GALLANT INFOTECH P. LTD, MUMBAI V. DCIT CEN CIR 36, MUMBAI

ITA 2963/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7777 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-12-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL K SINGH
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. K. AGARWAL, JM & SHRI R.K. PANDA, AM I.T.A. NO. 2963/MUM/2009 (ASSESSMENT YEAR 2006-07) M/S. GALLANT INFOTECH PVT. LTD. AKRUTI TRADE CENTRE, ROAD NO. 7, MAROL MIDC, ANDHERI (EAST), MUMBAI-400 093 PAN: AABCG3543J VS. DY. CIT, CENTRAL CIRCLE 36, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 APPELLANT RESPONDENT APPELLANT BY: MR. VIJAY MEHTA RESPONDENT BY: MR. SUNIL K. SINGH O R D E R DATE OF HEARING: 01.02.2010 DATE OF ORDER: 02.02.2010 PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 19 TH MARCH, 2009 OF THE CIT(A), CENTRAL VI, MUMBAI RELA TING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IN ITS ONLY EFFECTIVE GROUND HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE CONCEPT OF MUTUALITY IS NOT APP LICABLE TO THE ASSESSEE COMPANY. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE MANAGEMENT AND ADMIN ISTRATION OF AKRUTI SOFTECH PARK AT MAROL, MIDC, ANDHERI (EAST), MUMBAI. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OBSERVED FROM VARIOUS DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAS QUALIFIED ITS COMPUTATION OF TOTAL INCOME BY ST ATING THAT ITS INCOME IS EXEMPT ON THE GROUND OF MUTUALITY. HOWEV ER, THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE AS SESSEE IS A I.T.A. NO. 2963/MUM/2009 M/S. GALLANT INFOTECH PVT. LTD. ===================== 2 COMPANY, A LEGAL ENTITY AND DISTINCT PERSON ENGAGED IN THE BUSINESS OF MAINTAINING SOFTECH PARK, THE CONCEPT OF MUTUALI TY IS NOT APPLICABLE. ACCORDING TO HIM, THE CONCEPT OF MUTUA LITY IS APPLICABLE TO ENTITIES LIKE CLUBS, GROUPS, ETC., CREATED FOR M UTUAL BENEFIT OF ITS MEMBERS. 4. IN APPEAL IT WAS SUBMITTED THAT THE OBJECTIVES AS P ER MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY H AVE BEEN AMENDED WITH EFFECT FROM 27 TH JANUARY, 2004 TO ENABLE THE COMPANY TO COLLECT MAINTENANCE CHARGES AND OTHER OUTGOINGS FROM THE OCCUPANTS OF THE PREMISES. IT WAS SUBMITTED THAT T HE COMPANY LEVIED A COMMON CHARGE ON ITS MEMBERS/SHAREHOLDERS WHICH WAS USED TO PAY FOR THE DAY TO DAY EXPENSES INCURRED BY THE COMPANY ON THE MEMBERS THEMSELVES. IT WAS ALSO STATED THAT NO SERVICE WAS PROVIDED TO OUTSIDERS AND THAT THE SERVICES TO THE MEMBERS WERE RENDERED ON NO PROFIT BASIS. RELYING ON A NUMBER O F CASE DECISIONS, IT WAS SUBMITTED THAT THE CONCEPT OF MUTUALITY IS A PPLICABLE TO THE COMPANY ALSO. 5. HOWEVER, THE VARIOUS SUBMISSIONS MADE BY THE ASSESS EE DID NOT FIND FAVOUR WITH THE CIT(A). HE OBSERVED THAT THE OBJECT CLAUSE IN THE MOA OF THE ASSESSEE COMPANY CLEARLY BRINGS O UT THAT THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS O F DEVELOPING ETC., OF INTERNET, WEB DESIGNING, SOFTWARE PROGRAMMES, RA DIO COMMUNICATIONS AND TELECOMMUNICATIONS, ETC. EVEN T HE AMENDMENT TO THE OBJECT CLAUSE, AS POINTED OUT BY T HE ASSESSEE AT THE TIME OF HEARING, REFERS ONLY TO INCIDENTAL OBJE CT CLAUSE OF THE MOA AND NOT IN THE MAIN OBJECT CLAUSE. HE OBSERVED THAT THE OBJECT CLAUSE FURTHER ENABLES THE COMPANY TO UNDERTAKE A H OST OF OTHER ACTIVITIES WHICH DO NOT RELATE TO AND ARE NOT INCID ENTAL TO THE CONCEPT OF MUTUALITY. FROM THE LANGUAGE OF THE CLA USES OF THE OBJECT CLAUSE, HE OBSERVED THAT THE ASSESSEE COMPANY IS NO T MEANT TO PROVIDE ONLY SERVICES TO THE MEMBERS AS IN THE CASE OF CLUBS, I.T.A. NO. 2963/MUM/2009 M/S. GALLANT INFOTECH PVT. LTD. ===================== 3 HOUSING SOCIETIES, ETC., TO WHOM THE CONCEPT OF MUT UALITY APPLIES. HE ACCORDINGLY UPHELD THE ACTION OF THE ASSESSING OFFI CER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN A PPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN A COOPERATIVE HOUSING SOCIETY RENDERS THE NATURE OF W ORK THAT THE COMPANY IS DOING ITS INCOME IS EXEMPT UNDER THE PRI NCIPLE OF MUTUALITY. EVEN UNDER THE CO-OPERATIVE SOCIETIES A CT HOUSING SOCIETY IS A SEPARATE LEGAL ENTITY AND, THEREFORE, THERE IS NO JUSTIFICATION IN DENYING THE PRINCIPLE OF MUTUALITY TO THE ASSESSEE COMPANY WHEN IT IS EXACTLY DOING THE SAME NATURE OF WORK AS DONE BY A COOPERATIVE HOUSING SOCIETY. REFERRING TO PAP ER BOOK PAGE 13, HE DREW THE ATTENTION OF THE BENCH TO THE CERTIFICA TE OF REGISTRATION ON SPECIAL RESOLUTION PASSED FOR ALTERATION OF OBJE CTIVES. REFERRING TO PAPER BOOK PAGE 4, HE DREW THE ATTENTION OF THE BENCH TO CLAUSE 2A WHICH HAS BEEN INSERTED AFTER THE ALTERATION OF OBJECT CLAUSE AND WHICH READS AS UNDER: 2A. TO MANAGE, ADMINISTER, IMPROVE, RECONSTRUCT AND ALTER LANDS, BUILDINGS, INFOTECH/COMMERCIAL PRO JECT NAMELY AKRUTI SOFTECH PARK AT MAROL MIDC, ANDHERI (EAST), MUMBAI REQUIRED FOR ATTAINING MAIN OBJECT, WHETHER BELONGING TO THE COMPANY OR NOT, TO ENTER I NTO CONTRACTS AND ARRANGEMENTS OF ALL KIND AS MAY BE EXPEDIENT WITH THE OCCUPIERS THEREOF, TO EQUIP THE SAME OR ANY PART THEREOF WITH ALL OR ANY AMENITIES, FACI LITIES AND CONVENIENCES AND TO COLLECT MAINTENANCE CHARGES AND OTHER OUTGOINGS FROM THE OCCUPIERS OF THE PREMI SES UNDER THE OWNERSHIP OR MANAGEMENT OF THE COMPANY. 7. REFERRING TO PAGE 21 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO CLAUSE 29 OF THE ARTICLES OF ASSOCI ATION WHICH READS AS UNDER: *29. THE COMPANY WILL NOT UNDERTAKE ANY NEW BUSINESS OTHER THAN THE BUSINESS SPECIFIED IN SUB-C LAUSE 2A OF PART B OF CLAUSE III OF THE MEMORANDUM OF ASSOCIATION WITHOUT THE AFFIRMATIVE CONSENT OF ALL THE EQUITY SHARE HOLDERS IN GENERAL MEETING. I.T.A. NO. 2963/MUM/2009 M/S. GALLANT INFOTECH PVT. LTD. ===================== 4 * INSERTED VIDE SPECIAL RESOLUTION PASSED IN EXTRA ORDINARY GENERAL MEETING HELD ON JANUARY 27, 2004. HE SUBMITTED THAT THE CIT(A) HAS NOT CONSIDERED THE ABOVE CLAUSES AND CAME TO THE CONCLUSION THAT THE PRINCIPLE OF MU TUALITY IS NOT APPLICABLE TO THE COMPANY. REFERRING TO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF CHELMSFORD CLUB VS. CI T REPORTED IN 243 ITR 89 HE SUBMITTED THAT THE DOCTRINE OF MUTUAL ITY WILL BE APPLICABLE TO THE ASSESSEE COMPANY. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSES SING OFFICER TO CONSIDER THE PRINCIPLE OF MUTUALITY ON THE BASIS OF THE AMENDMENT TO THE OBJECT CLAUSE OF THE ASSESSEE COMPANY. 8. THE LEARNED DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT HE HAS NO OBJECT ION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R FRESH ADJUDICATION IN THE LIGHT OF THE AMENDMENT TO THE MOA AND ARTICL ES OF ASSOCIATION OF THE COMPANY. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER DENIED THE BENEFIT OF PRINCIPLE OF MUTUALITY TO THE ASSESSEE COMPANY ON THE GROUND THA T THE CONCEPT OF MUTULIATY IS APPLICABLE ONLY TO CLUBS/GROUPS, ET C., CREATED FOR MUTUAL BENEFIT OF THEIR MEMBERS. WE FIND THE CIT(A ) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE AMENDMENT REFERRED TO BY THE ASSESSEE HAS BEEN BROUGHT ABOUT ONLY INCIDENTAL OBJECT CLAUSE OF THE MOA AND NOT IN THE MAIN OBJECT CLAUSE. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN VIEW OF CLAUSE 29 OF THE AOA THE COMPANY WILL NOT UNDERTAKE ANY NEW BUSINESS OTHER THAN THE BUSINESS SPECIFIED IN SUB C LAUSE 2A OF PART B OF CLAUSE 3 OF THE MOA WHICH HAS NOT BEEN CONSIDERE D BY THE CIT(A). I.T.A. NO. 2963/MUM/2009 M/S. GALLANT INFOTECH PVT. LTD. ===================== 5 WE FIND MERIT IN THE SUBMISSIONS OF THE LEARNED COU NSEL FOR THE ASSESSEE THAT THE CIT(A) HAS NOT ADDRESSED THIS NEW CLAUSE IN THE ARTICLE OF ASSOCIATION OF THE COMPANY. WE, THEREFO RE, DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE AMEND MENT TO MOA AND ARTICLES OF ASSOCIATION OF THE COMPANY AND IN ACCOR DANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE A SSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 2 ND FEBRUARY, 2010 SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 2 ND JANUARY, 2010 COPY TO: (1) THE APPELLANT, (2) THE RESPONDENT, (3) THE CIT(A), CENTRAL-VI, MUMBAI, (4) THE CIT, CENTRAL-III, MUMBAI, (5) THE DR, G BENCH, ITAT, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI TPRAO