DDIT (IT) 2 (1), MUMBAI V. M/S SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC., MUMBAI

ITA 3807/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75361 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 11-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Source of fund; Revised return
• Section: 32; 6; 12; 10; 2; 143(3)

Judgement Text

` , IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL ME MBER . / ITA NO. 3807 / MUM./ 2010 ( / ASSESSMENT YEAR : 20 0 7 08 ) DY . DIRECTOR OF INCOME TAX (IT) 2(1) SCINDIA HOUSE, BALLARD ESTATE N.M. ROAD, MUMBAI 400 038 .. / APPELLANT V/S M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC ALF HOUSE, GR. FLOOR, LOK BHARTI COMPLEX, MAROL MAROSHI ROAD, MAROL ANDHERI (E), MUMBAI 400 059 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AA FCS2907Q . / C.O. NO. 41/MUM./2011 ( . 3807 /MUM./201 0 ) ( ARISING OUT OF ITA NO. 3807 /MUM./201 0 ( / ASSESSMENT YEAR : 2007 08 ) M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC ALF HOUSE, GR. FLOOR, LOK BHARTI COM PLEX, MAROL MAROSHI ROAD, MAROL ANDHERI (E), MUMBAI 400 059 .. / CROSS OBJECTOR V/S DY. DIRECTOR OF INCOME TAX (IT) 2(1) SCINDIA HOUSE, BALLARD ESTATE N.M. ROAD, MUMBAI 400 038 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAFCS2907Q / ASSESSEE BY : NONE / REVENUE BY : M .S . NEERAJA PRADHAN M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 2 / DATE OF HEARING 1 5 . 01 .201 4 / DATE OF ORDER 22.01.2014 / ORDER / PER BENCH THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE, CHALLENGING THE IMPUGNED ORDER DATED 1 ST FEBRUARY 2010 , PASSED BY THE COMMISSIONER (APPEALS) II , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 20 07 08 . THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTION WHICH IS ARISING OUT OF THE AFORESAID APPEAL OF THE REVENUE. THE GROUNDS RAISED BY THE REVENUE, READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS COVERED BY THE PRINCIPLE OF MUTUALITY WITHOUT APPRECIATING THE FACT THAT: I. THE ASSESSEE WAS HAVING TRANSA CTIONS WITH THE NON MEMBERS ALSO. II. IT FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE REGARDING THE EXPENSES AND THEREBY, FAILED TO SATISFY THE ASSESSING OFFICER THAT THE REVENUE RECEIVED WERE MATCHED BY THE EXPENSES INCURRED. 2 . WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. WE, HOWEVER, PROCEED TO DISPOSE OF THE APPEAL PREFERRED BY THE REVENUE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 3 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, AT THE OUTSET, SUBMITTED THAT SIMILAR ISSUE HAS COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS ALSO AND IN THE SERIES OF DECISIONS RIGHT FROM THE ASSESSMENT YEAR 1996 97 TO 2006 07 AND 2008 09 , THE TRIBUNAL HAS DECIDED THIS ISSUE. SHE ALSO FILED COPY OF THE TRIBUNAL ORDER S FOR THE ASSESSMENT YEAR 2006 07 AND 2008 09. 4 . AFTER CAREFULLY CONSIDERING THE RELEVANT FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) AS WELL AS THE EARLIER ORDERS OF THE TRIBUNAL, IT IS SEEN THAT THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 1996 97 IN ITA NO.4970/MUM./ 2005 AND C.O. NO.67/MUM./2006, ORDER DATED 26 TH SEPTEMBER 2012. THIS DECISION OF THE TRIBUNAL HAS BEEN FOLLOWED IN ALL THE ASSESSMENT YEARS UP TO 2006 07 AND ALSO IN T HE ASSESSMENT YEAR 2008 09. ON A PERUSAL OF THE TRIBUNAL ORDER DATED 14 TH NOVEMBER 2012 IN ITA NO.572/MUM./2010, IT IS SEEN THAT SIMILAR GROUNDS HAVE BEEN RAISED BY THE REVENUE. THE TRIBUNAL, FOLLOWING THE DECISION FOR THE ASSESSMENT YEAR 1996 97, HAS OBSE RVED AND HELD AS UNDER: 3 WE HAVE HEARD THE LD DR AS WELL AS THE LD SR COUNSEL FOR THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE ISSUE INVOLVED IN THE REVENUES APPEAL AS WELL AS IN THE CROSS OBJECTION OF TH E ASSESSEE ARE CONSIDERED AND DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996 - 97 VIDE ORDER DATED 26.9.2012. 4 THE ONLY ISSUE RAISED BY THE REVENUE IS REGARDING THE PRINCIPLE OF MUTUALITY, WHICH HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1996 - 97 AFTER A DETAILED DISCUSSION OF THE FACTS AS WELL AS LAW AND THE DECISIONS OF THE HONBLE SUPREME COURT AS WELL AS THE HIGH COURT IN PAA 3.4 TO 3.24 . THE CONCLUDING PART OF THE ORDER OF THE TRIBUNAL I N PARA 3.11.20, 3.12 TO 3.24 ARE AS UNDER: 3.11.20. WE HAVE NOTICED IN AN EARLIER PARA OF THIS ORDER THAT IN A CASE OF A NON - MUTUAL ORGANIZATION, A FEW TRANSACTIONS WITH THE MEMBERS DO NOT CONVERT ITS NON - MUTUAL STATUS TO MUTUAL. IN THE LIKE MANNER, THE O THERWISE STATUS OF MUTUALITY OF AN ORGANIZATION CANNOT BE DESTROYED BECAUSE OF A FEW TRANSACTION WITH THE NON - MEMBERS. WHAT EXTENT OF M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 4 PARTICIPATION BY NONMEMBERS DESTROYS THE OTHERWISE MUTUAL STATUS OF AN ORGANIZATION OR WHAT EXTENT OF PARTICIPATION BY MEM BERS CHANGES THE OTHERWISE STATUS OF NONMUTUALITY DEPENDS ON THE CONSIDERATION OF THE TOTALITY OF FACTS AND CIRCUMSTANCES OF EACH CASE. 3.12. FOLLOWING PRINCIPLES OF MUTUALITY CAN BE DEDUCED FROM THE ABOVE DISCUSSION: - A. NO ONE CAN TRADE WITH HIMSELF AN D HENCE THERE CAN BE NO PROFIT FROM SELF. B. WHEN INDIVIDUALS JOIN AND FORM AN ASSOCIATION AND SUCH ASSOCIATION SELLS/PROVIDES GOODS/SERVICES OR FACILITIES ONLY TO ITS MEMBERS, THERE CAN INVARIABLY BE NO PROFIT MOTIVE. EVEN IF SOME PROFIT ENSUES TO THE OR GANIZATION FROM MEMBERS ON TRANSACTIONAL LEVEL, WHILE PURSUING THE OBJECTS OF THE ASSOCIATION IN PROVIDING GOODS AND SERVICES TO ITS MEMBERS, THERE CAN BE NO TAX ON SUCH PROFIT ON THE BASIS OF THE PRINCIPLE OF MUTUALITY. THE REASON IS THAT THE CONTRIBUTORS TO THE PROFIT AND PARTICIPATORS IN SUCH PROFIT, ARE THE SAME PERSONS AS A CLASS. IF NO PROFIT FOLLOWS FROM THE TRANSACTIONS WITH THE MEMBERS, OBVIOUSLY, THERE CAN BE NO TAX EVEN DEHORS THE RULE OF MUTUALITY. C. IF, AN ORGANIZATION OF THE NATURE AS DISCUS SED IN POINT NO. B ABOVE, APART FROM ENTERING INTO TRANSACTIONS WITH ITS MEMBERS IN FURTHERANCE OF ITS OBJECTS, INVESTS ITS FUNDS OR MAKES DEPOSIT IN BANK, THE RETURN OR INTEREST ON SUCH INVESTMENT/DEPOSITS WILL NOT BE COVERED BY THE CHARACTER OF MUTUALITY AND SUCH AN AMOUNT WILL BE LIABLE TO TAX. IT IS SO FOR THE REASON THAT THE PRINCIPLE OF MUTUALITY WILL LACK AS THE CONTRIBUTORS OF SUCH INTEREST INCOME WILL NOT BE PARTICIPATING IN SUCH INCOME. HOWEVER, MUTUAL CHARACTER OF THE ORGANIZATION IN RESPECT OF T RANSACTIONS WITH ITS MEMBERS WILL CONTINUE AND INCOME THERE FROM WILL ENJOY EXEMPTION. D. WHEN INDIVIDUALS JOIN AND FORM AN ASSOCIATION AND SUCH ASSOCIATION SELLS/PROVIDES GOODS/SERVICES/FACILITIES ONLY TO PUBLIC AT LARGE, THAT IS, NON - MEMBERS, THERE MAY OR MAY NOT BE PROFIT MOTIVE. WHEN THERE IS PROFIT MOTIVE AND PROFITS ACTUALLY FOLLOWS, SUCH PROFIT IS LIABLE TO TAX. IF THERE IS NO PROFIT MOTIVE BUT STILL PROFIT FOLLOWS, SUCH A PROFIT IS ALSO CHARGEABLE TO TAX. IF, HOWEVER THERE IS NO PROFIT MOTIVE AND N O PROFIT RESULTS, THERE WILL NOT BE ANY TAX BECAUSE OF NO INCOME AND NOT BECAUSE OF PRINCIPLE OF MUTUALITY. OBVIOUSLY IN SUCH A CASE, THE CONTRIBUTORS TO THE PROFIT, BEING THE CUSTOMERS AS A CLASS, WILL BE DIFFERENT FROM THE PARTICIPATORS IN THE PROFIT, BE ING THE MEMBERS OF THE ASSOCIATION AS A CLASS, THEREBY BREACHING THE PRINCIPLE OF MUTUALITY. E. IF, IN A CASE OF ASSOCIATION OF THE NATURE AS DISCUSSED IN POINT NO. D. ABOVE, THERE ARE BY AND LARGE TRANSACTIONS WITH NON - MEMBERS, BUT THERE ARE ONLY A FEW T RANSACTIONS WITH MEMBERS AS WELL, THE NATURE OF THE ORGANIZATION AS NON - MUTUAL, WILL REMAIN AS SUCH. WHEREAS PROFITS FROM TRANSACTIONS WITH NON - MEMBERS WILL BE LIABLE TO TAX, PROFIT FROM TRANSACTIONS WITH THE MEMBERS WILL CONTINUE TO ENJOY EXEMPTION. M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 5 F. W HEN THE ORGANIZATION PROVIDES FACILITIES AND SERVICES BOTH TO ITS MEMBERS AND NON - MEMBERS, THE FOLLOWING CONSEQUENCES FLOW: - (I) IF THE `OBJECT OF SUCH AN ORGANIZATION IS `TO EARN PROFIT, THERE IN NO MUTUALITY IN RESPECT OF TRANSACTIONS WITH MEMBERS. ( II) WHEN THE `OBJECT OF THE ORGANIZATION IS `NOT TO EARN PROFIT BUT PROFIT EMERGES FROM TRANSACTIONS WITH MEMBERS AND NON - MEMBERS, THE RULE OF MUTUALITY WILL NOT APPLY TO THE EXTENT OF TRANSACTIONS WITH MEMBERS UNLESS TRANSACTIONS WITH MEMBERS ARE PHENOM ENALLY MINIMAL. (III) IN BOTH THE ABOVE CASES COVERED UNDER (I) AND (II), PROFIT FROM TRANSACTIONS WITH NON - MEMBERS IS ALWAYS TAXABLE. 3.13. NOW WE WILL TEST THE FACTS OF THE INSTANT CASE ON THE TOUCHSTONE OF THE BROADER PRINCIPLES OF MUTUALITY AS FIGURE D OUT BY US IN PRECEDING PARA. IT IS OBSERVED THAT THE ASSESSEE EXTENDED FACILITIES TO AIRPORT AUTHORITIES, UNITED NATION, IFC, UNESCO AND EQUANT CUSTOMERS. IT IS EVIDENT FROM PAGE 27 PARA 74 OF THE `STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE THE LEA RNED CIT(A) THAT THE ASSESSEE - COMPANY AND EQUANT SHARED NETWORK OUTSIDE INDIA IN ORDER TO ACHIEVE ECONOMIES OF SCALE. UNDER THIS ARRANGEMENT, THE COSTS INCURRED BY EACH PARTY WERE SHARED ACCORDING TO USAGE AND THESE COSTS RECHARGED WERE SHOWN IN ITS INCOME AND EXPENDITURE ACCOUNT. THE FACT THAT THE ASSESSEE RENDERED SERVICES TO EQUANT CUSTOMERS IS ALSO BORNE OUT FROM ITS LETTER DATED 25.03.2004, A COPY OF WHICH IS PLACED ON PAGE 29 ONWARDS OF THE PAPER BOOK. FROM PARA (IVC), IT CAN BE NOTICED THAT : SITA A ND EQUANT SHARED NETWORK RESOURCES IN CERTAIN COUNTRIES OUTSIDE INDIA, IN ORDER TO MAXIMIZE SUCH ECONOMIES OF SCALE. UNDER THOSE ARRANGEMENTS, THE COSTS INCURRED BY EACH PARTY WERE SHARED ACCORDING TO USAGE. IT SHOWS THAT NON - MEMBERS DID AVAIL THE FACILIT IES EXTENDED BY THE ASSESSEE. 3.14. NOW LET US SEE THE VOLUME OF TRANSACTIONS WITH SUCH NON - MEMBERS. THE ASSESSEES CONTENTION IS THAT IT WAS SIMPLY RECOVERING COSTS FROM ITS MEMBERS AND NON - MEMBERS FOR RENDERING SERVICES AND THERE WAS NO PROFIT MOTIVE. THE TOTAL OF COST RECOVERIES FROM GOVERNMENT, INTERNATIONAL ORGANIZATIONS AND EQUANT CUSTOMERS, CONSTITUTING NON - MEMBERS AS A GROUP, IS 0.07% OF THE TOTAL COST RECOVERIES. IT SHOWS THAT THE ASSESSEE PROVIDED SERVICES TO ITS MEMBERS AT 99.93% OF ITS TOTAL O PERATIONS. THIS FACT EVIDENCES THAT NONMEMBERS AVAILED THE FACILITIES PROVIDED BY THE ASSESSEE TO A VERY LIMITED EXTENT, LESS THAN EVEN 0.1% OF TOTAL. 3.15. AT THIS MOMENT, WE WILL TRY TO ASCERTAIN IF THE ASSESSEE WAS SET UP WITH A PROFIT MOTIVE. WE HAVE PERUSED ARTICLES OF ASSOCIATION OF THE ASSESSEE, A COPY OF WHICH IS PLACED AT PAGE 116 ONWARDS OF THE PAPER BOOK. OBJECTS OF THE ASSESSEE ARE CONTAINED IN ARTICLE 3. MAIN OBJECT OF THE ASSESSEE AS PER CLAUSE A) OF ARTICLE 3 IS TO FOSTER ALL COMMUNICATION A ND INFORMATION PROCESSING, MATTERS DIRECTLY OR INDIRECTLY CONNECTED WITH THE TRANSMISSION AND PROCESSING OF ALL CATEGORIES OF INFORMATION M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 6 REQUIRED IN THE OPERATION OF THE AIR TRANSPORT INDUSTRY AND TO STUDY THE PROBLEMS RELATING TO THEM WITH THE AIM OF PRO MOTING IN AL COUNTRIES SAFE AND REGULAR AIR TRANSPORT. OTHER OBJECTS OF THE ASSESSEE ARE ON THE SAME LINES. THERE IS NO REFERENCE TO ANY PROFIT MOTIVE IN SUCH OBJECTS. IT HAS BEEN CONSISTENTLY CLAIMED BY THE ASSESSEE THAT IT HAS NOT EARNED ANY PROFIT FR OM ITS TRANSACTIONS AND THE CONSIDERATION SO RECEIVED REPRESENTS ONLY COST RECOVERIES. 3.16. THE ABOVE FACTS INDICATE THAT PRIMARILY, THE ASSESSEE IS NOT SET UP WITH A `PROFIT MOTIVE. SECONDLY, THE NON - MEMBERS AVAILING THE FACILITIES EXTENDED BY THE ASSE SSEE ARE VERY INSIGNIFICANT, NOT EVEN 1% OF THE TOTAL. 3.17. THESE FACTS ARE DEFINITE POINTER TOWARDS THE ASSESSEE BEING A MUTUAL ORGANIZATION. UNDER SUCH CIRCUMSTANCES WE ARE OF THE CONSIDERED OPINION THAT THE PRINCIPLE OF MUTUALITY CANNOT BE DENIED IN E NTIRETY EVEN IN RESPECT OF TRANSACTIONS BY THE ASSESSEE WITH ITS MEMBERS. ACCORDINGLY, THE VIEW TAKEN BY THE LEARNED CIT(A) CAN NOT BE FAULTED WITH INSOFAR AS IT ACCEPTS THE RULE OF MUTUALITY QUA THE TRANSACTIONS WITH MEMBERS AND DENIES THE SAME QUA THE TR ANSACTIONS WITH NON - MEMBERS. 3.18. THE NEXT ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IN SUPPORT OF HIS CONTENTION THAT THE MUTUALITY SHOULD BE REJECTED IN ENTIRETY WAS WITH REFERENCE TO ARTICLES 20 AND 50 OF THE ARTICLES OF ASSOCIATION OF THE A SSESSEE. IT WAS SUBMITTED THAT SINCE THE RETIRING OR RESIGNING MEMBERS ARE NOT ENTITLED TO PARTICIPATE IN THE RESERVES TO SOME EXTENT, THE MUTUALITY WAS LOST. IT WAS ARGUED THAT THE CONTRIBUTOR TO AND PARTICIPATOR IN THE SURPLUS FUND SHOULD BE CONSIDERED O N THE LEVEL OF INDIVIDUAL PERSONS. FOR THIS PROPOSITION, HE RELIED ON THE JUDGMENT IN THE CASE OF WANKANER JAIN SOCIAL WELFARE SOCIETY (SUPRA). IN THIS CASE THE HONBLE MADRAS HIGH COURT CONSIDERED THE FACTS IN WHICH THE OBJECT OF THE SOCIETY WAS TO CREATE AND CULTIVATE THE HABIT OF SAVING AND THRIFT AMONG THE MEMBERS OF THE SOCIETY TO HELP BY WAY OF LOAN OR OTHER ASSISTANCE TO MEMBERS IN CASE OF A BONA FIDE NEED. THE RULES AND REGULATIONS OF THE SOCIETY MADE IT COMPULSORY FOR EVERY MEMBER TO PARTICIPATE IN THE SCHEME OF DEPOSIT. THE ASSESSING OFFICER DENIED THE MUTUALITY ON THE GROUND THAT EVERY DEPOSITOR WAS NOT NECESSARILY BORROWER AND THEREFORE, THE INTEREST PAID BY THE BORROWERS AND DISTRIBUTED AMONGST THE NON - BORROWER MEMBERS DENTED THE MUTUALITY. THE HONBLE MADRAS HIGH COURT UPHELD THIS PRINCIPLE BY HOLDING THAT SINCE THE INTEREST INCOME WAS AVAILABLE FOR BEING DISTRIBUTED AMONGST ALL THE MEMBERS INCLUDING THOSE WHO HAD NOT BORROWED MONEYS, THE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS WAS L OST AND HENCE THE PRINCIPLE OF MUTUALITY WAS NOT SATISFIED. 3.19. THE QUESTION WHICH, THEREFORE, ARISES FOR OUR CONSIDERATION IS WHETHER THE MUTUALITY IS LOST BY REASON OF A MEMBER RESIGNING OR RETIRING FROM THE SOCIETY AND NOT GETTING ANY SHARE IN THE RE SERVES. IN OTHER WORDS, THE LARGER QUESTION IS WHETHER THE CONTRIBUTORS TO THE FUND AND PARTICIPATORS IN THE FUND SHOULD BE THE SAME PERSONS ON AN M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 7 INDIVIDUAL LEVEL OR A CLASS LEVEL. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO - OPERATIVE HOU SING SOCIETY (SUPRA) CONSIDERED THE QUESTION OF MUTUALITY ON THE TRANSFER FEES RECEIVED BY THE CO - OPERATIVE SOCIETY FROM ITS MEMBERS. IN THIS CASE, THE HONBLE JURISDICTIONAL HIGH COURT RECOGNIZED `CLASS OF MEMBERS AS PARTICIPATORS AS WELL AS CONTRIBUTORS FOR MUTUALITY, INSTEAD OF THE `INDIVIDUAL MEMBERS. IT HAS BEEN HELD IN THIS CASE THAT THE FACT THAT ONLY SOME MEMBERS FROM THOSE WHO CONTRIBUTED MAY PARTICIPATE IN THE SURPLUS, IS IRRELEVANT AS LONG AS THE CLASS IS SAME. 3.20. THE LEARNED DEPARTMENTAL R EPRESENTATIVE ALSO RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA) TO CONTEND THAT THE PRINCIPLE OF MUTUALITY FAILS IF THE PERSONS WHO CONTRIBUTE TO THE INCOME ARE NOT THE SAME PERSONS WHO PART ICIPATE IN THE SURPLUS OF THE ORGANIZATION. IN THIS CASE THE ASSESSEE CARRIED ON A BANKING BUSINESS RESTRICTED TO ITS SHAREHOLDERS, THAT IS, THE SHAREHOLDERS WERE ENTITLED TO PARTICIPATE IN VARIOUS RECURRING DEPOSITS SCHEMES OF THE ASSESSEE OR TO OBTAIN LO ANS OF SECURITIES. THESE RECURRING DEPOSITS CONSTITUTED THE MAIN SOURCE OF FUNDS OF THE ASSESSEE FOR ADVANCING LOANS. OUT OF THE INTEREST REALIZED BY THE ASSESSEE ON THE LOANS, INTEREST ON RECURRING DEPOSIT WAS PAID AND THE BALANCE WAS DIVIDED AMONGST THE MEMBERS ACCORDING TO THEIR SHAREHOLDING. THE ITO DENIED THE PRINCIPLE OF MUTUALITY AND ASSESSED THE ENTIRE PROFIT TO TAX, WHICH VIEW HAS BEEN UPHELD BY THE HONBLE SUPREME COURT. 3.21. WE ARE UNABLE TO SEE AS TO HOW THIS JUDGMENT ADVANCES THE CASE OF THE REVENUE. THE ASSESSEE IN THAT CASE RECEIVED RECURRING DEPOSITS AND MADE ADVANCES TO CERTAIN MEMBERS. THE SURPLUS WAS DISTRIBUTED AMONGST MEMBERS ACCORDING TO THEIR SHAREHOLDING AFTER MAKING A PROVISION FOR RESERVES ETC. THE SHAREHOLDERS WHO WERE ENTITLED TO PARTICIPATE IN THE SURPLUS NEED NOT HAVE EITHER TAKEN LOANS OR MADE RECURRING DEPOSITS. FROM THESE FACTS, IT IS PALPABLE THAT THE SHAREHOLDERS WERE DIFFERENT AS A CLASS FROM THE PERSONS WHO AVAILED THE LOAN FACILITY AS A CLASS. IT WAS NOT NECESSARY FOR A SHAREHOLDER EITHER TO TAKE LOAN OR TO MAKE A RECURRING DEPOSIT. THUS THE CONTRIBUTORS TO THE FUNDS WERE DIFFERENT AS A GROUP FROM THE PARTICIPATORS, BEING, THE SHAREHOLDERS OF THE CLUB AS A GROUP. 3.22. IN VIEW OF THE FACT THAT ARTICLES 20 AND 50 DEBAR THE RETIRING OR RESIGNING MEMBERS FROM PARTICIPATING IN THE RESERVES AVAILABLE, CANNOT BE CONSIDERED AS A FACTOR ECLIPSING THE PRINCIPLE OF MUTUALITY. IT IS SO FOR THE REASON THAT THE PERSONS WHO ARE ENTITLED TO SHARE AND PARTICIPATE IN THE RESERVES OF THE SOCIETY CONTINUE TO REMAIN THE SAME AS A GROUP OR CLASS OF PERSONS. THE MERE FACT THAT A PERSON AT THE TIME OF RESIGNATION OR RETIREMENT IS NOT ENTITLED TO SHARE IN THE RESERVES OF THE ORGANIZATION, WOULD NOT DAMAGE THE MUTUALITY SO LONG AS THE PERSONS WH O ARE ENTITLED TO SHARE SUCH RESERVES CONTINUE TO BE THE MEMBERS AS A CLASS. 3.23. BE THAT AS IT MAY, IT IS OBSERVED THAT THIS FACT HAS BEEN CONSIDERED BY THE TRIBUNAL WHILE DECIDING THE PRINCIPLE OF MUTUALITY IN M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 8 RELATION TO ASSESSMENT YEARS 1974 - 75 AND 1 975 - 76. THE TRIBUNAL HAS ELABORATELY REPRODUCED AND DISCUSSED THESE TWO ARTICLES IN ITS ORDER AND THEREAFTER RECORDED A POSITIVE CONCLUSION GRANTING THE STATUS OF MUTUAL ORGANIZATION TO THE ASSESSEE. SAME IS TRUE IN RESPECT OF THE CREATION OF RESERVES AS W ELL. THE LEARNED AR HAS POINTED OUT THAT THE RESERVES SO REFERRED TO BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WERE CREATED MANY YEARS AGO IN ACCORDANCE WITH THE BELGIAN STATUTORY REQUIREMENTS OR AROSE DUE TO REVALUATION OR REFURBISHMENT COST OR DUE TO CA PITALIZATION OF REFURBISHMENT COST. THE QUESTION OF RESERVES HAS ALSO BEEN DISCUSSED IN THE ORDER FOR ASSESSMENT YEARS 1974 - 75 AND 1975 - 76. IN VIEW OF THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IN EARLIER YEARS HOLDING THAT THE MUTUALITY IS NOT DISTURBED B Y REASON OF ARTICLE 20 AND 50 OF THE ASSESSEE OR THE CREATION OF RESERVES, WE DO NOT DEEM IT NECESSARY TO DIVE DEEP INTO THE ARGUMENTS OF THE LD. DR WITH A VIEW TO BRING OUT ANY DECISION CONTRARY TO WHAT HAS ALREADY BEEN TAKEN BY THE TRIBUNAL IN EARLIER YE ARS ON THE SAME FACTS AND CIRCUMSTANCES. 3.24. WE, THEREFORE, SUM UP OUR CONCLUSION ON GROUND NO.1 TAKEN BY THE REVENUE IN ITS APPEAL BY HOLDING THAT THE ASSESSEE IS COVERED BY THE PRINCIPLE OF MUTUALITY TO THE EXTENT OF ITS TRANSACTIONS WITH THE MEMBERS. INCOME FROM TRANSACTIONS WITH NON - MEMBERS IS OUTSIDE THE PURVIEW OF MUTUALITY. 4 FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, WE HOLD THAT THE ASSESSEE IS COVERED BY THE PRINCIPLE OF MUTUALITY TO THE EXTENT OF ITS TRANSACTION WITH THE MEMBERS ONLY AND THE INCOME FROM THE TRANSACTION OF NON MEMBERS IS OUTSIDE THE PURVIEW OF THE MUTUALITY. 5 . THUS, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE INCOME OF THE ASSESSEE TO THE EXTENT OF THE TRANSACTIONS ENTERED WITH THE MEMBERS ARE COVERED BY THE PRINCIP LES OF MUTUALITY HENCE, THE SAME IS EXEMPT FROM TAXATION AND ONLY THE INCOME FROM THE TRANSACTIONS FROM NON MEMBERS IS OUTSIDE THE PURVIEW OF PRINCIPLES OF MUTUALITY. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 6 . 6. IN THE RESULT, REVENUES APPEAL IS TREATED AS DISMISSED. WE NOW TAKE UP CROSS OBJECTION PREFERRED BY THE ASSESSEE , VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 9 THE APPELLANT COMPANY OBJECTS TO THE ORDER DATED 1 FEBRUARY 20 1 0, PASSED UNDER SECTION 250 BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 11, MUMBAI ['CIT (A)'] ON THE FOLLOWING GROUNDS OF APPEAL: REIMBURSEMENT OF COSTS IS OT 'INCOME' I . THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT COMPANY RECOVERS ITS COSTS ONLY AND THAT REIMBURSEMENT OF COSTS CANNOT BE REGARDED AS TAXABLE 'INCOME', EVEN IF RECOVERED FROM NON - MEMBERS. COMPUTATION OF TOTAL INCOME 2 . THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER ('ADIT') I N ESTIMATING THE PROFITS OF THE APPELLANT COMPANY AT 5% OF THE GROSS AMOUNT RECOVERED FROM NON - MEMBERS. GROUNDS NOT ADDRESSED THE LEARNED CIT(A) ERRED IN NOT ADDRESSING THE FOLLOWING GROUNDS OF APPEAL PREFERRED BY THE APPELLANT COMPANY: 3. THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX (' ADIT') ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 44C OF THE ACT APPLY TO THE APPELLANT COMPANY IN RESPECT OF CERTAIN EXPENSES INCURRED AT HEAD OFFICE LEVEL WHICH MAY NOT FALL WITHIN THE DEFINITION OF 'HEAD OFFICE E XPENDITURE' AS DEFINED IN SECTION 44C OF THE ACT. 4. THE LEARNED ADIT ALSO FAILED TO APPRECIATE THAT HEAD OFFICE DOES NOT ONLY APPORTION CERTAIN COSTS TO INDIA, BUT ALSO ALLOCATES THE MATCHING COST RECOVERIES, SO THAT IN THE EVENT OF ANY DISALLOWANCE OF HEAD OFFICE COST APPORTIONMENTS, THE MATCHING COST RECOVERIES SHOULD ALSO BE EXCLUDED FROM THE TAXABLE INCOME OF THE BRANCH, APPLYING THE PRINCIPLE CONTENDED IN ARTICLE 7( I )(A) OF THE INDIA - BELGIUM TAX TREATY. 5. THE LEARNED ADJT ERRED IN OBSERVING THAT THE PROVISIONS OF SECTION 40(A)(III) MAY APPLY TO THE APPELLANT COMPANY. 6. THE LD. ADIT ERRED IN HOLDING THAT THE APPELLANT COMPANY WAS REQUIRED TO WITHHOLD TAX FROM THE INTEREST PAYMENTS MADE BY IT TO ITS MEMBERS AND NOT HAVING DONE SO, THE PAYMENTS AR E DISALLOWABLE UNDER SECTION 40(A)(I) OF THE ACT. THE LEARNED ADIT FAILED TO APPRECIATE THAT THE PAYMENTS WERE NOT LIABLE TO TAX IN INDIA AND ACCORDINGLY THE APPELLANT WAS NOT REQUIRED TO WITHHOLD ANY TAX AT SOURCE AND CONSEQUENTLY NO DISALLOWANCE COULD BE MADE UNDER SECTION 40(A)(I) OF THE ACT IN RESPECT OF SUCH INTEREST CHARGES. 7. THE LEARNED ADIT ERRED IN NOT APPRECIATING THAT THE NET INCOME OF THE APPELLANT COMPANY IS NIL AS IT RECOVERS AT COST. ACCORDINGLY THE APPELLANT COMPANY DID NOT HAVE ANY TAXA BLE INCOME. 8. THE LEARNED ADIT ERRED IN NOT ALLOWING DEPRECIATION ALLOWANCE UNDER M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 10 SECTION 32 OF THE ACT WHILE COMPUTING THE NET INCOME OF THE APPELLANT COMPANY. INTEREST INCOME 9. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE INTEREST INCOME (C OMPRISING OF BANK INTEREST AND INTEREST ON INCOME TAX REFUND) RECEIVED BY THE APPELLANT COMPANY IS ALSO COVERED BY THE PRINCIPLE OF MUTUALITY. 10 . THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT COMPANY IS DEBARRED FROM MAKING A CLAIM FOR EXEMPTION OF INTEREST INCOME AT THE APPELLATE STAGE, WITHOUT FILING REVISED RETURN AND AGITATING THE ISSUE FIRST BEFORE THE ASSESSING AUTHORITY . 11 . THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT COMPANY HAS A RIGHT TO MAKE FRESH/ADDITIONAL CLAIM AT T HE APPELLATE STAGE. 7 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THIS ISSUE ALSO STANDS DECIDED BY THE TRIBUNAL IN THE EARLIER YEARS RIGHT FROM THE ASSESSMENT YEAR 1996 97 TO 2006 07 AND 2008 09. 8 . ON A PERUSAL OF THE EARLIER YEARS ORDER FOR THE ASSESSMENT YEAR 2006 07, WE FIND THAT GROUND NO.1 TO 8 OF T HE CROSS OBJECTION HAVE BEEN DEALT BY THE TRIBUNAL IN THE FOLLOWING MANNER: 7.1 THE ISSUE RAISED IN GROUND NO.1 AND 2 OF THE CO HAS BEEN DEALT BY THE TRIBUNAL FOR THE ASSESSMENT YE AR 1996 - 97 IN PARAS 5.4 & 5.5 AS UNDER: 5.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE CAN BE NO DISPUTE ABOUT THE FACT THAT ANY AMOUNT RECEIVED BY WAY OF REIMBURSEMENT, NOT CONTAINING ANY ELEMENT OF PROFIT, IS NOT LIABLE TO TAX. THIS PRINCIPLE HAS BEEN LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. SIEMENS AKTIONGESELLSCHAFT [(2009) 177 TAXMAN 81 (BOM.)] AND THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAHINDRA AND MAHINDRA LTD. V. DCIT [(2009 ) 313 ITR (AT) 263 (MUM) (SB)]. IN THESE CASES, IT HAS BEEN HELD THAT WHEN A PARTICULAR AMOUNT OF EXPENDITURE IS INCURRED AND THE SAME SUM IS REIMBURSED AS SUCH, THAT CANNOT BE CONSIDERED AS HAVING ANY PART OF IT IN THE NATURE OF INCOME. THIS BRINGS US TO THE PRINCIPLE THAT IF THERE IS CERTAIN REIMBURSEMENT OF EXPENSES AS SUCH, WITHOUT THERE BEING ANY MARK UP INCLUDED IN SUCH REIMBURSEMENT, THERE M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 11 CANNOT BE ANY QUESTION OF EARNING ANY INCOME LIABLE TO TAX FROM SUCH REIMBURSEMENT. WE AGREE WITH THE LEARNED AR ON THIS PRINCIPLE THAT THE REIMBURSEMENT OF EXPENSES DOES NOT LEAD TO ANY INCOME AND IN SUCH A SITUATION THERE CAN BE NO QUESTION OF ANY INCOME EMBEDDED IN SUCH REIMBURSEMENT. 5.5. HOWEVER WE FIND THAT THIS PRINCIPLE IS NOT APPLICABLE IN THE FACTS AND CI RCUMSTANCES OF THE INSTANT CASE. IT IS OBSERVED FROM THE STATEMENTS OF SHRI S.GOPALAKRISHNAN AND MR.ANDREW CLEAK RECORDED AT THE TIME OF SURVEY THAT THE BASIS OF ALLOCATION OF COSTS TO DIFFERENT COUNTRIES BY THE HO WAS NOT KNOWN. IT WAS ADMITTED THAT THE H O ALLOCATES A PROPORTION OF ITS GENERAL ADMINISTRATIVE AND FINANCING COST TO OTHER BRANCHES TO EXACTLY MATCH THE TOTAL COST INCURRED IN EACH COUNTRY IN EACH MONTH. IT WAS ALSO ADMITTED THAT THERE WAS NO VERIFICATION OF THE EXPENSES ALLOCATED BY THE HO BECA USE THE BASIS OF CHARGE WAS KNOWN TO HO ALONE AND THE DETAILS OF SUCH COMPUTATION WERE NOT PROVIDED TO THE INDIAN BRANCH. ON A QUESTION ABOUT THE RECORDING OF REVENUES, IT WAS ADMITTED THAT THE ENTRY WAS PASSED ON THE RECEIPT OF INTIMATION FROM HO AND HOW SUCH REVENUES ARE DETERMINED, WAS NOT KNOWN. IN RESPONSE TO QUESTION NOS.12 AND 13, SHRI GOPALAKRISHNAN ADMITTED THAT ACCOUNTS WERE FINALIZED BY THE HO AND AFTER FINALIZATION OF SUCH ACCOUNTS, A SIGNED COPY OF THE BALANCE SHEET WAS SENT TO THE BRANCH OFFIC E IN INDIA. THE LEARNED AR HAS INVITED OUR ATTENTION TOWARDS ITS LETTER DATED 5.02.2005 ADDRESSED TO THE LD. CIT(A) ABOUT THE BASIS OF ALLOCATION. FROM THIS LETTER IT IS CRYSTAL CLEAR THAT THE ASSESSEE STATED BEFORE THE LEARNED CIT(A) THAT THE GLOBAL COST RECOVERIES MADE BY THE SITA HO ARE ALLOCATED TO ALL OF THE SITA BRANCHES WORLDWIDE SO AS TO MATCH THE COSTS BORNE BY THOSE BRANCHES. THUS, THE OVERALL EFFECT OF ALLOCATING HEAD OFFICE COSTS TO THE SITA BRANCHES WORLDWIDE IS TO INCREASE BOTH THE BRANCH COS TS AND ALSO THE CORRESPONDING COST RECOVERIES WHICH ARE ALLOCATED TO EACH BRANCH TO MATCH THOSE COSTS. FROM THIS LETTER IT IS ALSO OBSERVED THAT THE BASIS OF ALLOCATION OF COSTS AMONGST VARIOUS BRANCHES IS KNOWN ONLY AT THE HO LEVEL WITH NO INTIMATION TO THE INDIAN BRANCH ABOUT SUCH BASIS. AT THIS STAGE, WE WOULD LIKE TO HIGHLIGHT THAT INDIA IS CONCERNED ONLY WITH THE TAX REVENUES RELATING TO INDIAN OPERATIONS. UNLESS IT IS PROPERLY ESTABLISHED THAT ALL THE EXPENSES CLAIMED BY THE INDIAN BRANCH REPRESENTS THE ASSESSEES SHARE IN A PROPER MANNER, IT CANNOT BE ACCEPTE D THAT THE ALLOCATION WAS MADE ON SOME RATIONAL BASIS. HERE IS A CASE IN WHICH BOTH THE SIDES OF THE ASSESSEES INCOME AND EXPENDITURE ACCOUNT ARE TALLYING PAISA TO PAISA. THE LEARNED AR SUBMITTE D THAT THE COST AND REVENUES ARE MATCHED AND IF THERE IS ANY NET OVER - RECOVERY OR NET UNDER - RECOVERY, THE M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 12 SAME IS CARRIED FORWARD AND AT THE END OF THE YEAR THE AUDITED ACCOUNTS REFLECT CUMULATIVE UNDER - RECOVERY OR OVER - RECOVERY FOR THE YEAR. THIS SUBMISSI ON WAS MADE BY READING FROM THE ASSESSEES AFORESAID LETTER DATED 05.02.2005 ADDRESSED TO THE CIT(A). ON A SPECIFIC QUESTION AS TO WHAT IS THE AMOUNT OF UNDER - RECOVERY OR OVER - RECOVERY IN THE ACCOUNTS OF THE ASSESSEE FOR THIS YEAR OR ANY EARLIER OR LATER Y EAR, THE LEARNED AR FAILED TO POINT OUT ANY SUCH AMOUNT. WE HAVE PERUSED THE INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET OF THE ASSESSEE. IT IS OBSERVED THAT BOTH THE SIDES OF THE ASSESSEES INCOME AND EXPENDITURE ARE MATCHING PAISA TO PAISA AND THERE IS NO UNDER - RECOVERY OR OVER - RECOVERY SHOWN AS AN ASSET OR A LIABILITY IN ITS BALANCE SHEET. FURTHER, WHEN WE CONSIDER THE FACT THAT THE ACCOUNTS OF THE ASSESSEE WERE MAINTAINED AT THE HO LEVEL, THERE REMAINS NOTHING TO DOUBT THE CORRECTNESS VIEW TAKEN BY THE LEARNED CIT(A) THAT THE ACCOUNTS OF THE ASSESSEE DO NOT DIVULGE THE CORRECT INCOME. NOT ONLY THE BASIS OF ALLOCATION OF EXPENSES BUT ALSO THAT OF THE REVENUE, AS DONE BY THE HO IS NOT KNOWN TO THE ASSESSEE. UNDER SUCH CIRCUMSTANCES, THE CONTENTION THA T THE ASSESSEE WAS ONLY RECOVERING COSTS FROM ITS NON - MEMBERS AND THERE WAS NO PROFIT ELEMENT IN IT, IS NOT OPEN FOR VERIFICATION. 7.2 WHEN THE TRIBUNAL HAS DECIDED THIS ISSUE AFTER CONSIDERING THE RIVAL CONTENTION AND RELEVANT FACTS, THEN IN THE ABSENCE OF ANY NEW FACTS OR MATERIAL, WE DO NOT FIND ANY SUBSTANCE IN THE CONTENTION OF THE LD SR COUNSEL FOR THE ASSESSEE REGARDING THE REMARKS OF THE TRIBUNAL IN THE EARLIER YEAR. MOREOVER, THE SAME DOES NOT EFFECT THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE. 7. 3 AS REGARDS GROUND NO.2 TO 9 OF THE CO ARE CONCERNED, THE TRIBUNAL AS CONSIDERED THE SAME IN PARA 5.6 & 5.7 AS UNDER: 5.6. THE LEARNED AR ALSO PRESSED INTO SERVICE THE PROVISIONS OF SECTION 44C TO CONTEND THAT WHERE THE BASIS OF ALLOCATION OF HO EXPENDI TURE IS NOT KNOWN, DEDUCTION FOR SUCH HO EXPENSES HAS TO BE MADE IN TERMS OF SECTION 44C. IN THE LIGHT OF THIS SECTION, THE LEARNED AR CONTENDED THAT ONLY A SMALL PORTION OF THE HO EXPENSES OUGHT TO HAVE BEEN DISALLOWED BY THE LD. CIT(A) INSTEAD OF COMPUTI NG INCOME AT 5% OF THE GROSS RECEIPTS. 5.7. WE ARE NOT CONVINCED WITH THIS CONTENTION FOR THE REASON THAT SECTION 44C ONLY TALKS OF HO EXPENSES, WHICH MEAN EXECUTIVE AND GENERAL ADMINISTRATIVE EXPENDITURE INCURRED BY THE ASSESSEE OUTSIDE INDIA INCLUDING E XPENDITURE IN RESPECT OF RENT, RATES, REPAIRS ETC. IT IS ONLY THE ALLOCATION OF GENERAL AND ADMINISTRATIVE EXPENSES WHICH IS COVERED WITHIN THE PURVIEW OF SECTION 44C. ON THE CONTRARY, WE ARE CONSIDERING A CASE IN WHICH NOT ONLY M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 13 THE BASIS OF ALLOCATION OF EXPENSES IS NOT KNOWN, BUT THE BASIS OF ALLOCATION OF INCOME IS EQUALLY UNKNOWN AT INDIA LEVEL. THIS BRINGS US TO A SITUATION WHERE NEITHER THE INCOME SIDE NOR THE EXPENDITURE SIDE OF THE ASSESSEES INCOME AND EXPENDITURE ACCOUNT IS FULLY CAPABLE OF VERIFI CATION. IT IS IN SUCH CIRCUMSTANCES THAT RULE 10 OF INCOME - TAX RULES, 1962 COMES TO THE RESCUE OF THE REVENUE FOR DETERMINATION OF INCOME IN THE CASE OF NON - RESIDENTS. IT IS THIS VERY RULE WHICH HAS BEEN INVOKED BY THE ASSESSING OFFICER AND ALSO APPLIED BY THE LEARNED CIT(A) IN ESTIMATING THE INCOME OF THE ASSESSEE. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) WAS MORE THAN JUSTIFIED IN ESTIMATING THE INCOME AT 5% OF THE GROSS RECEIPTS FROM NON - MEMBERS. THESE GROUNDS TAKEN BY THE ASSESSEE ARE NOT ALLOWED. 8 . FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL, WE FIND NO MERIT IN THE GROUND NO 1 TO 9 OF THE CO RAISED BY THE ASSESSEE; ACCORDINGLY, THE SAME ARE DISMISSED. 9 . GROUND NO.10 IS REGARDING LEVY OF INTEREST U/S 234D. 9 . THUS, RESPECTFULLY FOLLOWING THE SAM E, WE DO NOT FIND ANY MERIT IN THE GROUND NO.1 TO 8 RAISED BY THE ASSESSEE IN THE CROSS OBJECTION. ACCORDINGLY, THESE GROUNDS ARE TREATED AS DISMISSED. 10 . INSOFAR AS GROUND NO.9 IS CONCERNED, WE FIND THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN A SSESSMENT YEAR 2008 09 WHEREIN THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 11. IN GROUND NO.9, THE ASSESSEE HAS CHALLENGED THAT THE INTEREST INCOME COMPRISING OF BANK INTEREST AND INTEREST ON INCOME TAX REFUND RECEIVED BY THE ASSESSEE IS ALSO COVERED B Y THE PRINCIPLES OF MUTUALITY. 12. AS ADMITTED BY BOTH THE PARTIES, THIS ISSUE ALSO STANDS DECIDED AGAINST THE ASSESSEE IN VIEW OF THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S COMMON EFFLUENT TREATMENT PLANT, (THANE - BELAPUR) ASSOCIAT ION, [2010] 328 ITR 362 (BOM.), WHEREIN IT HAS BEEN HELD THAT INTEREST RECEIVED FROM F.D. WITH THE BANK DOES NOT POSSESS THE SAME CHARACTER OF MUTUALITY AND THE INTEREST INCOME WOULD, THEREFORE, BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. IN T HE LATEST JUDGMENT, THE HON'BLE SUPREME COURT IN BANGALORE CLUB V/S CIT, [2013] 29 TAXMAN.COM 29 (SC), HAD SETTLED THIS ISSUE AND HELD THAT THE AMOUNT OF INTEREST EARNED BY THE ASSESSEE ON THE DEPOSITS MADE IN THE BANK WILL NOT FALL WITHIN THE AMBIT OF M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 14 PR INCIPLES OF MUTUALITY AND IS EXIGIBLE TO TAX IN THE HANDS OF THE ASSESSEE. THUS, IN VIEW OF THE LAW SETTLED BY THE HON'BLE SUPREME COURT CITED SUPRA, GROUND NO.9 RAISED BY THE ASSESSEE STANDS DISMISSED. 11 . THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, GROUND NO.9 RAISED BY THE ASSESSEE IS TREATED AS DISMISSED. 12 . INSOFAR AS THE ISSUE ARISING OUT OF THE GROUND NO.10 AND 11 ARE CONCERNED, THE SAME HAS BECOME INFRUCTUOUS IN VIEW OF THE FINDIN GS GIVEN IN GROUND NO.9 WHICH HAS BEEN DECIDED AGAINST THE ASSESSEE. ACCORDINGLY, GROUND NO.10 AND 11 ARE TREATED AS DISMISSED. 13 . 1 3 . IN THE RESULT, THE CROSS OBJECTION PREFERRED BY THE ASSESSEE IS TR EATED AS DISMISSED . 14 . , 14 . TO SUM UP, REVENUES APPEAL AND ASSESSEES CROSS OBJECTION ARE TREATED AS DISMISSED . 22 ND JANUARY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2014 SD/ - SANJAY ARORA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 22 ND JANUARY 2014 M/S. SOCIETE INTERNATIONALE DE TELECOMMUNICATIONS AERONAUTIQUES SC 15 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMB AI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI