ITO (E) 1(1), MUMBAI V. BHARAT DIAMOND BOURSE, MUMBAI

ITA 4852/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7667 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N P SINGH; SUMAN KUMAR
• Assessee Lawyers: R K SINHA
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Additional evidence; Cancellation of registration
• Section: 143(3); 12A; 12AA

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 884/ MUM/2012 ( / ASSESSMENT YEAR : 2009-10) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE DIRECTOR OF INCOME- TAX(EXEMPTIONS), WARD 1(1), PIRAMAL CHAMBERS, 6 TH FLOOR, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 2789/ MUM/2011 ( / ASSESSMENT YEAR : 2005-06) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE ADDITIONAL COMMISSIONER OF INCOME- TAX(EXEMPTIONS), RANGE-1 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 4437/ MUM/2011 ( / ASSESSMENT YEAR : 2005-06) THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 / V. BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 2790/ MUM/2011 ( / ASSESSMENT YEAR : 2006-07) ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 2 BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE ADDITIONAL COMMISSIONER OF INCOME- TAX(EXEMPTIONS), RANGE-1 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 4852/ MUM/2011 ( / ASSESSMENT YEAR : 2007-08) THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 / V. BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 2791/ MUM/2011 ( / ASSESSMENT YEAR : 2007-08) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 6591/ MUM/2011 ( / ASSESSMENT YEAR : 2008-09) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 3 ./ I.T.A. NO. 3004/ MUM/2013 ( / ASSESSMENT YEAR : 2009-10) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 3127/ MUM/2015 ( / ASSESSMENT YEAR : 2010-11) BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX, TOWER H, GROUND FLOOR, BADRA(EAST), MUMBAI- 400051 / V. THE INCOME TAX OFFICER (EXEMPTIONS), 1(1) 5 TH FLOOR,, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 ./ PAN : AAACB2358R ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SH. R K SINHA, AR REVENUE BY : SHRI N P SINGH, CIT- DR AND SUMAN KUMAR / DATE OF HEARING : 29-03-2017 / DATE OF PRONOUNCEMENT : 30-03-2017 / O R D E R PER BENCH THESE ARE BUNCH OF NINE APPEALS WHICH ARE FILED BY THE ASSESSEE AS WELL REVENUE FOR DIFFERENT ASSESSMENT YEARS . THESE APPE ALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE SHALL TAKE UP APPEAL BEARING ITA NO. 8 84/MUM/2012 WHICH IS FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 C HALLENGING ORDER DATED ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 4 27.12.2011 PASSED BY LEARNED DIRECTOR OF INCOME-TAX (EXEMPTION) (HEREINAFTER CALLED DIT(E) ) U/S 12AA(3) OF INCOME-TAX ACT,196 1 CANCELLING REGISTRATION OF THE ASSESSEE AND HOLDING THAT THE ASSESSEE IS A NON CHARITABLE TRUST/INSTITUTION. THE DIT(E) CANCELLED THE REGIST RATION OF THE ASSESSEE AS CHARITABLE TRUST/INSTITUTION KEEPING IN VIEW PROVIS O TO SECTION 2(15) OF 1961 ACT WHICH WAS BEING ADDED THERETO W.E.F. 01.04.2009 BY FINANCE ACT, 2008 AND FINANCE ACT, 2010 , WHICH READS AS UNDER : SECTION 2(15) [ ( 15 ) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POO R, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCL UDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEM ENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGRE GATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; ] THE LEARNED DIT(E) ISSUED SCN DATED 31.10.2011 ASKI NG ASSESSEE TO EXPLAIN AS TO WHY ITS REGISTRATION SHOULD NOT BE WITHDRAWN BY INVOKING PROVISIONS OF SECTION 12AA(3) OF 1961 ACT ON THE GROUNDS THAT THE ACTIVITIES OF THE ASSESSEE WERE IN THE NATURE OF TRADE , COMMERCE , BUSINESS D URING THE RELEVANT PREVIOUS YEAR TO IMPUGNED ASSESSMENT YEAR 2009-10. THE ASSESSEE STATED BEFORE LEARNED DIT(E) IN REPLY TO SCN THAT ITS MAI N OBJECTS ARE : (A) TO ESTABLISH A BOURSE FOR THE PROMOTION OF EXPORTS OF GEM & JEWELLERY FROM INDIA AND TO PROVIDE FOR THIS PURPOS E INFRASTRUCTURE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 5 AND OTHER FACILITIES IN INDIA FOR INDIAN AND OVERSE AS BUYERS AND SELLERS OF GEM AND JEWELLERY. (B) TO ESTABLISH AND PROMOTE EFFECTIVE LIAISON BETWEEN THE GEM AND JEWELLERY TRADE AND INDUSTRY IN INDIA AND ABROAD. (C) TO PROMOTE , ADVANCE , PROTECT AND DEVELOP TRADE, C OMMERCE AND INDUSTRY IN INDIA RELATING TO GEM & JEWELLERY INCLU DING CUTTING, POLISHING AND PROCESSING. (D) TO DEVELOP INDIA AS MODERN AND SOPHISTICATED GEM & JEWELLERY MARKET IN THE WORLD BY ESTABLISHING AND MAINTAIN AN INTERNATIONAL TRADING CENTRE IN INDIA ALL THOSE ENGAGED AS MANUFA CTURERS , TRADERS, EXPORTERS,IMPORTERS, BROKERS AND COMMISSION AGENTS IN THE GEM & JEWELLERY TRADE AND INDUSTRY. THE ASSESSEE ALSO SUBMITTED THAT THE MAJOR ACTIVITY CARRIED ON BY THE ASSESSEE IS TO PROVIDE INFRASTRUCTURE FACILITIES INCLUDING H ANDLING, STORAGE AND CLEARANCE OF IMPORT AND EXPORT CARGO OF DIAMONDS, P RECIOUS , SEMI-PRECIOUS STONES ETC. . THE ASSESSEE SUBMITTED THAT IT ENTERE D INTO AN AGREEMENT WITH MMTC BY WHICH IT WAS AGREED BY MMTC TO FUNCTION AS CUSTODIAN AT THE OFFICE OF THE ASSESSEE WHERE INFRASTRUCTURE FACILITIES INC LUDING HANDLING, STORAGE AND TRANSPORTATION OF IMPORT AND EXPORT CARGO OF DIAMON DS, PRECIOUS AND SEMI- PRECIOUS STONES ARE PROVIDED TO GEM AND JEWELLERY T RADERS AND MEMBERS OF THE ASSESSEE. THE SERVICES RENDERED BY THE ASSESSEE , THUS, AS CONTENDED BY THE ASSESSEE WERE AS UNDER: (1) PROVISION OF RENT FREE ACCOMMODATION FOR HOUSING AN D CUSTOMS CLEARANCE CENTRE AS WELL AS THE CUSTODIANS OFFICE. (2) MAINTENANCE OF STRONG ROOM AT THE DPCCC AS WELL AS AT THE SAHAR INTERNATIONAL AIR-CARGO COMPLEX. (3) PROVISION OF SECURITY AND TO AND FRO TRANSPORTATION OF EXPORT AND IMPORT PARCELS BETWEEN DPCCC AND SAHAR INTERNATIONA L AIR CARGO COMPLEX ON EVERY WORKING DAY. (4) DEPOSITING OF AIRWAYS BILLS WITH RESPECTIVE AIRLINE OFFICES. (5) COLLECTION AND DISTRIBUTION OF EP COPIES OF SHIPPIN G BILLS. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 6 (6) PROVIDING EXPORT/IMPORT STATISTICS ON WEBSITE OF TH E ASSESSEE ON REGULAR BASIS. IT WAS STATED THAT THE ABOVE ARRANGEMENT WAS ON COS T RECOVERY BASIS. THESE SERVICES WERE RENDERED BY ASSESSEE TO GEM AND JEWEL LERY TRADERS ONLY. THUS, IT WAS CONTENDED THAT THE BASIC MOTIVE OF THE ASSESSEE IS TO PROVIDE SERVICES TO THE MEMBERS AND NOT TO MAKE PROFITS OR CARRY OUT AN Y COMMERCIAL ACTIVITY WITH PROFIT MOTIVE. THE ASSESSEE ALSO CONTENDED THA T THE ACTIVITIES OF THE ASSESSEE ARE NOT NON GENUINE AND ALSO THERE IS NO A LLEGATION THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CARRIED OUT IN ACCORDANCE W ITH THE OBJECTS OF THE ASSESSEE AND PRAYED THAT THE REGISTRATION GRANTED U /S 12A OF 1961 ACT BE NOT WITHDRAWN OR CANCELLED. THE LEARNED DIT(E) INVOKED AMENDED PROVISIONS OF SE CTION 2(15) OF 1961 ACT WHICH WERE AMENDED W.E.F. 01-04-2009 BY FINANCE ACT , 2008 AND FINANCE ACT, 2010 . THE LD. DIT(E) OBSERVED THAT ASSESSEE HAS SHOWN INCOME OF RS. 4,35,12,773/- ON ACCOUNT OF REIMBURSEMENT OF HANDLI NG, CARTING AND CUSTOM EXPENSES AS RECOVERED FROM ITS MEMBERS , AGAINST WH ICH PAYMENT OF RS. 69,87,555/- WAS MADE TO MMTC WHICH ACT AS CUSTODIAN AND TO THE CUSTOM AUTHORITIES OF RS. 1,74,13,599/-. IT WAS OBSERVED B Y LD. DIT(E) THAT THE ASSESSEE MAKES PAYMENT TO MMTC WHICH HAS ACTED AS C LEARING AND FORWARDING AGENT ON BEHALF OF MEMBERS. IT WAS HELD BY LD. DIT(E) THAT THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF BUS INESS WHICH IS BEING CARRIED ON BY THE ASSESSEE AND THERE IS NO CONCEPT OF MUTUA LITY AS CONTENDED BY ASSESSEE. THUS, LD DIT(E) HELD THAT ACTIVITIES OF T HE ASSESSEE ARE IN THE NATURE OF BUSINESS AND RECEIPTS OF THE ASSESSEE EXCEEDED T HE MONETARY LIMIT SPECIFIED BY SECOND PROVISO TO SECTION 2(15) OF 1961 ACT WHIC H HAS COME INTO EFFECT FROM ASSESSMENT YEAR 2009-10. THUS, THE ASSESSEE HA S LOST ITS CHARITABLE CHARACTER. THUS, THE TRUST BECOMES NON GENUINE FOR THE PURPOSES OF SECTION ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 7 11 OF 1961 ACT AS IT LOOSES ITS CHARITABLE STATUS A ND HENCE PROVISIONS OF SECTION 12AA(3) OF 1961 ACT GETS ATTRACTED, WAS THE OBSERVATION OF LD. DIT(E). THE LEARNED DIT(E) THUS CANCELLED/WITHDREW THE REG ISTRATION AS ALLOWED TO THE ASSESSEE IN EARLIER YEARS U/S 12AA OF 1961 ACT W.E.F. ASSESSMENT YEAR 2009-10 AND THE ASSESSEE WAS HELD TO BE NON-CHARITA BLE TRUST/INSTITUTION BY LD. DIT(E), VIDE ORDERS DATED 27.12.2011 PASSED U/S 12AA(3) OF 1961 ACT. 3. AGGRIEVED BY THE ORDERS DATED 27.12.2011 PASSED BY LEARNED DIT(E) U/S 12AA(3) OF 1961 ACT CANCELLING / WITHDRAWING THE R EGISTRATION AS ALLOWED TO THE ASSESSEE IN EARLIER YEARS U/S 12AA OF 1961 ACT W.E.F. ASSESSMENT YEAR 2009-10, THE ASSESSEE FILED FIRST APPEAL BEFORE THE TRIBUNAL. 4. THE ASSESSEE HAS REITERATED ITS SUBMISSIONS AS W ERE MADE BEFORE LEARNED DIT(E) WHICH ARE NOT REPEATED FOR SAKE OF BREVITY. THE ASSESSEE ALSO CONTENDED THAT THE ACTIVITIES OF THE ASSESSEE WERE HELD TO BE CHARITABLE BY HONBLE APEX COURT IN THE ASSESSEES OWN CASE IN DIT V. BHARAT D IAMOND BOURSE (2003) 259 ITR 280(SC) VIDE ORDERS DATED 16.12.2002. WHERE IN LORDSHIPS HELD AS UNDER: SECTION 2(15) OF THE ACT DEFINES 'CHARITABLE PURPO SE' AS INCLUDING RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADV ANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IN ORDER TO DECIDE THE FIRST QUESTION, THE CIRCUMST ANCES UNDER WHICH THE APPELLANT-ASSESSEE CAME INTO EXISTENCE ARE REQUIRED TO BE NOTICED. THE DIAMOND EXPORTERS IN INDIA HAD FORMED A DIAMOND EXP ORTERS ASSOCIATION FOR FACILITATING EXPORT OF DIAMONDS. THERE WAS NEED FOR SETTING UP A DIAMOND BOURSE IN BOMBAY WITH CUSTOMS CLEARANCE FAC ILITIES WHICH WOULD FACILITATE THE EXPORT OF DIAMONDS AND MAKE TH E TRADE MORE COMPETITIVE IN THE INTERNATIONAL MARKET. IN 1984 TH E CENTRAL GOVERNMENT ACCEPTED THE PROPOSAL MADE BY THE SAID ASSOCIATION TO SET UP A DIAMOND BOURSE IN BOMBAY. THE MINERALS AND METALS TRADING C ORPORATION OF INDIA LTD. (A CENTRAL GOVERNMENT UNDERTAKING) AGREED TO C O-ORDINATE THE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 8 ADMINISTRATIVE STEPS AND THE BOURSE WAS TO BE NAMED AS SUGGESTED BY THE MINISTRY OF COMMERCE AS 'BHARAT DIAMOND BOURSE' . A DECISION TO SET UP THE SAME WAS TAKEN UP BY THE GOVERNMENT OF INDIA IN THE MINISTRIES OF FINANCE AND COMMERCE WITH THE OBJECT OF ENCOURAGING AND INCREASING THE EXPORT OF POLISHED DIAMONDS FROM INDIA. THE CITY OF BOMBAY HAD BEEN TRADITIONALLY THE HEADQ UARTERS OF DIAMOND TRADE AND EXPORTS, THOUGH THE MAIN BUSINESS CENTRE WAS LOCATED IN A CONGESTED LOCALITY. THE INTERNATIONAL AIRPORT IN BO MBAY IS SITUATED IN SAHAR, ANDHERI, IN NORTH BOMBAY. THE LONG DISTANCE BETWEEN THE CENTRE OF ACTIVITY OF THE DIAMOND TRADE AND THE INTERNATIO NAL AIRPORT MADE IT HIGHLY INCONVENIENT AND CUMBERSOME FOR OPERATIONS O F THE DIAMONDS EXPORT TRADE FROM THE POINT OF VIEW OF TRANSPORTATI ON, SECURITY AND CUSTOMS CLEARANCE. IT WAS, THEREFORE, DECIDED WITH THE CONCURRENCE OF THE CENTRAL GOVERNMENT TO HAVE A CUSTOM CLEARANCE FACIL ITY OPENED AT DIAMOND PLAZA NEAR OPERA HOUSE AS A CUSTOMS AREA FO R THE PURPOSE OF STORAGE AND CLEARANCE OF DIAMONDS. THERE WAS ALSO T HE QUESTION OF SECURITY SINCE DIAMONDS AND GEMS IMPORTED AND EXPOR TED IN SMALL PACKETS IN LARGE QUANTITIES HAD TO BE TRANSPORTED O VER LONG DISTANCES. THE REGISTRAR OF COMPANIES WAS MOVED FOR A CERTIFIC ATE OF INCORPORATION OF THE ASSESSEE-COMPANY WHICH WAS DONE ON 18TH AUGU ST, 1984. ON 22ND NOVEMBER, 1984 THE COLLECTOR OF CUSTOMS, BOMBA Y ISSUED A NOTICE UNDER SECTION 8 OF THE CUSTOMS ACT APPROVING THE MM TC SITUATED AT DIAMOND PLAZA BUILDING NEAR OPERA HOUSE AS A 'CUSTO MS AREA' FOR THE PURPOSES OF STORAGE AND CLEARANCE OF DIAMONDS, GEMS ETC. ON THE SAME DAY, ANOTHER NOTIFICATION WAS ISSUED UNDER SECTION 45(1) OF THE CUSTOMS ACT APPROVING MMTC AS THE CUSTODIAN OF THE IMPORTED CARGO OF SUCH GOODS UNTIL THEIR CLEARANCE IN ACCORDANCE WITH THE PROVISIONS OF THE CUSTOMS ACT. IT WAS ALSO NOTIFIED THAT MMTC WOULD B E THE CUSTODIAN WITH REGARD TO THE EXPORT CARGO UNTIL THEY ARE TRANS-SHI PPED AND HANDED OVER TO THE AIRLINES AT SAHAR INTERNATIONAL AIRPORT, BOM BAY. WHEN MMTC WAS APPOINTED AS THE CUSTODIAN, IT HAD INCURRED EXPENDI TURE ON BEHALF OF BHARAT DIAMOND BOURSE TO THE EXTENT OF ABOUT RS. 81 LAKHS FOR SETTING UP OF THE BOURSE. ON 31ST AUGUST, 1984 THE MANAGING CO MMITTEE OF THE ASSESSEE RESOLVED TO TREAT THE EXPENSES INCURRED BY MMTC AS A LOAN WHICH WAS TO BE RETURNED WITH INTEREST @ 6% PER ANN UM. MMTC HAD TAKEN CERTAIN PREMISES ON LEASE IN THE DIAMOND PLAZ A WHICH WAS SUB- LEASED TO THE ASSESSEE ON THE SAME TERMS AND CONDIT IONS EXCEPT FOR THE DEPOSIT. THE PRINCIPAL OBJECT OF ESTABLISHMENT OF T HE BOURSE WAS TO FACILITATE THE DIAMOND TRADE SO THAT MAXIMUM REVENU E COULD BE EARNED BY WAY OF FOREIGN EXCHANGE AND ALSO TO MAKE THE DIA MOND TRADE MORE COMPETITIVE AT THE INTERNATIONAL LEVEL. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 9 ON 15TH DECEMBER, 1987 AN AGREEMENT WAS ARRIVED AT BETWEEN MMTC AND THE ASSESSEE UNDER WHICH IT WAS AGREED THAT, FR OM 1ST APRIL, 1988, SERVICE CHARGES WOULD BE COLLECTED BY THE ASSESSEE AND NOT BY MMTC, AND FROM THAT DATE THE BOURSE WOULD MEET ITS OWN OB LIGATIONS TOWARDS ITS STAFF, THEIR EXPENSES ETC. AND SO ON. UNDER THE SAI D AGREEMENT THE OPERATIONS OF THE BOURSE WERE TAKEN OVER FROM THE M MTC. THE SETTING UP OF THE DIAMOND BOURSE HAD A GREAT IM PACT ON THE DIAMOND EXPORT TRADE. THE TOTAL VALUE OF PARCELS CLEARED TH ROUGH THE BOURSE INCREASED FROM RS. 2,231 CRORES IN 1985-86 TO RS. 1 1,261 CRORES IN THE YEAR 1991-92. THESE FIGURES INDICATE THAT THE EXPOR T TURN OVER OF DIAMONDS GRADUALLY INCREASED DURING THE RELEVANT PE RIOD AND CONSEQUENTLY THE COUNTRY HAD BENEFITED BY INCREASED EARNING OF FOREIGN EXCHANGE. ON THE BASIS OF THESE FACTS, THE REVENUE AUTHORITY GRANTED REGISTRATION TO THE APPELLANT AS AN INSTITUTION ESTABLISHED FOR CHA RITABLE PURPOSES WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THOUGH THE ASSESSEE DOES EARN CERTAIN INCOME BY REASON OF HIRING OF LOCKER FACILI TIES AS INCIDENTAL TO THE MAIN CUSTOM CLEARANCE FACILITIES MADE AVAILABLE TO MEMBERS AS WELL AS NON-MEMBERS, AND DEBITS THE EXPENSES INCURRED IN RE SPECT OF CUSTOMS DEPARTMENT, TRANSPORT CHARGES, SECURITY CHARGES AND RENT FOR THE PREMISES, THESE EARNINGS MUST BE TREATED AS ANCILLA RY TO THE DOMINANT PURPOSE FOR WHICH THE DIAMOND BOURSE WERE ESTABLISH ED. THE REVENUE AUTHORITIES HAVE CONCURRENTLY HELD THAT , TAKING AN OVERALL VIEW, THE DOMINANT OBJECTS OF THE ASSESSEE ARE CHAR ITABLE AS THE DOMINANT OBJECT IS ONE OF GENERAL PUBLIC UTILITY AN D, THEREFORE, THE ASSESSEE IS ENTITLED TO BE REGISTERED AS AN INSTITU TION ESTABLISHED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2( 15) OF THE ACT. THE LEARNED SENIOR COUNSEL FOR THE REVENUE, HOWEVER , RELIED ON THE JUDGMENTS OF THIS COURT IN THE CASE OF DELHI STOCK EXCHANGE ASSOCIATION LTD. V. CIT [1997] 225 ITR 235 AND THE JUDGMENT OF THE PATNA HIGH COURT IN THE CASE OF BIHAR STATE FOREST DEVELOPMENT CORPN . V. CIT [1997] 224 ITR 757 TO CONTENT THAT THE ACTIVITIES OF THE ASSESSEE BOU RSE FALL OUTSIDE THE DEFINITION OF 'CHARITABLE PURPOSE', EVE N THOUGH THE BOURSE MIGHT HAVE BEEN REGISTERED AS AN INSTITUTION ESTABL ISHED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THE DECISION OF THE CONSTITUTIONAL BENCH OF THIS CO URT IN ADDL. CIT V. SURAT ART SILK CLOTH MFRS. ASSOCIATION [1980 ] 2 SCC 31 REALLY CLINCHES THE ISSUE. THE ASSESSEE IN SURAT ART SILK CLOTH MFRS. ASSOCIATION'S CASE (SUPRA) WAS AN ASSOCIATION ESTAB LISHED TO PROMOTE COMMERCE AND TRADE IN ART SILK YARN, RAW SILK, COTT ON YARN, ART SILK CLOTH, SILK CLOTH AND COTTON CLOTH. ITS OBJECTS, AS EVIDENCED FROM THE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 10 MEMORANDUM OF ASSOCIATION, INCLUDED, INTER ALIA, CA RRYING ON BUSINESS IN ART SILK YARN, RAW SILK, COTTON YARN, ART SILK CLOT H, SILK CLOTH, AND COTTON CLOTH BELONGING TO AND ON BEHALF OF ITS MEMB ERS AS WELL AS BUYING AND SELLING AND DEALING IN ALL KINDS OF CLOTH AND Y ARN BELONGING TO AND ON BEHALF OF ITS MEMBERS. THE CONSTITUTIONAL BENCH OF THIS COURT HELD THAT, IF THERE ARE SEVERAL OBJECTS OF THE INSTITUTION, SOME OF WHICH ARE CHARITABLE AND SOME NON-CHARITABLE, AND THE TRUSTEES OR THE MA NAGERS IN THEIR DISCRETION MAY APPLY THE INCOME OF THE INSTITUTION OF THOSE OBJECTS, THE TRUST OR INSTITUTION WOULD NOT BE LIABLE TO BE REGA RDED AS CHARITABLE AND NO PART OF ITS INCOME WOULD BE EXEMPTED FROM TAX. W HERE THE MAIN OR PRIMARY OBJECTS ARE DISTRIBUTIVE, EACH AND EVERY ON E OF THE OBJECT MUST BE CHARITABLE IN ORDER THAT THE TRUST BE HELD AS A VAL ID CHARITY. BUT, IF THE PRIMARY OR DOMINANT PURPOSE OF THE INSTITUTION IS C HARITABLE AND ANOTHER WHICH, BY ITSELF, MAY NOT BE CHARITABLE, BUT IS MER ELY ANCILLIARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT OBJECT, IT WO ULD NOT PREVENT THE INSTITUTION FROM VALIDLY BEING RECOGNIZED AS A CHAR ITY. THE TEST TO BE APPLIED IS, WHETHER THE OBJECT WHICH IS SAID TO BE NON-CHARITABLE IS THE MAIN OR PRIMARY OBJECT OF THE TRUST OR INSTITUTION OR IT IS ANCILLIARY OR INCIDENTAL TO THE DOMINANT OBJECT WHICH IS CHARITAB LE. REITERATING ITS EARLIER VIEW IN CIT V. ANDHRA CHAMBER OF COMMERCE [1965] 55 ITR 722 , THE SUPREME COURT SAID IN SURAT ART SILK CLOTH MFRS . ASSOCIATION'S CASE (SUPRA) THAT IF THE PRIMARY PURPOSE IS ADVANCEMENT OF OBJECTS FOR GENERAL PUBLIC UTILITY, THE INSTITUTION WOULD REMAIN CHARIT ABLE, EVEN IF AN INCIDENTAL NON-CHARITABLE OBJECT FOR ACHIEVING THAT PURPOSE WAS CONTEMPLATED. IN THE CASE OF ANDHRA CHAMBER OF COMM ERCE (SUPRA) IT WAS HELD THAT A CHAMBER OF COMMERCE DID NOT CEASE T O BE CHARITABLE MERELY BECAUSE THE MEMBERS OF THE CHAMBER WERE INCI DENTALLY BENEFITED IN CARRYING OUT ITS MAIN CHARITABLE PURPOSE. THIS C OURT APPROVINGLY FOLLOWED THE RATIO IN THE CASE OF COMMISSIONER OF I NLAND REVENUE V. YORKSHIRE AGRICULTURAL SOCIETY [1928] 1 KB 611 AND INSTITUTION OF CIVIL ENGINEERS V. COMMISSIONER OF CIVIL REVENUE [1932] 1 KB 149 FOR REACHING THE CONCLUSION THAT MERELY BECAUSE SOME FA CILITIES INCIDENTALLY AROSE TO THE MEMBERS OF A SOCIETY OR INSTITUTION IN THE COURSE OF CARRYING OUT ITS MAIN CHARITABLE PURPOSE, THAT BY ITSELF WOU LD NOT PREVENT THE INSTITUTION FROM BEING A CHARITY. ALL SUBSEQUENT JUDGMENTS HAVE NOTICED AND FOLLOWED THE JUDGMENT OF THE CONSTITUTIONAL BENCH IN SURAT ART SILK CLOTH MFRS. ASSOCIATION'S CASE (SUPRA) AND THE DOMINANT PURPOSE TEST EVOLVED THERE IN AND APPLIED THEM TO THE FACTS BEFORE THEM. APPLYING THIS DOMINANT PU RPOSE TEST TO THE OBJECTS OF THE RESPONDENT-ASSESSEE IT APPEARS TO US THAT THERE IS NO ESCAPE FROM THE CONCLUSION THAT IT IS VALIDLY RECOG NIZED AS AN INSTITUTION ESTABLISHED FOR CHARITABLE PURPOSE. THE ASSESSEE'S PREDOMINANT OBJECTS ARE : ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 11 '(I ) TO ESTABLISH COMMON FACILITIES REQUIRED TO PROMOTE EXPORTS OF DIAMONDS FROM INDIA AND TO PROVIDE FOR THIS PURPOSE TRADING HALLS AND OTHER UTILITIES AT A CENTRAL PLACE FOR INDIAN EXPORTERS AND OVERSEA S BUYER TO CARRY ON TRADE AND COMMERCE IN DIAMONDS WITH SPEED AND IN SECURE CONDITIONS. (II) TO ESTABLISH AND PROMOTE EFFECTIVE LIAISON BETWEEN DIAMOND TRADE AND INDUSTRY IN INDIA AND ABROAD WITH A VIEW TO PRO MOTING THEIR SALES FROM INDIA IN INTERNATIONAL MARKET. (III) TO PROMOTE, ADVANCE, PROTECT AND DEVELOP TRADE, COM MERCE AND INDUSTRY IN INDIA RELATING TO EXPORTS AND IMPORTS OF DIAMON DS AND (IV) TO DEVELOP INDIA AS MODERN AND SOPHISTICATED DIAMON D MARKET BY ESTABLISHING AND MAINTAINING AN INTERNATIONAL T RADING CENTRE IN INDIA FOR ALL THOSE ENGAGED AS MANUFACTURERS, TRADERS, EXPORTERS AND IMPORTERS, BROKERS/COMMISSION AGENTS OF DIAMONDS.' THESE BEING THE PREDOMINANT OBJECTIVES, WE AGREE WI TH THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS THE HIGH COURT THAT THE ASS ESSEE WAS RIGHTLY REGISTERED UNDER SECTION 11 BY TREATING IT AS AN IN STITUTION ESTABLISHED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2( 15) OF THE ACT. IT WAS ARGUED THAT AMENDMENTS HAVE BEEN BROUGHT IN BY STATUTE TO SECTION 2(15) OF 1961 ACT WHEREIN PROVISO 1 AND 2 ARE INSER TED BY FINANCE ACT, 2008 AND FINANCE ACT, 2010 W.E.F. 01-04-2009 , WHICH WAS FURTHER AMENDED BY FINANCE ACT, 2011 W.E.F. 01-04-2012 AND FINANCE ACT , 2015 W.E.F. 01-04- 2016. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT SINCE LAST THREE PRECEDING YEARS PRIOR TO IMPUGNED ASSESSMENT YEAR, THE ACTIVITY OF THE ASSESSEE WAS NOT CONSIDERED TO BE BUSINESS BY THE R EVENUE IN SCRUTINY ASSESSMENT FRAMED U/S 143(3) OF 1961 ACT, FOR ASSES SMENT YEARS 2006-07 , 2007-08 AND 2008-09. IT WAS CONTENDED THAT EXEMPTIO N U/S 11(1)(A) OF 1961 ACT WAS ALLOWED TO THE ASSESSEE BY AO. THE ASSESSME NT ORDER DATED 27-12- 2010 FOR ASSESSMENT YEAR 2008-09 PASSED BY AO U/S 1 43(3)(II) OF 1961 ACT WAS PLACED ON RECORD BY THE ASSESSEE WHICH IS PLACE D IN FILE , TO SUBSTANTIATE THAT THE ASSESSEE WAS TREATED AS CHARITABLE INSTITU TION BY REVENUE. IT WAS ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 12 SUBMITTED THAT LEARNED DIT(E) HAS HELD THAT THE ASS ESSEE IS ENGAGED IN BUSINESS AND PROVISO TO SECTION 2(15) OF 1961 ACT I NSERTED W.E.F. 01-04-2009 ARE CLEARLY HIT AND HENCE REGISTRATION GRANTED TO T HE ASSESSEE U/S 12AA OF 1961 ACT WAS CANCELLED / WITHDRAWN AND THE ASSESSEE WAS HELD TO BE NON CHARITABLE TRUST/INSTITUTION. THE ASSESSEE ALSO PLA CED RELIANCE ON CBDT CIRCULAR NO. 21 DATED 27-05-2016 WHICH STIPULATES T HAT IN CASE OF PROVISO TO SECTION 2(15) OF 1961 ACT BEING HIT, THE REGISTRATI ON ALREADY GRANTED U/S 12AA OF 1961 ACT NEED NOT BE WITHDRAWN/CANCELLED BY DIT( E) BUT AT THE ASSESSMENT STAGE EXEMPTION AS GRANTED U/S 11 AND 12 OF 1961 AC T BE NOT ALLOWED AND SUCH INCOME FROM ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY RENDERED BY SUCH TRUST/INSTITUTION BE HELD TO BE BU SINESS INCOME AND BROUGHT TO TAX UNDER NORMAL PROVISIONS OF THE 1961 ACT. THE SAID CIRCULAR NO. 21 DATED 27-05-2016 ISSUED BY CBDT IS REPRODUCED HE REUNDER: CIRCULAR NO.21/2016 [F.NO.197/17/2016-ITA-I] SECTION 12AA OF THE INCOME-TAX ACT, 1961 - CHARITAB LE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE - CLARIFIC ATION ON CANCELLATION OF REGISTRATION UNDER SECTION 12AA IN CERTAIN CIRCUMSTANCES CIRCULAR NO.21/2016 [F.NO.197/17/2016-ITA-I], DATED 27-5-2016 SECTIONS 11 AND 12 OF THE INCOME-TAX ACT, 1961 ('AC T') EXEMPT INCOME OF CHARITABLE TRUSTS OR INSTITUTIONS, IF SUCH INCOME I S APPLIED FOR CHARITABLE PURPOSE AND SUCH INSTITUTION IS REGISTERED UNDER SE CTION 12AA OF THE ACT. 2. SECTION 2(15) OF THE ACT PROVIDES DEFINITION OF 'CH ARITABLE PURPOSE'. IT INCLUDES 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY' PROVIDED IT DOES NOT INVOLVE CARRYING ON OF ANY ACT IVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ETC. FOR FINANCIAL CONS IDERATION. THE 2ND PROVISO TO SAID SECTION, INTRODUCED W.E.F. 1-4-2009 VIDE FINANCE ACT 2010, ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 13 PROVIDES THAT IN CASE WHERE THE ACTIVITIES OF ANY T RUST OR INSTITUTION IS OF THE NATURE OF ADVANCEMENT OF ANY OTHER OBJECT OF GE NERAL PUBLIC UTILITY AND IT INVOLVES CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; BUT THE AGGREGATE VALUE OF RE CEIPTS FROM SUCH COMMERCIAL ACTIVITIES DOES NOT EXCEED RS. 25,00,000 /- IN THE PREVIOUS YEAR, THE PURPOSE OF SUCH TRUST/INSTITUTION SHALL B E DEEMED AS 'CHARITABLE' DESPITE IT DERIVING CONSIDERATION FROM SUCH ACTIVITIES. HOWEVER, IF THE AGGREGATE VALUE OF THESE RECEIPTS E XCEEDS THE SPECIFIED CUT-OFF, THE ACTIVITY WOULD NO LONGER BE CONSIDERED AS CHARITABLE AND THE INCOME OF THE TRUST/INSTITUTION WOULD NOT BE ELIGIB LE FOR TAX EXEMPTION IN THAT YEAR. THUS AN ENTITY, PURSUING ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, COULD BE TREATED AS A CHARITABLE IN STITUTION IN ONE YEAR AND NOT A CHARITABLE INSTITUTION IN THE OTHER YEAR DEPE NDING ON THE AGGREGATE VALUE OF RECEIPTS FROM COMMERCIAL ACTIVITIES. THE P OSITION REMAINS SIMILAR WHEN THE FIRST AND SECOND PROVISOS OF SECTION 2(15) GET SUBSTITUTED BY THE NEW PROVISO INTRODUCED W.E.F. 1-4-2016 VIDE FINANCE ACT, 2015, CHANGING THE CUT-OFF BENCHMARK AS 20% OF THE TOTAL RECEIPTS INSTEAD OF THE FIXED LIMIT OF RS.25,00,000/- AS IT EXISTED EARLIER. 3. THE TEMPORARY EXCESS OF RECEIPTS BEYOND THE SPECIFI ED CUT-OFF IN ONE YEAR MAY NOT NECESSARILY BE THE OUTCOME OF ALTERATI ON IN THE VERY NATURE OF THE ACTIVITIES OF THE TRUST OR INSTITUTION REQUI RING CANCELLATION OF REGISTRATION ALREADY GRANTED TO THE TRUST OR INSTIT UTION. HENCE, SECTION 13 OF THE ACT HAS BEEN AMENDED VIDE FINANCE ACT, 2012 BY INSERTING A NEW SUB-SECTION (8) THEREIN TO PROVIDE THAT SUCH ORGANI ZATION WOULD NOT GET BENEFIT OF TAX EXEMPTION IN THE PARTICULAR YEAR IN WHICH ITS RECEIPTS FROM COMMERCIAL ACTIVITIES EXCEED THE THRESHOLD WHETHER OR NOT THE REGISTRATION GRANTED IS CANCELLED. THIS AMENDMENT HAS TAKEN EFFE CT RETROSPECTIVELY FROM 1ST APRIL, 2009 AND ACCORDINGLY APPLIES IN REL ATION TO THE ASSESSMENT YEAR 2009-10 ONWARDS. 4. IN VIEW OF THE AFORESAID POSITION, IT IS CLARIFIED THAT IT SHALL NOT BE MANDATORY TO CANCEL THE REGISTRATION ALREADY GRANTE D U/S 12AA TO A CHARITABLE INSTITUTION MERELY ON THE GROUND THAT TH E CUT-OFF SPECIFIED IN THE PROVISO TO SECTION 2(15) OF THE ACT IS EXCEEDED IN A PARTICULAR YEAR WITHOUT THERE BEING ANY CHANGE IN THE NATURE OF ACTIVITIES OF THE INSTITUTION. IF IN ANY PARTICULAR YEAR, THE SPECIFIED CUT-OFF IS EXCEE DED, THE TAX EXEMPTION WOULD BE DENIED TO THE INSTITUTION IN THAT YEAR AND CANCELLATION OF REGISTRATION WOULD NOT BE MANDATORY UNLESS SUCH CAN CELLATION BECOMES NECESSARY ON THE GROUND(S) PRESCRIBED UNDER THE ACT . ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 14 5. WITH THE INTRODUCTION OF CHAPTER XII-EB IN THE ACT VIDE FINANCE ACT, 2016, PRESCRIBING SPECIAL PROVISIONS RELATING TO TA X ON ACCRETED INCOME OF CERTAIN TRUSTS AND INSTITUTIONS, CANCELLATION OF RE GISTRATION GRANTED U/S 12AA MAY LEAD TO A CHARITABLE INSTITUTION GETTING H IT BY SUB-SECTION (3) OF SECTION 115TD AND BECOMING LIABLE TO TAX ON ACCRETE D INCOME. THE CANCELLATION OF REGISTRATION WITHOUT JUSTIFIABLE RE ASONS MAY, THEREFORE, CAUSE ADDITIONAL HARDSHIP TO AN ASSESSEE INSTITUTIO N DUE TO ATTRACTION OF TAX-LIABILITY ON ACCRETED INCOME. THE FIELD AUTHORI TIES ARE, THEREFORE, ADVISED NOT TO CANCEL THE REGISTRATION OF A CHARITA BLE INSTITUTION GRANTED U/S 12AA JUST BECAUSE THE PROVISO TO SECTION 2(15) COMES INTO PLAY. THE PROCESS FOR CANCELLATION OF REGISTRATION IS TO BE I NITIATED STRICTLY IN ACCORDANCE WITH SECTION 12AA(3) AND 12AA(4) AFTER C AREFULLY EXAMINING THE APPLICABILITY OF THESE PROVISIONS. 6. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCE RNED. THUS, IT WAS SUBMITTED THAT IN VIEW OF CBDT CIRCULA R NO. 21 DATED 27-05- 2016, THE REGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 ACT NEED NOT BE CANCELLED , WHILE IF THE ASSSSEES ACTIVITIES ARE H IT BY AMENDED PROVISIONS OF SECTION 2(15) OF 1961 ACT, THE TAX EXEMPTION COULD BE DENIED TO THE ASSESSEE TO THE EXTENT ACTIVITIES ARE HIT BY AMENDED PROVISI ONS. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF DIT(E) V. KHAR GYMKHANA (2016) 137 DTR 249( BOM.). 5. THE LEARNED CIT-DR ON THE OTHER HAND RELIED UPON DECISION OF AMRITSAR- TRIBUNAL IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY V. CIT (2012) 23 TAXMANN.COM 343(ASR.) TO CONTEND THAT LEARNED DIT(E ) HAS RIGHTLY CANCELLED THE REGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 A CT. IT WAS SUBMITTED THAT SECTION 2(15) OF 1961 ACT WAS AMENDED AND PROVISO W ERE ADDED BY FINANCE ACT, 2008 AND FINANCE ACT, 2010 W.E.F. 01-04-2009. THE ASSESSEES ACTIVITY ARE IN THE NATURE OF TRADE, BUSINESS AND COMMERCE A ND/OR SERVICES IN RELATION TO TRADE, COMMERCE AND BUSINESS CARRIED OUT BY GEM , DIAMOND AND JEWELLERY ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 15 TRADERS AND IS CLEARLY HIT BY PROVISO TO SECTION 2( 15) OF 1961 ACT.IT WAS SUBMITTED THAT ACTIVITY OF THE ASSESSEE WERE HELD T O BE CHARITABLE BY HONBLE SUPREME COURT IN ASSESSEES OWN CASE IN DIT V. BHA RAT DIAMOND BOURSE (2003) 259 ITR 280(SC) VIDE ORDERS DATED 16.12.2002 BUT THE SAID JUDGMENT OF HONBLE APEX COURT IS DATED 16.12.2002 WHICH IS MUCH PRIOR TO AMENDMENT BROUGHT IN BY FINANCE ACT, 2008 AND FINAN CE ACT, 2010 W.E.F. 01- 04-2009 AND HENCE RATIO OF DECISION OF HONBLE SUPR EME COURT IN THE AFORESAID DECISION IS NOT APPLICABLE KEEPING IN VIE W AMENDED PROVISIONS OF SECTION 2(15) OF 1961 ACT. THE ASSESSEE DID NOT BRO UGHT TO THE NOTICE OF LEARNED DIT(E) THE AFORESAID JUDGMENT OF HONBLE AP EX COURT DURING PROCEEDINGS BEFORE LEARNED DIT(E) CANCELLATION OF R EGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 ACT ,AND HENCE LEARNED DIT(E) HAD NO OCCASION TO DEAL WITH THE SAID JUDGMENT OF HONBLE APEX COURT. IT WAS SU BMITTED THAT CBDT CIRCULAR NO 21 DATED 27-05-2016 WAS BROUGHT IN THE YEAR 2016 WHILE THE ORDER PASSED BY LEARNED DIT(E) IS DATED 27-12-2011 WHICH IS MUCH PRIOR TO CBDT CIRCULAR AND IT WAS SUBMITTED THAT IN ANY CASE , CBDT CIRCULAR IS PROSPECTIVE IN NATURE AND THERE IS NO OCCASION TO A PPLY THE SAME RETROSPECTIVELY . IT WAS SUBMITTED THAT THERE IS CL EAR FINDING BY LEARNED DIT(E) THAT THE ASSESSEES ACTIVITY ARE IN THE NATURE OF T RADE, BUSINESS AND COMMERCE AND/OR SERVICES IN RELATION TO TRADE, COMMERCE AND BUSINESS CARRIED OUT BY GEM , DIAMOND AND JEWELLERY TRADERS AND IS CLEARLY HIT BY PROVISO TO SECTION 2(15) OF 1961 ACT. IT IS ALSO SUBMITTED THAT IT IS NOT A MARGINAL CASE WHERE THE TURNOVER IS CLOSE TO THE CUT-OFF TURNOVER SPECIFIED IN SECTION 2(15) OF 1961 ACT RATHER THE TURNOVER OF THE ASSESSEE IS SIGNIFICANTL Y HIGHER THAN MINIMUM TURNOVER STIPULATED BY SECTION 2(15) OF 1961 ACT AN D HENCE NO PURPOSE WILL BE SERVED BY RETAINING THE REGISTRATION BY THE ASSESSE E U/S 12AA OF 1961 ACT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDE R SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT(E) V. MAHARASH TRA HOUSING AND AREA ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 16 DEVELOPMENT AUTHORITY (2017) 392 ITR 240(BOM.) HAS DULY CONSIDERED THE DECISION OF AMRITSAR-TRIBUNAL IN THE CASE OF JAMMU DEVELOPMENT AUTHORITY(SUPRA) AND THEN HELD THAT IN THE ABSENCE OF ANY ACTIVITY DEMONSTRATING THAT THE ASSESSEE WAS NOT A GENUINE T RUST AND NO MATERIAL INDICATING THAT ASSESSEE OR ITS AFFAIRS ARE NOT CAR RIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST, REGISTRATION CANNOT BE CA NCELLED. IT WAS ALSO POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT BO TH THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KHAR GYMKHANA(SUPR A) AND MHADA(SUPRA) ARE RELATING TO ASSESSMENT YEAR 2009-10 AND ALSO IN THE INSTANT APPEAL THE ASSESSMENT YEAR UNDER CONSIDERATION BY TRIBUNAL IS ASSESSMENT YEAR 2009- 10. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON BY RIVAL PARTIES. T HE MAIN OBJECTS OF THE ASSESSEE AS CONTENDED BY THE ASSESSEE ARE AS UNDER: (E) TO ESTABLISH A BOURSE FOR THE PROMOTION OF EXPORTS OF GEM & JEWELLERY FROM INDIA AND TO PROVIDE FOR THIS PURPOS E INFRASTRUCTURE AND OTHER FACILITIES IN INDIA FOR INDIAN AND OVERSE AS BUYERS AND SELLERS OF GEM AND JEWELLERY. (F) TO ESTABLISH AND PROMOTE EFFECTIVE LIAISON BETWEEN THE GEM AND JEWELLERY TRADE AND INDUSTRY IN INDIA AND ABROAD. (G) TO PROMOTE , ADVANCE , PROTECT AND DEVELOP TRADE, C OMMERCE AND INDUSTRY IN INDIA RELATING TO GEM & JEWELLERY INCLU DING CUTTING, POLISHING AND PROCESSING. (H) TO DEVELOP INDIA AS MODERN AND SOPHISTICATED GEM & JEWELLERY MARKET IN THE WORLD BY ESTABLISHING AND MAINTAIN AN INTERNATIONAL TRADING CENTRE IN INDIA ALL THOSE ENGAGED AS MANUFA CTURERS , TRADERS, EXPORTERS,IMPORTERS, BROKERS AND COMMISSION AGENTS IN THE GEM & JEWELLERY TRADE AND INDUSTRY. THE ASSESSEE HAD ALSO SUBMITTED THAT THE MAJOR ACTI VITY CARRIED ON BY THE ASSESSEE IS TO PROVIDE INFRASTRUCTURE FACILITIES IN CLUDING HANDLING, STORAGE AND CLEARANCE OF IMPORT AND EXPORT CARGO OF DIAMONDS, P RECIOUS , SEMI-PRECIOUS ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 17 STONES ETC. . THE ASSESSEE SUBMITTED THAT IT ENTERE D INTO AN AGREEMENT WITH MMTC BY WHICH IT WAS AGREED BY MMTC TO FUNCTION AS CUSTODIAN AT THE OFFICE OF THE ASSESSEE WHERE INFRASTRUCTURE FACILITIES INC LUDING HANDLING, STORAGE AND TRANSPORTATION OF IMPORT AND EXPORT CARGO OF DIAMON DS, PRECIOUS AND SEMI- PRECIOUS STONES ARE PROVIDED TO GEM AND JEWELLERY T RADERS AND MEMBERS OF THE ASSESSEE. THE SERVICES RENDERED BY THE ASSESSEE , THUS, AS CONTENDED BY THE ASSESSEE WERE AS UNDER: (1) PROVISION OF RENT FREE ACCOMMODATION FOR HOUSING AN D CUSTOMS CLEARANCE CENTRE AS WELL AS THE CUSTODIANS OFFICE. (2) MAINTENANCE OF STRONG ROOM AT THE DPCCC AS WELL AS AT THE SAHAR INTERNATIONAL AIR-CARGO COMPLEX. (3) PROVISION OF SECURITY AND TO AND FRO TRANSPORTATION OF EXPORT AND IMPORT PARCELS BETWEEN DPCCC AND SAHAR INTERNATIONA L AIR CARGO COMPLEX ON EVERY WORKING DAY. (4) DEPOSITING OF AIRWAYS BILLS WITH RESPECTIVE AIRLINE OFFICES. (5) COLLECTION AND DISTRIBUTION OF EP COPIES OF SHIPPIN G BILLS. (6) PROVIDING EXPORT/IMPORT STATISTICS ON WEBSITE OF TH E ASSESSEE ON REGULAR BASIS. IT WAS STATED THAT THE ABOVE ARRANGEMENT WAS ON COS T RECOVERY BASIS. THESE SERVICES WERE RENDERED BY ASSESSEE TO GEM AND JEWEL LERY TRADERS ONLY. THE SERVICES RENDERED BY THE ASSESSEE WERE HELD TO BE C HARITABLE ACTIVITIES BY HONBLE APEX COURT IN ASSESSEES OWN CASE IN DIT V. BHARAT DIAMOND BOURSE (2003) 259 ITR 280(SC) VIDE ORDERS DATED 16.12.2002 , WHEREIN THE HONBLE APEX COURT CONSIDERED THE PRE-AMENDED PROVISIONS O F SECTION 2(15) OF 1961 ACT. SECTION 2(15) OF 1961 ACT WAS AMENDED BY FINAN CE ACT, 2008 AND FINANCE ACT, 2010 W.E.F. 01-04-2009. THE RELEVANT E XTRACTS OF PROVISIONS OF SECTION 2(15) OF 1961 ACT ARE REPRODUCED HEREUNDER : ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 18 SECTION 2(15) [ ( 15 ) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POO R, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCL UDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEM ENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT IN VOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGRE GATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; ] THERE WERE ALSO FURTHER AMENDMENTS IN SECTION 2(15) OF 1961 ACT BY FINANCE ACT, 2011 AND FINANCE ACT, 2015. THE ASSESS EES ACTIVITIES ARE PREDOMINANTLY IN THE NATURE OF ADVANCEMENT OF OBJEC TS OF GENERAL PUBLIC UTILITY WHICH ACTIVITIES APPEARS PRIMA-FACIE TO BE CONNECTED TO TRADE, COMMERCE OR BUSINESS, OR AN ACTIVITY OF RENDERING A NY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS OF GEM , DIAMOND AND JEWELLERY BUSINESS AND ALSO THE ASSESSEE TURNOVER IS EXCEEDIN G THE MAXIMUM THRESHOLD LIMIT FOR AVAILING EXEMPTION. HOWEVER, TH ERE IS A NEED FOR AO TO EVALUATE THE ACTIVITIES OF THE ASSESSEE IN CONTE XT OF AMENDED DEFINITION OF SECTION 2(15) OF 1961 ACT AT THE STAG E OF FRAMING ASSESSMENT. SO FAR SO GOOD, THE PROVISIONS OF SECTI ON 12AA(3) OF 1961 ACT AS IT STOOD NOW EMPOWERS LEARNED PRINCIPAL COMMISSIONER OR COMMISSIONER TO CANCEL THE REGISTRATION U/S 12AA OF 1961 ACT ON EITHER OF THE TWO GROUNDS NAMELY THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDA NCE WITH THE OBJECTS ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 19 OF THE TRUST OR INSTITUTION. SECTION 12AA(3) OF 196 1 ACT IS REPRODUCED HEREUNDER :- [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRAN TED REGISTRATION UNDER CLAUSE ( B ) OF SUB-SECTION (1) [OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE I TS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996)]] AND SUBSEQUENTLY THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER IS SAT ISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS A N ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST O R INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD.] THE COURTS HAVE TAKEN A CONSISTENT VIEW THAT LEARNE D PRINCIPAL COMMISSIONER OR COMMISSIONER SHALL HAVE POWER TO CANCEL THE REGI STRATION ONLY ON FULFILLMENT OF EITHER OF THE CONDITIONS AS STIPULAT ED BY PROVISIONS OF SECTION 12AA(3) OF 1961 ACT THAT THE ACTIVITIES OF SUCH TRU ST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THUS, THE LEARNED PRINCIPAL C OMMISSIONER OR COMMISSIONER CAN CANCEL THE REGISTRATION ON FULFILL MENT OF THE EITHER OF THE ABOVE TWO CONDITIONS WHILE IN THE INSTANT CASE THE SUCH CONDITIONS ARE NOT BEING SHOWN TO HAVE BEEN FULFILLED. THERE IS ALSO N O CHANGE IN NATURE OF ACTIVITIES OF THE ASSESSEE AS COMPARED TO IMMEDIATE LY PRECEDING YEAR AS REVENUE COULD NOT BROUGHT ON RECORD ANY SUCH FINDIN GS. THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT(E) V. MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY(SUPRA) AND DIT(E) V. KHAR GYMKHANA(SUPRA) ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 20 HAVE TAKEN THE SIMILAR VIEW AND SAID DECISIONS OF JURISDICTIONAL HIGH COURT ARE BINDING ON US. BOTH THE ABOVE DECISIONS PERTAINED T O ASSESSMENT YEAR 2009- 10 WHEREIN THE AMENDMENTS TO THE PROVISIONS OF SECT ION 2(15) OF 1961 ACT IS BROUGHT W.E.F. ASSESSMENT YEAR 2009-10. IN THE INST ANT APPEAL , WE ARE ALSO CONCERNED WITH ASSESSMENT YEAR 2009-10 . THE LEARN ED DIT(E) HAS CANCELLED THE REGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 A CT DUE TO AMENDED PROVISIONS OF SECTION 2(15) OF 1961 ACT WHICH WERE AMENDED BY FINANCE ACT, 2008 AND FINANCE ACT, 2010 W.E.F. 01-04-2009 AND NO T ON THE GROUNDS AS SPECIFIED IN SECTION 12AA(3) OF 1961 ACT. THE HON BLE BOMBAY HIGH COURT WHILE ADJUDICATING THE CASE OF DIT(E) V. MAHARASHTR A HOUSING AND AREA DEVELOPMENT AUTHORITY(SUPRA) HAS DULY TAKEN NOTE OF AMRITSAR-TRIBUNAL TAKING CONTRARIAN VIEW ON THIS ISSUE IN JAMMU DEVEL OPMENT AUTHORITY(SUPRA) CASE. THUS , IN OUR CONSIDERED VIEW THE REGISTRATIO N U/S 12AA OF 1961 ACT OF THE ASSESSEE CANNOT BE CANCELLED BY LEARNED DIT(E) AND THE SAME IS HEREBY RESTORED WITH EFFECT FROM THE DATE IT WAS CANCELLED BY LEARNED DIT(E) VIDE IMPUGNED ORDER OF LEARNED DIT(E) WHICH IS UNDER CHA LLENGE BEFORE US. WE WOULD LIKE TO CLARIFY THAT DUE TO AMENDED PROVISION S OF SECTION 2(15) OF 1961 ACT, THE ASSESSEE SHALL NOT BE ENTITLED TO CLAIM TA X EXEMPTIONS U/S 11 AND 12 OF 1961 ACT IF THE ACTIVITIES OF THE ASSESSEE ARE F OUND BY THE AO DURING THE ASSESSMENT PROCEEDINGS TO BE HIT BY THE AMENDED PRO VISIONS OF SECTION 2(15) OF 1961 ACT . THE AO SHALL DURING THE COURSE OF ASS ESSMENT , RECORD FINDING AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE ALTHOUGH BEING IN THE NATURE OF ACTIVITIES OF ADVANCEMENT OF OBJECTS OF PUBLIC UTI LITY FALLS WITHIN FOUR CORNER OF TRADE, COMMERCE OR BUSINESS , OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY AS MANDATED U/S 2(15) OF THE ACT OR NOT , UNINFLUENCED BY OUR PRIMA-FACIE FINDING AS RECORDED EARLIER IN THIS ORDER . THERE IS A SPECIFIC PROVISION INSERTED BY FINANCE A CT, 2012 W.E.F. 01-4-2009 ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 21 VIDE SUB-SECTION 8 TO SECTION 13 OF 1961 ACT TO THA T EFFECT WHICH IS REPRODUCED HEREUNDER: [ SECTION 11 NOT TO APPLY IN CERTAIN CASES. (1) TO (7) *** [(8) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PRE VIOUS YEAR OF THE PERSON IN RECEIPT THEREOF IF THE PROVISIONS OF THE FIRST PROVISO* TO CLAUSE ( 15 ) OF SECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN TH E SAID PREVIOUS YEAR.] THE AO SHALL DURING THE COURSE OF ASSESSMENT VERIFY AND DETERMINE THE ACTIVITIES OF THE ASSESSEE THAT ARE HIT BY AMENDED DEFINITION OF SECTION 2(15) OF 1961 ACT AND ACCORDINGLY TAX-EXEMPTIONS SH ALL BE DENIED ON SUCH ACTIVITIES. WITH THE ABOVE STATED CONDITIONS, THE REGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 ACT IS RESTORED. WE ORDER ACCORDINGLY. 8. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 884/MUM/2012 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED AS INDICA TED ABOVE. 9. WE SHALL NOW TAKE APPEAL IN ITA NO. 3004/MUM/201 3 FOR ASSESSMENT YEAR 2009-10 AND ITA NO. 3127/MUM/2015 FOR ASSESSMENT YE AR 2010-11, BOTH BEING FILED BY THE ASSESSEE. IT IS AGREED BY BOTH T HE RIVAL PARTIES THAT THE AFORE-SAID APPEALS ARE CONSEQUENTIAL IN NATURE TO A PPEAL IN ITA NO. 884/MUM/2012 FOR ASSESSMENT YEAR 2009-10 , AS IN BO TH THE ASSESSMENT YEARS THE TAX EXEMPTION WAS DENIED BY THE AUTHORITI ES BELOW ON THE GROUNDS THAT REGISTRATION OF THE ASSESSEE U/S 12AA OF 1961 ACT STOOD CANCELLED BY LEARNED DIT(E) AND HENCE THE ASSESSEE WAS NOT ENTIT LED TO TAX-EXEMPTIONS U/S 11 OF 1961 ACT. BUT, SINCE WE HAVE RESTORED THE REG ISTRATION OF THE ASSESSEE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 22 U/S 12AA OF 1961 ACT WHILE ADJUDICATING THE APPEAL IN ITA NO. 884/MUM/2012 AS SPECIFIED IN THE SAID ORDER,THESE T WO APPEALS BECOME CONSEQUENTIAL IN NATURE TO OUR ORDER IN ITA NO 884/ MUM/2012 , AND THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND T HE ISSUES ARE RESTORED BACK TO THE FILE OF THE AO TO BE ADJUDICATED ON MERITS I N THE LIGHT OF OUR ORDER IN ITA NO. 884/MUM/2012. WE WOULD LIKE TO CLARIFY THAT WE HAVE KEPT QUESTION OF APPLICABILITY OF MUTUALITY RAISED BY THE ASSESSEE A S AN ALTERNATE GROUND OPEN AND THE SAME IS NOT ADJUDICATED BY US. THE ASSESSEE IS GIVEN LIBERTY TO RAISE THE SAID GROUND OF APPLICABILITY OF MUTUALITY TO TH E ASSESSEE KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CASE BEFORE THE AO. WE ORDER ACCORDINGLY. 10. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 3004/MUM/2013 FOR ASSESSMENT YEAR 2009-10 AND ASSESSEES APPEAL IN IT A NO. 3127/MUM/2015 FOR ASSESSMENT YEAR 2010-11 IS ALLOWED FOR STATISTI CAL PURPOSES AS INDICATED ABOVE. 11. NOW WE SHALL TAKE UP CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE IN ITA NO. 2789/MUM/2011 AND ITA NO.4437/MUM/2011 RESP ECTIVELY FOR ASSESSMENT YEAR 2005-06. 12. THE GRIEVANCE OF THE ASSESSEE IN ITS APPEAL AR E TWO FOLD. FIRSTLY, THE ASSESSEE IS AGGRIEVED BY THE ADDITIONS SUSTAINED BY LEARNED CIT(A) TO THE TUNE OF RS.4,38,34,270/- WHICH WAS OUTSTANDING IN THE BO OKS OF THE ASSESSEE TOWARDS IAAI HANDLING CHARGES. SECOND GRIEVANCE OF THE ASSESSEE IS WITH RESPECT TO THE ADDITION SUSTAINED BY LEARNED CIT(A) TOWARDS DISALLOWANCE OF PROVISION FOR OUTSTANDING LIABILITY OF COST RECOVER Y-CUSTOMS TO THE TUNE OF RS.24,58,567/- . WHILE REVENUE GRIEVANCE IS WITH RE SPECT TO RELIEF GIVEN BY LEARNED CIT(A) OF RS.3,79,78,729/- TOWARDS DELETION OF ADDITION MADE TOWARDS OPENING BALANCE OF OUTSTANDING LIABILITY OF COST R ECOVERY-CUSTOMS. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 23 13. FIRST WE SHALL DEAL WITH ISSUE OF DISALLOWANCE OF OUTSTANDING LIABILITY OF IAAI HANDLING CHARGES TO THE TUNE OF RS. 4,38,34,27 0/-. 14. THE BRIEF FACTS OF THE CASE ARE THAT IT WAS OBS ERVED BY THE AO THAT ASSESSEE HAS MADE PROVISION OF RS.4,38,34,270/- UND ER THE HEAD OUTSTANDING LIABILITY OF IAAI HANDLING CHARGES WH ICH IS PAYABLE TO INTERNATIONAL AIRPORT AUTHORITY OF INDIA (IAAI), WH ILE THE ASSESSEE HAS NOT MADE ANY PAYMENT OUT OF THE SAME TILL 31-03-2005. T HE PROVISION FOR THE SAME WAS CREATED SINCE 1985-86 WHICH WAS HELD TO BE INFLATED EXPENSES BOOKED BY THE ASSESSEE SINCE 1985-86. THE AO OBSERV ED THAT THE ASSESSEE OUGHT TO HAVE WRITTEN BACK AS INCOME , AS THE SAID OUTSTANDING LIABILITY CAN NO LONGER EXIST BEYOND A REASONABLE TIME. THE ASSES SEE SUBMITTED THAT IT IS COLLECTING CHARGES OF RS. 300/- PER PARCEL FROM ITS MEMBERS AND 10% OF THE SAME IS KEPT TOWARDS PROVISION. THE ASSESSEE FAILED TO EXPLAIN AS TO THE REASONS WHY THE AFORESAID ENTIRE LIABILITY IS KEPT PENDING FOR LAST MORE THAN 20 YEARS. THE AO ADDED THE SAID OUTSTANDING LIABILI TY AS ON 31-03-2005 AMOUNTING TO RS.4,38,34,270/- AS INCOME OF THE ASSE SSEE FOR THE INSTANT ASSESSMENT YEAR , VIDE ASSESSMENT ORDER DATED 30.11 .2007 PASSED U/S 143(3) OF 1961 ACT. 15. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-11-2 007 PASSED BY THE AO U/S 143(3) OF 1961 ACT , THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE LEARNED CIT(A). 16. DURING APPELLATE PROCEEDINGS BEFORE LEARNED CIT (A), THE ASSESSEE CONTENDED THAT IN TERMS OF LETTER DATED 20-4-1989 O F IAAI ADDRESSED TO MMTC, THE ASSESSEE IS LIABLE TO PAY LICENSE FEE FOR ALLOT MENT OF STRONG ROOM TO THE ASSESSEE/MMTC IN THE CARGO COMPLEX OF IAAI AT SAHAR AIRPORT IN MUMBAI. IT ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 24 WAS SUBMITTED THAT THE SAID LICENSE FEE IS PAYABLE AT A FIXED RATE PER SQUARE FEET OF THE AREA PLUS ADDITIONALLY CALCULATED @ 10% OF THE TURNOVER HANDLED, AND HENCE ACCORDINGLY PROVISIONS WERE MADE IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF ME TAL BOX OF INDIA LIMITED V. THEIR WORKMEN (1969) 73 ITR 53(SC) AND BHARAT EARTH MOVERS V. CIT (2000) 245 ITR 428(SC) TO CONTEND THAT IF BUSINESS LIABILI TY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWE D ALTHOUGH LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DA TE. THUS, IT WAS CONTENDED THAT THE LIABILITY TOWARDS HANDLING CHARGES PAYABLE TO IAAI SUBSISTS WHICH IS NOT DENIED BY THE ASSESSEE AND ALSO IT IS PAYABLE T O CENTRAL GOVERNMENT BODY WHICH WILL ALSO NOT GET TIME BARRED. IT WAS SUBMITT ED THAT LIABILITY FOR HANDLING CHARGES AT RS. 30 PER PARCEL PAYABLE BY ASSESSEE TO IAAI HAS ARISEN IN TERMS OF ARRANGEMENT AGREED UPON IN APRIL, 1989. IT WAS S UBMITTED THAT THERE IS NO MATERIAL ON RECORD BASED ON WHICH IT CAN BE CONTEND ED THAT THE SAID LIABILITY PROVIDED FOR IN BOOKS OF ACCOUNTS HAS CEASED OR IS NO LONGER PAYABLE. THE ASSESSEE RELIED UPON LARGE NUMBER OF CASES WHICH AR E LISTED IN PAGE 6 OF APPELLATE ORDER OF LEARNED CIT(A) DATED 09-01-2011. THE ASSESSEE ALSO FILED FOLLOWING DOCUMENTS IN SUPPORT OF ITS CONTENTIONS T HAT LICENSE FEE IS PAYABLE TO MMTC , AS DETAILED HEREUNDER: (I) COPY OF AGREEMENT DATED 15-12-1988 BETWEEN THE ASSESSEE AND MMTC. (II) DETAILS OF LICENSE FEE PAID TO AIRPORT AUTHORI TY OF INDIA DURING FINANCIAL YEAR 2004-05 AND 2005-06. (III) COPIES OF TWO INVOICES FOR LICENSE FEES. THE LEARNED CIT(A) OBSERVED THAT THE AO HAS OBSERVE D THAT THE ASSESSEE HAS NOT PAID OUTSTANDING LIABILITY SINCE 1985-86.THE CO NTENTION OF THE ASSESSEE IS ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 25 THAT IT IS LIABLE TO PAY THE LICENSE FEE FOR ALLOTM ENT OF STRONG ROOM TO THE ASSESSEE TO MMTC IN THE CARGO COMPLEX OF THE IAAI A T SAHAR INTERNATIONAL AIRPORT IN MUMBAI . THE LEARNED CIT(A) OBSERVED THA T THE ASSESSEE HAS SUBMITTED LETTER DATED 20.04.1989 OF IAAI WRITTEN B Y ONE SH. D K GROVER , COMMERCIAL MANAGER FOR AIRPORT WHICH REVEALS THAT T HE MMTC OCCUPIES THE SPACE FOR STRONG ROOM IN THE CARGO COMPLEX FROM 26. 02.1985 TO 25.02.1988 AND THROUGH THE SAID LETTER IAAI REQUESTED MMTC TO SUBMIT AN APPLICATION FOR EXTENSION OF LICENSE FOR FURTHER PERIOD OF 3 YEARS I.E. 26.02.1988 TO 25.02.1991. THE SAID LETTER ALSO REVEALED THAT THE ASSESSEE IS ADDITIONALLY LIABLE TO PAY LICENSE FEE EQUIVALENT TO 10% OF TOTA L GROSS TURNOVER . FURTHER, LETTER DATED 16.06.1995 OF IAAI ADDRESSED TO MMTC W AS SUBMITTED WHICH STIPULATES THAT MMTC SHOULD PAY ADDITIONAL ROYALTY @10% OF ITS GROSS TURNOVER FROM THE BUSINESS GENERATED IN CARGO COMPL EX. THE ASSESSEE ALSO SUBMITTED LETTER DATED 2.10.1999 OF MMTC ADDRESSED TO IAAI , WHEREIN THE MMTC STATED AS UNDER: PLEASE REFER TO YOUR LETTER NO AAB/C-462/1.2/PT/5 228/9669 DATED 31.03.1993 REGARDING ALLOTMENT OF SPACE ADMEASURING 37.80 SQ. MTS. IN THE CARGO COMPLEX BUILDING.WE FIND FROM OUR RECO RDS THAT WE HAVE BEEN PAYING THE LICENSE FEE AS CLAIMED BY YOU ALL T HESE YEARS AND THERE IS NO DUES OUTSTANDING AS ON DAT. HOWEVER, IF THERE IS ANY OTHER DUES ARE TO BE PAID BY US, YOU ARE REQUESTED TO KINDLY L ET US KNOW THE EXACT AMOUNT PAYABLE BY US SO THAT THE SAME CAN BE REMITT ED TO YOU. WITH REGARDS TO ADDITIONAL PAYMENT OF 10% OF THE GR OSS TURNOVER CLAIMED BY YOU , WE INVITE YOUR KIND ATTENTION TO O UR LETTER DATED 27.09.1989, WHEREIN IT WAS CLEARLY INTIMATED TO YOU THAT MMTC DO NOT HAVE ANY TURNOVER IN THE STRONG ROOM OPERATIONS AT SAHAR. WE HAVE BEEN APPOINTED AS CUSTODIANS OF THE VALUABLE CARGO BY THE CUSTOMS AND OUR RESPONSIBILITY IS TO RECORD THE IMPORT CARG O AT SAHAR STRONG ROOM AND TRANSFER IT TO OUR DPCC STRONG ROOM AT LAM INGTON ROAD AND PRESENT THE SAME TO CUSTOMS FOR EXAMINATION AND EVE NTUALLY DELIVER TO THE IMPORTERS. SIMILARLY EXPORT CARGO IS ALSO RECEI VED AT THE STRONG ROOM AT SAHAR WHICH HAS BEEN APPRISED BY THE CUSTOM S AT DPCC AND SEEPZ. THESE PARCELS ARE SUBSEQUENTLY HANDED OVER T O THE AIRLINES UNDER THE PREVENTIVE ESCORT. FROM THE ABOVE, IT IS CLEAR THAT NO ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 26 SALE/PURCHASE TRANSACTIONS TAKE PLACE IN THE STRONG ROOM AND ALSO MMTC DO NOT HAVE ANY TURNOVER EMANATING OUT OF THES E TRANSACTIONS ; HENCE THE QUESTION OF PAYMENT 10% OF THE TURNOVER T O YOU DOES NOT ARISE AT ALL. FROM THE ABOVE FACTS ON RECORD , LEARNED CIT(A) OB SERVED THAT IAAI ALLOTTED STRONG ROOM TO MMTC AND SAID MMTC IS PAYING THE LIC ENSE FEE REGULARLY TO IAAI BUT THE ADDITIONAL LICENSE FEE CALCULATED @10% OF THE GROSS TURNOVER WAS NOT PAID BY MMTC TO IAAI. THE LEARNED CIT(A) OBSERV ED THAT THE TURNOVER DID NOT BELONGED TO MMTC AND HENCE MMTC IS THEREFORE NO T LIABLE TO MAKE THE PAYMENT. IT WAS OBSERVED BY LEARNED CIT(A) THAT THE RE IS NO LIABILITY OF THE ASSESSEE TO IAAI AS THE STRONG ROOM WAS NOT ALLOTTE D TO THE ASSESSEE BUT TO MMTC. IT WAS OBSERVED BY LEARNED CIT(A) THAT THE IA AI HAS NOT RAISED ANY CLAIM ON THE ASSESSEE W.R.T. SUCH OUTSTANDING LIABI LITY. IT WAS OBSERVED BY LEARNED CIT(A) THAT EXCEPT LETTER DATED 20.04.1989 OF IAAI , THERE IS NO OTHER EVIDENCE OF CLAIM OF SUCH DEMAND PER RECORDS AND TH IS LETTER WAS ALSO REPLIED BY MMTC DENYING THEIR LIABILITY. THUS, LEARNED CIT( A) HELD THAT THERE EXISTS NO LIABILITY TOWARDS IAAI HANDLING CHARGES AS REFLE CTED TO BE PAYABLE IN BOOKS OF ACCOUNTS AND THAT IS THE REASON WHY ASSESSEE DID NOT PAY ANY SUCH AMOUNT TO IAAI SINCE 1985-86. THE LEARNED CIT(A) UP HELD THE ADDITIONS MADE BY THE AO , VIDE APPELLATE ORDER DATED 09.01.2011. 17. AGGRIEVED BY APPELLATE ORDER DATED 09.01.2011 P ASSED BY LD. CIT(A) , THE ASSESSEE FILED SECOND APPEAL WITH THE TRIBUNAL. 18. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D ITS SUBMISSIONS AS WERE MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NOT REP EATED FOR SAKE OF BREVITY. IT WAS SUBMITTED THAT STRONG ROOM WAS ALLOTTED TO M MTC BY IAAI WHEREIN THERE WAS STIPULATION OF PAYMENT OF LICENSE FEE BAS ED ON FIXED RATE PER SQUARE FEET AND ALSO ADDITIONALLY LICENSE FEE CALCULATED @ 10% ON TURNOVER WAS PAYABLE BY MMTC TO IAAI TOWARDS THE LICENSE FEE. IT WAS SUBMITTED THAT THERE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 27 WAS AN AGREEMENT OF THE ASSESSEE WITH MMTC AND THE ASSESSEE UNDER AN AGREEMENT WITH MMTC WAS LIABLE TO PAY SAID LICENSE FEE BASED ON TURNOVER. IT WAS SUBMITTED THAT THE ASSESSEE IS SECTION 25 COMPA NY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND FOLLOWING MERCANTILE ME THOD OF ACCOUNTING. IT IS SUBMITTED THAT THERE IS NO DISPUTE AS FAR AS FIXED LICENSE FEE IS CONCERNED BASED ON SQUARE FEET AREA OF STRONG ROOM ALLOTTED B Y IAAI TO MMTC WHICH HAD BEEN REGULARLY PAID TO IAAI . THE DISPUTE IS WITH R ESPECT TO LICENSE FEE PAYABLE TO BE COMPUTED BASED ON 10% OF TURNOVER. IT WAS SUB MITTED THAT THE ASSESSEE IS PROVIDING THIS LIABILITY PAYABLE TOWARDS IAAI B ASED ON 10% OF TURNOVER SINCE 1985-86 IN ITS BOOKS OF ACCOUNTS ALBEIT NO PA YMENT HAS BEEN MADE SINCE 1985-86 TILL DATE . THUS, IT WAS SUBMITTED TH AT RS. 4,38,34,270/- WAS OUTSTANDING TO BE PAYABLE IN ITS BOOKS OF ACCOUNTS WHICH WAS ACCUMULATED OVER THE YEARS , WHEREIN ENTIRE OUTSTANDING LIABILI TY HAS BEEN TREATED AS INCOME OF THE ASSESSEE BY THE AUTHORITIES BELOW FOR THE INSTANT ASSESSMENT YEAR UNDER APPEAL BEFORE THE TRIBUNAL . IT WAS SUBM ITTED THAT AGREEMENT WAS BETWEEN MMTC AND IAAI , WHEREIN IAAI ALLOTTED STRON G ROOM TO MMTC. ON BEING ASKED, IT WAS SUBMITTED THAT NO TAX WAS DEDUC TED AT SOURCE UNDER THE PROVISIONS OF 1961 ACT BY THE ASSESSEE WHILE MAKING PROVISION IN ITS BOOKS OF ACCOUNT OF SUCH LIABILITY TOWARDS LICENSE FEE BASED ON 10% OF TURNOVER . IT WAS ALSO SUBMITTED THAT SAID OUTSTANDING LIABILITY AS W AS APPEARING IN ITS BOOKS OF ACCOUNTS WAS WRITTEN BACK IN ASSESSMENT YEAR 2011-1 2 AS INCOME AS THE SAID LIABILITY CEASED TO EXIST BECAUSE OF NEW ENTITY NAM ELY MUMBAI INTERNATIONAL AIRPORT LIMITED BEING CREATED BY GOVERNMENT OF INDI A TO MANAGE AND OPERATE MUMBAI AIRPORT , WHEREIN IAAI HAD DIVESTED AND TRAN SFERRED ALL ITS OPERATIONS TO THIS NEW ENTITY. IT WAS ALSO SUBMITTED THAT NEIT HER IAAI DEMANDED THE SAID AMOUNT FROM ASSESSEE NOR MMTC DEMANDED THIS AMOUNT FROM THE ASSESSEE. 19. THE LEARNED DR RELIED ON THE ORDERS OF AUTHORIT IES BELOW AND SUBMITTED THAT THE ASSESSEE DID NOT RAISE THIS ISSUE OF DISPU TE EXISTING AS TO PAYMENT OF ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 28 LICENSE FEE OF STRONG ROOM ADDITIONALLY PAYABLE CO MPUTED @10% OF TURNOVER BEFORE THE AO, AS WAS RAISED BEFORE THE LEARNED CIT (A). 20.WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD BEFORE US. THE MAIN OBJECTS OF THE ASSESSEE AS CONT ENDED BY THE ASSESSEE ARE : (1) TO ESTABLISH A BOURSE FOR THE PROMOTION OF EXPORTS OF GEM & JEWELLERY FROM INDIA AND TO PROVIDE FOR THIS PURPOS E INFRASTRUCTURE AND OTHER FACILITIES IN INDIA FOR INDIAN AND OVERSE AS BUYERS AND SELLERS OF GEM AND JEWELLERY. (2) TO ESTABLISH AND PROMOTE EFFECTIVE LIAISON BETWEEN THE GEM AND JEWELLERY TRADE AND INDUSTRY IN INDIA AND ABROAD. (3) TO PROMOTE , ADVANCE , PROTECT AND DEVELOP TRADE, C OMMERCE AND INDUSTRY IN INDIA RELATING TO GEM & JEWELLERY INCLU DING CUTTING, POLISHING AND PROCESSING. (4) TO DEVELOP INDIA AS MODERN AND SOPHISTICATED GEM & JEWELLERY MARKET IN THE WORLD BY ESTABLISHING AND MAINTAIN AN INTERNATIONAL TRADING CENTRE IN INDIA ALL THOSE ENGAGED AS MANUFA CTURERS , TRADERS, EXPORTERS, IMPORTERS, BROKERS AND COMMISSION AGENTS IN THE GEM & JEWELLERY TRADE AND INDUSTRY. THE ASSESSEE HAD ALSO SUBMITTED THAT THE MAJOR ACTI VITY CARRIED ON BY THE ASSESSEE IS TO PROVIDE INFRASTRUCTURE FACILITIES IN CLUDING HANDLING, STORAGE AND CLEARANCE OF IMPORT AND EXPORT CARGO OF DIAMONDS, P RECIOUS , SEMI-PRECIOUS STONES ETC. . THE ASSESSEE SUBMITTED THAT IT ENTERE D INTO AN AGREEMENT WITH MMTC BY WHICH IT WAS AGREED BY MMTC TO FUNCTION AS CUSTODIAN AT THE OFFICE OF THE ASSESSEE WHERE INFRASTRUCTURE FACILITIES INC LUDING HANDLING, STORAGE AND TRANSPORTATION OF IMPORT AND EXPORT CARGO OF DIAMON DS, PRECIOUS AND SEMI- PRECIOUS STONES ARE PROVIDED TO GEM AND JEWELLERY T RADERS AND MEMBERS OF THE ASSESSEE. THE SERVICES RENDERED BY THE ASSESSEE , THUS, AS CONTENDED BY THE ASSESSEE WERE AS UNDER: (1) PROVISION OF RENT FREE ACCOMMODATION FOR HOUSING AN D CUSTOMS CLEARANCE CENTRE AS WELL AS THE CUSTODIANS OFFICE. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 29 (2) MAINTENANCE OF STRONG ROOM AT THE DPCCC AS WELL AS AT THE SAHAR INTERNATIONAL AIR-CARGO COMPLEX. (3) PROVISION OF SECURITY AND TO AND FRO TRANSPORTATION OF EXPORT AND IMPORT PARCELS BETWEEN DPCCC AND SAHAR INTERNATIONA L AIR CARGO COMPLEX ON EVERY WORKING DAY. (4) DEPOSITING OF AIRWAYS BILLS WITH RESPECTIVE AIRLINE OFFICES. (5) COLLECTION AND DISTRIBUTION OF EP COPIES OF SHIPPIN G BILLS. (6) PROVIDING EXPORT/IMPORT STATISTICS ON WEBSITE OF TH E ASSESSEE ON REGULAR BASIS. IT WAS STATED THAT THE ABOVE ARRANGEMENT WAS ON COS T RECOVERY BASIS. IT IS STATED THAT THESE SERVICES WERE RENDERED BY ASSESSE E TO GEM AND JEWELLERY TRADERS ONLY. WE HAVE OBSERVED THAT COLLECTOR OF CUSTOMS, MUMBAI VIDE NOTIFICATION DATED 22.11.1984 APPOINTED MMTC , U/S 45 OF THE CUSTOMS A CT, 1962 , AS A CUSTODIAN OF IMPORTED AND EXPORT CARGO OF DIAMONDS, PRECIOUS AND SEMI- PRECIOUS STONES, PEARLS ETC. . WE HAVE OBSERVED TH AT STRONG ROOM WAS ALLOTTED TO MMTC BY IAAI IN CARGO COMPLEX OF THE SAHAR INTER NATIONAL AIRPORT, MUMBAI WHICH WAS IN OCCUPATION OF MMTC FROM 26.02.1 985 (PB /PAGE 64- 65) . THE TERMS OF ALLOTMENT OF SAID STRONG ROOM PR OVIDED FIXED PAYMENTS CALCULATED BASED UPON AREA OF STRONG ROOM AND ADDIT IONALLY LICENSE FEE IS PAYABLE TO BE COMPUTED @ 10% BASED ON TURNOVER. THE ASSESSEE HAS PLACED COMMUNICATION DATED 20/21.04.1989 BY IAAI TO MMTC W HICH IS PLACED ON RECORD (PB /PAGE 64-65) WHICH REFLECT THE SAID TERM S OF ALLOTMENT OF STRONG ROOM. THUS, IAAI IS LICENSOR WHILE MMTC IS LICENSEE OF STRONG ROOM AT CARGO COMPLEX AT SAHAR INTERNATIONAL AIRPORT, MUMBAI. THE ALLOTMENT LETTER ISSUED BY IAAI IN FAVOUR OF MMTC OR THEIR INTER-SE LICENSE AGREEMENT ARE NOT PLACED ON RECORD BY THE ASSESSEE. THERE WAS BACK TO BACK ARRANGEMENT OF MMTC ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 30 WITH THE ASSESSEE DATED 29-03-1986 WHICH WAS LATER REVISED VIDE AGREEMENT DATED 15-12-1988, WHEREIN THE HANDLING CHARGES ( LI CENSE FEE PAYABLE BY MMTC TO IAAI IS TERMED AS HANDLING CHARGES BY ASSES SEE) PAYABLE TO IAAI BY MMTC , WERE TO BE PAID BY THE ASSESSEE AND PROVIDED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE ENTIRE RESPONSIBIL ITY FOR THE SAID HANDLING CHARGES ( LICENSE FEE ) PAYABLE TO IAAI BY MMTC SHA LL BE OF THE ASSESSEE , WITHOUT ANY DEMUR. THE SAID AGREEMENT BETWEEN MMTC AND THE ASSESSEE DATED 15-12-1988 IS PLACED ON RECORD IN PAPER BOOK/ PAGE 29-31, WHILE ORIGINAL AGREEMENT DATED 29-03-1986 IS NOT PLACED O N RECORD BY THE ASSESSEE. THE ASSESSEE HAS NOT ENTERED INTO ANY LICENSE/SUB-L ICENSE AGREEMENT OR TRIPARTITE LICENSE AGREEMENT WITH IAAI/MMTC SO FAR AS ALLOTMENT OF STRONG ROOM AT CARGO COMPLEX, SAHAR INTERNATIONAL AIRPORT, MUMBAI IS CONCERNED AS IT EMERGES FROM THE RECORDS BEFORE US. THERE IS NO DISPUTE SO FAR AS LIABILITY OF THE ASSESSEE TOWARDS THIS HANDLING CHARGES(LICENSE FEE) BEING FIXED CHARGES COMPONENT CALCULATED BASED ON AREA ALLOTTED FOR STR ONG ROOM TO MMTC BY IAAI, WHICH HAS ARISEN OWING TO INTER-SE AGREEMENT BETWEEN MMTC AND THE ASSESSEE AS DETAILED ABOVE, WHICH THE ASSESSEE IS R EGULARLY PAYING TO IAAI/MMTC OVER THE YEARS. THE DISPUTE HAS ARISEN WI TH RESPECT TO LICENSE FEE PAYABLE BY MMTC TO IAAI WHICH IS TO BE CALCULATED B ASED ON 10% OF TURNOVER. THE ASSESSEE HAD MADE PROVISION OF THIS COMPONENT O F LICENSE FEE ( CALLED AS HANDLING CHARGES BY ASSESSEE) PAYABLE BY MMTC TO IA AI BY CALCULATING THE SAME AS 10% OF ITS TURNOVER ( BEING SERVICE CHARGES ) AS RECORDED IN ITS BOOKS OF ACCOUNTS FROM STRONG ROOM FROM THE YEAR 1985-86 TILL THE END OF PREVIOUS YEAR 2004-2005 I.E. 31-03-2005 EVERY YEAR IN CONTEM PLATION THAT IT IS THE LIABILITY OF THE ASSESSEE VIDE BACK TO BACK AGREEME NT/ARRANGEMENT WITH MMTC. WHILE , ON THE OTHER HAND MMTC WHO IS LICENSE E OF THE SAID STRONG ROOM WHEREIN IAAI IS LICENSOR , VIDE OLD COMMUNICAT IONS OF 1990S PLACED BY THE ASSESSEE ON RECORD HAVE PLEADED BEFORE IAAI THA T IT HAS NO TURNOVER FROM STRONG ROOM AND HENCE THERE IS NO LIABILITY OF MMTC TO PAY THE SAID LICENSE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 31 FEE COMPUTED @10% OF TURNOVER AS THE TURNOVER ITSEL F FROM STRONG ROOM IS ZERO. THERE IS NO LATEST COMMUNICATION PLACED ON RE CORD BY THE ASSESSEE WITH RESPECT TO CLAIM OF IAAI/MMTC W.R.T. LICENSE FEE PA YABLE BASED ON 10% OF TURNOVER. WE HAVE OBSERVED THAT REVENUE HAS ALSO NO T MADE ANY ENQUIRY TO FIND OUT BONAFIDE AND GENUINENESS OF THE CLAIM OF T HE ASSESSEE , NOR SAID AMOUNT HAS BEEN PAID BY THE ASSESSEE. THE ASSESSEE ALBEIT MADE PROVISIONS IN ITS BOOKS OF ACCOUNTS BUT DID NOT PAY SAID AMOUN T OF HANDLING CHARGES ( LICENSE FEE) COMPUTED @10% OF ITS TURNOVER TO EITHE R MMTC OR IAAI SINCE 1985-86 I.E. FOR MORE THAN LAST TWENTY YEARS WHICH IS BEING ACCUMULATED IN ITS BOOKS OF ACCOUNTS AND HAVE NOW GROWN TO A FIGURE OF RS. 4,38,34,270/- BEING AN OUTSTANDING LIABILITY TILL 31-03-2005 . THE REVE NUE IS NOW BRINGING ENTIRE OUTSTANDING LIABILITY PAYABLE BY ASSESSEE AS APPEAR ING IN ITS BOOKS OF ACCOUNTS TO TAX ON THE GROUNDS THAT THE LIABILITY CAN NO LONGER EXISTS BEYOND A REASONABLE TIME AS HELD BY AO AND OUGHT TO HAVE B EEN WRITTEN BACK , WHILE LEARNED CIT(A) HAS HELD THAT STRONG ROOM WAS ALLOTT ED TO MMTC AND HENCE NO LIABILITY GETS FASTENED ON THE ASSESSEE BECAUSE MMT C ITSELF IS CONTENDING BEFORE IAAI THAT IT HAD NO TURNOVER ARISING FROM ST RONG ROOM AND CONSEQUENTLY THERE IS NO LIABILITY TOWARDS LICENSE FEE CALCULATED BASED ON 10% OF GROSS TURNOVER. BASED ON SAID HYPOTHESIS , THE A UTHORITIES BELOW HAVE ADDED THE ENTIRE OUTSTANDING LIABILITY EXISTING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS OF 31-03-2005 TOWARDS HANDLING CHARGES( LICENSE FEE) PAYABLE TO IAAI TO THE TUNE OF RS. 4,38,34,270/- AS INCOME OF THE ASSESSEE. WE HAVE OBSERVED THAT THE ASSESSEE HAS PLACED ON RECORD CER TAIN OLD CORRESPONDENCE BETWEEN MMTC AND IAAI OF 1990S WHICH IS PLACED IN PAPER BOOK/PAGE 64-69 AS WELL ITS AGREEMENT WITH MMTC (PB/PAGE 29-31) , W HILE NO ATTEMPT HAS BEEN MADE BY REVENUE TO VERIFY LATEST FACT SHEET OF LIABILITY TOWARDS LICENSE FEE ( TERMED AS HANDLING FEE BY ASSESSEE) PAYABLE TOWA RDS LICENSE OF STRONG ROOM GRANTED BY IAAI IN FAVOUR OF MMTC WHO IN TURN GRANT ED IT TO THE ASSESSEE VIDE AGREEMENT, AS WE HAVE DETAILED ABOVE IN THIS ORDER. THE MMTC IS ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 32 CONTINUOUSLY DENYING TO IAAI VIDE OLD COMMUNICATIO NS OF 1990S PLACED ON RECORD THAT IT DID NOT HAD ANY TURNOVER IN STRONG R OOM, WHILE IAAI WAS CONTINUOUSLY DEMANDING THE DETAILS OF TURNOVER ARIS ING FROM STRONG ROOM FROM MMTC, WHICH IT APPEAR FROM THE RECORDS BEFORE US THAT MMTC DID NOT FURNISH TO IAAI DESPITE BEING SPECIFICALLY ASKED TO DO SO. THE EVIDENCES WERE WITHHELD BY MMTC WHICH WERE ESPECIALLY IN KNOWLEDGE OF MMTC/ASSESSEE DESPITE BEING REPEATEDLY ASKED BY IAAI, AND ONLY C ONTENTIONS WERE MADE BY MMTC BEFORE IAAI UNSUPPORTED BY EVIDENCES THAT IT D ID NOT HAD ANY TURNOVER FROM STRONG ROOM. SECTION 106 OF INDIAN EVIDENCE AC T, 1872 IS CLEARLY BREACHED AS FACTS WERE ESPECIALLY WITHIN THE KNOWLE DGE OF MMTC/ASSESSEE. THE ASSESSEE HAVING ENTERED INTO AN BACK TO BACK AR RANGEMENT WITH MMTC AND AGREED TO BEAR THE LICENSE FEE PAYABLE TO IAAI MADE PROVISION FOR LICENSE FEE (CALLED AS HANDLING FEE PAYABLE TO IAAI BY ASSE SSEE) BASED ON 10% OF ITS OWN TURNOVER ARISING FROM STRONG ROOM AS PER ITS UN DERSTANDING OF WORD TURNOVER , BUT DID NOT PAID THE SAID AMOUNT TO IA AI NOR EVIDENCE AS TO TURNOVER WERE SUBMITTED TO IAAI. THE LICENSE HAS BE EN GRANTED BY IAAI IN FAVOUR OF MMTC W.R.T. STRONG ROOM AT CARGO COMPLEX AT MUMBAI AIRPORT AND MEANING OF THE WORD TURNOVER HAS TO BE INTERPRETE D BETWEEN THE TWO CONTRACTING PARTIES I.E. MMTC AND IAAI AS TO WHAT T HEY UNDERSTOOD AD-IDEM BY THE WORD TURNOVER WHILE ENTERING INTO LICENSE AGREEMENT FOR STRONG ROOM VIDE THEIR ORIGINAL LICENSE AGREEMENT/ALLOTMENT LET TER BETWEEN IAAI AND MMTC, AS THE LIABILITY WILL DEVOLVE ON ASSESSEE BAS ED ON THE MEANING AND INTERPRETATION OF THE WORD TURNOVER AS UNDERSTOOD AD-IDEM BY BOTH THE CONTRACTING PARTIES TO THE AGREEMENT/ALLOTMENT LETT ER I.E. MMTC AND IAAI. THE SAID DOCUMENTS BEING LICENSE AGREEMENT/ALLOTMENT LE TTER ARE NOT PLACED ON RECORD BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AS WELL BEFORE THE TRIBUNAL AND ARE AGAIN WITHHELD BY THE ASSESSEE WHICH IS AGA IN IN BREACH OF SECTION 106 OF 1872 ACT AS THE FACTS ARE ESPECIALLY IN KNOW LEDGE OF ASSESSEE . THE WORD TURNOVER CAN HAVE DIFFERENT SHADES AND MEANI NG WHEN USED IN ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 33 DIFFERENT CONTEXT .IN PRESENT CONTEXT, IT COULD ME AN EITHER TURNOVER OF STRONG ROOM SERVICE CHARGES RECOVERED OR IT COULD ALSO MEA N GROSS TURNOVER OF EXPORT/IMPORT HANDLED THROUGH STRONG ROOM BY MMTC O R ITS ASSIGNEES EITHER DIRECTLY OR FOR THE MEMBERS OF ASSESSEES INSTITUTI ON , WHICH CAN ONLY BE ASSESSED AFTER VERIFYING THE TERMS AND CONDITIONS A S CONTAINED IN LICENSE AGREEMENTS/ ALLOTMENT LETTER ETC., WHICH INCIDENTAL LY IS NOT PLACED ON RECORD BY THE ASSESSEE AND ARE WITHHELD BY ASSESSEE. THES E ARE MATTER OF FACT WHICH CAN ONLY BE UN-FOLDED AFTER GOING THROUGH TERMS AND CONDITIONS OF LICENSE AGREEMENT / ALLOTMENT LETTER BETWEEN MMTC AND IAAI AS WELL OTHER RELEVANT AND MATERIAL EVIDENCES .THE SAID ALLOTMENT LETTER/ LICENSE AGREEMENT BETWEEN MMTC AND IAAI WHEREIN STRONG ROOM WAS ALLOTTED TO M MTC BY IAAI IS NOT BROUGHT ON RECORD BY THE ASSESSEE NOR THE CURRENT C OMMUNICATION / STATUS W.R.T. STRONG ROOM IS BROUGHT ON RECORD. SIMILARLY, WE HAVE OBSERVED THAT VERY OLD CORRESPONDENCE OF 1990S IS BROUGHT ON RECORD B Y THE ASSESSEE. THE AUTHORITIES BELOW HAVE ALSO NOT MADE ANY DIRECT ENQ UIRY WITH MMTC, IAAI OR MUMBAI INTERNATIONAL AIRPORT LIMITED TO VERIFY THE CONTENTION OF THE ASSESSEE AND TO GET RELEVANT AND MATERIAL UPTO DATE INFORMAT ION/EVIDENCES IN CONNECTION THERETO W.R.T. THIS LIABILITY TOWARDS LI CENSE FEE BASED ON 10% OF TURNOVER. THE CONTENTION OF THE ASSESSEE THAT IT HA S WRITTEN BACK THE OUTSTANDING LIABILITY TOWARDS HANDLING CHARGES PAYA BLE TO IAAI IN THE FINANCIAL YEAR 2010-11 I.E. ASSESSMENT YEAR 2011-12 ON THE GR OUNDS THAT IAAI HAS DIVESTED AND TRANSFERRED ITS OPERATIONS TO MUMBAI I NTERNATIONAL AIRPORT LIMITED AND HENCE LIABILITY OF THE ASSESSEE CEASED , DOES NOT INSPIRE CONFIDENCE UNLESS POSITIVE AND COGENT EVIDENCE IS B ROUGHT ON RECORD TO THAT EFFECT AS NORMALLY WHEN THE OPERATIONS ARE TRANSFER RED / DIVESTED , THEN ADEQUATE PROVISIONS ARE MADE IN AGREEMENTS TO PRESE RVE ALL RIGHTS IN EXISTING AGREEMENTS WHICH ARE EITHER TAKEN OVER BY SUCCESSOR OR ARE RETAINED BY TRANSFEROR BUT TO SAY THAT THE LIABILITY HAS CEASED JUST BECAUSE IAAI DIVESTED ITS OPERATIONS IN FAVOUR OF MUMBAI INTERNATIONAL AI RPORT LIMITED CANNOT BE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 34 ACCEPTED UNLESS POSITIVE COGENT EVIDENCE IS BROUGHT ON RECORD TO THAT EFFECT TO PROVE THE SAID CONTENTION. THUS, KEEPING IN VIEW F ACTUAL MATRIX OF THE CASE , IN OUR CONSIDERED VIEW THIS MATTER NEED TO BE SET A SIDE TO THE FILE OF THE AO FOR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW AND AFTER MAKING SUCH ENQUIRIES AND VERIFICATIONS AS THE AO MAY DEEM FIT. THE ASSESSEE IS DIRECTED TO PRODUC E ALL RELEVANT AND MATERIAL INFORMATION/EVIDENCES IN RELATION TO THE SAID LICEN SE FEE PAYABLE TO IAAI/MMTC WHICH IS COMPUTED @10% OF TURNOVER. NEEDL ESS TO SAY THAT THE AO SHALL GRANT PROPER AND ADEQUATE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL J USTICE IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. 21. THE NEXT ISSUE IN THESE CROSS APPEALS ARE WITH RESPECT TO COST RECOVERY- CUSTOMS . THE AO OBSERVED THAT THE ASSESSEE HAS MAD E A PROVISION OF RS. 85,09,032/- UNDER THE HEAD O/S LIABILITY OF COST R ECOVERY CUSTOMS . THE AO OBSERVED THAT THIS LIABILITY IS TO BE PAID TO CUSTO M AUTHORITY. THE AO OBSERVED THAT THE ASSESSEE HAS PAID A SUM OF RS. 60,50,465/- TO CUSTOM AUTHORITY UP- TILL THE YEAR END. THUS, IT WAS OBSERVED THAT A LIA BILITY OF RS. 24,58,567/- REMAINS OUTSTANDING AS ON 31-03-2005. IT WAS OBSERV ED BY THE AO THAT THE ASSESSEE IS CLAIMING EVERY YEAR EXCESS AMOUNT VIDE PROVISIONS VIS--VIS AMOUNT ACTUALLY PAID TO CUSTOMS SINCE THE FINANCIAL YEAR 1988-89. THUS, THE AO CONCLUDED THAT THE ASSESSEE HAS INFLATED EXPENSE S AND THE ENTIRE ACCUMULATED AMOUNT OF LIABILITY PAYABLE TO CUSTOMS FOR THE LAST 17 YEARS AGGREGATING TO RS. 4,04,37,296/- WAS BROUGHT TO TAX AS IN THE OPINION OF THE AO , THE SAID AMOUNT OF LIABILITY OUGHT TO BE WRITT EN BACK ,VIDE ASSESSMENT ORDER DATED 30-11-2007 PASSED U/S 143(3) OF 1961 AC T. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 35 22 AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-11-20 07 PASSED BY THE AO U/S 143(3) OF 1961 ACT, THE ASSESSEE FILED FIRST AP PEAL BEFORE LEARNED CIT(A) WHICH WAS PARTLY ALLOWED BY LEARNED CIT(A) WHEREIN DISALLOWANCE OF RS.24,58,567/- W.R.T. ADDITIONAL CHARGES PAYABLE TO CUSTOM FOR PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR WAS CONFIR MED BY LEARNED CIT(A), WHILE THE DISALLOWANCE OF THE AMOUNT OUTSTANDING T O BE PAYABLE TO CUSTOMS FOR EARLIER YEARS AS ON THE BEGINNING OF THE YEAR T O THE TUNE OF RS. 3,79,78,729/- WAS DELETED BY LEARNED CIT(A). THE A SSESSEE IS IN APPEAL BEFORE TRIBUNAL FOR SUSTAINING OF AFORE-STATED ADDITION TO THE TUNE OF RS. 24,58,567/- BY LEARNED CIT(A) , WHILE REVENUE IS IN APPEAL FOR DELETION OF DISALLOWANCE TO THE TUNE OF RS. 3,79,78,729/- BY LEARNED CIT(A). THE BRIEF FACTS IMPORTANT TO UNDERSTAND THE BACKGRO UND OF ENTIRE DISPUTE HAD GENESIS IN THE YEAR 1983 WHEN THE CUSTOMS AUTHORITI ES DECIDED TO TRANSFER THE JEWELLERY APPRAISAL SECTION (AIRFREIGHT WING) F ROM BALLARD ESTATE TO SAHAR INTERNATIONAL AIRPORT. THE DIAMOND INDUSTRY REPRESE NTED TO GOVERNMENT OF INDIA REGARDING GRAVE RISKS INVOLVED IN SENDING AND RECEIVING SEVERAL CRORES WORTH OF DIAMOND, JEWELLERY , PEARLS ETC EVERY DAY FROM EXPORTERS OFFICE AT OPERA HOUSE AREA AND REPRESENTED TO GOI THAT CUSTOM S EXAMINATION AND CLEARANCE SHOULD CONTINUE IN HEART OF THE CITY NEAR THE AREA WHERE TRADE IS CONCENTRATED TO MINIMIZE RISKS. THE REQUEST OF THE DIAMOND TRADE WAS ACCEPTED BY GOI AND THE ASSESSEE WAS SET UP TO CO-O RDINATE FACILITIES FOR THE IMPORT AND EXPORT OF DIAMONDS , GEMS AND JEWELLERY , PRECIOUS AND SEMI PRECIOUS CARGO. . THE ASSESSEE IS PROVIDING INFRAST RUCTURE FACILITIES INCLUDING HANDLING, STORAGE AND CLEARANCE OF IMPORT AND EXPOR T CARGO OF DIAMONDS, PRECIOUS , SEMI-PRECIOUS STONES ETC. . WE HAVE OBSE RVED THAT COLLECTOR OF CUSTOMS, MUMBAI VIDE NOTIFICATION DATED 22.11.1984 APPOINTED MMTC , U/S 45 OF THE CUSTOMS ACT, 1962 , AS A CUSTODIAN OF IMP ORTED AND EXPORT CARGO OF DIAMONDS, PRECIOUS AND SEMI-PRECIOUS STONES, PEARLS ETC. . THE ASSESSEE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 36 ENTERED INTO AN AGREEMENT WITH MMTC BY WHICH IT WAS AGREED BY MMTC TO FUNCTION AS CUSTODIAN AT THE OFFICE OF THE ASSESSEE WHERE INFRASTRUCTURE FACILITIES INCLUDING HANDLING, STORAGE AND TRANSPOR TATION OF IMPORT AND EXPORT CARGO OF DIAMONDS, PRECIOUS AND SEMI-PRECIOUS STONE S ARE PROVIDED TO GEM AND JEWELLERY TRADERS AND MEMBERS OF THE ASSESSEE. THE CUSTOM AUTHORITIES DEPUTED CUSTOMS OFFICIALS AND STAFF FOR DOING FUNCT IONS UNDER CUSTOMS ACT 1962 FOR WHICH PAY AND ALLOWANCE OF CUSTOMS PLAZA C USTOMS CLEARANCE CENTRE(DPCCC) AND SAHAR WERE RECOVERED FROM ASSESSE E THROUGH MMTC. THE ASSESSEE IN TURN RECOVERED THESE COSTS FROM ITS MEM BERS. THERE WERE CERTAIN ADDITIONAL COST FOR ADDITIONAL STAFF DEPUTED BY CUS TOM AUTHORITIES FOR THE ABOVE SERVICES AND CLAIM FOR THE SAID ADDITIONAL CO ST WAS PROVIDED IN BOOKS OF ACCOUNTS BY THE ASSESSEE , BUT THE SAME WAS NOT PAI D BY THE ASSESSEE AS THE SAME WAS NOT YET SETTLE AND THE ASSESSEE WAS SEEKIN G EXEMPTION OF THE SAME FROM GOI. THE ASSESSEE HAS CONTESTED THAT THE SAME IS NOT FOREGONE OR WAIVED BY GOVERNMENT OF INDIA ACTING THROUGH CHIEF ACCOUNT S OFFICER, NEW CUSTOM HOUSE , MUMBAI. THE ASSESSEE SUBMITTED THAT THE LIA BILITY IS PROVIDED IN BOOKS OF ACCOUNTS KEEPING IN VIEW MERCANTILE METHOD OF ACCOUNTING. IT WAS SUBMITTED THAT SINCE LIABILITY HAS NOT CEASED THE S AME CANNOT BE BROUGHT TO TAX AND THE AO HAS NOT BROUGHT ANY EVIDENCE TO ESTA BLISH THAT THE SAID LIABILITY HAS CEASED TO EXIST. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE IS PA YING FOR THE WORKING STRENGTH OF THE CUSTOM OFFICIAL SANCTIONED BY GOVER NMENT AS PER REQUEST OF MMTC SINCE 1985. THE LEARNED CIT(A) OBSERVED THAT T HE ASSESSEE CONTENDED THAT THE CUSTOM DEPARTMENT HAS POSTED EXTRA STRENGT H OF STAFF TO FACILITATE THEMSELVES WITHOUT THE REQUEST MADE BY THE ASSESSEE OR MMTC. IT WAS OBSERVED THAT CUSTOM AUTHORITIES ARE RAISING THE IN VOICE AS PER THE STAFF POSTED WHILE THE ASSESSEE IS REIMBURSING THE COST A S PER THE ORIGINAL AGREEMENT ENTERED BY THE ASSESSEE WITH MMTC/CUSTOM AUTHORITIES. THE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 37 LEARNED CIT(A) OBSERVED THAT DISPUTE IS W.R.T. PAYM ENT OF EXTRA STAFF DEPLOYED BY THE CUSTOM AUTHORITIES WITHOUT THE APPROVAL/SANC TION OF THE MMTC/ASSESSEE. THE LEARNED CIT(A) OBSERVED THAT THE MATTER IS UNDER DISPUTE AND THE ASSESSEE HAS REQUESTED MMTC TO TAKE UP THIS MATTER WITH MINISTRY OF FINANCE TO PERSUE WITH CUSTOM AUTHORITI ES TO WITHDRAW THE EXCESSIVE CLAIM. THE LEARNED CIT(A) OBSERVED THAT T HE ASSESSEE IS NOT PAYING THESE ADDITIONAL CHARGES AND IN-FACT IS CONTESTING FOR WAIVER FROM GOI THROUGH MMTC. THUS, THE LEARNED CIT(A) OBSERVED THAT THE LI ABILITY OF EARLIER YEAR HAS NOT CEASED TO EXIST AND HENCE RELIEF WAS GRANTED TO THE ASSESSEE TO THE EXTENT OF RS. 3,79,78,729/- W.R.T. OUTSTANDING ACCUMULATED LIABILITY TOWARDS CUSTOMS OF EARLIER YEARS, AS THE CUSTOMS AUTHORITIES WERE S TILL MAKING THE CLAIM OF THE SAME. WHILE LEARNED CIT(A) UPHELD DISALLOWANCE TO T HE TUNE OF RS.24,58,567/- TOWARDS ADDITIONAL CHARGE TOWARDS ADDITIONAL STAFF DEPLOYED BY CUSTOM DEPARTMENT FOR THE CURRENT YEAR ON THE GROUNDS THAT THE ASSESSEE ITSELF IS DENYING THE LIABILITY OF SAID ADDITIONAL CHARGE TO CUSTOM AUTHORITY, VIDE APPELLATE ORDER DATED 09-01-2011. 23. AGGRIEVED BY APPELLATE ORDER DATED 09-01-2011 P ASSED BY LEARNED CIT(A), BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE TRIB UNAL. 24. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED ITS SUBMISSIONS AS WERE MADE BEFORE THE AUTHORITIES BELOW WHICH ARE NOT REP EATED FOR SAKE OF BREVITY. IT WAS SUBMITTED THAT GOI HAS NOT WAIVED THIS LIABI LITY AND IN-FACT THE SAME STOOD RECOVERED BY GOI, WHEREIN BANK GUARANTEE WAS ISSUED ON BEHALF OF THE ASSESSEE BY CANARA BANK IN FAVOUR OF GOI VIDE BANK GUARANTEE NO 018-11 DATED 14-01-2011 FOR RS. 5,11,50,000/- WHICH STOOD ENCASHED ON 16-05- 2011. THUS, IT WAS SUBMITTED THAT THE SAID ENTIRE O UTSTANDING LIABILITY PAYABLE FOR COST RECOVERY-CUSTOMS STOOD PAID AND DISCHARGED . ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 38 25. THE LEARNED DR SUBMITTED THAT THE ASSESSEE WAS DISPUTING SAID LIABILITY AND HENCE THE ASSESSMENT ORDER OF THE AO BE AFFIRME D . HE RELIED ON THE ORDER OF THE AO. 26. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. THE BRIEF FACTS IMPORTANT TO UNDERSTAND THE BACKGRO UND OF ENTIRE DISPUTE HAD GENESIS IN THE YEAR 1983 WHEN THE CUSTOMS AUTHORITI ES DECIDED TO TRANSFER THE JEWELLERY APPRAISAL SECTION (AIRFREIGHT WING) F ROM BALLARD ESTATE TO SAHAR INTERNATIONAL AIRPORT. THE DIAMOND INDUSTRY REPRESE NTED TO GOVERNMENT OF INDIA REGARDING GRAVE RISKS INVOLVED IN SENDING AND RECEIVING SEVERAL CRORES WORTH OF DIAMOND, JEWELLERY , PEARLS ETC EVERY DAY FROM EXPORTERS OFFICE AT OPERA HOUSE AREA AND REPRESENTED TO GOI THAT CUSTOM S EXAMINATION AND CLEARANCE SHOULD CONTINUE IN HEART OF THE CITY NEAR THE AREA WHERE TRADE IS CONCENTRATED TO MINIMIZE RISKS. THE REQUEST OF THE DIAMOND TRADE WAS ACCEPTED BY GOI AND THE ASSESSEE WAS SET UP TO CO-O RDINATE FACILITIES FOR IMPORT AND EXPORT OF DIAMONDS , GEMS AND JEWELLERY , PRECIOUS AND SEMI PRECIOUS CARGO. . THE ASSESSEE IS PROVIDING INFRAST RUCTURE FACILITIES INCLUDING HANDLING, STORAGE AND CLEARANCE OF IMPORT AND EXPOR T CARGO OF DIAMONDS, PRECIOUS , SEMI-PRECIOUS STONES ETC. . WE HAVE OBSE RVED THAT COLLECTOR OF CUSTOMS, MUMBAI VIDE NOTIFICATION DATED 22.11.1984 APPOINTED MMTC , U/S 45 OF THE CUSTOMS ACT, 1962 , AS A CUSTODIAN OF IMP ORTED AND EXPORT CARGO OF DIAMONDS, PRECIOUS AND SEMI-PRECIOUS STONES, PEARLS ETC. . THE ASSESSEE ENTERED INTO AN AGREEMENT WITH MMTC BY WHICH IT WAS AGREED BY MMTC TO FUNCTION AS CUSTODIAN AT THE OFFICE OF THE ASSESSEE WHERE INFRASTRUCTURE FACILITIES INCLUDING HANDLING, STORAGE AND TRANSPOR TATION OF IMPORT AND EXPORT CARGO OF DIAMONDS, PRECIOUS AND SEMI-PRECIOUS STONE S ARE PROVIDED TO GEM AND JEWELLERY TRADERS AND MEMBERS OF THE ASSESSEE. THE CUSTOM AUTHORITIES DEPUTED CUSTOMS OFFICIALS AND STAFF FOR DOING FUNCT IONS UNDER CUSTOMS ACT, 1962 FOR WHICH PAY AND ALLOWANCE OF CUSTOMS PLAZA C USTOMS CLEARANCE ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 39 CENTRE(DPCCC) AND SAHAR WERE RECOVERED FROM ASSESSE E THROUGH MMTC.THE ASSESSEE IN TURN RECOVERED THESE COSTS FROM ITS MEM BERS. THERE WERE CERTAIN ADDITIONAL COST FOR ADDITIONAL STAFF DEPUTED BY CUS TOM AUTHORITIES FOR THE ABOVE SERVICES AND CLAIM FOR THE SAID ADDITIONAL CO ST WAS PROVIDED IN BOOKS OF ACCOUNTS BY THE ASSESSEE , BUT THE SAME WAS NOT PAI D BY THE ASSESSEE AS THE ASSESSEE WAS CONTESTING THAT GOI DEPUTED EXTRA CUST OMS OFFICIALS AND STAFF OVER AND ABOVE AGREED STRENGTH. IT IS UNDISPUTED TH AT THE ASSESSEE REQUESTED GOI TO CONTINUE WITH CUSTOM CLEARANCE FACILITIES AT HEART OF CITY AND AGREED TO PAY FOR PAY AND ALLOWANCE OF CUSTOM STAFF AND OFFIC ERS DEPUTED TO HANDLE SOVEREIGN FUNCTION OF CUSTOM CLEARANCES , APPRAISAL AND COLLECTION OF CUSTOM DUTIES ETC. . THE GOI WAS REGULARLY MONITORING THE STAFF AND OFFICER STRENGTH REQUIRED TO CARRY OUT THESE SOVEREIGN FUNCTIONS FOR ASSESSEE AND ITS MEMBERS OF DIAMOND AND JEWELLERY TRADE. BASED ON THE INCREA SED VOLUME OF TRADE HANDLED THROUGH THESE PREMISES AT CUSTOMS PLAZA CUS TOMS CLEARANCE CENTRE(DPCCC) AND SAHAR , GOI WAS DEPUTING ADDITION AL STAFF COMMENSURATE WITH WORK-LOAD WHICH INCREASED WITH INCREASE IN VOL UME OF TRADE. THIS FACT OF DEPLOYMENT OF ADDITIONAL STRENGTH OF CUSTOM OFFICIA LS AND STAFF FROM TIME TO TIME AT THESE PREMISES DUE TO INCREASE IN WORKLOAD IS CLEARLY EMANATING FROM THE LETTER DATED 04-09-2008 ISSUED BY CHIEF ACCOUNT S OFFICER , NEW CUSTOM HOUSE , MUMBAI , WHICH IS PLACED IN PAPER BOOK/PAGE 63. THE OTHER CORRESPONDENCE IN CONNECTION WITH THESE COST RECOVE RY-CUSTOMS TOWARDS THESE ADDITIONAL STAFF AND OFFICER IS PLACED IN PAPER BOO K/PAGE 5-61. WE ARE OF CONSIDERED VIEW THAT GOI ACCEDED TO THE REQUEST OF THE MEMBERS OF GEM, DIAMOND AND JEWELLERY TRADE TO CONTINUE PROVIDING C USTOM RELATED ACTIVITIES STIPULATED UNDER CUSTOMS ACT AT THESE PREMISES WHIC H ARE IN THE HEART OF CITY AS DESIRED BY GEM, DIAMOND AND JEWELLERY INDUSTRY. THE ASSESSEE AGREED TO BEAR ALL PAY AND ALLOWANCE OF CUSTOM OFFICER AND ST AFF DEPLOYED FOR THIS PURPOSES BY GOI . THE GOI WHILE RENDERING THESE FUN CTIONS ARE PERFORMING SOVEREIGN FUNCTION AND THE STAFF / OFFICERS WERE IN CREASED BY GOI KEEPING IN ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 40 VIEW INCREASED VOLUME OF WORK AT THESE PREMISES, SO THAT SOVEREIGN FUNCTIONS OF THE STATE CAN BE PROPERLY DISCHARGED IN ACCORDAN CE WITH MANDATE OF CUSTOMS ACT, 1962. IN OUR CONSIDERED VIEW, THE ASSE SSEE IS LIABLE FOR PAYMENT OF PAY AND ALLOWANCE AS AGREED FOR ORIGINAL STRENGT H AS WELL INCREASED/ADDITIONAL STRENGTH OF CUSTOM OFFICER/STA FF DEPUTED FROM TIME TO TIME FOR WHICH BILLS WERE RAISED BY GOI. THE ASSESS EE , IN OUR CONSIDERED VIEW, HAVING AGREED WITH GOI TO DEPLOY THEIR CUSTOM STAFF /OFFICER AT THESE PREMISES AND PAY FOR THE SAME WILL BE LIABLE TO PAY FOR ADDI TIONAL STRENGTH OF CUSTOM OFFICER/STAFF DEPLOYED BY GOI IN PERFORMANCE OF THE SE SOVEREIGN FUNCTIONS OF STATE BY GOI , UNLESS IT IS BROUGHT ON RECORD THAT DECISION OF GOI IN DEPLOYING ADDITIONAL STAFF AND OFFICERS IS UNCONSCIONABLE OR IS SUFFERING FROM PERVERSITY . THE ASSESSEE ONCE AGREED TO BEAR THESE COSTS , THER EAFTER, CANNOT INTERFERE WITH GOI IN DISCHARGING ITS DUTIES , OBLIGATION AN D RESPONSIBILITIES TOWARDS PERFORMANCE OF SOVEREIGN FUNCTIONS OF STATE UNDER C USTOMS ACT,1962 , UNLESS IT IS BROUGHT ON RECORD THAT DECISION OF GOI IN DEP LOYING ADDITIONAL STAFF AND OFFICERS IS UNCONSCIONABLE OR IS SUFFERING FROM PER VERSITY . NOTHING OF THAT SORT IS EMANATING FROM RECORDS AND PLEADINGS BEFORE US. THESE FUNCTIONS UNDER CUSTOMS ACT ,1962 TO BE PERFORMED BY GOI ARE SOVERE IGN FUNCTIONS OF STATE AND IT IS THE RESPONSIBILITY OF GOI TO PROPERLY DIS CHARGE ITS DUTIES, OBLIGATIONS AND RESPONSIBILITIES AS MANDATED UNDER THE CUSTOMS ACT, 1962. FURTHER, IT HAS NOW COME ON RECORD THAT THE OUTSTANDING AMOUNT PAYABLE BY THE ASSESSEE TO GOI IS NOW RECOVERED BY GOI THROUGH ENC ASHMENT OF BANK GUARANTEE , THE DISALLOWANCE MADE BY THE AO , THUS, CANNOT BE SUSTAINED. FOR LIMITED VERIFICATION OF THE CLAIM OF THE ASSESS EE THAT THE ENTIRE LIABILITY TOWARDS CUSTOMS STOOD DISCHARGED, WE ARE REMITTING THE MATTER BACK TO THE FILE OF AO FOR LIMITED VERIFICATION. THUS, THE ADDI TIONS SUSTAINED BY LEARNED CIT(A) IS ORDERED TO BE DELETED , WHILE RELIEF GRAN TED BY LEARNED CIT(A) IS HEREBY CONFIRMED, SUBJECT TO LIMITED VERIFICATION B Y THE AO AS INDICATED ABOVE. WE ORDER ACCORDINGLY. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 41 27. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 2789/MUM/2011 FOR ASSESSMENT YEAR 2005-06 IS ALLOWED AS INDICATED ABO VE AND REVENUE APPEAL IN ITA NO. 4437/MUM/2011 FOR ASSESSMENT YEAR 2005-0 6 IS DISMISSED AS INDICATED ABOVE. 28. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO. 2790/MUM/2011 FOR ASSESSMENT YEAR 2006-07. THE ISSUE IN THIS APPEAL A RE IDENTICAL TO THE ISSUES IN ASSESSEES APPEAL IN ITA NO. 2789/MUM/2011 FOR A SSESSMENT YEAR 2005- 06 AND OUR DECISION IN ITA NO. 2789/MUM/2011 FOR AS SESSMENT YEAR 2005- 06 SHALL APPLY MUTATIS MUTANDIS TO ISSUES IN APPEAL IN ITA NO. 2790/MUM/2011 FOR ASSESSMENT YEAR 2006-07.WE ORDER ACCORDINGLY. 29. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 2790/MUM/2011 FOR ASSESSMENT YEAR 2006-07 IS ALLOWED AS INDICATED ABO VE. 30. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO. 2791/MUM/2011 FOR ASSESSMENT YEAR 2007-08. THE ISSUE IN THIS APPEAL A RE IDENTICAL TO THE ISSUES IN ASSESSEES APPEAL IN ITA NO. 2789/MUM/2011 FOR A SSESSMENT YEAR 2005- 06 AND OUR DECISION IN ITA NO. 2789/MUM/2011 FOR AS SESSMENT YEAR 2005- 06 SHALL APPLY MUTATIS MUTANDIS TO ISSUES IN APPEAL IN ITA NO. 2791/MUM/2011 FOR ASSESSMENT YEAR 2007-08.WE ORDER ACCORDINGLY. 31. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 2791/MUM/2011 FOR ASSESSMENT YEAR 2007-08 IS ALLOWED AS INDICATED ABO VE. 32. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN ITA NO. 6591/MUM/2011 FOR ASSESSMENT YEAR 2008-09. THE ISSUE IN THIS APPEAL A RE IDENTICAL TO THE ISSUES IN ASSESSEES APPEAL IN ITA NO. 2789/MUM/2011 FOR A SSESSMENT YEAR 2005- ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 42 06 AND OUR DECISION IN ITA NO. 2789/MUM/2011 FOR AS SESSMENT YEAR 2005- 06 SHALL APPLY MUTATIS MUTANDIS TO ISSUES IN APPEAL IN ITA NO. 6591/MUM/2011 FOR ASSESSMENT YEAR 2008-09.WE ORDER ACCORDINGLY. 33. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO . 6591/MUM/2011 FOR ASSESSMENT YEAR 2008-09 IS ALLOWED AS INDICATED ABO VE. 34. NOW WE SHALL TAKE UP REVENUES APPEAL IN ITA NO .4852/MUM/2011 FOR ASSESSMENT YEAR 2007-08. THE REVENUE IS AGGRIEVED I N THIS APPEAL BY DECISION OF LEARNED CIT(A) IN APPLYING PRINCIPLES OF MUTUALI TY WITHOUT ANY SUCH CLAIM FILED BY THE ASSESSEE IN RETURN OF INCOME FILED WIT H REVENUE AS WELL NO SUCH CLAIM WAS RAISED BY THE ASSESSEE DURING ASSESSMENT STAGE BEFORE THE AO. THE SAY OF LEARNED DR IS THAT LEARNED CIT(A) HAS ACCEPT ED SAID ADDITIONAL CLAIM OF THE ASSESSEE OF PRINCIPLES OF MUTUALITY APPLICABLE TO THE ASSESSEE WHICH WAS RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE LE ARNED CIT(A) AS ALSO WHEREIN ADDITIONAL EVIDENCES WERE SUBMITTED BY THE ASSESSEE BEFORE LEARNED CIT(A) FOR THE FIRST TIME , WITHOUT COMPLYING WITH REQUIREMENT S OF RULE 46A(3) OF INCOME- TAX RULES, 1962. IT WAS SUBMITTED BY LEARNED DR THA T LEARNED CIT(A) DID NOT CALLED FOR REMAND REPORT FROM THE AO AS TO HIS EXAM INATION AND COMMENTS ON THE CLAIM OF MUTUALITY RAISED BY THE ASSESSEE FOR T HE FIRST TIME BEFORE LEARNED CIT(A) AND FULFILLMENT OF REQUIREMENTS OF RULE 46A( 3) OF 1962 RULES WAS NOT COMPLIED WITH. IT WAS SUBMITTED BY LEARNED DR THAT RULE 46A(3) OF 1962 RULES IS NOT MERE FORMALITY AND IN THE ABSENCE OF F ULFILLMENT OF THE SAME , THE APPELLATE ORDER OF LEARNED CIT(A) IS VITIATED AND I S REQUIRED TO BE SET ASIDE. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY AGREED WITH THE CONTENTIONS OF LEARNED DR AND AGREED THAT THE MATTER MAY BE SET AS IDE TO THE FILE OF LEARNED CIT(A), AS NO REMAND REPORT WAS CALLED BY LEARNED C IT(A). THUS, BOTH THE PARTIES FAIRLY AGREED THAT THIS MATTER BE RESTORED TO THE FILE OF LEARNED CIT(A) FOR FRESH ADJUDICATION OF THE ISSUE ON MERITS AFTER GIVING OPPORTUNITY TO THE AO ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 43 FOR NECESSARY EXAMINATION, ENQUIRY AND VERIFICATION OF THE ADDITIONAL CLAIM OF APPLICATION OF PRINCIPLES OF MUTUALITY AS WELL OF E VALUATION OF ADDITIONAL EVIDENCES FILED BY THE ASSESSEE , AND THEREAFTER S UBMISSION OF AOS REMAND REPORT TO THE LEARNED CIT(A). IN VIEW OF THE UNDISP UTED ADMITTED POSITION BETWEEN BOTH THE PARTIES THAT RULE 46A(3) OF INCOME -TAX RULES, 1962 WAS NOT FOLLOWED BY LEARNED CIT(A) IN THE INSTANT APPEAL , WHEREIN NO OPPORTUNITY WAS GRANTED TO AO TO SUBMIT HIS REMAND REPORT , WE ARE INCLINED TO SET ASIDE THE ISSUES IN APPEAL TO THE FILE OF LEARNED CIT(A) FOR FRESH ADJUDICATION OF ISSUES ON MERITS AFTER GRANTING OPPORTUNITY TO THE AO IN TERM S OF RULE 46A(3) OF INCOME- TAX RULES, 1962 . THUS THIS APPEAL OF THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 35. IN THE RESULT, APPEAL FILED BY THE REVENUE IN I TA NO. 4852/MUM/2011 FOR ASSESSMENT YEAR 2007-08 IS ALLOWED FOR STATISTI CAL PURPOSES. 36. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 884/MUM/2012 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED AS INDICA TED ABOVE , APPEAL OF THE ASSESSEE IN ITA NO. 3004/MUM/2013 FOR ASSESSMENT YE AR 2009-10 AND ASSESSEES APPEAL IN ITA NO. 3127/MUM/2015 FOR ASSE SSMENT YEAR 2010-11 IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE , APPEAL OF THE ASSESSEE IN ITA NO. 2789/MUM/2011 FOR ASSESSMENT YEAR 2005-06 I S ALLOWED AS INDICATED ABOVE AND REVENUE APPEAL IN ITA NO. 4437/ MUM/2011 FOR ASSESSMENT YEAR 2005-06 IS DISMISSED AS INDICATED ABOVE, APPEAL OF THE ASSESSEE IN ITA NO. 2790/MUM/2011 FOR ASSESSMENT YE AR 2006-07 IS ALLOWED AS INDICATED ABOVE, APPEAL OF THE ASSESSEE IN ITA N O. 2791/MUM/2011 FOR ASSESSMENT YEAR 2007-08 IS ALLOWED AS INDICATED ABO VE , APPEAL OF THE ASSESSEE IN ITA NO. 6591/MUM/2011 FOR ASSESSMENT YE AR 2008-09 IS ALLOWED AS INDICATED ABOVE AND APPEAL FILED BY THE REVENUE IN ITA NO. ITA 884/M/2012 , 2789/M/2011 4437/M/2011, 2790/M/ 2011 4852/M/2011, 2791/M/ 2011 6591/M/2011, 3004/M/ 2013 3127/M/2015 44 4852/MUM/2011 FOR ASSESSMENT YEAR 2007-08 IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH, 2017. # $% &' 30-03-2017 ( ) SD/- SD/- (JOGINDER SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 30-03-2017 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 9 / CIT- CONCERNED, MUMBAI 5. <=( >>?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, < > //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI