DCIT(E)- CIRCLE-2(1), NEW DELHI V. NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES, NEW DELHI

MA 175/DEL/2020

AI Insights

The case involves the Deputy Commissioner of Income Tax (DCIT) filing miscellaneous applications under section 254(2) of the Income-tax Act, 1961, seeking to recall orders related to appeals for the Assessment Years 2013-14, 2014-15, and 2015-16, which were initially dismissed based on the tax effect being below the threshold limit. The Revenue argued that the tax effect exceeded the threshold after a revised calculation. The assessee contested the applications as being time-barred and argued on merits based on previous judicial decisions favoring the principle of mutuality. The Tribunal found that the applications were within the time limit and, on merits, upheld the principle of mutuality, leading to the dismissal of the Revenue's appeals for AYs 2013-14 & 2015-16 but dismissed the application for AY 2014-15 due to the revised tax effect threshold.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46981 (ITAT-DELHI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Other Referred Cases: Srinivas Sashidhar Chaganty v. ITO, CIT vs Hindustan Sports Club, Ranchi Club, Standing Conference of Public Enterprises, Bankipur Club Ltd., CIT vs Northern India Motion Pictures Association
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: MANUJ SABHARWAL
• Keywords: Tax effect; Period of limitation; Charitable institution
• Section: 254(2); 11; 13

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”, NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER MA No.174/Del/2020 (in ITA No.1915/DEL/2019) (Assessment Year : 2014-15) DCIT (E), Circle 2 (1), vs. National Software & Services Companies (NASSCOM), New Delhi. Office-cum-shop No.30-31, Ashoka Hotel, 50B, Chanakyapuri, New Delhi – 110 021. (PAN: AAATN2595F) MA No.173 & 175/Del/2020 IN / AND (ITA Nos.1914 & 1916/DEL/2019) (Assessment Years : 2013-14 & 2015-16) DCIT (E), Circle 2 (1), vs. National Software & Services Companies (NASSCOM), New Delhi. Office-cum-shop No.30-31, Ashoka Hotel, 50B, Chanakyapuri, New Delhi – 110 021. (PAN: AAATN2595F) (APPLICANT) (RESPONDENT) APPLICANT/ASSESSEE BY : Shri Manuj Sabharwal, Advocate Shri Devvrat Tiwari, Advocate Shri Drona Negi, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 21.03.2025 Date of Order : 09.04.2025 O R D E R PER S. RIFAUR RAHMAN, AM : 2 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 1. DCIT (E), Circle 2(1), New Delhi (hereinafter referred to as ‘the Applicant’) by moving applications under section 254 (2) of the Income-tax Act, 1961 (for short ‘the Act’) in the aforesaid cases for Assessment Years 2013-14, 2014-15, & 2015-16 in ITA Nos.1914 to 1916/DEL/2019 (order dated 23.08.2019) prayed for recalling of the aforesaid order. 2. We observed that all the three appeals were disposed off by the coordinate Bench on the basis of tax effect and at that point of time the limit was Rs.50 lakhs, accordingly the Tribunal dismissed the same on the basis of tax effect. Now, the Revenue has filed misc. applications for recalling of the case on the basis that the tax effect in the present case in AY 2013-14 is Rs.4,10,59,677/- which is above the threshold limit of Rs.50,00,000/- for filing the appeal before the ITAT as per the CBDT Circular no.17 of 2019 dated 08.08.2019. Ld. DR vehemently argued that the tax effect is beyond the limit prescribed in the aforesaid circular. 3. On the other hand, ld. AR of the assessee submitted as under:- “1. The present MAs are barred by limitation prescribed under s. 254(2) of the Income-tax Act, 1961 as the same have been f led after the expiry of six months from the end of the month in which the orders sought to be recalled have been passed. 2. The order sought to be recalled was passed on 23rd August 2019 and the time limit for the purpose of s. 254(2) is to be computed from 3 1'1 August 2019. The pronouncement of order sought to be recalled was made on the date of hearing being 23rd August 2019 and the same also records the presence of the opposite party, which shall be construed as 3 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 communication i.e., knowledge (actual as well as constructive) to the opposite party. 3. Having regard to the same, the limitation would set in from 281h February 2020. i.e. after the expiry of six months computed from 31'1 August 2019. However, the Appellant Department is computing the said period of limitation from the date on which the order is received by the Department (which is 161h January 2020) and the same is clearly contrary to the phrase \"Six months from the end of the month in which the order is passed\" contained in s. 254(2) of the Act. 4. The said matter is squarely covered in favour of the Respondent assessee in the case of Srinivas Sashidhar Chaganty v. ITO [2017] 88 taxrnann.com 883 (Hyderabad - Trib.). 5. Even otherwise. the issue on merits in the main appeals is squarely covered by the decision of the Hon’ble Delhi High Court in the assessee's own case for A Y 2011-12 (ITA No. 2212024) and by the decision of the Hon’ble Delhi Tribunal for A Y 2009-10 (ITA No. 6521/Dell20 I 3). AY 2010-11 (ITA No. 3237/De1l2016) and AY 2012-13 (ITA No. 5738/Dell20 16). 6. Without prejudice, the tax-effect for the years as per application filed by the department as under:- A Y :2013-14 - Rs.5,46,71,045, AY: 2014-15 - Rs.52.28,727and AY : 2015-16 - Rs. 4,10,59,677 and the MA for 2014-15- is to be dismissed for tax effect owing to new tax effect Circular No.5 of 2024 read with Circular No.9 of 2024.” 4. Considered the rival submissions and material available on record. We observed that no doubt, these appeals were disposed off on the basis of tax effect, however it is brought to our notice that in AY 2013-14 tax effect is Rs.5,46,71,045/-, in AY 2014-15 it is Rs.52,28,727/- and in AY 2015-16 it is Rs.4,10,59,677/-. After considering the facts on record, initially ld. AR of the assessee raised the issue of limitation with the submission that misc. applications filed by the Revenue are beyond six months. On verification of 4 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 record, we observed that the order of the Tribunal was received by the Revenue only on 30.09.2019 and the MAs were filed on 16.01.2020, which is within six months. Therefore, the misc. applications filed by the Revenue are within the time limit. 5. Coming to the issue on merit, we observed that in AY 2014-15, the tax effect is Rs.52,28,727/- and even if we recall the order, we observed that the present tax effect limit is revised by CBDT vide Circular No.09/2024 dated 17.09.2024 to Rs.60,00,000/-. Then this appeal has to be disposed off on the basis of tax effect, therefore, the misc. application in MA No.174/Del/2020 for AY 2014-15 filed by the Revenue is dismissed. 6. With regard to MA Nos.173 & 175/Del/2020 filed by the Revenue, we observed that the tax effect in these AYs 2013-14 & 2015-16 are more than Rs.50 lakhs. Therefore, these appeals are recalled and misc. applications filed by the Revenue are allowed. 7. Coming to the appeals preferred by the Revenue in ITA Nos.1914/Del/2019 & 1916/Del/2019, considered the rival submissions and material placed on record, we observed that the issue under consideration is squarely covered by the decision of Hon’ble Delhi High Court in assessee’s own case for AY 2011-12 in ITA No.22/2024. The relevant findings of Hon’ble Delhi High Court is as under :- 5 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 “2. We had on the last occasion noticed the submission of Mr. Sabharwal, learned counsel for the respondent-assessee, who had drawn our attention to the judgment rendered by the ITA T in ITA 6521/De1/20 13 I and where it had ultimately come to hold as follows:- “10. In so far as the objection of the Id. AO based on the variance in the subscription fee and variance in voting rights is concerned, in ITO vs Venkatesh Premises Cooperative Society Ltd., 402 ITR 670 (St,'), the Hon'ble Apex court held that so long as the membership forms a class, the identity of individual member is irrelevant and any difference in the contributions payable by the members cannot fall foul of the law as sufficient classification exists. In CIT vs Hindustan Sports Club (supra), the Hon'ble Bombay High Court held that once the assessee is governed by the principle of mutuality, even if there are difference class of members, some of whom are not entitled to vote, the club would not be cease to be governed by principle of mutuality. In Ranchi Club (supra) and Standing Conference of Public Enterprises (supra), it is held that merely because the assessee had entered into transactions with non members and earned profits out of transactions held with them, it is right to claim exemption on the principle of mutuality in respect of transactions held by it with its members is not lost. The principle of establishing identity between the contributors and participators would apply only in respect of contributions made by the members. Hon'ble court concluded that the assessee being a mutual concern, the income derived from the property let out to its members and their guests and sale of liquor etc. to its members would not be taxable. 11. In this case, as already stated, the assessee had offered to tax the income derived from the receipts from the non-members. In so far as the members are concerned, there is no dispute as to the identity between the contributors and the participators. 12. During the course of arguments, the question as to the way of disposal of the funds, if any, had arisen. By placing reliance on the decision in the case of Bankipur Club Ltd. (supra), Id. AR submitted that in that case also vide clause 7 of the Memorandum of Association, it was provided that upon winding up and dissolution of the association, the remaining property after the 6 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 satisfaction of its debts and liabilities, shall not be paid or distributed amongst the members but shall be given or transferred to such other institution or institutions having similar objects to be determined by the members at or before the time on dissolution. On this aspect, the Hon'ble Apex court referred to the decision of the Hon'ble P&H High Court in the case of CIT vs Northern India Motion Pictures Association (1989) 180 ITR 160 to the effect that it is for the contributors to deprive themselves of the control on the disposal of the surplus and they could agree to divide the surplus amongst themselves and contribute the amount to a similar association or to a charitable trust, still the assessee will be a mutual benefit association and its income is not taxable. This aspect also, therefore, stands covered by the judicial precedent and does not admit of any fresh discussion. 13. For the above reasons, we concur with the findings of the ld CIT(A) that the case law relied upon by the Id. AR supports the view taken by the Id. CIT(A) on the aspect of principle of mutuality and the entitlement of the assessee to claim the benefit of Section 11 of the Act. We, therefore, uphold the same and find the grounds of appeal as devoid of merits.” 3. We find that the factual position remains unchanged even for Assessment Year 2011-12. 4. Mr. Maratha's apprehensions however, was with respect to the ITAT in paragraph 13 observing that the respondent-assessee would also be entitled to claim the benefit of Section 11 of the Income Tax Act, 1961 [\"Act\"]' However, and as Mr. Sabharwal rightly points out, in proceedings which had been taken before the Assessing Officer it was the consistent and unequivocal stand of the assessee that it would not fall within the ambit of Section 2(15) of the Act and that it was not intending to claim any benefit of Section 11 of the Act.” 8. Since Hon’ble Delhi High Court has adjudicated the issue on the basis of mutuality, the same issue will apply in the appeals filed by the Revenue in AYs 2013-14 & 2015-16. Accordingly, we are inclined to dismiss the appeals filed by the Revenue. 7 MA Nos.173 to 175/Del/2022 ITA Nos.1914 & 1916/DEL/2019 9. In the result, the misc. application filed by the Revenue in Assessment Year 2014-15 is dismissed and in AYs 2013-14 & 2015-16 are allowed. The appeals filed by the Revenue in AYs 2013-14 & 2015-16 are also dismissed. Order pronounced in the open court on this 9th day of April, 2025. Sd/- sd/- (CHALLA NAGENDRA PRASAD) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 09.04.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "