WESTERN INDIA STEEL CO. P.LTD, MUMBAI V. CIT CITY 3, MUMBAI

ITA 3863/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88379 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT K SERIVASTVA
• Assessee Lawyers: C A GULANIKAR
• Keywords: Maximum Marginal Rate; Deemed to accrue or arise in india; Question of law; Assessment record
• Section: 14A; 6; 263

Judgement Text

, TH THTH TH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - G BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3863/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2009-10 WESTERN INDIA STEEL CO. PVT. LTD. 16TH FLOOR, 'A' WING, MITTAL TOWER, RAJNI PATEL ROAD, NARIMAN POINT, MUMBAI-400021 PAN:AACCP0558K VS DCIT CIRCLE 3(3), 612 AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-20 ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : SHRI C.A.GULANIKAR + * / REVENUE BY : SHRI AJIT K. SERIVASTVA ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 07.01.2015 -.# + ), / DATE OF PRONOUNCEMENT : 11-02-2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 22.03.2013 OF CIT-3,MUM BAI,PASSED U/S.263 OF THE ACT,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LEARNED CIT WITHOUT SPECIFYING IN THE SHOW C AUSE NOTICE OR GIVING OPPORTUNITY TO YOUR APPELLANT ERRED IN HOLDING AND INTERPRETING THE SCO PE OF SECTION 67A ACT IN RELATION TO THE PROVISION IN PARENTHESIS OTHER THAN A COMPANY OR A CO-OPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860... AND S IMILAR PROVISION IN SECTION 86, APPLY TO ASSESSEE AS COMPANY AND AS YOUR APPELLANT IS A COMPANY, THE PROVISIONS OF SECTION 67A AND SECTION 86 WILL NOT APPLY. (2)THE INTERPRETATION PLACED ON THE PROVISION IN PA RENTHESIS IN SECTION 67A AND SECTION 86 AND TO SECTION 40(BA) TO DENY THE BENEFIT TO SHARE OF A ME MBER OF AOP, LEARNED COMMISSIONER DID NOT DIFFERENTIATE AS BETWEEN A COMPANY AS A MEMBER OF A OP IS DIFFERENT FROM COMPANY AS AN ASSESSEE AND THE IDENTICAL PROVISIONS CONTAINED IN THESE SEC TION NAMELY 40(BA), SECTION 67A AND SECTION 86 DEAL WITH THE SHARE OF MEMBER OF AOP AND NOT COMPAN Y AS ASSESSEE. (3)HAVING REGARD TO DECISION IN MAHENDRA HOLDING & FINANCE LTD V DY CIT [2008] 23 SOT 215 (MUM) (TM) AND CIT V. IDEAL ENTERTAINMENTS P LTD [2 011] 336 ITR 357 (KAR) IT MAY BE HELD THAT ON COMBINED READING OF SECTION 40(BA), 67A AND 86 M AKE IT CLEAR THAT THERE IS NO BAR FOR A PRIVATE LIMITED COMPANY FROM GETTING THE BENEFIT OF SECTION 86 AS A MEMBER OF AN ASSOCIATION OF PERSONS. (4)SO, HOLDING ORDER PASSED UNDER SECTION 263 MAY B E SET ASIDE. 2.IN DECIDING APPEAL FOR THIS YEAR AGAINST DISALLOW ANCE UNDER SECTION 14A OF THE ACT OF RS 24,49,972/-IN RELATION TO SHARE OF YOUR APPELLANT F ROM M/S BUILDARC WESTERN [AOP] AS ALLOCATED ULS 67A OF THE ACT [INTEREST OF RS.16,21,387/- AND SHARE OF PROFIT RS 13,24,594/-AGGREGATING TO RS29,45,981/-] THE LEARNED CIT(A) 7,MUMBAI,IN HIS A PPELLATE ORDER NO CIT(A)7 DCIT-3(3)/1T5/1 1-12 DATED 23-01-2012 HELD THAT (A)THE ENTIRE TAXED SHARE OF YOUR APPELLANT WAS INC OME OF THE NATURE NOT INCLUDIBLE IN TOTAL INCOME [IMPLIEDLY UNDER CLAUSE (A) OF PROVISO TO SECTION 8 6 OF THE ACT]; (B)IN RESPECT OF EXPENDITURE RELATING THERETO, PROV ISION OF SECTION 14A ARE ATTRACTED (C) WORKED OUT DISALLOWANCE UNDER RULE 8D OF INCOME -TAX RULES: RS 24,49,972/-(D)AND CONFIRMED PART DISALLOWANCE MADE BY THE A.O. OF RS 1,49,117/- IT IS APPARENT THAT THE NATURE OF TAXED SHARE OF YOUR APPELLANT FROM AOP WAS SUBJECT OF APPEAL AND E FFECTIVELY DECIDED BY THE APPELLATE AUTHORITY, THE ASSESSMENT ORDER IS MERGED IN APPELLATE ORDER, THE LEARNED CIT ERRED IN HOLDING THAT HE HAS THE 2 ITA NO. 3863/M/2013 WESTERN INDIA STEEL CO. PVT. LTD . POWER AND AUTHORITY TO ASSUME JURISDICTION UNDER SE CTION 263 OF THE ACT. (2) IT MAY BE SO HELD THAT THE ORDER U/S 263 MAY BE CANCELLED OR ANNULLED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E NAMELY (1)ALL THE FACTS IN RELATION TO THE SHARE FROM AOP OF M/S BUILDARCH WESTERN WERE BEFORE THE ASSESSING OFFICER AND HAVING REGARD TO STATUTORY PR OVISIONS ALLOWED THE CLAIM OF YOUR APPELLANT THAT THE SHARE FROM AOP CONSISTING OF INTEREST AND PROFIT, TAXED AT MAXIMUM RATE, FALLS WITHIN THE PREVIEW OF SECTION 86 AND UNDER THE FIRST PROVISO T HERETO THE SHARE OF SUCH MEMBER OF AOP IS NOT INCLUDIBLE EVEN FOR RATE PURPOSES THE LEARNED CIT E RRED IN HOLDING THAT (A)THE AO ALLOWED THE CLAIM WITHOUT VERIFYING FACTS (B)WITHOUT VERIFYING WHETHER SUCH RECEIPT ARE EXEMP T FROM TAX IS INCONSISTENT WITH THE FACTS AND CIRCUMSTANCES ON RECORD AND CONSEQUENTLY ERRED BOTH ON FACTS AND IN LAW, THE LEARNED. CIT HAS ERRED IN PASSING THE ORDER U/S. 263 OF THE ACT WHIC H IS BAD IN LAW AND WITHOUT JURISDICTION. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED , CIT HAS ERRED IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND AL SO PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND ERRED IN SETTING ASIDE THE ENTIRE ASSESSMENT TO BE MADE FRESH. WHEN THE SHOW CAUSE NOTICE U/S 263 SPECIFIED TAXED INTEREST OF RS 16,21,387 BUT EX CLUDING TAXED SHARE OF PROFIT RECEIVED AS A MEMBER OF AOP BUILDARCH WESTERN. 5 YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL IN CASE OF NEED OR NECESSITY 2. IN THE RETURN OF INCOME FILED ON 26-09-2009,THE SO URCES OF INCOME FOR THE YEAR UNDER APPEAL SHOWN BY THE ASSESSEE WERE TRADING PROFITS AND SHA RE FROM AOP A JOINT VENTURE FOR DEVELOPMENT OF PROPERTY AT WORLI.THE INCOME DECLARED AT RS. 60, 90,000/-.THE SHARE OF INTEREST OF RS.16,21,387/- AND SHARE OF PROFIT FROM AOP OF RS. 13,24,549 TOTALING TO RS. 29,45,981 WAS CLAIMED AS EXEMPT. THE AO FINALISED THE ASSESSMENT ON 22.02.2011 DETERMINING THE INCOME OF THE ASSESSEE AT RS.85.39 LAKHS.WHILE GOING THROUGH THE ASSESSMENT RECORDS THE CIT OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO REVENUE.HE FOUND THAT THE ASSESSEE COMPANY WAS A MEMBER OF AOP AND WAS IN REC EIPT OF INTEREST FROM THE SAID AOP, M/S BUILDARCH WESTERN,THAT IT HAD CLAIMED EXEMPTION OF INCOME OF RS. 16,21,387/- ON THE PLEA THAT THE SAME HAD BEEN DISALLOWED IN THE HANDS OF THE AOP.HE WAS OF THE OPINION THAT THE AO HAD ALLOWED THE EXEMPTION WITHOUT VERIFYING THE FACTS W HETHER SUCH RECEIPTS FROM AOP WERE EXEMPT FROM TAX OR NOT.HE ISSUED A NOTICE U/.S 263 OF THE ACT. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE,THE ASSESSEE FILED ITS REPLY ON 25.02.2013 AND STATED THAT AS PER THE PROVISIONS OF SECTION 167B(2),67A,86 AND 40 (BA)IT WAS NOT LIABLE TO PAY TAXES,THAT ENTIRE INCOME OF THE SPECIFIED AOP WAS TAXED AT MAXIMUM MA RGINAL RATE (MMR)THEN SHARE OF SUCH MEMBER WAS NOT INCLUDIBLE IN TOTAL INCOME,THAT AS P ER SECTION 67A SHARE OF MEMBER CONSISTED OF AMOUNT OF PROFIT AND INTEREST PAID.AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE ,THE CIT HELD THAT SECTIONS 40(BA) AND 167B(2)WERE NOT RELEVANT T O DECIDE THE ISSUE BEFORE HIM,THAT ASSESSEE WAS A PRIVATE LIMITED COMPANY,THAT SEC.67A AND 86 A PPLIED TO THE ASSESSEE S WHO WERE NOT COMPANY/COOPERATIVE SOCIETY,THAT THE ASSESSEE BEIN G A COMPANY WAS NOT ENTITLED TO CLAIM INTEREST INCOME TAX FREE UNTIL THE SAME WAS EXEMPT U/S.10 OF THE ACT,THAT THE ASSESSEE HAD RECEIVED RS.16.21 LAKHS FROM AOP AS A MEMBER,THAT ACCORDING TO THE PROVISIONS OF SECTION 5 ANY INCOME RECEIVED OR DEEMED TO BE RECEIVED ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA THEN SAME WOULD FORM PART OF THE TOTAL INCOME OF THE ASS ESSEE ,THAT INTEREST INCOME AND SHARE INCOME WERE NOT SIMILAR KIND OF RECEIPTS,THAT INTEREST PAY MENT IN CASE OF AOP WAS AN EXPENDITURE,THAT SHARE OF PROFIT WAS OUT OF THE TAXED PROFIT OF THE AOP,THAT IT WAS A DIFFERENT MATTER THAT IN THE HANDS OF AOP INTEREST PAYMENT OF RS.16.21 LAKHS WAS DISALLOWED U/S.40(BA)OF THE ACT,THAT THE ASSESSEE HAD MADE A CLAIM BEFORE THE AO IN THIS RE GARD,THAT INTEREST INCOME RECEIVED BY THE ASSESSEE FROM AOP WAS TAXABLE.HE FURTHER OBSERVED THAT THE AO HAD ALLOWED THE CLAIM WITHOUT VERIFYING THE FACTS AS TO WHETHER SUCH RECEIPT FROM AOP WAS EXEMPT FROM TAX,THAT ASSESSMENT WAS ERRONEOUS AND REQUIRED VERIFICATION.HE SET ASIDE TH E ASSESSMENT TO THE FILE OF THE AO FOR DETAILED VERIFICATION. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)CONTENDE D THAT ENTIRE INCOME OF THE AOP WAS 3 ITA NO. 3863/M/2013 WESTERN INDIA STEEL CO. PVT. LTD . TAXED AT MMR U/S.167B OF THE ACT,THAT INCOME OF THE AOP WAS DIVIDED BETWEEN THE TWO PARTNERS AS PER THE PROVISIONS OF SECTION 67 A OF THE ACT,TH AT ASSESSEE HAD RIGHTLY CLAIMED THAT THE TAXED SHARE QUALIFIED FOR EXEMPTION,THAT PROVISIONS OF SE CTION 67A AND 86 DID NOT EXCLUDE A COMPANY AS A MEMBER OF AOP FOR REBATE AVAILABLE AS PER THE PRO VISIONS OF THE ACT,THAT THE CIT HAD NOT PROPOSED TO INVOKE PROVISIONS OF SECTION 67A AND 86 WHILE ISSUING THE NOTICE FOR REVISION,THAT POINT FOR WHICH ORDER U/S.263 WAS PASSED WAS SUBJEC T OF EFFECTIVE APPEAL DECISION,THAT THE ASSESSMENT ORDER HAD ALREADY MERGED WITH THE ORDER OF THE FIRST APPELLATE AUTHORITY (FAA),THAT THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJU DICIAL TO REVENUE.HE RELIED UPON THE CASES OF MAHINDRA HOLDINGS & FINANCE LTD.(115ITD69)AND IDEAL ENTERTAINMENT(336ITR357),JAYKUMAR B PATIL(236ITR31),GREENWOOD CORPORATION(314ITR1).DEPA RTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE CIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT BY A JOINT VENTURE AGREEMENT DATED 4TH JAN 2006, THE ASSESSEE JOINED M/S BUILDARCH, A PARTNERSHIP FIRM TO CONSTITUTE AN ASSOCIATION OF PERSON(AOP).THE JOINT VENTURE AOP WAS STYLED AND CALLED M/S BUILDARCH WESTERN(BW).THE BROAD TERM OF JOINT VENTU RE,AS AGREED BY THE ASSESSEE WERE THAT THE JOINT VENTURE WAS FOR THE DURATION OF COMPLETION OF PROJECT AT WORLI,THAT IT WOULD PROVIDE FINANCE LIMITED TO RS. 2,50,00,000/-,THAT THE FINANCE PROVI DED WOULD CARRY COMPOUND INTEREST @ OF 12 PERCENT P.A.,THAT IT WOULD BE PAYABLE ON COMPLETION OF PROJECT AND THE SHARE PROFIT OF THE ASSESSEE WOULD BE 45%,THAT THE INVESTMENT IN JOINT VENTURE A T THE BEGINNING OF THE YEAR WAS RS.1,50,50,000/- WHICH ROSE TO RS. 2,00,50,000/- AT THE END OF THE YEAR,THAT THE AOP WAS TAXED AT MMR,THAT THE ASSESSEE RECEIVED SHARE PROFIT OF RS. 13.24 LAKHS FROM THE JV UNDERTAKEN BY THE AOP BESIDES GETTING INTEREST OF RS.16.21 LAKHS,THAT THE CIT HELD THAT INTEREST COMPONENT OF A MEMBER OF AOP TAXED AS MMR DID NOT FALL WITHIN PROV ISIONS OF SECTION 67A AND 86 OF THE ACT. THERE ARE THREE SECTIONS IN THE ACT WHICH TAKE CARE OF THE ISSUE IN QUESTION.DEPENDING UPON THE FACTS PRESENTED BY THE ASSESSEE WHICH MAY DIFFER FR OM CASE TO CASE,THE PROVISIONS OF SECTIONS 67A ,86 AND 167B OF THE ACT DETERMINE TAX LIABILITY ARI SING OUT OF JOINT VENTURE OR ASSOCIATION.SECTION 67A PROVIDES FOR THE METHOD OF COMPUTING A MEMBERS SHARE IN THE INCOME OF ASSOCIATION OF PERSONS.SECTION 86 ALSO PROVIDES THE MANNER OF COMP UTATION AND, SECTION 167B PROVIDES FOR CHARGE OF TAX WHERE THE SHARES OF THE MEMBERS IN AN ASSOCIATION OF PERSONS ARE UNKNOWN. AS FAR AS SECTION 86 IS CONCERNED,IT HAS UNDERGONE SEVERAL AMENDMENTS WITH EFFECT FROM APRIL 1, 1964 ONWARDS TIME TO TIME AND HENCE,ONE HAS TO SEE DEPENDING UPON THE AY. ITS APPLICABILITY AS TO WHICH AMENDMENT WILL APPLY TO THE CASE IN HAND.B UT IT IS A FACT THAT SECTION 86 IS PART OF CHAPTER VII AND IT DEALS WITH THE INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO TA X IS PAYABLE . IN ONE OF THE EARLY JUDGMENT DEALING WITH SECTION 8 6 OF THE ACT THE HONBLE DELHI HIGH COURT IN THE MATTER OF KAILASH LAMBA(157ITR266)HAS HELD AS U NDER: THOUGH THE INCOME OF AN ASSOCIATION OF PERSONS IS CHARGED TO INCOME-TAX UNDER THE INCOME-TAX ACT, 1961, AN ASSOCIATION OF PERSONS IS NOT A LEGAL PERSON LIKE A COMPANY, AND THE INCOME EARNED BY AN ASSOCIATION IS EQUALLY THE INCOME OF THE MEMB ERS OF THE ASSOCIATION TO THE EXTENT TO WHICH THEY HAVE AGREED TO SHARE THE SAME. IT IS CLEAR THA T THOUGH AN ASSOCIATION OF PERSONS IS A TAXABLE ENTITY AND THE ASSOCIATION CAN BE SAID TO EARN THE INCOME ON WHICH IT IS CHARGEABLE TO TAX, EACH MEMBER OF THE ASSOCIATION ALSO DERIVES INCOME IN RE SPECT OF WHICH, BEING A PERSON, HE IS ALSO CHARGEABLE. THERE IS NOTHING IN THE INCOME-TAX ACT, 1961, WHICH PRECLUDES THE TAXATION OF BOTH THE ASSOCIATION OF PERSONS AND THE INDIVIDUAL, THE FORM ER IN RESPECT OF ITS INCOME AND THE LATTER IN RESPECT OF HIS SHARE OF THE INCOME FROM THE ASSOCIA TION. OF COURSE, THE SAME INCOME IS NOT INTENDED TO BE SUBJECTED TO TAX TWICE AND THIS DOUB LE TAXATION IS AVOIDED BY THE PROVISION CONTAINED IN SECTION 86(V) OF THE INCOME-TAX ACT, 1 961.(EMPHASIS SUPPLIED) IN THE MATTER OF SMT.REVATHI THE HONBLE KERALA HIG H COURT(249ITR117)HAS HELD AS UNDER: FOR CLAIMING EXEMPTION OR REBATE UNDER SECTION 86( V) OF THE INCOME-TAX ACT, 1961, TWO CONDITIONS ARE NECESSARY (I) THE REBATE WILL BE ALL OWABLE PROVIDED THE ASSOCIATION HAS PAID THE TAX, AND (II) THE REBATE WILL BE ALLOWABLE ONLY IN RESPE CT OF THAT PORTION OF THE INCOME ON WHICH TAX WAS 4 ITA NO. 3863/M/2013 WESTERN INDIA STEEL CO. PVT. LTD . PAID BY THE ASSOCIATION. THE WORDS ANY PORTION AN D THE WORDS ON WHICH INCOME-TAX HAS ALREADY BEEN PAID BY THE ASSOCIATION WOULD EVIDENC E THAT THE BENEFIT IS AVAILABLE ONLY TO THAT PORTION WHICH HAS SUFFERED TAX AND NOT FOR THE WHOL E AMOUNT. HONBLE BOMBAY HIGH COURT,IN THE CASE OF LALITA M B HAT,HAS LAID DOWN THE FOLLOWING PRINCIPLE WITH REGARD TO SHARE-INCOME OF AN AOP AND PROVISION S OF SECTION 86: A CONJOINT READING OF SECTIONS 86 AND 110 OF THE I NCOME-TAX ACT, 1961, MAKES IT CLEAR THAT THE PORTION OF THE AMOUNT WHICH A MEMBER IS ENTITLED TO RECEIVE FROM THE ASSOCIATION OF PERSONS IS EXEMPTED FROM INCOME-TAX IF INCOME-TAX HAS ALREADY BEEN PAID THEREON BY THE ASSOCIATION OF PERSONS. THE EXPRESSION 'ANY PORTION OF THE AMOUNT WHICH THE ASSESSEE IS ENTITLED TO RECEIVE FROM THE ASSOCIATION' IN SECTION 86(V) MEANS THE AMOUNT OF SHARE OF THE ASSESSEE IN THE INCOME OF THE ASSOCIATION TO WHICH HE IS ENTITLED AND THIS AMOUNT HAS TO BE DETERMINED WITHOUT DEDUCTION OF ANY INCOME-TAX PAYABLE OR PAID THEREON BY THE ASSOCIATI ON OF PERSONS. THE SHARE OF INCOME OR AMOUNT RECEIVABLE BY THE ASSESSEE IS NOT DEPENDENT ON THE AMOUNT OF TAX PAYABLE BY THE ASSOCIATION OF PERSONS BECAUSE INCOME-TAX ITSELF IS PAYABLE ON THE 'INCOME'. THE 'AMOUNT' REFERRED TO IN SECTION 86(V), IN ANY EVENT, WOULD BE THE AMOUNT RECEIVABLE BY THE MEMBER OF THE ASSOCIATION OF PERSONS OUT OF ITS INCOME WITHOUT DEDUCTION OF THE INCOME-T AX PAID BY THE ASSOCIATION OF PERSONS THEREON. IF NO INCOME-TAX HAS ALREADY BEEN PAID BY THE ASSOCIAT ION OF PERSONS THEREON, SECTION 86(V) WILL NOT APPLY AND THE MEMBER OF SUCH ASSOCIATION OF PERSONS WOULD NOT BE ENTITLED TO ANY EXEMPTION IN RESPECT OF THE AMOUNT RECEIVABLE BY HIM AS A MEMBER THEREOF. WE FIND THAT FOR THE YEAR UNDER APPEAL THE SECTION PROVIDED THAT IF THE ASSOCIATION OF PERSONS IS CHARGED TO TAX AT THE MAXIMUM MARGINAL RATE, THE SH ARE INCOME OF A MEMBER OF THE ASSOCIATION OF PERSONS IS NOT TO BE INCLUDED IN HIS TOTAL INCOME E VEN FOR RATE PURPOSES.FROM THE ABOVE IT BECOMES CLEAR THAT A MEMBER OF AN AOP IS NOT REQUIRED TO PA Y TAX ON THE INCOME RECEIVED BY IT FROM THE AOP PROVIDED THAT THE AOP HAS ALREADY PAID THE TAXE S.IN THE CASE UNDER CONSIDERATION THERE IS NO DOUBT ABOUT PAYMENT OF TAX BY THE AOP.THE CIT HAD R ESERVATION ABOUT THE INTEREST INCOME RECEIVED BY THE ASSESSEE ,AS HE WAS OF THE VIEW THA T THE ASSESSEE BEING A COMPANY COULD NOT CLAIM EXEMPTION.IN OUR OPINION STAND TAKEN BY THE CIT IS CONTRARY TO THE PROVISIONS OF THE ACT AND THE VIEWS OF THE COURTS.WE HAVE ALREADY RELIED UPON SOM E OF THE MATTERS DEALING WITH THE ISSUE IN THE EARLIER PARAGRAPHS.IN THE CASE OF IDEAL ENTERTAINME NT P.LTD.(336ITR357)THE HONBLE MADRAS HIGH COURT HAS DECIDED THE SIMILAR ISSUE.FOLLOWING WAS T HE SUBSTANTIAL QUESTION LAW BEFORE THE COURT: 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESS EE- COMPANY IS ENTITLED FOR DEDUC TION TOWARDS INTEREST INCOME FROM KAILAS PROJECTS, AN ASSOCIATION OF PERSONS AS PER THE PROVISIONS OF SECTION 86 ?' THE ASSESSEE WAS A MEMBER OF AN ASSOCIATION OF PERS ONS TITLED KAILAS PROJECT.IT RECEIVED INTEREST FROM THE SAID ASSOCIATION OF PERSONS AND CLAIMED TH E SAID AMOUNT TOWARDS EXEMPTION UNDER SECTION 86 OF THE ACT.HOWEVER, THE AO DISALLOWED TH E CLAIM OF THE ASSESSEE ON THE GROUND THAT THE PROVISIONS OF SECTION 86 OF THE ACT COUDL BE MADE A PPLICABLE ONLY TO THE ASSESSEE WHO WAS NOT A COMPANY OR CO-OPERATIVE SOCIETY.THEREFORE, INASMUCH AS THE ASSESSEE WAS A COMPANY,THE AO HELD THAT THE PROVISIONS OF SECTION 86 OF THE ACT WERE N OT APPLICABLE TO IT. HOWEVER ON APPEAL, THE FAA ALLOWED THE CLAIM AND DELETED THE ADDITIONS MADE BY THE AO.NOT SATISFIED WITH THE SAME, THE REVENUE TOOK THE MATTER ON FURTHER APPEAL BEFORE TH E TRIBUNAL AND THE TRIBUNAL ON A CONSIDERATION OF SECTION 86 AND COMPARING THE SAME WITH SECTION 4 0(BA) OF THE ACT CONCURRED WITH THE DECISION OF THE FAA BY HOLDING THAT A READING OF SECTION 86 WOULD CLEARLY SHOWED THAT THERE WAS NO BAR FOR THE ASSESSEE TO CLAIM THE BENEFITS PROVIDED THEREUN DER.CHALLENGING THE SAME,THE REVENUE FIELD THE APPEAL BEFORE THE COURT.DISMISSING THE APPEAL,THE H ONBLE COURT HELD AS UNDER: 3. IN ORDER TO APPRECIATE THE CONTENTIONS OF THE L EARNED COUNSEL APPEARING FOR THE APPELLANT, IT IS USEFUL TO EXTRACT THE PROVISIONS OF SECTION 86 OF T HE INCOME-TAX ACT WHICH IS AS FOLLOWS : XXXXXXXXXXXXXXXXXXXXX 4.A PERUSAL OF THE ABOVE-SAID PROVISION WOULD CLEAR LY SHOW THAT IN THE CASE WHERE THE ASSESSEE IS A MEMBER OF ASSOCIATION OF PERSONS, INCOME-TAX WAS NO T TO BE PAYABLE BY THE ASSESSEE IN RESPECT OF HIS SHARE IN THE INCOME OF THE ASSOCIATION OR BODY IN THE MANNER PROVIDED UNDER SECTION 67A OF THE ACT. THE EXCLUSION PROVIDED UNDER THE SECTION THAT OTHER THAN THE COMPANY OR THE CO-OPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 WOULD BE MADE APPLICABLE ONLY TO THE ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS AND NOT TO THE MEMBER. IN OTHER WORDS, IF THE ASSOCIATION OF PERSONS OR A BOD Y OF INDIVIDUALS HAPPENED TO BE A COMPANY OR A 5 ITA NO. 3863/M/2013 WESTERN INDIA STEEL CO. PVT. LTD . CO-OPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, THEN IN SUCH AN EVENTUALITY THE MEMBER, WHO IS ALSO AN ASSESSEE IS NOT ENTITLED TO GET THE BENEFITS PROVIDED UNDER SECTION 86 OF THE ACT. 5. FURTHER, A READING OF SECTION 40(BA) OF THE ACT WOULD ALSO MAKE IT CLEAR THAT THE SHARE OF THE ASSESSEE UNDER THE INCOME OF ASSOCIATION OF PERSONS SHALL NOT BE TAXABLE. HENCE, A COMBINED READING OF THE ABOVESAID PROVISIONS WOULD MAKE IT C LEAR THAT THERE IS NO BAR FOR A PRIVATE COMPANY LIKE THE ASSESSEE FROM GETTING THE BENEFITS OF SECT ION 86 OF THE ACT. 6. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT IN OR DER TO INTERPRET A TAXING STATUTE, A LITERAL INTERPRETATION WILL HAVE TO BE GIVEN WHILE INTERPRE TING THE SAME. UNLESS THE INTERPRETATION WOULD LEAD TO MANIFEST IN JUSTICE OR ABSURDITY SUCH AN IN TERPRETATION CANNOT BE GIVEN OTHER THAN THE LITERAL INTERPRETATION. THEREFORE, CONSIDERING THE WELL SET TLED PRINCIPLES OF INTERPRETATION, WE ARE OF THE OPINION THAT THE DECISION MADE BY THE TRIBUNAL WHIL E CONFIRMING THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DOES NOT WARRANT ANY INTERFERE NCE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE APPEAL. HENCE, THE APPEAL IS DISMISSED AND THE SUBSTANTIAL QUESTION OF LAW RAISED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RESPECTFULLY,FOLLOWING THE ABOVE DECISION OF THE MA DRAS HIGH COURT, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE .BESIDES ,IT IS ALSO A FACT THAT ISSUE DEALT BY THE CIT IN THE ORDER PASSED U/S.263 OF THE ACT WAS DEALT BY TH E FAA AND THUS IT WAS BEYOND THE SCOPE OF SECTION 263. THUS,THE ORDER HAS TO BE DECLARED INVA LID.CONSIDERING THE LEGAL POSITION,WE HOLD THAT THE ORDER OF THE CIT WAS NOT TENABLE. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ( 9 '() + : + ) ;<. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH, FEBRUARY,2015 . 8 + -.# > ?' 11 QJOJH , 201 5 . + 7 @ SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER , / MUMBAI, ?' /DATE: 11.02 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) A #) A #) A #) A #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR G BENCH, ITAT, MUMBAI / D7 &)' , . . . 6. GUARD FILE/ 7 E ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, F / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI