The ITO, Ward-2, Gandhinagar V. Gujarat State Federation of Co.Op.Sugar Factories Ltd., Gandhinagar

ITA 133/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50853 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. K. GARO DIA, AM) ITA NO.133/AHD/2011 A. Y.: 2007-08 THE INCOME TAX OFFICER, WARD-2, GANDHINAGAR, BLOCK NO.14, 5 TH FLOOR, UDHYOG BHAVAN, SECTOR- 11, GANDHINAGAR VS GUJARAT STATE FEDERATION OF CO- OP. SUGAR FACTORIES LTD, PLOT NO.274, SECTOR NO.16, GANDHINAGAR PA NO. AAAAG 0288 P (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI K. MADHUSUDAN, SR. DR ASSESSEE BY SHRI M. J. SHAH, AR DATE OF HEARING: 04-11-2011 DATE OF PRONOUNCEMENT: 04-11-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A), G ANDHINAGAR, AHMEDABAD DATED 1-11-2010 FOR ASSESSMENT YEAR 2007- 08, ON THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING TH E ASSESSEE AS ELIGIBLE FOR EXEMPTION ON THE BASIS OF PRINCIPLES OF MUTUALITY. 2. THE LD. CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE RENTAL INCOME OF RS.1,87,940/- FROM REST HOUSE AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY ON THE BASIS OF PRINCIPLES OF MUTUALITY. 2. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) ON BO TH THE ABOVE GROUNDS THAT IN THE EARLIER YEARS 2003-04 TO 2006-0 7, THE LEARNED ITA NO.133/AHD/2011 ITO, W-2, GANDHINAGAR VS. GUJARAT STATE FEDERATION OF CO-OP SUGAR FACTORIES LTD. 2 CIT(A) ACCEPTED THE STAND OF THE ASSESSEE ON PRINCI PLES OF MUTUALITY. THE LEARNED CIT(A) FOLLOWED HIS ORDER FOR EARLIER Y EARS AND ACCEPTED THE CLAIM OF THE ASSESSEE FOR EXEMPTION ON THE PRIN CIPLE OF MUTUALITY. 3. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT FOR DECIDING THE APPLICABILITY OF PRINCIPLES O F MUTUALITY, THE AO HAS TO CONSIDER THE AMENDMENT THROUGH RESOLUTION. H E HAS SUBMITTED THAT IN THE ASSESSMENT YEARS 2003-04 TO 2005-06, IT AT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESSEE IN ITA NO. 1 129, 1727 AND 3679/AHD/2007 VIDE ORDER DATED 25-03-2011 RESTORED THE MATER IN ISSUE TO THE FILE OF THE AO FOR RECONSIDERATION. CO PY OF THE ORDER IS PLACED ON RECORD IN WHICH THE SUBMISSIONS OF THE PA RTIES AND THE ORDER OF THE TRIBUNAL IN PARA 6 TO 9 READ AS UNDER: 6. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT IN ORDER TO AVOID PROTECTIVE LITIGAT IONS ON THE ABOVE ISSUES, THE ASSESSEE CO-OPERATIVE SOCIETY PASSED RESOLUTION NO.6 IN THE ANNUAL GENERAL BODY MEETING HELD ON 11-03-2011 AND ADDED CLAUSE NO.9A T O THE BYELAW OF THE FEDERATION, IN THE CASE OF LIQUI DATION OF THE FEDERATION AFTER CLEARANCE OF ALL OUTSTANDING DUES/LIABILITIES BY THE LIQUIDATOR, REMAINING PROPE RTY/ASSET WILL BE DISTRIBUTED AMONGST THE INSTITUTIONAL MEMBE RS I. E. MEMBER SUGAR FACTORIES IN PROPORTION OF FINANCIAL CONTRIBUTION MADE BY THEM. COPY OF THE SAME IS FIL ED IN THE PAPER BOOK ALONG WITH ENGLISH TRANSLATION. HE H AS SUBMITTED THAT THE ABOVE RESOLUTION HAS BEEN SANCTI ONED BY THE DIRECTOR OF SUGAR, GUJARAT STATE, GANDHINAGA R VIDE LETTER DATED 15-3-2011 AND THE SAME WAS ADDED IN TH E FORM NO.4 AS PER THE SANCTION DATED 15-3-2011. COPI ES OF THE SAME ALONG WITH ENGLISH TRANSLATION COPIES A RE FILED ON RECORD. THE TRUE COPY OF THE RESOLUTION (PB-4) R EADS AS UNDER: ITA NO.133/AHD/2011 ITO, W-2, GANDHINAGAR VS. GUJARAT STATE FEDERATION OF CO-OP SUGAR FACTORIES LTD. 3 TRUE COPY OF RESOLUTION NO.6 OF THE ANNUAL GENERAL BODY MEETING OF THE GUJARAT STATE FEDERATION OF CO-OP. SUGAR FACTORIES LTD., GANDHINAGAR HELD ON 11 TH MARCH, 2011: RESOLUTION NO. 6: MOFIFICATION IN BYE-LAWS OF THE FEDERATION : IN CASE OF LIQUIDATION OF THE FEDERATION, AFTER CLEARANCE OF OUTSTANDING DUES / LIABILITIES BY THE LIQUIDATOR, REMAINING PROPERTY / ASSETS CAN BE DISTRIBUTED AMONGST INSTITUTIONAL MEMBERS I.E. MEMBER SUGAR FACTORIES, THERE IS NO PROVISION IN BY - LAWS OF THE FEDERATION. THE EXECUTIVE BODY MEETING OF THIS FEDERATION WHICH WAS HELD ON 22-06-2010 VIDE RESOLUTION NO.12 PROPOSED TO GENERAL BODY AND HENCE IT HAS BEEN UNANIMOUSLY DECIDED TO MAKE PROVISION IN BY-LAWS OF THIS FEDERATION AS INDICATED BELOW: 9(A) IN CASE OF LIQUIDATION OF THE FEDERATION, AF TER CLEARANCE OF ALL OUTSTANDING DUES / LIABILITIES BY THE LIQUIDATOR, REMAINING PROPERTY /ASSETS WILL BE DISTRIBUTED AMONGST INSTITUTIONAL MEMBERS I. E. MEMBER SUGAR FACTORIES IN PROPORTION OF FINANCIAL CONTRIBUTION MADE BY THEM. THE LEARNED COUNSEL FOR THE ASSESSEE ACCORDINGLY SUBMITTED THAT SINCE THE RESOLUTION PASSED RECENTLY , THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR RECONSIDERATION AND PASSING THE ORDER AFRESH IN ORD ER TO DECIDE THE ABOVE ISSUES ONCE FOR ALL. THE LEARNED D R ALSO SUBMITTED THAT THE MATTER IN ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR RECONSIDERATION. 7. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES, IN THE LIGHT OF RESOLUTION NO.6 OF THE ASSESSEE (SU PRA) WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R ESTORE BOTH THE ISSUES TO THE FILE OF THE AO FOR RECONSIDE RATION OF THE ISSUES AFRESH. THE MAIN REASON FOR REJECTING TH E CLAIM ITA NO.133/AHD/2011 ITO, W-2, GANDHINAGAR VS. GUJARAT STATE FEDERATION OF CO-OP SUGAR FACTORIES LTD. 4 OF THE ASSESSEE WAS THAT THE ASSESSEE HAS NOT FULFI LLED THE CONDITION REGARDING DISTRIBUTION OF SURPLUS ASS ETS ONLY AMONGST THE MEMBERS OF THE ASSOCIATION ON ITS DISSOLUTION. IN THE ABSENCE OF CLEAR CUT PROVISIONS FOR DISTRIBUTION OF SURPLUS, CLAIM OF THE ASSESSEE ON B OTH THE GROUNDS OF APPEAL WAS REJECTED. THE ASSESSEE HAS HOWEVER, MODIFIED THE BYE-LAWS BY ADDING CLAUSE 9 ( A) REFERRED TO ABOVE WHICH WAS ACCORDED SANCTION BY DIRECTOR OF SUGAR, GANDHINAGAR AND ACCORDINGLY IT W AS PUT IN FORM NO.4 ALSO. THESE PAPERS WERE NOT BEFORE TH E AO FOR CONSIDERATION. THEREFORE, THE LEARNED COUNSEL F OR THE ASSESSEE RIGHTLY CONTENDED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO ON BOTH THE GROUNDS FOR RECONSIDERATION IN ACCORDANCE WITH THE ABOVE NEW DEVELOPMENT BY MODIFYING THE BYE-LAWS OF THE FEDERA TION. THE LEARNED DR HAS NO OBJECTION FOR RESTORING THE M ATTER TO THE FILE OF THE AO ON BOTH THE GROUNDS OF APPEAL . ACCORDINGLY, THE ORDERS OF THE AUTHORITIES ARE SET ASIDE AND BOTH THE GROUNDS ARE RESTORED TO THE FILE OF TH E AO FOR RECONSIDERATION IN THE LIGHT OF THE DOCUMENTS NOW P LACED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE A BOVE. THE AO SHALL PASS REASONED ORDER BY GIVING REASONAB LE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1129/AHD/2007 FOR ASSESSMENT YEAR 2003-04 IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE LEARNED CIT(A) FOLLOWED THE SAME ORDER IN TH E REMAINING ASSESSMENT YEARS 2004-05 AND 2005-06. BY FOLLOWING THE ORDER IN ASSESSMENT YEAR 2003-04, THE REMAINING ORDERS OF THE AUTHORITIES BELOW ARE ALSO SET ASIDE AND THE MATTER IN ISSUES ARE RESTORED TO THE FILE OF THE AO FOR RECONSIDERATION AFRESH AS DIRECTED ABOVE . 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES. HE HAS SUBMITTED THAT IN ASSESSMENT YEAR 2006-07 AL SO THE TRIBUNAL FOLLOWED THE SAME ORDER AND RESTORED THE MATTER TO THE FILE OF THE AO ITA NO.133/AHD/2011 ITO, W-2, GANDHINAGAR VS. GUJARAT STATE FEDERATION OF CO-OP SUGAR FACTORIES LTD. 5 FOR RECONSIDERATION. THE LEARNED DR ALSO SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR RECONSIDE RATION AS PER DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSE E. 4. ON CONSIDERATION OF THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE ORDERS OF THE TRIBUNAL, WE SET ASIDE THE ORDE RS OF THE AUTHORITIES BELOW AND RESTORE THE SAME ISSUES TO TH E FILE OF THE AO FOR RECONSIDERATION BECAUSE IN THE EARLIER YEARS THE ID ENTICAL ISSUES ARE PENDING BEFORE THE AO FOR RECONSIDERATION AS PER TH E ORDER OF THE TRIBUNAL. THE AO SHALL GIVE REASONABLE SUFFICIENT O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- ITA NO.133/AHD/2011 ITO, W-2, GANDHINAGAR VS. GUJARAT STATE FEDERATION OF CO-OP SUGAR FACTORIES LTD. 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD