8.2008 (SUPRA) T HE DISPUTE REMAINING WAS ONLY WITH REGARD TO HIRING CHARGES FROM THE CONVENT ION CENTRE OF THE ASSESSEE; THAT THE ASSESSEE IS A SOCIETY FORMED FOR IMPROVING PERFORMANCE OF PUBLIC ENTERPRISES; THAT FOR THIS PURPOSE IT CARRIE D OUT VARIOUS ACTIVITIES AND HAD BUILT UP AN OFFICE COMPLEX KNOWN AS SCOPE COMP LEX; THAT THE COMPLEX HOUSES THE OFFICES OF THE VARIOUS PUBLIC ENTERPRISE S WHICH HAD CONTRIBUTED FOR THE SAME; THAT TO PROVIDE A COMMON FACILITY OF HOLD ING SEMINARS/CONFERENCES BY PUBLIC ENTERPRISES IT HAS A CONVENTION CENTRE WITHIN THE COMPLEX; THAT THE PRIMARY OBJECTIVE AND USE WAS FOR ITS MEMBERS; THAT SINCE THE EXPENDITURE OF MAINTENANCE OF THIS CONVENTION CENTR E WAS TOO HIGH AND THERE WAS SOMETIMES A REQUEST BY OTHER INSTITUTION/ BODIES TO USE THE FACILITY THE SAME WAS ALLOWED SUBJECT TO AVAILABILITY BY CHA RGING NOMINAL HIRE CHARGES; THAT THUS THE NOMINAL HIRE CHARGE WAS KNOT A SOURCE OF INCOME BUT PARTIAL RECOVERY OF THE EXPENDITURE BEING INCURRED; THAT AN IDEA OF THE SAME CAN BE HAD FROM THE FACT THAT THE TOTAL HIRE CHARGE S INCLUDING FROM MEMBERS AND NON-MEMBERS WAS RS. 22.58 AND THE DIRECT EXPEND ITURE WAS RS. 26.63 LAKHS (WITHOUT APPORTIONMENT OF PROPORTIONATE DEPRE CIATION ETC.); THAT THUS THERE WAS NO INCOME FROM CONVENTION CENTRE; THAT TH E AO HOWEVER WHILE GIVING APPEAL EFFECT TAXED THE HIRE CHARGES AS RENT AL INCOME IGNORING THE FACT THAT PREMISES WAS NOT LET OUT OR POSSESSION GIVEN O UT; THAT THE HIRE CHARGES ITA 4305(DEL)09 5 FOR CONVENTION CENTRE REPRESENTED CHARGES FOR USE O F THE FACILITY OF CONVENTION CENTRE AND NOT LETTING OUT; THAT SINCE T HE AMOUNT INVOKED WAS NOT MUCH THE ASSESSEE HOWEVER DID NOT FILE ANY APPEAL AGAINST THE ORDER OF THE AO; THAT IN PENALTY PROCEEDINGS THE ASSESSEE RAISED THIS ISSUE AND CIT(A) IN HIS ORDER HAD AGREED WITH THE CONTENTION OF THE ASSESSEE BUT GAVE A DIFFERENT FINDINGS THAT APPORTIONMENT OF EXPENSES OF RS. 26.63 LAKHS IN MAINTENANCE SHOULD NOT BE PRO-RATA AS RECEIPTS FROM MEMBER WERE SUBSIDIZED; THAT THESE FINDINGS OF THE CIT(A) WERE NOT CORRECT; THAT WHILE WORKING OUT THE INCOME OF CONVENTION CENTRE THE TOT AL RECEIPTS AND TOTAL EXPENDITURE HAD TO BE CONSIDERED; THAT THERE COULD NOT BE A QUESTION OF NOTIONAL LOSS OR NOTIONAL INCOME; THAT THE FACT WAS THAT THERE WAS NET LOSS IN RESPECT OF CONVENTION CENTRE AND THAT BE SO NO INCO ME AND HENCE NO LEVY OF PENALTY; THAT THE CIT(A) ACCORDINGLY WAS NOT JUSTIF IED IN GIVING DIRECTION TO THE AO TO COMPUTE THE INCOME AND THE PENALTY THEREO N BY IGNORING THE TOTAL RECEIPTS AND TOTAL EXPENDITURE; THAT FURTHER THE CO NFIRMATION OF LEVY OF PENALTY BY CIT(A) WAS OTHERWISE UNJUSTIFIED; THAT T HE APPELLANT WAS AN ORGANIZATION OF PUBLIC ENTERPRISES HEADED BY GOVER NMENT FUNCTIONARIES AND HAD FILED ITS RETURN OF INCOME FOLLOWING ITS POLICI ES CONSISTENTLY AND ACCEPTED BY THE DEPARTMENT; THAT IT HAD DISCLOSED ALL PARTIC ULARS OF INCOME; THAT THERE WAS NO CONCEALMENT OF ANY PARTICULARS NOR ANY PARTI CULARS FURNISHED ARE ITA 4305(DEL)09 6 INACCURATE; THAT THE ASSESSEE HAD FURNISHED ITS EXP LANATION AND THE EXPLANATION WAS NOT FOUND TO BE FALSE ; AND THAT TH E SAID EXPLANATION WAS A BONA FIDE EXPLANATION AND ALL THE FACTS RELATING TO THE SAME HAD BEEN DISCLOSED. 6. THE LEARNED DR ON THE OTHER HAND HAS FORCEFUL LY SUPPORTED THE IMPUGNED ORDER. 7. IT HAS BEEN ARGUED THAT THE INCOME IN QUESTION W AS FROM THE ASSESSEES NON MEMBERS TO WHOM THE PRINCIPLE OF MUTUALITY DO ES NOT APPLY HENCE OBVIOUSLY IT IS A CASE OF CONCEALMENT AND THE PENA LTY WAS RIGHTLY LEVIED. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. WE FIND THE GRIEVANCE OF THE ASSESSEE TO BE JUSTIFI ED. WHILE PASSING THE IMPUGNED ORDER THE LD. CIT(A) FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE TOTAL HIRE CHARGES WERE OF RS. 22.58 LAKHS WHE REAS THE DIRECT TAX EXPENDITURE WITHOUT APPORTIONMENT OF PROPORTIONATE DEPRECIATION ETC. WAS TO THE TUNE OF RS. 26.63 LAKHS WHICH SHOWS THAT THERE WAS IN FACT NO INCOME CAME TO THE ASSESSEE FROM ITS CONVENTION CENTRE. THE EXPENDITURE OF THE MAINTENANCE OF THE CONVENTION CENTRE BEING TO HIGH IT WAS BEING LET OUT TO NON MEMBERS ON HIRE CHARGES OTHER THAN IT BEING US ED BY THE MEMBERS OF THE ASSESSEE. PERTINENTLY THE LD. CIT(A) ADMITTED/AG REED THAT THOUGH THE TRIBUNAL HAD SPECIFICALLY DIRECTED THE AO TO TAX ON LY THE NET INCOME AFTER ITA 4305(DEL)09 7 EXCLUDING THE EXPENSES INCURRED IN RELATION TO THE EARNING OF RENTAL INCOME SUCH DIRECTIONS WERE NOT FOLLOWED BY THE AO AND ALL THE EXPENSES INCURRED IN RELATION TO EARNING OF THE RENTAL INCOME FROM THE ASSESSEES NON MEMBERS FOR THE USE OF THE CONVENTION CENTRE HAD NOT BEEN ALLOWED BY THE AO. MOREOVER IN VIEW OF THE FACT THAT THE DIRECT EXPE NDITURE FAR EXCEEDED THE RENTAL INCOME FROM THE ASSESSEES NON MEMBERS THER E OBVIOUSLY WAS NO INCOME TO THE ASSESSEE RATHER THERE WAS A NET LOSS IN RESPECT OF THE CONVENTION CENTRE. THIS BEING SO IT IS TRITE THA T NO PENALTY COULD HAVE BEEN LEVIED IN THE ABSENCE OF ANY INCOME. 9. IN THE RETURN OF INCOME FILED THE ASSESSEE HAD DULY DISCLOSED ALL PARTICULARS OF ITS INCOME. AS SUCH THERE WAS NO C ONCEALMENT OF ANY PARTICULARS OF INCOME BY THE ASSESSEE. THE PARTIC ULARS FURNISHED WERE ALSO NOT INACCURATE IN VIEW OF THE ABOVE. IT WAS THE C OMPUTATION OF INCOME WITH REFERENCE TO CHARGEABILITY OF TAX WHICH WAS THE SOL E DISPUTE. AN EXPLANATION HAD BEEN FURNISHED BY THE ASSESSEE . S UCH EXPLANATION WAS NOT FOUND TO BE FALSE NOR WAS SUCH EXPLANATION SHOWN T O BE MALA FIDE. ALL FACTS PERTAINING TO SUCH EXPLANATION HAD BEEN DISCLOSED. 10. IN SUCH CIRCUMSTANCES THE ASSESSEE IS CORRECT IN CONTENDING THAT NO CONCEALMENT PENALTY WAS LEVIABLE. THIS ALSO FINDS SUPPORT FROM THE FOLLOWING CASE LAWS:- ITA 4305(DEL)09 8 1. CIT V. BUDHEWAL CO-OPERATIVE SUGAR MILLS LTD. [2 008] 6 DTR (P&H) 31; 2. CEMENT MARKETING CO. OF INDIA LTD. V. ACST & ORS . [1980] 124 ITR 15(SC); 3. DENA BANK V. IAC [1997] 25 ITD 109 (BOM); 4. HINDUSTAN STEEL LTD. V. STATE OF ORISSA [1972] 8 3 ITR 26(S); AND 5. CIT V. INTERNATIONAL AND VISUAL CO. [2007] 288 I TR 570(DEL). 11. IN CIT V. INTERNATIONAL AND VISUAL CO. (SUPRA) IT HAS BEEN HELD TO THE EFFECT THAT WHERE THERE HAS BEEN FULL DISCLOSURE OF FACTS BY THE ASSESSEE NO CONCEALMENT PENALTY IS LEVIABLE. 12. IN VIEW OF THE ABOVE THE GRIEVANCE RAISED BY T HE ASSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE ORDER P ASSED BY THE LD. CIT(A) IS QUASHED. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.01.2010. SD/- SD/- (K.D. RANJAN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22.01.2010 *RM ITA 4305(DEL)09 9 COPY FORWARDED TO: 1. M/S. STANDING CONFERENCE OF PUBLIC ENTERPRISES (SCOPE)7-LODHI ROAD CORE NO. 8 NEW DELHI. 2. ITO WARD 31(1) N. DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR