M/s. The Tiruchirapalli District Bus Operators Association, CHENNAI V. DCIT, Trichy

ITA 1169/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0942 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Keywords: Search and seizure; Charitable institution; Opportunity of being heard
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI HARI OM MARATHA, J.M. AND SHRI ABRAHAM P.GEORGE, AM .. ITA NO. 1169/MDS/2010 A Y: 2001-02 THE TIRUCHIRAPALLI DISTRICT BUS OPERATORS ASSOCIATION NO. 5/G, LAWSONS ROAD CANTONMENT, TIRUCHIRAPALLI620 001. PAN NO. AAATT 9428 K VS. THE DY. C.I.T COMPANY CIRCLE - II TIRUCHIRAPALLI ITA NO. 1236/MDS/2010 A Y: 2001-02 THE DY. C.I.T VS. THE TIRUC HIRAPALLI DISTRICT BUS COMPANY CIRCLE- II OP ERATORS ASSOCIATION TIRUCHIRAPALLI NO. 5/ G, LAWSONS ROAD C ANTONMENT, TIRUCHIRAPALLI620001 PAN NO. AAATT 9428 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PHILIP GEORGE DEPARTMENT BY : SHRI K.E.B. RENGARAJAN O R D E R PER ABRAHAM P. GEORGE, AM: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND DEPARTMENT RESPECTIVELY, BOTH DIRECTED AGAINST THE ORDER OF TH E LD. PAGE 2 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 CIT(A),TIRUCHIRAPALLI. WHEREAS THE ASSESSEE IN ITS APPEAL IS AGGRIEVED ON THE LD. CIT(A)S CONCLUSION THAT IT CA NNOT BE CONSIDERED AS A MUTUAL ASSOCIATION AND PRINCIPLE OF MUTUALITY COULD NOT BE APPLIED, REVENUE IS AGGRIEVED THAT THE LD. C IT(A) FAILED TO FOLLOW THE RATIO OF THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF U.P. FOREST CORPORATION VS. DCIT 297 ITR 1W HREIN IT WAS HELD THAT REGISTRATION U/S 12A OF THE INCOME-TAX ACT, 19 61 [IN SHORT, THE ACT] WAS A BASIC CONDITION PRECEDENT FOR A CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A SOCIETY ESTABLISHED UNDER THE SOCIETIES REGISTRATION ACT, FOR THE WELFA RE OF VARIOUS BUS OPERATORS IN TIRUCHIRAPALLI DISTRICT, FILED ITS RET URN OF INCOME FOR THE IMPUGNED YEAR DECLARING NIL INCOME. ITS CONTENTION WAS THAT IT WAS ENTITLED TO EXEMPTION UNDER THE PRINCIPLES OF MUTUA LITY. ASSESSING OFFICER, HOWEVER, REJECTED THIS CLAIM OF THE ASSESS EE. IN ITS APPEAL BEFORE LD. CIT(A), ASSESSEE RELIED ON THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF CIT VS. WILLINGTON SPORTS CLUB REPORTED IN 302 ITR 279. LD. CIT(A), RELYING ON THE DECISION O F HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 AND 2000-01 IN PAGE 3 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 ITA NO. 414/CIT(A)/2006-07 HELD THAT THOUGH THE SOC IETY COULD NOT BE CONSIDERED AS A MUTUAL ASSOCIATION, ITS INCOME H AD TO BE COMPUTED AS FOR ANY OTHER CHARITABLE INSTITUTION, I F IT HAD SPENT 75% OF THE RECEIPTS DURING THE YEAR FOR ITS OBJECTS. 3. WHEN THE MATTER CAME BEFORE US, LD. A.R. SUBMITT ED THAT APPEALS WERE FILED BY THE ASSESSEE AS WELL AS BY TH E REVENUE AGAINST THE ORDER OF THE LD. CIT(A) FOR ASSESSMENT YEARS 2000-01 AND 2004-05, WHICH WAS RELIED ON BY THE LD. CIT(A) FOR THE IMPUGNED ASSESSMENT YEAR, AND THIS TRIBUNAL, VIDE ITS ORDER DATED 15.10.2010 IN ITA NO. 1798, 1799, 1802 AND 1803/MDS/2008 HAD R EMITTED THE MATTER BACK TO THE ASSESSING OFFICER FOR CONSIDERAT ION DE NOVO. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. LD. CIT(A) RELIED ON THE PREDECESSORS ORDER FOR AS SESSMENT YEAR 2004-05 AND 2000-01. BOTH THE ASSESSEE AS WELL AS THE REVENUE HAD CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL FO R THOSE ASSESSMENT YEARS. IT WAS HELD BY THIS TRIBUNAL IN PARAS 2 TO 7 OF ITS ORDER DATED 15.10.2010 AS UNDER: PAGE 4 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 2. ONE OF THE PREDOMINANT ISSUES TO BE CONSIDERED IN THESE APPEALS IS THE CORRECT STATUS OF THE ASSESSEE IN LA W. THE ASSESSEE-ASSOCIATION HAS RETURNED THE INCOME IN THE STATUS OF A MUTUAL ASSOCIATION. AFTER EXAMINING THE FACTS OF THE CASE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE BEN EFITS OF THE ACTIVITIES OF THE ASSESSEE-ASSOCIATION HAS GONE BEY OND THE CIRCLE OF MUTUALITY AND, THEREFORE, THE ASSESSEE CO ULD NOT BE GIVEN THE STATUS OF A MUTUAL ASSOCIATION. ACCORDIN GLY, THE CLAIM OF THE ASSESSEE OF NON TAXABILITY OF THE SURPLUS HA S BEEN REJECTED. THE ASSESSING AUTHORITY, ON THE OTHER HA ND, TREATED THE ASSESSEE AS AN ASSOCIATION OF PERSONS AND COMPL ETED THE ASSESSMENTS. IN FIRST APPEALS, THE COMMISSIONER OF INCOME-TAX (APPEALS) AGREED WITH THE VIEW OF THE ASSESSING OFF ICER THAT THERE IS NO MUTUALITY IN ASSESSEES CASE AND IT COU LD NOT BE ASSESSED IN THE STATUS OF A MUTUAL CONCERN. BUT HE HELD THAT THE ASSESSEE COULD HAVE CLAIMED THE STATUS OF A CHA RITABLE SOCIETY BUT FOR THE REGISTRATION UNDER SEC.12A, HAV ING NOT OBTAINED. 3. IN THE ABOVE BACKGROUND, THE CONTENTION OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN TREATING IT AS A CHARITABLE SOCIETY AND NOT AS A MU TUAL CONCERN. THE CONTENTION OF THE REVENUE IS THAT THE COMMISSIO NER OF INCOME-TAX (APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS A CHARITABLE ASSOCIATION AND NOT AS AN ASSOCIATION OF PERSONS. ON THE FINDING OF THE COMMISSIONER OF INCOME-TAX (A PPEALS) THAT THE ASSESSEE IS A CHARITABLE ASSOCIATION, BOTH THE ASSESSEE PAGE 5 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 AS WELL AS THE REVENUE ARE IN APPEALS. THEREFORE, THE REAL DISPUTE IS BETWEEN THE STATUS OF A MUTUAL CONCERN O R ASSOCIATION OF PERSONS. THE ASSESSEE, THE ASSESSIN G AUTHORITY AND THE COMMISSIONER OF INCOME-TAX (APPEALS) HAVE G ONE ON DIFFERENT TANGET, AS A RESULT OF WHICH THE ORDERS H AVE BECOME POINTLESS. 4. WHILE EXAMINING THE ISSUE OF CORRECT STATUS OF T HE ASSESSEE, WE FIND THAT THE DISCUSSIONS AVAILABLE IN THE ORDERS OF THE LOWER AUTHORITIES ARE NOT SUFFICIENT TO COME TO A REASONABLE CONCLUSION. WE ARE AFRAID THAT THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ASSESSEE IS A CHAR ITABLE INSTITUTION IS SOMEWHAT FARFETCHED. HE HAS NOT CRI TICALLY EXAMINED THE OBJECTS OF THE ASSESSEE-ASSOCIATION AN D CHARITABLE ACTIVITIES CARRIED ON BY THE ASSESSEE. WITHOUT SUCH BASIC FACTS ON RECORD, IT IS QUITE PREMATURE TO CON CLUDE THAT THE ASSESSEE IS A CHARITABLE SOCIETY. TAXING OF THE IN COME FOR WANT OF REGISTRATION UNDER SEC.12A IS A DIFFERENT ISSUE. 5. AT THE SAME TIME, THE ARGUMENT OF THE ASSESSEE T HAT IT IS A MUTUAL CONCERN IS ALSO NOT EASILY DIGESTIBLE. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE A RE OF THE CONSIDERED VIEW THAT THESE CASES HAVE TO BE RECONSI DERED BY THE ASSESSING AUTHORITY IN A DETAILED MANNER, DE NO VO, IN ACCORDANCE WITH LAW. DETERMINATION OF THE STATUS I S A CRUCIAL ISSUE THAT HAS TO BE EXAMINED SYSTEMATICALLY AND CA REFULLY. WE REMIT BACK THESE FILES TO THE ASSESSING OFFICER TO CALL FOR DETAILS PAGE 6 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 FROM THE ASSESSEE AND TO DECIDE THE ISSUE OF STATUS AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ONC E THE QUESTION OF STATUS IS DETERMINED BY THE ASSESSING O FFICER, HE MAY EXAMINE OTHER ISSUES RELATING TO THE COMPUTATIO N OF INCOME. 7. IN RESULT, THESE CASES ARE REMITTED BACK TO THE ASSESSING OFFICER. THE APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. FOLLOWING THIS DECISION OF THE TRIBUNAL, WE ARE OF THE OPINION THAT FOR THE IMPUGNED ASSESSMENT YEAR ALSO, THE MAT TER HAS TO BE REMITTED BACK TO THE ASSESSING OFFICER. ACCORDINGL Y, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE M ATTER BACK TO THE ASSESSING OFFICER, FOR CONSIDERATION AFRESH IN LINE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL FOR ASSESSMENT YEA R 2000-01 AND 2004-05, MENTIONED SUPRA. PAGE 7 OF 7 I.T.A. NOS 1169 & 1236./MDS/2009 6. IN THE RESULT, BOTH THE CROSS APPEALS OF THE ASS ESSEE AND REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURP OSES. PRONOUNCED IN THE OPEN COURT ON 16.3.2011. SD/- SD/- ( HARI OM MARATHA) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 16 TH MARCH, 2011. VL/ COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE