M/s Cargo Handling Private Workers Pool, Visakhapatnam, Hyderabad V. The ACIT Circle-1(1) visakhapatnam, Visakhapatnam

ITA 356/VIZ/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76499 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-02-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 16-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Charitable institution
• Section: 234B; 12A; 147; 6; 11

Judgement Text

ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO S . 355 TO 360 /VIZAG/ 2011 ASSESSMENT YEARS : 1999-2000 TO 2004-05 RESPECTIVEL Y M/S. CARGO HANDLING PRIVATE WORKERS POOL VISAKHAPATNAM VS. ACIT CIRCLE-1(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAATC 1920F MP NO.75/VIZAG/2011 ASSESSMENT YEAR : 1999-2000 TO 2004-05 M/S. CARGO HANDLING PRIVATE WORKERS POOL VISAKHAPATNAM VS. ACIT CENTRAL CIRCLE VISAKHAPATNAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI C.P. RAMASWAMY, C.A. REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 26.02.2014 DATE OF PRONOUNCEMENT : 03.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE ARE BUNCH OF SIX APPEALS WHICH ARE AGAINST A COMMON ORDER OF THE CIT(A) VISAKHAPATNAM DATED 30.09.2011 PERTAININ G TO THE ASSESSMENT YEARS 1999-2000 TO 2004-05. THE ASSESSEE HAS ALSO FILED A MISCELLANEOUS PETITION SEEKING RECTIFICATION OF THE ORDER DATED 8 .1.2010 OF THE ITAT VISAKHAPATNAM BENCH IN ITA NOS.272 TO 274/VIZAG/200 5, ITA NOS. 296 TO 297/VIZAG/2006 AND ITA NO.342/VIZAG/2008. SINCE FA CTS ARE IDENTICAL AND ISSUES ARE COMMON, THESE APPEALS ALONG WITH MISCELL ANEOUS PETITION ARE CLUBBED TOGETHER AND DISPOSED OF IN THIS COMBINED O RDER. ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 2 2. SINCE FACTS ARE IDENTICAL EXCEPT FIGURES, WE WI LL TAKE THE FACTS FROM ITA NO.355/VIZAG/2011 FOR THE ASSESSMENT YEAR 1999-2000 FOR THE SAKE OF CONVENIENCE. ALL THE APPEALS HAVE BEEN FILED WITH THE FOLLOWING COMMON GROUNDS: 1) THE ORDER OF THE LEARNED CIT(APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT, IS AGAINST LAW, WEIGHT O F EVIDENCE AND PROBABILITIES OF THE CASE. 2) A) THE LEARNED C3T(APPEALS) GROSSLY ERRED IN DISMISSING THE GROUND ON THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE A PPELLANT ON CASH BASIS AND CONFIRMING THE DECISION OF THE ASSESSING OFFICE R THAT IT WAS MERCANTILE. B) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE TH AT THE HON'BLE ITAT, VISAKHAPATNAM BENCH, IN ITS COMMON ORDER DATED 08 J ANUARY 2010 (PASSED FOR THE VERY SAME ASSESSMENT YEARS 1999-200 0 TO 2004-05) HELD THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE APPELLANT HAS BEEN CASH SYSTEM (AS RECOGNIZED IN PARAGRAPH 11.3 O F THAT ORDER) AND CONSEQUENTLY ERRED IN DISMISSING THE GROUND ON THE METHOD OF ACCOUNTING. C) THE LEARNED CIT(APPEALS) FAILED TO APPRECIATE TH AT THIS ISSUE WAS ALSO AGREED TO BY BOTH SIDES AS AN OFF SHOOT OF THE MAIN ISSUE VIZ., EXEMPTION U/S. 11, AS CLARIFIED BY THE HON'BLE ITAT IN PARAGR APH 3 OF ITS ORDER DATED 8 JANUARY 2010. CONSEQUENTLY, HE ERRED IN OBSERVING THAT THE ITAT DID NOT ADJUDICATE ON THIS ISSUE. 3) THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING TH E INTEREST LEVIED/S 234B WHEN THERE IS NO TAXABLE INCOME BY VIRTUE OF THE EX EMPTION GRANTED TO THE APPELLANT ON THE SUBSTANTIVE GROUNDS IN TERMS OF SECTIONS 11 TO 13 OF THE INCOME-TAX ACT, 1961 - ESP ECIALLY WHEN THE ALLEGED VIOLATIONS IN THE ORIGINAL ASSESSMENTS WERE FOUND TO BE ABSENT AND CONSEQUENTLY THE CLAIM FOR EXEMPTION WAS VALIDA TED BY THE HON'BLE HAT IN ITS ORDER DATED 08 JANUARY 2010. 4) FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS TH AT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE A PPEAL BE ALLOWED. 5) THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 3. THE ONLY ISSUE RAISED IN THE GROUNDS RELATES TO THE METHOD OF ACCOUNTING ADOPTED IN CASE OF THE ASSESSEE IN SO FA R AS INTEREST INCOME IS ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 3 CONCERNED. WHILE THE ASSESSEE HAS CLAIMED INTEREST INCOME HAS BEEN OFFERED ON THE BASIS OF CASH SYSTEM OF ACCOUNTING FOLLOWED BY IT, THE DEPARTMENT HAS HELD THAT THE INTEREST INCOME IS TO BE TAXED ON ACC RUAL BASIS AS ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 4. BRIEFLY STATED, THE ASSESSEE IS A TRUST CREATED UNDER A TRUST DEED DATED 19.1.1994. THE ASSESSEE TRUST IS ALSO REGISTERED U /S 12A OF THE INCOME-TAX ACT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR I MPUGNED ASSESSMENT YEAR AS WELL AS FOR THE OTHER ASSESSMENT YEARS UNDER CONSID ERATION IN THE PRESENT APPEALS CLAIMING EXEMPTION U/S 11 OF THE ACT. THE RETURNS OF INCOME RELATING TO THE ASSESSMENT YEARS 1999-2000 TO 2003-04 W ERE PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, HOWEVER, THE ASSE SSMENTS WERE REOPENED U/S 147 OF THE ACT. THE RETURNS OF INCOME RELATING TO THE ASSESSMENT YEAR 2003-04 AND 2004-05 WERE TAKEN UP FOR SCRUTINY ASSE SSMENT. IN THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER REJECT ED THE CLAIM OF EXEMPTION OF THE ASSESSEE U/S 11 OF THE ACT ON VARIOUS GROUND S. BEING AGGRIEVED OF THE DENIAL OF EXEMPTION U/S 11 OF THE ACT, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) ALSO CONFIRMED THE VIEW OF THE ASSESSING OFFICER. THE ASSESSEE THERE AFTER CARRIED APPEAL TO THE INCOME T AX APPELLATE TRIBUNAL. 5. THE ITAT AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE AND OTHER MATERIALS ON RECORD DISPOSED OF THE APPEAL VIDE ORD ER DATED 8.1.2010. IN THE SAID ORDER, THE ITAT WHILE DEALING WITH THE REASONS ON WHICH THE ASSESSING OFFICER HAD DENIED EXEMPTION U/S 11 OF THE ACT TO T HE ASSESSEE, HELD THAT THERE IS NO VIOLATION OF SECTION 11 (5) AND SECTION 11(3) OF THE ACT WITH REGARD TO THE AMOUNTS OF RS.30 LAKHS AND RS.5 LAKHS RESPEC TIVELY, ADVANCED BY THE ASSESSEE. SIMILARLY, THE ITAT ALSO CLEARLY RECORDE D ITS FINDING THAT THERE IS ALSO NO VIOLATION OF SECTION 13(1)(C) READ WITH SEC TION 13(2) OF THE ACT. SO FAR AS THE ASSESSING OFFICERS FINDING WITH REGARD TO T HE ACCUMULATION OF INCOME U/S 11(2) OF THE ACT IS CONCERNED, THE ITAT ALSO HE LD THAT THE ASSESSING OFFICER HAS COME TO HIS CONCLUSION WITH REGARD TO A PPLICATION OF THE AFORESAID PROVISION MAINLY BECAUSE HE HAS TREATED THE ACTIVIT IES OF THE ASSESSEE AS COMMERCIAL ONE. THE TRIBUNAL OBSERVED THAT THE ASS ESSING OFFICER WHILE DOING ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 4 SO HAS FAILED TO UNDERSTAND THE DIFFERENCE BETWEEN THE TERM CHARITABLE PURPOSE AND CHARITABLE ACTIVITIES. THE TRIBUNAL THEREFORE DIRECTED THE ASSESSING OFFICER TO TAKE INTO ACCOUNT THE APPLICAT ION FILED BY THE ASSESSEE TRUST IN FORM NO.10 IN TERMS WITH SECTION 11(2) AND COMPUTE THE INCOME OF THE ASSESSEE. WHILE GIVING EFFECT TO THE AFORESAID ORDER OF THE ITAT, THE ASSESSING OFFICER PASSED A CONSEQUENTIAL ORDER (COP Y OF WHICH IS PLACED AT PAGE 27 OF THE PAPER BOOK), WHEREIN THE ASSESSING O FFICER RECOMPUTED THE TOTAL INCOME BY DETERMINING THE INCOME OF THE ASSES SEE AT RS.98,92,234/-, WHICH ACCORDING TO THE ASSESSING OFFICER IS NOT ELI GIBLE FOR EXEMPTION U/S 11(2) OF THE ACT. SIMILARLY, ORDERS WERE ALSO PASS ED FOR OTHER ASSESSMENT YEARS. 6. BEING AGGRIEVED OF THE CONSEQUENTIAL ORDERS PASS ED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). IN COURSE OF H EARING OF APPEAL BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT T HE ASSESSING OFFICER HAS COMMITTED AN ERROR IN TREATING THE METHOD OF ACCOUN TING OF THE ASSESSEE TO BE MERCANTILE SYSTEM, WHEREAS HE SHOULD HAVE FOLLOW ED THE DIRECTIONS OF THE ITAT WHICH ACCEPTED THE METHOD OF ACCOUNTING OF THE ASSESSEE AS CASH SYSTEM. THE CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE VIS-- VIS THE ORDER DATED 8.1.2010 OF THE TRIBUNAL NOTED THAT THOUGH THE ASSESSEE HAD RAISED A SPECIFIC GROUND REGARDING THE METHOD O F ACCOUNTING BEFORE THE CIT(A) IN THE APPEAL FILED AGAINST THE ASSESSMENT ORDER, HOWEVER THE CIT(A) APPEARS TO HAVE NOT ADJUDICATED ON THE ISSUE. HE F URTHER NOTED THAT AGAINST THE SAID ORDER OF THE CIT(A), WHILE THE ASSESSEE PR EFERRED APPEAL BEFORE THE ITAT, NO SPECIFIC GROUND WAS RAISED BEFORE THE TRIB UNAL WITH REGARD TO THE METHOD OF ACCOUNTING. HE THEREFORE CONCLUDED THAT THE TRIBUNAL DID NOT DECIDE ON THE ISSUE OF METHOD OF ACCOUNTING AND ACC ORDINGLY THE CIT(A) UPHELD THE METHOD OF ACCOUNTING ADOPTED BY THE ASSE SSING OFFICER OBSERVING AS UNDER: EVEN IF IT IS ASSUMED THAT THE ALLEGED REVISED GRO UNDS OF APPEAL, OF WHICH AN UNSIGNED COPY IS SUBMITTED BEFO RE ME, ARE CORRECT AND CONSEQUENTLY IF IT IS ASSUMED THAT THE HONBLE TRIBUNAL DID NOT DECIDE THE GROUND NO.3(B) WHICH RELATES TO THE ISSUE OF METHOD OF ACCOUNTING, THE CORRECT FORUM FOR THE APP ELLANT TO AGITATE THIS ISSUE IS BEFORE THE HONBLE TRIBUNAL I TSELF U/S 254 AND ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 5 NOT BEFORE THE CIT(A) IN AN APPEAL AGAINST CONSEQUE NTIAL ORDER. THUS, IT IS HELD THAT THERE IS NOTHING WRONG WITH T HE CONSEQUENTIAL ORDER PASSED BY AO ON THIS ISSUE AND HENCE THE GROU NDS PERTAINING TO THIS ISSUE ARE DISMISSED. 7. THE LD. A.R. REFERRING TO THE ORDER OF THE TRIBU NAL PASSED IN ITA NO.272 AND OTHERS /VIZAG/2005 DATED 8.1.2010 SUBMIT TED THAT THE TRIBUNAL WHILE DECIDING THE APPEAL HAS CLEARLY EXPRESSED ITS VIEW THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING IN SO FAR AS CO LLECTION OF INTEREST IS CONCERNED. THEREFORE, THE ASSESSING OFFICER HAS EX CEEDED HIS JURISDICTION BY NOT GIVING EFFECT TO THE ORDER OF THE TRIBUNAL AND HOLDING THAT THE INTEREST INCOME HAS TO BE ASSESSED ON MERCANTILE BASIS. 8. THE LD. D.R. ON THE OTHER HAND RELYING UPON THE FINDING OF THE CIT(A), SUBMITTED THAT SO FAR AS ASSESSMENT YEARS 1999-2000 TO 2001-02 ARE CONCERNED, THE ASSESSEE HAS NEITHER RAISED ANY GROU ND BEFORE THE CIT(A) NOR BEFORE THE TRIBUNAL WITH REGARD TO THE METHOD OF AC COUNTING. THOUGH IN ASSESSMENT YEARS 2002-03 TO 2004-05, THE ASSESSEE H AS RAISED GROUND WITH REGARD TO THE METHOD OF ACCOUNTING BUT NEITHER THE CIT(A) NOR THE ITAT HAD ADJUDICATED THESE GROUNDS. THEREFORE, THE ASSESSEE HAVING NOT CHALLENGED THE SAID ORDER OF THE TRIBUNAL OR SOUGHT RECTIFICAT ION, THE ISSUE HAS BECOME FINAL AND THE ASSESSING OFFICER COULD NOT HAVE CONS IDERED AN ISSUE WHICH IS NOT DECIDED BY THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A). WE HAVE ALSO PERUSED THE OTHER MATERIALS ON RECORD. AS CAN BE SEEN FROM THE ORDER DATED 8.1.2010 OF THE ITAT VISAKHAPATNAM BENCH IN ITA NO.272 AND OTHE RS/VIZAG/2005 FOR THE VERY SAME ASSESSMENT YEAR, THE TRIBUNAL WHILE CONSI DERING THE ISSUE OF METHOD OF ACCOUNTING HAS HELD AS UNDER: 11.3 THE NEXT ISSUE IS WHETHER THERE IS ANY VI OLATION OF SECTION 13(1)(C) R.W.S. 13(2) OF THE ACT. THE IMPUGNED AMOUNT OF RS .30.00 LAKHS AND RS.5.00 LACS HAVE BEEN ADVANCED TO THE TWO SETTLER ASSOCIATIONS. SINCE THEY ARE THE AUTHORS OF THE ASSESSEE TRUST AND THE TRUSTEES OF THE ASSESSEE TRUST ARE ALSO THE OFFICE BEARERS IN THE ABOVE SAID TWO ASSOCIATIONS, THE AO TREATED THE TWO ASSOCIATIONS AS THE PERSONS REFERRE D TO IN SECTION 13(3) OF THE ACT. AS POINTED OUT IN PARA 11.1 SUPRA, A CHARI TABLE TRUST WILL LOOSE ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 6 EXEMPTION U/S 11, IF ANY INCOME OR PROPERTY IS USED OR APPLIED FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SECTION 13(3). ACCORDING TO LD AR, THOUGH THE ASSESSEE DID NOT CHARGE INTEREST ON THES E TWO LOANS INITIALLY, LATER ON BOTH THE AMOUNTS WERE COLLECTED ALONG WITH THE INTEREST @ 12%. ACCORDING TO LD AR, SINCE THE IMPUGNED LOANS ARE CO VERED BY ADEQUATE SECURITY AND ADEQUATE INTEREST, THERE IS NO VIOLATI ON OF SECTION 13(1)(C) R.W.S. SECTION 13(2) OF THE ACT. IN THIS REGARD, LD AR HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL AP HI GH COURT IN THE CASE OF POLISETTY SOMASUNDARAM CHARITIES, SUPRA. THE RELEV ANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE EXTRACTED BELOW: SECTION 13(2)(A) PROVIDES THAT THE EXEMPTION UNDER SECTION 11 CANNOT BE DENIED IN THE EVENT OF LENDING THE AMOUNT JACKED UP BY INTEREST OR ADEQUATE SECURITY OR BOTH. THE LENDING AS SUCH IS NOT PROHIBITED IF ADEQUATE INTEREST AND SECURITY ARE TA KEN CARE OF. SECTION 13(2) (H) INTERDICTS INVESTMENT AND THE ACT OF INVESTMENT ALONE IS SUFFICIENT TO DENY THE EXEMPTION. IN VIEW OF THIS SEMINAL DISTINCTION, THE REVENUE ENDEAVOURED TO BRACKET THE TRANSACTION UNDER INVESTMENT SO AS TO ATTRACT THE DENIAL OF EXE MPTION UNDER CLAUSE (H). THE AMOUNT IS ADVANCED ON AN AGREED RATE OF INTEREST AND, THEREFORE, THE TRANSACTION IS WITHIN THE FOLD OF LENDING AND IT CANNOT BE CONSIDERED AS AN INVESTMEN T. THE LENDING IN CLAUSE (A) SHOULD BE SUPPORTED BY ADEQUA TE INTEREST OR SECURITY. THE APPELLANT ASSISTANT COMMISSIONER FOUN D THAT THE RATE OF INTEREST AT 12% IS NORMAL AND ADEQUATE AND THE F IRM IS FINANCIALLY SOUND AND THE APPELLANT TRIBUNAL CONFIRMED THE FIND ING. THEREFORE, THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 11 AND THE CONDITIONS UNDER SECTION 13(2) ARE SATISFIED AND SE CTION 13 (2) (H) IS NOT APPLICABLE. THE LD AR ALSO SUBMITTED THAT FOR THE PURPOSE OF CO MPUTING THE INCOME U/S 11 TO 13 OF THE INCOME TAX ACT, THE ASSESSEE IS FOLLOWING THE CASH SYSTEM OF ACCOUNTING. THE INTEREST COLLECTED FROM T HE IMPUGNED TWO LOANS HAS BEEN OFFERED TO TAX IN THE YEAR OF RECEIPT. THE DETAILS OF LOANS GRANTED AND RECEIPT OF INTEREST AND PRINCIPAL ON THESE TWO LOANS HAVE BEEN EXTRACTED BELOW FROM THE WRITTEN SUBMISSIONS OF LD AR. (EMPHASIS BY US). VISAKHAPATNAM STEVEDORES ASSOCIATION DATE RS. PS. 03-04-1995 LOAN AMOUNT GRANTED 30,00,000.00 INTEREST ACCRUED ON LOAN 46,60,451.86 ---------------- 76,60,451.86 LESS 15-10-2003 INTEREST AMOUNT RECEIVED 22,56,000.00 07-07-2007 INTEREST AMOUNT RECEIVED 12,51,121.86 26-11-2007 INTEREST AMOUNT RECEIVED 10,98,248.00 29-01-2008 INTEREST AMOUNT RECEIVED 20,000.00 24-03-2008 INTEREST AMOUNT RECEIVED 35,082.00 ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 7 26-11-2007 PRINCIPAL AMOUNT RECEIVED 10,00,00 0.00 29-01-2008 PRINCIPAL AMOUNT RECEIVED 10,00,00 0.00 24-03-2008 PRINCIPAL AMOUNT RECEIVED 10,00,000 .00 --------------------------------------------- ------- 46,60,451.86 30,00,000.00 76,60,451.86 --------------------------------------------- -------- NIL --------------- VISAKHAPATNAM CUSTOMS CLEARANCE & FORWARDING AGENTS ASSOCIATION DATE RS. PS. 03-04-2005 LOAN AMOUNT GRANTED 5,00,000.00 INTEREST ACCRUED ON LOAN 3,62,137.00 --------------- 8,62,137.00 LESS 26-02-2001 PRINCIPAL AMOUNT RECEIVED 5,00,000.00 15-05-2002 INTEREST AMOUNT RECEIVED 3,62,137.00 8, 62,137.00 --------------------------------------------- ---- NIL ---------------- ACCORDING TO LD AR, THE INTEREST RATE OF 12% WAS MO RE THAN THE INTEREST EARNED BY THE ASSESSEE BY PARKING THE SURPLUS FUNDS IN THE FIXED DEPOSITS OF THE SCHEDULED BANKS. THUS, THERE CANNOT BE ANY D ISPUTE THAT THE INTEREST RATE OF 12% RECEIVED BY THE ASSESSEE IS AD EQUATE. THE AO HAS NOT EXPRESSED ANY DOUBT ABOUT THE FINANCIAL STABILI TY OF THE TWO SETTLER ASSOCIATIONS. THUS THE AMOUNTS LENT TO THE TWO FOU NDER ASSOCIATIONS WERE ADEQUATELY SECURED AND ALSO EARNED ADEQUATE INTERES T @ 12%. IT WAS STATED THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM O F ACCOUNTING FOR THE INCOME TAX PURPOSES AND HENCE THE INTEREST CAN BE O FFERED TO TAX ONLY IN THE YEAR OF RECEIPT. THOUGH INITIALLY THE ASSESSEE TRUST DID NOT CHARGE INTEREST, LATER IT HAS FULLY COLLECTED THE DUE INTE REST. ACCORDING TO THE CASH SYSTEM, THE INTEREST HAS BEEN OFFERED TO TAX IN THE YEAR OF RECEIPT WHICH IS ALSO IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. 11.4 IT IS NECESSARY HERE TO CONSIDER A PECULIAR FEATURE ATTACHED TO THE ASSESSEE TRUST. GENERALLY THE TRUSTS ARE FOUNDED BY NATURAL PERSONS OR COMMERCIAL LEGAL PERSONS. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE TRUST WAS FOUNDED BY TWO TRADE ASSOCIATIONS, WHICH ARE NO N-COMMERCIAL LEGAL PERSONS. THE CONCEPT OF PERSONAL INTEREST IS ATTAC HED TO NATURAL PERSONS ONLY. IT IS VERY MUCH SETTLED THAT THERE CANNOT BE ANY PERSONAL ELEMENT IN THE CASE LEGAL PERSONS. THE AUTHORS OF THE ASSESSE E TRUST ARE TRADE ASSOCIATIONS, I.E. NON-COMMERCIAL LEGAL PERSONS. IT S OFFICE BEARERS ARE PRECLUDED FROM ENJOYING ANY PERSONAL BENEFITS OR GA INS. THE TRUSTEES OF A TRUST OR THE OFFICER BEARERS OF A TRADE ASSOCIATION WORK FOR THE WELFARE OF THE TRUST/ASSOCIATION WITHOUT ANY MONETARY BENEFIT. THE OBJECT OF INTRODUCING RESTRICTIONS THROUGH SECTION 13 IS STAT ED IN SAMPATH IYENGARS LAW OF INCOME TAX, 10 TH EDITION, PAGE 1807) AS UNDER: ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 8 THE RESTRICTION PROVIDED FOR U/S 13(1)(C) IS OBVIOUSLY INTENDED TO ENSURE THAT, DESPITE THE OSTENSIBLY CHARITABLE OBJE CTS OF SUCH A TRUST OR INSTITUTION, ITS INCOME IS NOT DIVERTED AWAY TO THE BENEFIT PERSONS WHO ARE CLOSELY CONNECTED WITH THE CREATION, ESTABLISHMENT AND CONDUCT OF THE TRUST OR INSTITUTION. THE AUTHORS OF THE ASSESSEE TRUST ARE TWO TRADE ASS OCIATIONS AND AS STATED EARLIER THERE CANNOT BE ANY PERSONAL INTEREST SO FA R AS THE TRADE ASSOCIATIONS ARE CONCERNED. THE IMPUGNED LOANS HAV E NOT BEEN GIVEN TO THE TRUSTEES BUT ONLY TO THE TRADE ASSOCIATIONS. T HOUGH THE TRUSTEES FALL IN THE CATEGORY OF SPECIFIED PERSONS U/S 13(3), THE TR ADE ASSOCIATIONS IN WHICH THEY ARE OFFICE BEARERS CANNOT BE TREATED AS A CONC ERN IN WHICH THEY ARE SUBSTANTIAL INTERESTED. HENCE THE QUESTION WHETHE R THE PROVISIONS OF SECTION 13(1)(C) SHALL APPLY TO THE ASSESSEE IN RES PECT OF THE IMPUGNED ADVANCES OR NOT IS A DEBATABLE ISSUE. BE THAT AS IT MAY, IN ANY CASE, ON MERITS, WE HAVE SEEN THAT THE IMPUGNED ADVANCES HAV E BEEN MADE WITH ADEQUATE SECURITY AND ADEQUATE INTEREST AND THEY HA VE BEEN COLLECTED SUBSEQUENTLY. HENCE WE DO NOT FIND ANY REASON TO S USPECT THE ADEQUACY OF SECURITY OR INTEREST IN TERMS OF SECTION 13(2)(A ) OF THE ACT. IN VIEW OF THE FOREGOING REASONS, WE HOLD THAT THERE IS NO VIO LATION OF SECTION 13(1)(C) R.W.S. SECTION 13(2) OF THE ACT. ULTIMATELY THE TRIBUNAL ALLOWED THE APPEALS. 10. AGAINST THE AFORESAID ORDER OF THE TRIBUNAL, TH E DEPARTMENT FILED A MA REGISTERED AS MA NO.71/VIZAG/2010. IN THE WRITTEN SUBMISSIONS FILED BY THE LD. D.R. IN THE AFORESAID MA WHICH HAS BEEN EXTRACT ED IN THE ORDER DATED 20.7.2010 PASSED IN MA NO.71/VIZAG/2010, THE DEPART MENT HAS SPECIFICALLY RAISED A GROUND WITH REGARD TO THE TRIBUNALS FINDI NG IN RESPECT OF THE METHOD OF ACCOUNTING WHICH READS AS UNDER: THE ORDER OF THE HONBLE ITAT IS PERVERSE IN SO FA R AS IT RELATES TO THE FINDINGS ON THE METHOD OF ACCOUNTANCY AND NON-A PPRECIATION OF THE FACTS RELATING TO THE APPLICABILITY OF PROVISIO NS OF SEC.13(2)(A) OF THE INCOME-TAX ACT. 11. THE TRIBUNAL DISMISSED THE MA BY OBSERVING AS U NDER: ON A CAREFUL READING OF THE PRAYER OF THE REVENUE AS WELL AS THE WRITTEN SUBMISSION, WE NOTICE THAT THE REVENUE IS REQUESTIN G THE TRIBUNAL TO REVIEW THE ORDER PASSED U/S 254 (1) OF THE ACT. IT IS A WELL SETTLED PROPOSITION OF LAW THAT THE POWER VESTED WITH THE T RIBUNAL U/S 254 (2) IS CONFINED TO THE, -PARAMETERS LAID DOWN IN THAT SUB SECTION, THAT IS TO SAY, THE APPELLATE TRIBUNAL MAY AMEND ANY ORDER PASSED B Y IT U/S 254 (1) WITH A VIEW TO RECTIFY ANY MISTAKE APPARENT FROM TH E RECORD. APPARENTLY IN THE INSTANT CASE THE REVENUE HAS FAILED TO POINT OUT ANY MISTAKE WHICH ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 9 IS APPARENT FROM THE RECORD. INSTEAD, AS STATED EAR LIER, THE REVENUE SEEKS REVIEW, WHICH THE TRIBUNAL IS NOT EMPOWERED T O DO. IN VIEW OF THE ABOVE, WE ARE UNABLE TO INTERFERE WITH THE ORDER PA SSED EARLIER. 12. FROM THE AFORESAID NARRATION OF FACTS, IT BECOM ES ABSOLUTELY CLEAR THAT THE DEPARTMENT HAS ACCEPTED THE FACT THAT THE TRIBU NAL WHILE DECIDING THE APPEAL IN THE EARLIER ROUND HAS GIVEN A FINDING ON THE METHOD OF ACCOUNTING. THEREFORE, CONSIDERED IN THIS FACTUAL BACK DROP, TH E FINDING OF THE CIT(A) THAT THE TRIBUNAL HAS NOT ADJUDICATED ON THE ISSUE IS DE VOID OF MERIT. ON THE CONTRARY, THE ORDER DATED 8.1.2010 PASSED BY THE CO ORDINATE BENCH OF THE ITAT IN ITA NO.272 TO 274 ALLOWING ASSESSEES APPEA L READ WITH THE ORDER DATED 20.7.2010 PASSED IN MA NO.71/VIZAG/2010 MAKES IT CLEAR THAT THE TRIBUNAL HAS ACCEPTED THE ASSESSEES CONTENTION OF RECOGNITION OF INTEREST INCOME ON THE BASIS OF CASH SYSTEM OF ACCOUNTING. THAT BEING THE CASE, THE ASSESSING OFFICER IN OUR VIEW HAS COMMITTED AN ERRO R IN NOT TAKING THE RECEIPTS AS PER THE RECEIPT AND PAYMENT ACCOUNT WHICH IS ON THE BASIS OF CASH SYSTEM OF ACCOUNTING. WE THEREFORE CONSIDERING THE TOTALI TY OF FACTS AND CIRCUMSTANCES OF THE CASE DIRECT THE ASSESSING OFFI CER TO COMPUTE THE INCOME OF THE ASSESSEE ON THE BASIS OF CASH SYSTEM OF ACCO UNTING FOLLOWED BY THE ASSESSEE AND ALLOW EXEMPTION U/S 11 OF THE ACT ACCO RDINGLY. 13. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. MP NO.75/VIZAG/2011: 14. THIS APPLICATION HAS BEEN FILED BY THE ASSESSEE SEEKING RECTIFICATION OF THE ORDER DATED 8.1.2010. THOUGH THE ORDER DATED 8 .1.2010 WAS FOR DISPOSING OF 6 APPEALS ONLY ONE M.P. IS FILED WHICH IS NOT IN ACCORDANCE WITH RULES. SIX SEPARATE M.PS HAVE TO BE FILED AND FEE PAID THEREON. UNDER THE CIRCUMSTANCES, WE TREAT THIS M.P. AS FILED ONLY FOR ONE YEAR I.E. 1999-2000. IN VIEW OF OUR DECISION WHILE DECIDING THE ASSESSEES APPEAL IN ITA NO.355/VIZAG/2011 HEREIN ABOVE, THIS MISCELLANEOUS APPLICATION HAS BECOME INFRUCTUOUS. EVEN OTHERWISE ALSO THE MISCELLANEOUS PETITION, IN OUR VIEW, IS ITA NOS.355 TO 360/VIZAG/2011 & MA NO.75/VIZAG/2011 M/S. CARGO HANDLING PRIVATE WORKERS POOL, VSKP 10 NOT MAINTAINABLE AS THE ASSESSEE HAS NOT POINTED OU T ANY MISTAKE APPARENT IN THE ORDER OF THE TRIBUNAL. ONLY BECAUSE THE REVENU E AUTHORITIES COMMITTED AN ERROR IN IMPLEMENTING OR UNDERSTANDING THE ORDER OF THE TRIBUNAL CANNOT LEAD TO A CONCLUSION THAT THERE IS MISTAKE IN THE O RDER OF THE TRIBUNAL. WE THEREFORE DO NOT FIND ANY MERIT IN THE PETITION FIL ED WHICH IS ACCORDINGLY DISMISSED. 15. IN THE RESULT, APPEALS OF THE ASSESSEES ARE ALLOWED AND M.P. IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 3 RD MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 3 RD MARCH, 2014 COPY TO 1 M/S. CARGO HANDLING PRIVATE WORKERS POOL, C/O DR. C.P. RAMASWAMI, ADVOCATE, FLAT NO.303/102, GITANJALI APARTMENTS, PL OT NO.108 SRI NAGAR COLONY, HYDERABAD 2 ACIT CIRCLE-1(1), VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER (B. VENU GOPAL) SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM