Assistant Commissioner of Income Tax, Vapi Circle, Vapi V. M/s Vapi Green Enviro Ltd., , Vapi

ITA 152/SRT/2023

AI Insights

The case involves appeals by the Revenue against the order of the CIT(A), which favored M/s. Vapi Green Enviro Ltd. for the Assessment Years 2017-18 and 2018-19. The primary issues were the application of the principle of mutuality and the allowance of depreciation. The Tribunal referenced its earlier decision in the assessee's own case for AYs 2013-14 and 2014-15, where it was established that the principle of mutuality applied, exempting the effluent treatment charges collected from members from being taxed as business income. The Tribunal also noted that the depreciation issue was consequential to the acceptance of mutuality.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301907 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 01-03-2023
• Other Referred Cases: Chamber of Commerce vs CIT AIR 1936 All 764
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; TDS; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA Nos.152 & 153/SRT/2023 Ǔनधा[रण वष[/AYs: (2017-18 & 2018-19) (Physical Hearing) The ACIT, Vapi Circle, Vapi. Vs. M/s. Vapi Green Enviro Ltd., 135, 1 st Floor, VIA House, GIDC, Char Rasta, Vapi – 396195. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACV8289P Appellant by Shri Ashok B. Koli, CIT(DR) Respondent by Shri Aarti Shah, AR Date of Hearing 19/05/2023 Date of Pronouncement 31/05/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the Revenue, pertaining to Assessment Years (AYs) 2017-18 and 2018-19, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], Surat, which in turn arise out of separate assessment orders passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. Since, the issues involved in all the appeals and cross objections are common and identical; therefore, these appeals and cross objections have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The facts as well as grounds of appeal narrated in ITA No.152/SRT/2023 for AY.2017-18, have been taken into consideration for deciding these two appeals en masse. 3. Grounds of appeal raised by the Revenue in the lead case in ITA No. 152/SRT/2023, are as follows: Page | 2 ITA Nos.152 & 153/SRT/2023 Vapi Green Enviro Ltd. “i. On the facts and in the circumstances of the case in law, the Ld. CIT(A) erred in concluding that being a section 26 company its income is not to be taxed and allowing the principle of mutuality. ii. The Ld. CIT(A) further erred in allowing depreciation deciding that it is consequential in nature. iii. The Ld. CIT(A) failed to consider the decision for Hon'ble High Court of Allahabad in Chamber of Commerce vs CIT AIR 1936 All 764. iv. It is therefore, prayed that the order of Ld. CIT(A), be set aside and that of the assessing officer be restored. v. The appellant craves to add, modify or alter any grounds during the course of appeal proceedings.” 4. When these appeals called out for hearing, the Ld. Counsel for the assessee invited our attention to the order dated 09.11.2021, passed by the Division Bench of this Tribunal in assessee’s own case in ITA No.153 & 732/SRT/2018, for AYs.2013-14 and 2014-15, whereby the issue relating to principle of mutuality and depreciation have been discussed and adjudicated. The Ld. Counsel for the assessee submitted that the present appeals are squarely covered by the aforesaid order of Tribunal, a copy of which is also placed before the Bench. 5. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue relied upon the orders of lower authorities. 6. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee’s own case vide order dated 09.11.2021. In this order, the Tribunal has inter alia observed as follows: “2. Brief facts of the case are that assessee-company is a Public Limited Company, engaged in the treatment of effluent and waste emanating out of various industries in Vapi region. The assessee-company was set-up by various members of the Vapi Industries Association and took over Common Effluent Treatment Plant (CETP) from Gujarat Industrial Development Corporation. The assessee filed its return of income for assessment year 2013-14 on 28.09.2013 declaring income of Rs.2.18 crores. The case was selected for scrutiny. The assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on 30.03.2016. The Assessing Officer while passing assessment order assessed total income of Rs.2.44 crores as business income by making addition of the loss on sale of fixed asset, and capital Page | 3 ITA Nos.152 & 153/SRT/2023 Vapi Green Enviro Ltd. contribution of Rs.24,25,715/-. The Assessing Officer disallowed the interest on late payment of Tax Deducted at Source (TDS) of Rs.60,455/-and penalty charges of Rs.52,961/- respectively. The assessee claimed it as a mutual association and claimed that effluent treatment charges collected from members is exempted. The Assessing Officer denied the mutuality and assessed the treatment charges as ‘business income’ and also disallowed the claim of depreciation of Rs.2.61 crore by taking view that assessee has not correctly worked out by deducting the contribution received from its members from written down value (WDV). Before Assessing Officer the assessee contended that on similar set of fact the concept mutuality, the exemption was allowed by Tribunal in earlier year. The Assessing Officer not accepted the contention of assessee by recording that the appeal of Revenue is pending before Hon'ble jurisdictional High Court. 3. Aggrieved by the treatment denying the concept of mutuality and various additions, the assessee filed appeal before Ld. CIT(A).The Ld. CIT(A) by following the order of earlier year on identical fact accepted the contention of assessee on the concept of mutuality. Since the concept of mutuality was accepted therefore, treatment of ‘business income’ of treatment charges collected from members, was also reversed. The Ld. CIT(A) also deleted the disallowance on account of late payment of TDS and penalty charges by holding that late payment of TDS and penalty charges were not claimed as deduction. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 4. We have heard the submission of Ld. Commissioner of Income Tax- Departmental Representative (CIT-DR) and Ld. Sr. DR for the Revenue and Ld. Authorized Representative (AR) for the assessee. At the outset of hearing the Ld. AR for the assessee submits that grounds of appeal raised by Revenue are covered in favour of assessee. The Ld. AR for the assessee submits that ground No.1 of appeal is covered in favour of assessee by series of decisions in assessee’s own case in earlier year, wherein the assessee has been accepted as mutual association. The Ld. AR for the assessee submits that Ld. CIT(A) while allowing the relief to the assessee followed the order of Tribunal in ITA No.833/AHD/2015 and ITA No.3295/AHD/2015 for assessment years 2010-11 & 2011-12. Ld. AR for the assessee submits that copy of decision in ITA No.833/AHD/2015 is placed on record. 5. On the other hand, Ld. CIT-DR for the Revenue supported the order of Assessing Officer. Ld. CIT-DR submits that assessee is engaged in the business activity and having surplus from the alleged contribution by its members. 6. We have considered the rival submission of both the parties and perused the order of lower authorities. The Assessing Officer denied the benefit of concept of mutuality by taking view that the department has already filed against the earlier decision of Tribunal in various years. We find that Ld. CIT(A) allowed relief to the assessee by following the decision of Tribunal in assessee’s own case for earlier year (supra). We note that assessee’s own case for AY 2010-11, the co-ordinate bench of Tribunal while following the order in earlier year accepted the status of assessee as a mutual association in order dated 22.03.2018 in ITA No.833/AHD/2015 (supra). No contrary facts or law is Page | 4 ITA Nos.152 & 153/SRT/2023 Vapi Green Enviro Ltd. brought to our notice to take other view. Thus, we affirm the order of Ld. CIT(A). 7. In the result, ground No.1 raised by Revenue is dismissed. 8. Ground No.2 relates to disallowance of depreciation by not reducing the contribution of members for acquisition of assets while computing depreciation. The Ld. AR for the assessee submits that member’s contribution for acquisition of assets are shown under member’s fund in the liability as capital which is utilized for acquisition of assets of the assessee and in no way, can be reduced in cost for asset by applying of section-43. The ld. AR for the assessee submits that Ld. CIT(A) appreciated the fact and granted relief to the assessee. 9. On the other hand, Ld. Sr-DR of the Revenue supported the order of Assessing Officer. The Ld. Sr. DR for the revenue submits that Assessing Officer disallowed the depreciation on the ground that the contribution received from the members for cost of asset should be reduced from WDV for calculation of depreciation allowable. On the other hand, the assessee’s stand was depreciation was debited to the income and expenditure account in its books and deduction for such depreciation was not claimed for taxable income shown in the return of income as the assessee has shown only from ‘other sources’. The assessee is also deleting with such entity which are not its members earning from non-members as well and acquisition of asset of the company cannot in no way be taken for deduction in cost of asset by applying provision of section-43 of the Act. 10. We have considered the contention of both the parties and gone through the orders of authorities below. We find that in earlier year on similar submission of parties the authorities below recorded that the assessee is also getting services from non-members which has to be taxed accordingly. However on disallowance of depreciation, it was held that there is principle of mutuality in case of assessee, therefore, the allowance of depreciation has no bearing as the principle of mutuality was accepted by Tribunal. However, the issue was remitted back for limited purposes with the following direction in ITA No833/AHD/2015 (supra) which is reproduced below:- “12. In the light of findings given by the Tribunal in the appellant’s own case, we find that the issue is covered against the Revenue and we have no reason to deviate from the said finding recorded by the co-ordinate bench of the Tribunal. Accordingly, following the same, we hold that the principle of mutuality has accepted by the Tribunal on earlier years is also hold good in the assessment under consideration. Therefore, the same is allowed. However, the Assessing Officer is directed to verify the claim of assessee whether any outsider is getting services or not from non-members which as to be taxed accordingly after giving full opportunity to the assessee. So far allowances of depreciation and prior period expenses are concern, as we held the principle of mutuality in the case of assessee, therefore, the allowances of depreciation and prior period expenses by Assessing Officer has no bearing as the principle of mutuality has been accepted by the Tribunal. In the result, appeal of the assessee is set aside and disposed of for statistical purposes.” Page | 5 ITA Nos.152 & 153/SRT/2023 Vapi Green Enviro Ltd. 11. Considering the order of co-ordinate Bench (supra), we direct the Assessing Officer to verify the fact that in accordance with direction in order dated 22.03.2018 (supra) and passed the order in accordance with law. In the result, ground No.2 raised by Revenue is allowed for statistical purposes in above terms.” 7. As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s own case and there is no change in facts and law and Ld. DR for the Revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the binding order of this Coordinate Bench in assessee’s own case (supra), we direct the Assessing Officer to verify the fact in accordance with direction, in order dated 22.03.2018 (supra) and passed the order in accordance with law. 8. In the result, ground no.2 raised by Revenue is allowed for statistical purposes in above terms. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order pronounced on 31/05/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 31/05/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat