The ITO, Ward-6(3), Surat V. M/s. Rughnathpura Saurashtra Nagrik Dhiran Sahakari Mandli Ltd., Surat

ITA 3658/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5558 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 10-09-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U S RAINA
• Assessee Lawyers: M K PATEL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 19/07/2010 DRAFTED ON: 1 9/07/2010 ITA NO.3658/AHD/2007 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER WARD-6(3) SURAT VS. M/S.RAGHNATHPURA SAURASHTRA NAGRIK DHIREN SAHAKARI MANDLI LTD. 6/2595, SWAMINARAYAN WADI RUGHNATHPURA, SURAT PAN/GIR NO. : AAAAR 1048 Q (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI U.S. RAINA, D.R. RESPONDENT BY: SHRI M.K. PATEL, A.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV, SURAT DA TED 29/06/2007 PASSED FOR ASSESSMENT YEAR 2004-05 CHALLENGING THE ORDER OF THE LEARNED CIT(APPEALS) IN DELETING THE ADDITION OF RS .22,05,960/- MADE BY THE ASSESSING OFFICER. REST OF THE GROUNDS REVOLVE AROUND THE MAIN ISSUE OF PRINCIPAL OF MUTUALITY WHETHER APPLICABLE ON T HE FACTS OF THE CASE. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 28 /12/2006 WERE THAT THE ASSESSEE A CO-OPERATIVE SOCIETY IS ENGAGED IN THE ACTIVITY OF ITA NO. 3658/AHD/2007 ITO VS. M/S.RUGHNATHPURA SAURASHTRA NAGRIK DHIREN SAHARI MANDLI LTD. ASST.YEAR - 2004-05 - 2 - PROVIDING BANKING FACILITIES TO ITS MEMBERS. THE SOCIETY IS ALSO DOING THE ACTIVITIES OF ELECTRICITY BILL COLLECTION AND P ROVIDING INSURANCE COVERAGE TO ITS MEMBERS. THE SOCIETY STARTED THE SCHEME OF SABHASAD SURAKSHA YOJNA (SSY) WHICH WAS APPROVED BY THE EXTR A ORDINARY GENERAL MEETING ON THE MANDLI W.E.F. 4.7.1999. THE ASSESS EE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.NIL ON 30/10/20 04 ALONGWITH PROFIT & LOSS ACCOUNT AND BALANCE-SHEET. THE RETURN OF IN COME IS ACCOMPANIED WITH THE AUDIT REPORT IN FORM NO.3CB DATED 26/04/20 04. IN ACCORDANCE OF THE SSY SCHEME AN AMOUNT OF RS.5/- W AS THE ENTRY FEES OF THE MEMBERS AND RS.500/- WAS TO BE COLLECTED AS CO NTRIBUTION TOWARDS SABHASAD SURAKSHA FUND. IT WAS EXPLAINED THAT AS PER THE SCHEME, OUT OF THE COLLECTION MADE IN THE CASE OF DEMISE OF ANY OF THE MEMBERS AN AMOUNT OF RS.1 LAC WAS TO BE PAID TO NEXT KIN OF T HE DECEASED MEMBER OF SSY. DURING THE YEAR AMOUNT RECEIVED WAS RS.16,82 ,000/- IN THE FORM OF MEMBERSHIP CONTRIBUTION AT THE RATE OF RS.500/- PER MEMBER. IN ADDITION TO THE SAID CONTRIBUTION, THE ASSESSEE SOC IETY HAS ALSO COLLECTED RS.35,05,960/- FROM ITS MEMBERS UNDER SSY SCHEME AT RS.40/- PER MEMBER AS CONTRIBUTION SO AS TO PAY RS.1 LAC TO EAC H OF THE HEIR OF THE DECEASED. ACCORDINGLY, AN AMOUNT OF RS.13 LACS WA S ALSO INCURRED/PAID TOWARDS THE DEATH SCHEME OF SSY. ACCORDING TO ASSE SSING OFFICER, THUS, THE ASSESSEE HAS COLLECTED OVER AND ABOVE THE MEMBE RSHIP FEE, ETC. AN AMOUNT OF RS.22,05,960/- UNDER THE SAID SCHEME. I N HIS OPINION, THE SAID AMOUNT WAS NEITHER EXPENDED OR UTILIZED FOR ITS MEM BER NOR IT WAS RETURNED BACK TO THE MEMBERS BUT KEPT BY THE SOCIET Y ITSELF. HENCE, THE SAID AMOUNT BEING REMAINED IN THE HANDS OF THE SOCI ETY WAS NOTHING BUT ITA NO. 3658/AHD/2007 ITO VS. M/S.RUGHNATHPURA SAURASHTRA NAGRIK DHIREN SAHARI MANDLI LTD. ASST.YEAR - 2004-05 - 3 - THE INCOME OF THE SOCIETY. IT WAS TAXED ACCORDING LY. THE MATTER HAS REACHED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LEARNED CIT(APPEALS) HAS PASSED A SHORT AND CRYPTIC ORDER PRIMARILY BECAUSE OF THE REASON THAT THE IDENTICAL ISSUE HAD COME UP IN ASSESSMENT YEAR 2003-04 WHICH WAS DECIDED IN ASSES SEES FAVOUR BY HOLDING THAT THERE WAS NO ELEMENT OF INCOME IN RESP ECT OF THE SAID FUND COLLECTED BY THE SOCIETY. 3.1. WITH THESE BRIEF BACKGROUND, WE HAVE HEARD BOTH THE SIDES. IT WAS INFORMED TO US THAT FOR ASSESSMENT YEAR 2003-04, TH IS ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT AHMEDABAD BENCH C IN FAV OUR OF THE ASSESSEE AND THEREIN AS WELL THE REVENUES GROUND W AS DISMISSED BY THE TRIBUNAL (IN ITA NO.1828/AHD/2006 - REVENUES APPE AL) VIDE ORDER DATED 30/06/2010 IN PARAGRAPH NO.8; REPRODUCED BEL OW:- 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGH T OF THE ABOVE DECISIONS IT IS CLEAR THAT UNDER THE INCOME TAX ACT THE INCOME COULD BE TAXED, PROFIT OR GAINS EARNED OR ACCRUING TO A PERSON. IN THE APPEAL UNDER CONSIDERATION, THERE IS A PRINCIPL E OF MUTUALITY IN THE SENSE THAT IDENTITY OF THE CONTRIBUTORS I.E. BY THE MEMBERS OF THE SOCIETY TO THE FUNDS AND THE RECIPIENT I.E. MEMBERS OF THE ASSESSEE SOCIETY ARE THE SAME. THE SCHEME WAS MADE FOR THE MUTUAL BENEFITS OF THE MEMBERS OF THE ASSESSEE SOCIETY AND THERE WAS NO BUSINESS TRANSACTION BETWEEN THE MEMBERS OF THE SOC IETY AND THE SOCIETY. THE FUNDS ARE COLLECTED BY THE SOCIETY FO R CREATION OF THE CORPUS, THE INCOME FROM WHICH WOULD BE UTILIZED FOR THE BENEFIT OF THE MEMBERS OF THE ASSESSEE SOCIETY ONLY. THE CONT RIBUTION TO THE CAPITAL ACCOUNT OF THE SOCIETY CANNOT BE TREATED AS ITS INCOME. SIMILARLY, BECAUSE THE AMOUNT CONTRIBUTED BY THE ME MBERS IS SURPLUS IN A PARTICULAR YEAR, THE SAID AMOUNT CANNO T BE CONSIDERED AS INCOME OF THE ASSESSEE. THERE IS A PRINCIPLE OF MUTUALITY SINCE ITA NO. 3658/AHD/2007 ITO VS. M/S.RUGHNATHPURA SAURASHTRA NAGRIK DHIREN SAHARI MANDLI LTD. ASST.YEAR - 2004-05 - 4 - THE FUNDS SO COLLECTED BY THE ASSESSEE SOCIETY CANN OT BE UTILIZED FOR ANY OTHER PURPOSE THAN FOR THE BENEFITS OF ITS MEMB ERS ONLY, THERE IS NO ELEMENT OF INCOME AS DEFINED UNDER THE INCOME TAX ACT. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE DEPARTMENTA L APPEAL. WE CONFIRM THE FINDINGS OF THE LEARNED CIT(A) AND DISM ISS THE APPEAL OF THE REVENUE. 3.2. ONCE THE RESPECTED CO-ORDINATE BENCH HAS ALREA DY TAKEN A VIEW IN FAVOUR OF THE ASSESSEE IN THE PAST AND ACCEPTED THE PLEA OF THE ASSESSEE THAT THE PRINCIPAL OF MUTUALITY WAS APPLICABLE ON THE ASSESSEE, THEREFORE, FOLLOWING THE SAME FOR THIS YEAR AS WELL REVENUES GROUND IS HEREBY DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23 / 07 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23 / 07 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD