The ACIT,(OSD)Circle-5,, Ahmedabad v. M/s. Odhav Enviro Projects Ltd., Ahmedabad

ITA 602/AHD/2011 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 60220514 RSA 2011
Bench Ahmedabad
Appeal Number ITA 602/AHD/2011
Duration Of Justice 4 month(s) 27 day(s)
Appellant The ACIT,(OSD)Circle-5,, Ahmedabad
Respondent M/s. Odhav Enviro Projects Ltd., Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 01-07-2011
Next Hearing Date 01-07-2011
Assessment Year 2007-2008
Appeal Filed On 25-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) ITA NO.602/AHD/2011 [ASSTT. YEAR : 2007-2008] ACIT (OSD) CIR.5 AHMEDABAD. VS. ODHAV ENVIRO PROJECTS LTD. PLOT NO.25 GIDC INDU.ESTATE ODHAV AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI G.S.SURYABANSHI ASSESSEE BY : SHRI B.T.THAKKAR O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XI AHMEDABAD DATED 20.12.2010 ARISING OU T OF THE ORDER OF THE AO UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. IN THIS APPEAL THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE IN RES PECT OF UNABSORBED DEPRECIATION OF RS.6 39 823/- AND RS.4 42 641/- IN RESPECT OF UNABSORBED BUSINESS LOSS OF PREVIOUS YEAR. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS A NON- PROFIT ORGANIZATION ENGAGED IN THE BUSINESS OF PROV IDING EFFLUENT TREATMENT SERVICES TO ITS MEMBER-UNITS SITUATED IN ODHAV AREA OF AHMEDABAD CITY. THE ASSESSEE SHOWN IN ITS RETURN I NCOME FOR A.Y.2007- 08 A LOSS OF RS.10 82 464/- COMPRISING OF UNABSORBE D DEPRECIATION OF RS.6 39 823/- AND BUSINESS LOSS OF RS.4 42 641/-. T O THE QUERY IT WAS EXPLAINED BY THE ASSESSEE THAT THE LOSS WAS DUE TO INCREASE IN ITA NO.602/AHD/2011 -2- CONSUMPTION OF MATERIAL FOR TREATMENT INCREASE IN TREATMENT EXPENSES AND FALL IN INTEREST INCOME ON INVESTMENTS. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT DESPI TE INCREASE IN THE OPERATING COST THE ASSESSEE CHOSE TO REDUCE THE TR EATMENT CHARGES FROM ITS MEMBER FOR THE TREATMENT FACILITY AVAILED BY THE ME MBERS WHICH IS NOTHING BUT A DELIBERATE DESIGN TO BOOK LOSS FOR TH E ASSESSEE. IN FIRST APPEAL THE LEARNED CIT(A) AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE. THE A GGRIEVED REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THERE IS NO PROPER EXPLANATION BY THE ASSESSEE AS T O WHY THE TREATMENT CHARGES WERE REDUCED WHEN THERE WAS INCREASE IN OPE RATING EXPENSES. THE CASE OF THE ASSESSEE CLEARLY SHOWED THAT THERE IS A DELIBERATE ATTEMPT BY THE ASSESSEE FOR INCURRING OF LOSS BY ALLOWING I TS MEMBERS TO AVAIL THE EFFLUENT TREATMENT FACILITY AT LESSER COST. AS PER THE OBJECTS OF THE ASSESSEE-ORGANIZATION IT HAS FORMED TO PROVIDE FAC ILITY TO ITS MEMBERS ON NO-PROFIT NO-LOSS BASIS WHICH ITSELF INDICATES THA T THE ASSESSEE HAS TO MANAGE ITS AFFAIRS IN SUCH A WAY THAT IT SHOULD NOT HAVE PROFIT OR LOSS FROM ITS ACTIVITIES. THEREFORE THE AOS FINDING IS PRO PER AND JUSTIFIABLE AND HIS ORDER ON THIS ISSUE MAY BE UPHELD AND THAT OF THE C IT(A) MAY BE SET ASIDE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND SUBMITTED THAT THE ASSESSEE COMPANY IS SET UP BY THE ORDER OF THE HONBLE GUJARAT HIGH COURT TO PROVIDE EFFLUENT TREATMENT SERVICES T O ITS MEMBERS UNIT IN ODHAV AREA OF THE AHMEDABAD. IT IS A NON PROFIT OR GANIZATION AND WHOSE BOARD OF DIRECTORS CONSIST OF ELECTED MEMBERS AND T HREE GOVERNMENT ITA NO.602/AHD/2011 -3- NOMINEES. NO DIRECTORS HAVE BEEN PAID ANY REMUNERA TION OR ALLOWANCES INCLUDING SITTING FEES. IT IS SUBMITTED THAT THE T REATMENT CHARGES RECEIPTS HAS BEEN REDUCED FROM RS.48.24 LAKHS TO RS.44.52 LA KHS DURING THE YEAR DUE TO THE FACT THAT THE RATES OF TREATMENT CHARGES HAS BEEN REDUCED. THAT THE RATES HAVE BEEN DECIDED BY THE BOARD FROM TIME TO TIME AS PER THE REPRESENTATION MADE BY THE MEMBERS UNITS AND CONSID ERING VARIOUS ASPECTS. THAT THE CONSUMPTION OF MATERIAL FOR TREA TMENT HAS INCREASED DUE TO STRICT NORMS FOLLOWED AS PRESCRIBED BY GUJAR AT POLLUTION CONTROL BOARD AND THEREFORE THE COST OF TREATMENT MATERIALS HAVE INCREASED. IT IS SUBMITTED THAT THE AO HAS WITHOUT CONSIDERING THE E XPLANATIONS AND THE FACTS THAT THE ASSESSEE IS A NON-PROFIT ORGANIZATIO N AND ONLY A SERVICE PROVIDER WITH SOCIAL MOTIVE APPLIED PROVISIONS OF S ECTION 145(2) OF THE ACT REJECTED THE CLAIM OF THE LOSS WITHOUT PINPOINT ING ANY DEFECT IN THE BOOKS OF ACCOUNT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT THE CIT(A) AFTER CONSIDERI NG THE SUBMISSIONS OF THE ASSESSEE HAS ALLOWED THE CLAIM OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: 3.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT AND THE OBSERVATIONS OF THE AO IN THE ASS ESSMENT ORDER. I AM INCLINED TO ACCEPT THE CONTENTIONS PUT FORTH B Y THE AR OF THE APPELLANT. WHILE REJECTING THE BOOKS OF ACCOUNT U/ S.145(2) OF THE ACT THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE AOS OBS ERVATIONS ARE GENERAL VAGUE AND BESIDE THE POINT. THE REASONS A DVANCED BY THE AR OF THE APPELLANT FOR FALL IN GP ARE TENABLE. IN THESE ITA NO.602/AHD/2011 -4- CIRCUMSTANCES I AM INCLINED TO DIRECT THE AO TO AC CEPT THE BOOKS RESULTS SHOWN BY THE APPELLANT AND THEREBY TO ACCEP T THE UNABSORBED DEPRECIATION AND BUSINESS LOSS AS RETURN ED BY THE APPELLANT. THESE TWO GROUNDS OF APPEAL ARE ALLOWED . IN THE PRESENT CASE THERE IS NO DISPUTE OVER THE A CTIVITIES OF THE ASSESSEE COMPANY WHICH IS AN ORGANIZATION SET UP AS PER THE ORDER OF THE HONBLE GUJARAT HIGH COURT FOR PROVIDING EFFLUENT TREATMENT TO THE INDUSTRIES SITUATED IN AND AROUND ODHAV AREA OF THE AHMEDABAD. THE TREATMENT CHARGES ARE DECIDED BY THE BOARD OF DIRECTORS AS PE R THE REPRESENTATION OF ITS MEMBER UNITS. ADMITTEDLY THERE IS NO PROFIT M OTIVE BEHIND THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FOR ITS MEMBE RS. THE AO HAS REJECTED THE BOOK RESULTS OF THE ASSESSEE WITHOUT P OINTING OUT ANY SPECIFIC DEFECTS. THE ASSESSEE EXPLAINED ABOUT INCREASE IN T HE OPERATING EXPENSES FOR PROVIDING THE FACILITIES TO ITS MEMBERS WHICH THE AO DID NOT ACCEPT ON THE GROUND THAT WHEN THERE IS INCREASE IN THE CO ST OF OPERATING EXPENSES THE ASSESSEE OUGHT TO HAVE SIMULTANEOUSLY INCREASED THE RATE OF TREATMENT CHARGES TO BE PAID TO THE ASSESSEE BY THE MEMBER UNITS. THIS HAVING NOT DONE THE AO DOUBTED THAT THE ASSESSEE H AS DELIBERATELY ALLOWED ITS MEMBERS TO AVAIL FACILITIES AT LESSER R ATE. THAT THE ASSESSMENT OF INCOME IS TO BE MADE ON THE BASIS OF ACTUAL RECE IPTS AND EXPENDITURE OF THE ASSESSEE AND NOT WHAT IN THE OPINION OF THE AO THE ASSESSEE OUGHT TO HAVE RECEIVED. THE DECISION OF THE ASSESSEE IN RED UCING THE RATE OF TREATMENT CHARGES MIGHT NOT BE WISE COMMERCIAL DECI SION BUT GENUINENESS OF THE SAME IS NOT IN DISPUTE. IT IS N OT THE CASE OF THE AO THAT THE ASSESSEE SUPPRESSED ITS RECEIPT OR INFLATED ITS EXPENDITURE. THEREFORE WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO IN REJECTING THE CLAIM OF ITA NO.602/AHD/2011 -5- THE ASSESSEE. ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND REJECT THE GROUNDS OF THE REVENUE. 7. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 22-07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD