Haryana Environmental Management Society, Gurgaon V. ITO, Gurgaon

ITA 2516/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66070 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH SR DR HEARING ON
• Assessee Lawyers: SACHIN VASUDEVA
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 2516/DEL/2012 ASSESSMENT YEAR: 2008-09 HARYANA ENVIRONMENTAL MANAGEMENT. VS. ITO, WARD 1 (2), SOCIETY SCO NO. 45, 1 ST FLOOR, GURGAON SECTOR -31, HUDA MARKET GURGAON. PAN: AAAAH1608Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SACHIN VASUDEVA, CA. REVENUE BY : SH. SATPAL SINGH, SR.DR. HEARING ON : 30/10/2012 ORDER PRONOUNCED ON THE DATE : ORDER PER I.C.SUDHIR, JM : THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS: 1. (A) THAT THE LEARNED CIT (A) HAS ERRED IN LAW IN TR EATING THE AMOUNT OF INTEREST OF RS.5,93,748/- ON FIXED DEPOSI TS, MADE OUT OF SUBSCRIPTION MONEY RECEIVED FROM MEMBERS, AS INC OME OF THE APPELLANT ON THE ALLEGED CONTENTION THAT THE SAID I NTEREST IN OUTSIDE THE PURVIEW OF DOCTRINE OF MUTUALITY 2. (A) THAT THE LEARNED CIT (A) HAS ERRED BOTH ON F ACTS AND IN LAW IN TREATING THE INTEREST AMOUNTING TO RS.15,08,300/ -, EARNED ON FIXED DEPOSITS MADE OUT OF THE GRANT OF RS.2 CRORE RECEIVED FROM ITA NO. 2516/DEL/2012 2 THE STATE GOVERNMENT UNDER THE ASIDE SCHEME, AS INC OME OF THE APPELLANT. (B) THAT IN THIS CONNECTION THE LEARNED CIT (A) HAS ERRED IN COMING TO THE ABOVE CONCLUSION THAT SINCE THE GRANT WAS HELD TO BE TAXABLE AS A REVENUE INCOME IN THE ASSESSMENT YE AR 2006- 07, HAVING BEEN RECEIVED FROM A NON-MEMBER, AND THE REFORE, THE ISSUE OF TAXABILITY OF INTEREST IS CONSEQUENTIA L TO THE ADDITION SO MADE ON ACCOUNT OF GRANT RECEIVED. (C) THAT THE LEARNED CIT (A) HAS MISDIRECTED HIMSEL F IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT INTE REST OF RS.15,08,300/- IS NOT AN INCOME OF THE APPELLANT AS THE APPELLANT IS ONLY A PASS THROUGH ENTITY ON ACCOUNT OF AN OVERRIDING TITLE TO SUCH AN AMOUNT ON THE BASIS OF DIRECTIONS OF STATE OF HARYANA (HARYANA STATE POLLUTION CONTROL B OARD) REQUIRING THE APPELLANT TO DISBURSE SUCH INTEREST T O GUJARAT ENVIRO PROTECTION & INFRASTRUCTURE ( HARYANA) P. LT D. 2. AT THE OUTSET OF HEARING THE LD. AR POINTED OUT THA T UNDER SIMILAR SET OF FACTS ON AN IDENTICAL ISSUE THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 HAS DECIDED TH E APPEAL IN FAVOUR OF THE ASSESSEE. A COPY OF THE ORDERS DATED 6.7.2012 A ND 31.7.2012 IN ITA NO.4228/DEL/2009 AND ANOTHER (A.Y.) 2006-07 AND ITA NO.2376/DEL/2012 AND ANOTHER (A.Y. 2007-08) HAVE BEEN FURNISHED. 3. THE LD. DR DID NOT DISPUTE THE ABOVE SUBMISSION OF THE ASSESSEE THAT AN IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN THE CASE OF ASSESSEE IN THE ABOVE STATED ASSESSMENT YEARS 2006- 07 AND 2007-08. HE HOWEVER, PLACED RELIANCE ON THE ORDERS OF THE AUTHO RITIES BELOW. ITA NO. 2516/DEL/2012 3 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW WE FIND THAT ASSESSEE IS A REGISTERED SOCIETY ENGAGED IN DEVELOP ING INTEGRATED HAZARDOUS WASTE MANAGEMENT FACILITIES FOR DISPOSAL OF HAZARDO US WASTE THROUGH A THIRD PARTY, NAMELY, GUJARAT ENVIRO PROTECTION & INFRASTR UCTURE (HARYANA) LIMITED (IN SHORT GEPIL). THE AO EXAMINED THE TERMS AND C ONDITIONS OF THE AGREEMENT BETWEEN THE TWO AND OBSERVED THAT THE SOC IETY HAS DEVELOPED HAZARDOUS WASTE MANAGEMENT FACILITY THROUGH GEPIL O N BUILD-OWN-OPERATE- TRANSFER BASIS. THE MUNICIPAL CORPORATION OF FARIDA BAD HAS LEASED OUT 31 ACRES OF LAND TO THE SOCIETY. THE CHARGES FOR DISPO SAL OF WASTE ARE PAID BY THE CUSTOMERS, WHO ARE ESSENTIALLY THE MEMBERS OF THE S OCIETY, TO GEPIL INCLUDING COST INCURRED TOWARDS ANALYSIS, TRANSPORT ATION, STORAGE, TREATMENT, DISPOSAL OF WASTE INTO LANDFILL, DISPOSAL OF INCINE RATOR ASH AND POST CLOSURE OPERATIONS INCLUDING MONITORING. SUCH CHARGES ARE C ALCULATED IN ACCORDANCE WITH THE FINAL PRICE SUBMITTED BY GEPIL TO THE SOCI ETY. THE HAZARDOUS WASTE IS TREATED BY GEPIL AT THE ALLOTTED SITE PROVIDED B Y THE SOCIETY, AND THE SOCIETY ACTS AS A FACILITATOR FOR THE PURPOSE OF DI SPOSAL OF HAZARDOUS WASTE. THE AO NOTED THAT THE GOVT. OF HARYANA HAD GIVEN AN INITIAL GRANT OF RS.2 CRORES TO THE SOCIETY FOR SETTING UP OF SUCH PLANT. THE AO HAS RAISED OBJECTIONS TO THE CLAIM OF SOCIETY FOR BEING A MUTU AL CONCERN ON THE GROUND THAT THE SOCIETY INSTEAD OF SETTING UP ITS OWN PLAN T ON THE LAND ALLOTTED TO IT, ITA NO. 2516/DEL/2012 4 HAS GIVEN LAND AND GRANT TO AN OUTSIDER PARTY I.E. GEPIL, THERE IS NOTHING IN THE AGREEMENT THAT GEPIL WILL WORK ON CHARITABLE BA SIS, THE OBJECTIVES OF THE SOCIETY ARE TO EARN PROFIT BY GIVING ITS OWN LAND R ECEIVED FROM THE GOVT. FOR THE PURPOSE OF SETTING UP OF PLANT AND THE PRICES F OR DISPOSAL OF WASTE ARE DETERMINED BY GEPIL. THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT THE STATUS OF THE SOCIETY HAS BEEN ACCEPTED AS A MU TUAL CONCERN BY THE LD. CIT (A) IN A.Y. 2006-07 ON THE BASIS THAT THE DEPAR TMENT HAS PREFERRED APPEAL AGAINST THE SAID FIRST APPELLATE ORDER BEFOR E THE TRIBUNAL. THE AO ACCORDINGLY TREATED THE SURPLUS OF RS.5,07,258/- AS INCOME OF THE ASSESSEE IN THE STATUS OF AN AOP. IN ADDITION TO THE ABOVE, THE INTEREST OF RS.15,08,300/- EARNED ON FDRS MADE OUT OF GRANT RECEIVED FROM THE GOVT. AND DIRECTLY TAKEN TO THE BALANCE SHEET HAS ALSO BEEN ADDED TO T HE INCOME OF THE ASSESSEE. THE AO HAS ALSO MADE ADDITION OF RS.1,80,000/- U/S 40(A) (IA) ON ACCOUNT OF RENT PAID WITHOUT DEDUCTION OF TAX AT SOURCE. THE A SSESSEE QUESTIONED THE ACTION OF THE AO IN COMPLETING THE ASSESSMENT ON A TOTAL INCOME OF RS.21,95,560/- AS AGAINST NIL RETURN OF INCOME AND NOT ALLOWING THE BENEFIT AVAILABLE TO THE ASSESSEE ON ACCOUNT OF CONCEPT OF MUTUALITY. 5. THE LD. CIT (A) UPHELD BOTH THE ADDITIONS OF RS. 5,07,258/- AND RS.15,08,300/- THOUGH HE HAS ALLOWED THE GROUND ON THE ISSUE OF MUTUALITY ITA NO. 2516/DEL/2012 5 IN VIEW OF FINDING OF LD. CIT (A) IN THIS REGARD FO R THE ASSESSMENT YEAR 2006- 07 IN THE CASE OF ASSESSEE ITSELF. 6. HAVING GONE THROUGH THE ORDERS OF THE TRIBUNAL F OR THE ASSESSMENT YEARS 2006-07 AND 2007-08 (SUPRA) WE FIND THAT THE ORDER FOR THE ASSESSMENT YEAR 2007-08 HAS BEEN PASSED ON THE BASIS OF FINDIN G OF THE TRIBUNAL ON THE ISSUE IN ASSESSMENT YEAR 2006-07, WHEREIN A DETAILE D ORDER HAS BEEN PASSED. IN THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEA R 2006-07 AN IDENTICAL ISSUE UNDER SIMILAR SET OF FACTS WERE RAISED. ON TH E ISSUE OF SETTING UP A COMMON INTEGRATED WASTE MANAGEMENT FACILITY WITH AS SISTANCE OF A GRANT RECEIVED FROM THE GOVT. AMOUNTING TO RS.2 CRORES BE ING 50% COST OF PROJECT, IT WAS HELD THAT WHAT IS MATERIAL IS THE PURPOSE FO R WHICH THE SUBSIDY WAS GRANTED AND NOT THE SOURCE OF THE GRANT AND IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJE CT, THE MONEY MUST BE TREATED TO HAVE BEEN RECEIVED AS CAPITAL RECEIPT. I T WAS HELD THAT BASED UPON PRINCIPLE OF MUTUALITY THE INCOME IS NOT TAXABLE. T HE LD. CIT (A) DISCUSSING THE FACTUAL POSITION HELD THAT THE ASSESSEE IS A MU TUAL CONCERN AND IS COVERED BY THE CONCEPT OF MUTUALITY. THE ADDITION MADE ON A CCOUNT OF GRANT UNDER SCHEME OF THE GOVT. AN INTEREST EARNED ON THE DEPOS ITS MADE WITH THE BANKS WERE DELETED. THE ACTION OF THE LD. CIT (A) HAS BEE N UPHELD BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2006-07. FOLLOWING THE SAID DECISION OF THE TRIBUNAL ITA NO. 2516/DEL/2012 6 ON THE ISSUES ESPECIALLY ON THE ISSUE OF APPLICABIL ITY OF CONCEPT OF MUTUALITY IN THE PRESENT CASE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW WITH THE DIRECTION TO THE AO TO DELETE THE ADDITIONS IN QUES TION IN VIEW OF THE DECISION OF THE TRIBUNAL ON THE ISSUES IN THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 PREFERRED BY THE REVENUE AND KEEPING IN MIND THE DE CISION OF THE TRIBUNAL THAT CONCEPT OF MUTUALITY IS APPLICABLE IN THE CASE OF ASSESSEE. THE GROUNDS ARE THUS ALLOWED. 7. IN RESULT APPEAL IS ALLOWED. 8. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAY OF 21/12/2012. SD/- SD/- ( B.C. MEENA ) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/12/2012 *AK VERMA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR