Addl. CIT, Noida v. M/s Jalvayu Sehkari Awas Samiti Ltd., Noida

ITA 830/DEL/2011 | 2002-2003
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 83020114 RSA 2011
Bench Delhi
Appeal Number ITA 830/DEL/2011
Duration Of Justice 7 month(s) 18 day(s)
Appellant Addl. CIT, Noida
Respondent M/s Jalvayu Sehkari Awas Samiti Ltd., Noida
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 30-09-2011
Date Of Final Hearing 14-09-2011
Next Hearing Date 14-09-2011
Assessment Year 2002-2003
Appeal Filed On 11-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I NEW DELHI) BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI B.K. HALDAR ACCOUNTANT MEMBER I.T.A. NO.829 830 &831/DEL/2011 ASSESSMENT YEAR : 2001-02 02-03 & 04-05 ADDL. ACIT JALVAYU SEHKARI AWAS SAMITI NOIDA RANGE LTD. Q-6A SECTOR-21 NOIDA. V. NOIDA. AND C.O. NO. 78 79 AND 80/DEL/2011 I.T.A.829 830 & 831/DEL/2011 ASSESSMENT YEARS:2001-02 02-03 & 04-05 JALVAYU SEHKARI AWAS ADDL. CIT SAMITI LTD. Q-6A NOIDA RANGE SECTOR-21 NOIDA. V. NOIDA. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAATJ AAATJ AAATJ AAATJ- -- -4438 4438 4438 4438- -- -M MM M DEPARTMENT BY : SHRI ROHIT GARG SR. DR. ASSESSEE BY : SHRI SANJAY KUMAR. ORDER PER BENCH: THESE ARE THREE APPEALS FILED BY THE REVENUE AGAINST T HE ORDERS OF LD CIT(A) GHAZIABAD ALL DATED 2.11.2010 FOR ASSESSM ENT YEAR 2001- 02 02-03 & 2004-05 AND THE CORRESPONDING CROSS OBJECT IONS FILED BY THE ASSESSEE . FOR THE SAKE OF CONVENIENCE ALL THESE AP PEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO829 830&831 CO 79 80&81/DEL/11 2 2 2. IN ALL THE APPEALS OF THE REVENUE IT IS DISPUTING THE FINDING OF THE LD CIT(A) THAT INTEREST INCOME THE ASSESSEE FROM FDR AN D TAXABLE BONDS IS EXEMPT FROM INCOME TAX ON APPLICATION OF PR INCIPLES OF MUTUALITY. 3. THE ASSESSEE IS A REGISTERED SOCIETY UNDER THE UTTAR PR ADESH COOPERATIVE SOCIETIES ACT 1965. THE OBJECTS OF THE SOCIETY AS NARRATED IN THE ASSESSMENT ORDER ARE AS UNDER:- 1. FOR HELPING ITS MEMBERS TO COMPLETE THE CONSTRUCTIO N OF BUILDING AFTER MAKING PROVISION FOR THE LAND FOR THE CONSTRUC TION OF BUILDING THE BUILDING MATERIAL AND OTHER NECESSARY FACILITIES. A) TO ACQUIRE LAND UNDER THE LAND ACQUISITION ACT OR OT HERWISE. B) THE SAMITI WILL ENTER INTO AN AGREEMENT TO PURCHASE THE LAND AND SEND A COPY OF THAT AGREEMENT TO THE REGISTRAR. C) TO LAY OUT AND DEVELOP THE LAND SO ACQUIRED. D) TO GET THE MAP AND BUDGET ESTIMATE PREPARED FOR THE CONSTRUCTION OF HOUSES ON THIS LAND; AND E) TO CONSTRUCT OR CAUSE TO BE CONSTRUCTED RESIDENTIAL B UILDING OR OTHER BUILDINGS ACCORDING TO THE CONVENIENCE OF THE MEMBERS. 2. TO EXTEND LOAN TO ITS MEMBERS FOR THE PURCHASE OF P LOT. 3. TO PROVIDE THE BUILDINGS CONSTRUCTED BY THE SAMITI ON HIRE PURCHASE OR RENT. 4. TO KEEP THE LAND SITE BUILDING AND ALL THE OTHE R MOVABLE AND IMMOVABLE PROPERTY IN ITS POSSESSION SELL MORTGAGE LET OUT OR DISPOSE OF 5. TO SECURE LOAN FROM THE U.P. COOPERATIVE HOUSING B OARD LTD. LUCKNOW FOR THE CONSTRUCTION/PURCHASE OF THE BUILDING . ITA NO829 830&831 CO 79 80&81/DEL/11 3 3 6. U.P. AVAS AVAM VIKAS PARISHAD TO EXTEND LOAN TO THE MEMBERS FOR THE PURCHASE/ CONSTRUCTION OF THE FLATS. 1. TO DEVELOP A COOPERATIVE COLONY AND IN CASE IT IS NECESSARY TO DO SO TO ESTABLISH AND MAINTAINED FOR THE FACILITY AND BE NEFIT OF ITS MEMBERS CONSUME5RS STORE CANTEEN TRANSPORT SERVICES AND OTHER RECREATIONAL AND EDUCATIONAL INSTITUTIONS. 2. TO MAKE AVAILABLE AND ARRANGE FOR THE BENEFIT OF THE MEMBERS THE FOLLOWING FACILITIES:- I) LIGHTING ARRANGEMENT ON THE FIXED PLACES ON THE ROAD . II) DISTRIBUTION AND DISPOSAL OF WATER. III) FACILITY OF DISPENSARY IV) CLEANING AND MAINTENANCE OF BUILDINGS GARDENS PUBL IC ROADS AND STREETS. V) SECURITY ARRANGEMENTS. 3. TO DO SUCH OTHER ACTS WHICH ARE NECESSARY OR SUITABL E FOR THE CONVENIENCE AND WELFARE OF THE MEMBERS OF THE SAMITI AND THE ACHIEVEMENT OF THE AFORESAID OBJECTS OF THE SAMITI. 4. THE ASSESSING OFFICER HELD THAT THE ASSESSEE SOCIETY WAS BEING RUN AS A MUTUALLY BENEFICIAL CLUB BY ITS MEMBERS AND FOR THAT PURPOSE FUNDS WERE COLLECTED FROM MEMBERS AND SPENT ON THEM. H OWEVER IT WAS HELD BY HIM THAT SOME ACTIVITIES WERE UNDERTAKEN B Y THE ASSESSEE TO EARN PROFIT AND THUS THE SAME ARE NOT COVERED BY T HE DOCTRINE OF MUTUALITY. IT WAS NOTED BY HIM THAT THE ASSESSEE RECEIVE D AMOUNTS FROM PARTIES WHO WERE NOT MEMBERS OF THE SOCIETY. ONE SUCH RECEIPT WAS INTEREST FROM BANK DEPOSIT AND RECEIPT FROM SOME TA XABLE BONDS. THE ASSESSING OFFICER THEREFORE HELD THAT INTEREST RE CEIVED BY THE ITA NO829 830&831 CO 79 80&81/DEL/11 4 4 ASSESSEE FROM SUCH BANK DEPOSITS AND BONDS WOULD NOT BE ENT ITLED TO EXEMPTION BY APPLICATION OF DOCTRINE OF MUTUALITY. HOWEVER THE EXPENSES CLAIMED RELATABLE TO EARNING SUCH INCOME UNDE R THE HEAD LT MAINTENANCE FUND WAS ALLOWED AND THE NET AMOUNT WAS HELD TO BE CHARGEABLE TO TAX. 5. IN ADDITION TO THE ABOVE IT WAS NOTED BY THE ASSESSI NG OFFICER THAT THE ASSESSEE RECEIVED SOME INCOME ON ACCOUNT OF THE FOLLOWING:- A) RECEIPT FROM VENDORS. B) RECEIPT FROM CABLE OPERATOR. C) LEASE RENT OF MI ROOM D) MISC. INCOME. 6. AFTER ALLOWING AN ESTIMATED EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF THE ABOVE INCOME THE NET OF SUCH RECEIPT WAS CONSIDERED BY THE ASSESSING OFFICER AS CHARGEABLE TO TAX. AGGRIEVED THE ASSESSEE FILED APPEALS BEFORE THE LD CIT(A). 7. BEFORE THE LD CIT(A) IT WAS CONTENDED BY THE ASSESSE E THAT FOR THE RELEVANT PERIOD THE ASSESSEE WAS HOLDING A VALID CE RTIFICATE U/S 12A OF THE ACT. SUCH CERTIFICATE WAS ISSUED ON 1.7.199 7. THE FIRST NOTICE FROM THE COMPETENT AUTHORITY FOR CANCELLATIO N OF THE SAID CERTIFICATE WAS RECEIVED BY THE ASSESSEE ON 8.12.2003 A ND THE CERTIFICATE WAS CANCELLED ON 16.1.2004. THUS FOR A SSESSMENT YEAR 2001-02 AND 2002-03 AT THE TIME OF FILING OF THE RE TURN OF INCOME THE ASSESSEE HELD A VALID CERTIFICATE U/S 12A OF THE ACT. SUBSEQUENT CANCELLATION OF THE SAID CERTIFICATE BY THE LD CIT C OULD NOT HAVE APPLIED TO THE ASSESSMENT OF THESE TWO ASSESSMENT YEARS. ITA NO829 830&831 CO 79 80&81/DEL/11 5 5 8. IT WAS FURTHER CONTENDED THAT THE SOCIETY IS A COO PERATIVE HOUSING SOCIETY AND THEREFORE IT IS A MUTUAL CONCERN . THUS THE SUBSCRIPTION COLLECTED FROM THE MEMBERS AND OTHER TYPE OF RECEIPTS WHICH WERE TO BE UTILIZED FOR THE OBJECT OF THE SOCI ETY ARE EXEMPT FROM TAX ON THE PRINCIPLE OF MUTUALITY. RELIANCE WAS PLA CED ON THE FOLLOWING CASE LAWS:- 1. CHEMSFORD CLUB V. CIT 243 ITR 89 (SC). 2. CIT V. BANKEYPUR CLUB LTD. 226 ITR 97 (SC). 9. FACTUALLY IT WAS SUBMITTED THAT NO PERSONS WERE ALL OWED TO COME INSIDE THE PREMISES OF THE SOCIETY WITHOUT VALID C ERTIFICATE. THE VENDORS WHO WERE HOUSE MAID SWEEPERS WASHER-MEN ELECT RICIAN CARPENTERS PLUMBERS ETC. WORKED FOR THE RESIDENTS/MEMB ERS OF THE SOCIETY. SUCH VENDORS RECEIVED THEIR WAGES FROM THE ME MBERS AND PAID ONLY PART OF IT TO THE SOCIETY. SIMILARLY VEN DORS WHO SELL THEIR GOODS AND THE CABLE OPERATOR CHARGED THE RESIDENTS FO R THE GOODS/SERVICES PROVIDED AND PAID SMALL AMOUNT TO THE SO CIETY. THUS THE AMOUNTS RECEIVED FROM THE VENDORS AND THE CABLE OPERATOR INDIRECTLY CAME FROM THE MEMBERS OF THE SOCIETY. IN SUCH CASES THE RECEIPT FULFILLS THE CONDITION OF MUTUALITY. RELIAN CE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1. SOMVIHAR APARTMENTS OWNERS HOUSING MAINTENANCE LTD. 60 ITD 392. 10. AS REGARDS RECEIPT OF LEASE RENT ON ACCOUNT OF MI ROOM IT WAS SUBMITTED THAT AN AIR FORCE DOCTOR VISITED THE MI RO OM DAILY BETWEEN 7.30 AM TO 1.30 PM AND PROVIDED FREE CONSULTANCY TO ALL WHO WERE IN SERVICE AND EX-SERVICE MEN AND THEIR DEPENDENTS. THE RENT FOR THE ITA NO829 830&831 CO 79 80&81/DEL/11 6 6 SAID ROOM WAS PAID BY THE AIR FORCE BOARD. THE SOCIE TY INCURRED EXPENDITURE FOR MAINTENANCE AND UPKEEP OF THE SAME R OOM. THE SOCIETY ALSO EARNED SOME MEAGER INCOME ON ACCOUNT OF DISPLAY ON NOTICE BOARD FROM THE MEMBERS WHO WANTED TO BUY SOME GOODS OR SELL ANY OF THEIR BELONGINGS. THIS WAS SHOWN AS MISC. INCOME. IT WAS CONTENDED THAT SUCH RECEIPTS ARE ALSO EXEMPT AS PER JUR ISDICTIONAL HIGH COURTS DECISION IN THE CASE NOIDA GOLF COURSE. 11. THE LD CIT(A) HELD THAT THE SOCIETY WAS NOT ENGAG ED IN ANY CHARITABLE ACTIVITY AND THEREFORE REJECTED THE CLAI M OF THE ASSESSEE THAT IT IS ENTITLED TO BENEFIT OF SECTION 11 & 12 OF THE ACT. HE HOWEVER HELD THAT THE INTEREST INCOME RECEIVED FROM BANK WOU LD BE EXEMPT FROM TAX IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF SHIVALIKA COOPERATIVE GROUP HOUSING SOCIE TY AND NOIDA GOLF COURSE SOCIETY. IT WAS HELD BY HIM THAT INTEREST INCOME FROM INVESTMENT OF SURPLUS FUNDS GENERATED FROM MEMBER RECEI PTS IN THE BANK FDR BONDS ETC. WOULD NOT BE TAXABLE. HOWEVER IT WAS HELD BY HIM THAT FOLLOWING RECEIPTS WOULD BE TAXABLE:- 1. LEASE RENT FROM MI ROOM. 2. RECEIPT FROM VENDORS. 3. RECEIPT FROM CABLE OPERATOR. 4. ANY OTHER RECEIPT RECEIVED FROM NON MEMBERS EXCLUDIN G INTEREST FROM BANKS ETC. AS MENTIONED EARLIER. 12. AGGRIEVED THE REVENUE HAS FILED APPEALS BEFORE T HE TRIBUNAL AND THE ASSESSEE HAS FILED CORRESPONDING CROSS OBJECTION. 13. BEFORE US THE LD DR IN ADDITION TO RELYING ON T HE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT THE INTEREST RECEIVED F ROM FDR AND ITA NO829 830&831 CO 79 80&81/DEL/11 7 7 OTHER TAXABLE BONDS ARE NOT RECEIPTS FROM MEMBERS OF THE SOCIETY. IT IS ONLY RECEIPTS FROM THE CONSTITUENT MEMBERS OF THE SOCIE TY WHICH ARE EXEMPT AS PER THE PRINCIPLE OF MUTUALITY. REFERRING TO THE FINDINGS OF THE LD CIT(A) ON THIS ISSUE IT WAS CONTENDED BY HIM TH AT IT CANNOT BE SAID THAT THE ISSUE INVOLVED IN THE PRESENT CASE HAS BEEN FINALLY SETTLED. IN SUPPORT OF THE ABOVE CONTENTION THE LD DR RELIED ON THE FOLLOWING CASE LAWS:- 1. CIT V. I.I.T. EMPLOYEES DEATH & SUPERANNUATION RELIE F FUND 234 ITR 308 (KARNATAKA). 2. CIT V. COMMON EFFLUENT TREATMENT PLANT (THANE BELAP UR) ASSOCIATION 328 ITR 362 (BOM.). 14. THE LD AR FOR THE ASSESSEE IN ADDITION TO RELYING ON THE ORDER OF THE LD CIT(A) SUBMITTED THAT THE ASSESSEE IS ENTITLED TO EXEMPTION BY APPLICATION OF PRINCIPLE OF MUTUALITY IN VIEW OF TH E RATIO LAID DOWN IN THE FOLLOWING CASES:- 1. CIT V. NOIDA GOLF COURSE SOCIETY IN I.T.A. N0. 36 OF 2003 DATED 26.5.2010. 2. SHIVALIKA COOPERATIVE GROUP HOUSING SOCIETY LTD. V. ITO 289 ITR (AT) 105 (DEL.). 3. GULMARG ASSOCIATION & ANOTHER V. ITO 19 TTJ (AHD.) 1 84. 4. BOMBAY GYMKHANA LTD. V. ITO 115 TTJ (MUM.) 639. 5. DELHI GYMKHANA CLUB LTD. V. DCIT 131 TTJ (DEL.) 329 . 6. DIRECTOR OF INCOME TAX (EXMP.) V. ALL INDIA ORIENTA L BANK OF COMMERCE WELFARE SOCIETY 184 CTR (DEL.). 274. ITA NO829 830&831 CO 79 80&81/DEL/11 8 8 15. IN THE REJOINDER IT WAS CONTENDED BY THE LD DR THAT THE CASE OF SHIVALIKA COOPERATIVE GROUP HOUSING SOCIETY LTD. V. ITO IS DISTINGUISHABLE ON FACTS. 16. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIES. AT THE OUTSET WE WOULD LIKE TO DISCUSS THE IMPORTANT CASE LAWS ON THE ISSUE INVOLVED. 17. IN THE CASE OF CHEMSFORD CLUB (SUPRA) THE HON'BLE SUPREME COURT HELD THAT THE LAW RECOGNIZES THE PRINCIPLE OF MUTUALITY EXCLUDING THE LEVY OF INCOME TAX FROM THE INCOME OF SUCH BUSINE SS TO WHICH THE - ----PRINCIPLE IS APPLICABLE. ADVERTING TO THE JUD GMENT OF PRIVY COUNCIL IN THE ENGLISH AND SCOTTISH JOINT COOPERATIVE WHOLESAL E SOCIETY LTD. V. COMMISSIONER OF AGRICULTURE IT 16 ITR 270 (PC) THE S UPREME COURT ADOPTED THE EXISTENCE OF THE FOLLOWING PRINCIPLES AS ESTABLISHING MUTUALITY:- I) THE IDENTITY OF THE CONTRIBUTOR TO THE FUNDS AND THE RECIPIENTS FROM THE FUNDS; II) THE TREATMENT OF THE COMPANY HAVE INCORPORATED AS A MERE ENTITY FOR THE CONVENIENCE OF THE MEMBERS AND POLICY HOLDER IN OTHER WORDS AS AN INSTRUMENT OBEDIE NT TO THEIR MANDATE; AND III) THE IMPOSSIBILITY THAT CONTRIBUTOR SHOULD DERIVE PRO FIT FROM THE CONTRIBUTIONS MADE BY THEMSELVES TO A FUND WHICH COULD ONLY BE EXPENDED OR RETURNED TO THEMSELVES. 18. THUS ONE OF THE IMPORTANT CRITERIA THAT IS REQUI RED TO BE FULFILLED FOR EXCLUDING ANY INCOME BY APPLICATION OF PRINCIPL E OF MUTUALITY IS THAT THE INCOME MUST ARISE OUT OF CONTRIBUTION MADE BY THE CONSTITUENTS. ITA NO829 830&831 CO 79 80&81/DEL/11 9 9 THE BASIC CONCEPT IS THAT ONE CANNOT EARN PROFIT FROM ONE SELF. THE HON'BLE SUPREME COURT IN THE SAID CASE HAS NOT LAID DOWN THAT IF ANY INCOME IS EARNED BY INVESTING THE SURPLUS AVAILABLE WI TH THE MUTUAL CONCERN OUT OF THE CONTRIBUTION MADE BY THE CONSTITU ENTS WITH THIRD PARTIES WHO WERE NON MEMBERS WOULD BE EXEMPT BY APPLI CATION OF PRINCIPLE OF MUTUALITY. A PERSON CAN DEFINITELY EARN PROFIT FROM SOMEBODY ELSE. MERELY BECAUSE SUCH PROFIT IS UTILIZED FO R THE BENEFIT OF THE MEMBERS WOULD NOT LEAD TO THE CONCLUSION THAT THE PRINCIPLE OF MUTUALITY IS ATTRACTED IN SUCH CASES. 19. IN THE CASE OF NOIDA GOLF COURSE SOCIETY (SUPRA) THE STANDING COUNSEL FOR THE INCOME TAX DEPARTMENT HAD CONCEDED T HAT THE ISSUE INVOLVED WAS SQUARELY COVERED BY THE DECISION OF THE H ON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. CAWNPUR C LUB LTD. WHICH DECISION WAS UPHELD BY THE HON'BLE SUPREME COURT IN T HE CASE NO.4777 4778 4534/1991 AND 80-46/1995. HOWEVER IN THE CASE OF CIT V. CAWNPUR CLUB LTD. 146 ITR 181 (ALLD.) THE F ACTS ON THE BASIS OF WHICH THE DECISION WAS GIVEN WAS THAT THE RECEIPTS WERE ALSO FROM THE MEMBERS. THE HON'BLE APEX COURT DISMISSED THE REVENUE S APPEAL AS THE FINDING OF THE HON'BLE ALLAHABAD HIGH COURT THA T INCOME OF THE SAID ASSESSEE WAS EXEMPT ON APPLICATION OF THE PRINCIPLE OF M UTUALITY WAS NOT CHALLENGED BY THE REVENUE BEFORE THE APEX COURT . WHAT WAS DISPUTED BY THE REVENUE WAS THE HEAD OF INCOME OF THE RECEIPTS FROM THE MEMBERS ON ACCOUNT OF ROOMS LET OUT TO MEMBERS ON MONTHLY RENT BASIS. THE HON'BLE SUPREME COURT DECLINED TO ANSWER T HE QUESTION BEING ACADEMIC IN NATURE. THUS THE CASE OF CAWNPUR CLUB LTD. HAVE NO WHERE LAID DOWN THAT RECEIPTS FROM NON MEMBERS ARE EXEMPT BY THE APPLICATION OF PRINCIPLE OF MUTUALITY. IN THE CASE OF NOIDA GOLF COURSE SOCIETY THE DECISION OF THE HON'BLE JURISDICTI ONAL HIGH COURT ITA NO829 830&831 CO 79 80&81/DEL/11 10 10 CAN THEREFORE BE SAID TO BE BASED ON THE CONCESSION M ADE BY THE DEPARTMENTAL COUNSEL. 20. IN THE CASE OF DELHI GYMKHANA CLUB LTD. (SUPRA) THE HON'BLE TRIBUNAL HELD THAT INCOME FROM INVESTMENT OF MONEY M ADE BY THE CLUB NOT IMMEDIATELY REQUIRED WOULD NOT BE BUSINESS INCOME OF THE ASSESSEE AND THE SAME COULD NOT ATTRACT APPLICATION OF SECTION 115 JB OF THE ACT. THE DISPUTE BEFORE THE HON'BLE TRIBUNAL WAS APPLICABILITY OF SECTION 115JB OF THE ACT IN THE CASE OF THE ASSESSEE WHO WAS REGISTERED AS A COMPANY. THE HON'BLE TRIBUNAL RELIED ON THE FOL LOWING CASE LAWS:- 1. COUNTRY CLUB (I.T.A. NO. 84 OF 2003) DECIDED BY THE HON'BLE DELHI HIGH COURT AS PER THEIR ORDER DATED 112.5.2007. 2. DIT (EXEMPTION) V. ALL INDIA ORIENTAL BANK OF COMME RCE WELFARE SOCIETY 184 CTR (DEL.) 274. 3. CIT V. DELHI GYMKHANA CLUB LTD. 155 ITR 377 (DEL.). 21. IN THE CASE OF SHIVALIKA COOPERATIVE GROUP HOUSIN G SOCIETY (SUPRA) IT WAS HELD BY THE HON'BLE TRIBUNAL THAT THE INTEREST INCOME EARNED BY AN ASSESSEE ON SURPLUS FUNDS OF A MUTUAL SOCIET Y DEPOSITED WITH THE BANKING INSTITUTION IS COVERED BY THE PRINCI PLE OF MUTUALITY. RELIANCE WAS PLACED BY THE HON'BLE TRIBUNAL ON THE F OLLOWING CASE LAW:- 1. DIT (EXMPTION) V. ALL INDIA ORIENTAL BANK OF COM MERCE WELFARE SOCIETY 184 CTR 274. 22. IN THE CASE OF ITI EMPLOYEES DEATH & SUPERANNUATI ON RELIEF FUND (SUPRA) THE HON'BLE KARNATAKA HIGH COURT HELD THAT INCOME EARNED BY MAKING DEPOSIT BY WAY OF INVESTMENT IN THE BANK COULD NOT ATTRACT THE PRINCIPLE OF MUTUALITY. RELIANCE WAS PLACED ON THE F OLLOWING CASE LAWS:- ITA NO829 830&831 CO 79 80&81/DEL/11 11 11 1. CIT V. RANCHI CLUB LTD. 196 ITR 137 (PAT.) (FULL BENCH) 2. SPORTS CLUB OF GUJARAT LTD V. CIT 171 ITR 504 (GUJ. ). 23. IN THE CASE OF COMMON EFFLUENT TREATMENT PLANT ( SUPRA) IT WAS HELD BY THE HON'BLE BOMBAY HIGH COURT THAT THE INTE REST INCOME FROM FIXED DEPOSIT WITH BANK WOULD NOT BE EXEMPT BY APPLI CATION OF THE PRINCIPLE OF MUTUALITY BEING ON ACCOUNT OF TRANSACT ION WITH A THIRD PARTY. IN THE SAID DECISION THE HON'BLE BOMBAY HIGH C OURT DISSENTED FROM THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND V. CI T 308 ITR 202. 24. FROM THE ABOVE DISCUSSION IT IS QUITE CLEAR THAT O N THE ISSUE AS TO WHETHER THE INTEREST INCOME EARNED FROM BANK BY INVESTING SURPLUS FUNDS AVAILABLE WITH A MUTUAL CONCERN OUT OF CONTRIB UTIONS RECEIVED FROM MEMBERS IS EXEMPT OR NOT ON APPLICATION OF PRI NCIPLE OF MUTUALITY THERE ARE TWO OPPOSITE VIEWS. AS THE VIEW OF THE HON' BLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE WE HOLD THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT INTEREST INCOME EARNED FROM INVESTMENT IN BANK AND OTHER TAXABLE BONDS IS EXEMPT FROM TAX ON AP PLICATION OF PRINCIPLE OF MUTUALITY. GROUND NO.1 TAKEN BY THE RE VENUE IN APPEALS FOR ASSESSMENT YEAR 2001-02 2002-03 & 2004-05 ARE REJECTED . THUS ALL THE APPEALS OF THE REVENUE ARE DISMISSED. 25. NOW WE TAKE UP THE CROSS OBJECTIONS RAISED BY THE A SSESSEE FOR ALL THE THREE ASSESSMENT YEARS NAMELY 2001-02 2002-03 & 2004-05. MOST OF THE ISSUES AGITATED IN ALL THE CROSS OBJECTIONS A RE IDENTICAL AND ONLY THE QUANTUM OF RELIEF CLAIMED VARY. ITA NO829 830&831 CO 79 80&81/DEL/11 12 12 26. THE FIRST GROUND RAISED IN ALL THE CROSS OBJECTIONS FOR ALL THE YEARS RELATE TO THE FINDING OF LD CIT THAT THE SOCIETY WA S NOT ENGAGED IN ANY CHARITABLE ACTIVITY. 27. THE FACT OF THE CASE IS THAT THE ASSESSEE WAS REGISTER ED U/S 12A OF THE INCOME TAX ACT 1961 AS PER THE ORDER OF CIT MEERUT DATED 1.7.1997. AS PER THE ASSESSMENT PROCEEDINGS U/S 143(3) FO R ASSESSMENT YEAR 2000-01 IT WAS NOTICED BY THE ASSESSING OFF ICER THAT THE ASSESSEE WAS NEITHER CARRYING OUT ANY WORK OF CHARI TY NOR WAS ANY CHARITABLE ACTIVITY INCLUDED IN THE MAIN OR SUBSIDIAR Y OBJECTS OF THE SOCIETY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SO CIETY WAS INVOLVED IN COMMERCIAL ACTIVITY FOR THE BENEFIT OF ITS MEMBERS. THE ASSESSING OFFICER THEREFORE FILED A REFERENCE THROUGH THE ADDL. CIT NOIDA TO THE CIT GHAZIABAD FOR REVIEW OF THE REGIST RATION GRANTED TO THE SOCIETY U/S 12A OF THE ACT. 28. THE CIT GHAZIABAD ISSUED A NOTICE DATED 8.12.200 3 TO THE ASSESSEE REQUIRING IT SHOW CAUSE AS TO WHY REGISTRATION GRA NTED TO IT U/S 12A OF THE ACT SHOULD NOT BE WITHDRAWN. AFTER G IVING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD THE LD CIT GH AZIABAD VIDE HIS ORDER DATED 16.1.2004 WITHDREW THE ORDER OF REGISTRA TION U/S 12A ISSUED ON 1.7.1997. THE ASSESSEE DID NOT CONTEST THE ABOV E ORDER OF WITHDRAWAL DATED 16.1.2004. IT APPEARS THAT SUBSEQUE NTLY THE ASSESSEE MOVED RECTIFICATION APPLICATION BEFORE THE LD CIT FOR RECTIFYING THE SAID ORDER DATED 16.1.2004. AS PER THE CLARIFICATION GIVEN BY THE LD AR FOR THE ASSESSEE THE APPELLATE PROCEEDING S ARISING OUT OF REJECTION OF SUCH RECTIFICATION APPLICATION MOVED BY THE ASSESSEE HAS ATTAINED FINALITY. THUS AS OF DATE THE SAID ORDER DA TED 16.1.2004 STANDS. ITA NO829 830&831 CO 79 80&81/DEL/11 13 13 29. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD ON THE IMPUGNED ISSUE. HOWEVER IN THE FACTS NARRATED ABOVE IT IS TO BE HELD THAT THE ORDER OF LD CIT DATED 16.2.2004 WITHDRAWIN G REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT ON 1.7.1997 IS A VALID ORDER. THE ABOVE ORDER HAS NOT BEEN STRUCK DOWN BY DUE PROCE SS OF LAW. THUS THE ASSESSING OFFICER COULD NOT HAVE GRANTED RELIE F U/S 11 OR 12 OF THE ACT. THIS BEING THE FACTUAL POSITION THE ASSESSEE CANNOT CONTEND THAT RELIEF UNDER THE ABOVE SECTION SHOULD BE ALLOWED TO IT BECAUSE IT IS CARRYING ON CHARITABLE ACTIVITY. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY MERIT IN GROUND NO.1 RAISED IN THE CROSS OBJ ECTIONS FOR ALL THE IMPUGNED ASSESSMENT YEARS AND REJECT THE SAME. 30. AS REGARDS GROUND NO.2 RAISED BY THE ASSESSEE WE FIND THAT THE MISC. RECEIPTS OF ALL THE YEARS ARE ON ACCOUNT OF AMOU NT RECEIVED FROM THE MEMBERS OF THE SOCIETY FOR USING THE NOTICE BOARD FACILITY. THUS THE AMOUNTS WERE RECEIVED FROM THE MEMBERS ONLY. TH IS BEING THE CASE WE HOLD THAT THE PRINCIPLE OF MUTUALITY WOULD APPLY TO SUCH RECEIPTS. WE THEREFORE DIRECT THAT THE MISC. INCOME SHOWN BY THE ASSESSEE ON ACCOUNT OF RECEIPTS FROM THE MEMBERS OF THE SO CIETY FOR USING THE NOTICE BOARD FACILITY SHOULD BE CONSIDERED T O BE EXEMPT BY APPLICATION OF PRINCIPLE OF MUTUALITY. 31. AS REGARDS THE OTHER RECEIPTS NAMELY RECEIPTS FROM MEMBERS RECEIPTS FROM CABLE OPERATOR LEASE RENT OF MI ROOM IT IS NOT DISPUTED THAT THE SAME HAVE BEEN RECEIVED FROM THIRD PARTIES A ND ARE ALSO NOT INCOME ARISING OUT OF SURPLUS FUNDS GENERATED OUT OF ME MBERS CONTRIBUTIONS. IN THIS VIEW OF THE MATTER WE HOLD TH AT SUCH INCOME WAS NOT EXEMPT BY APPLICATION OF PRINCIPLE OF MUTUALITY . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS CONTENDED THAT THE SOC IETY HAS SPENT MORE FOR EARNING THE ABOVE INCOME THAN THE ESTI MATED ITA NO829 830&831 CO 79 80&81/DEL/11 14 14 EXPENDITURE ALLOWED BY THE ASSESSING OFFICER. HOWEVER THERE IS NOTHING ON RECORD TO SUPPORT THE ABOVE CLAIM. WE THEREFORE DECLINE TO INTERFERE WITH THE CONCURRENT FINDINGS OF THE AUTHOR ITIES BELOW ON THIS ISSUE. THUS GROUND NO.2 & 3 RAISED BY THE ASSESSEE IN ALL THE CROSS OBJECTIONS ARE PARTLY ALLOWED. 32. IN ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS TAKEN A FURT HER GROUND BEING GROUND NO.4 WHICH READS AS UNDER:- BECAUSE THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS I N RESTRICTING THE RELIEF ALLOWABLE TO THE EXTENT OF `. 10 69 450/- BEING THE INCOME DECLARED IN THE RETURN FILED BY TH E ASSESSEE SOCIETY. 33. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. FOR ASSESSMENT YEAR 2004-05 THE INTEREST/DIVIDEND EARNED FR OM BANKS/MUTUAL FUNDS AND OTHERS EXCLUDING INTEREST FREE DEPOSITS AND INVESTMENT AMOUNTED TO `.18 73 266/-. HOWEVER THE ASSESSEE ITSELF RETURNED AN INCOME OF `.10 69 450/-. THE SAME RETURN WAS NOT REVISED .IF ASSESSEE GOT FULL RELIEF OF `.18 73 266/- ON APPLIC ATION OF PRINCIPLE OF MUTUALITY ONLY AN AMOUNT OF `.7 07 47/- WAS ASSESSABLE. THE LD CIT HELD THAT HE COULD NOT HAVE REDUCED THE TOTAL INCOM E OF THE ASSESSEE BELOW THE RETURNED INCOME. HE THEREFORE ALLOWED R ELIEF TO THE ASSESSEE ON ACCOUNT OF INTEREST RECEIVED TO THE EXTENT SO THAT THE RETURNED INCOME SHOULD NOT BE REDUCED. THE LD. A.R. CONTENDS THAT THE APPELLATE AUTHORITIES CAN GIVE RELIEF TO THE ASSESSEE WH ICH MAY RESULT IN REDUCTION OF RETURNED INCOME. HOWEVER THE ABOVE ISSUE IS SETTLED IN FAVOUR OF THE REVENUE BY THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF GOETZE INDIA LTD. V. CIT 284 ITR 323 (SC). W E ARE OF THE OPINION THAT THE RATIO LAID DOWN IN THE ABOVE CASE APPLIES TO THE APPELLATE ITA NO829 830&831 CO 79 80&81/DEL/11 15 15 AUTHORITIES ALSO. IN VIEW OF THE ABOVE WE REJECT GRO UND NO.4 FOR ASSESSMENT YEAR 2004-05 TAKEN BY THE ASSESSEE. 34. WE CLARIFY THAT IN VIEW OF THE RELIEF GRANTED BY US ON ACCOUNT OF MISC. RECEIPTS THE RETURNED INCOME IN ANY OF THE ASSESSM ENT YEAR WOULD NOT BE REDUCED. 35. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE DISMISSED WHEREAS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLO WED IN PART. 36. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF SEPTEMBER 2011. SD/- SD/- (U.B.S. BEDI) (B.K. HAL DAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 30.9.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. BY ORDER (ITAT NEW DELHI). ITA NO829 830&831 CO 79 80&81/DEL/11 16 16 DATE OF HEARING DATE OF DICTATION DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH