Som Vihar Apartment Owners Housing Maintenance Co-op Society Ltd., New Delhi V. ITO, New Delhi

ITA 4884/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3560 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition
• Section: 115JB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFOR SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 4884(DEL)2009 ASSESSMENT YEAR: 2005-06 SOM VIHAR APARTMENT OWNERS HOUSING INCOME TAX OFFICER, MAINTENANCE CO-OP. SOCIETY LTD. V. WARD 24(1), NEW DELHI. K- BLOCK, SOM VIHAR APT. SANGAM MARG, R.K. PURAM, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP DINODIA, CA RESPONDENT BY : SHRI MANISH GUPTA, SR. DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 005-06, TAKING THE FOLLOWING GROUNDS:- 1. RENT PAID BY THE STALL HOLDERS OF K. BLOCK ACCR UES TO 422 MEMBERS OF SOM VIHAR AS THE PROPERTY BELONGS TO THEM. IT I S COLLECTED BY THE SOCIETY AS A MATTER OF CONVENIENCE. ADDITION OF A NY PORTION OF THE RENT ON ACCOUNT OF FUNDS COLLECTED BY THE SOCIETY F ROM THE MEMBERS FOR PROVIDING VARIOUS SERVICES IS NOT JUSTIFIED AND ADD ITION SHOULD BE DELETED. 2. RENTALS ARE CONTRIBUTION FROM THE MEMBERS TO T HE SOCIETY FUNDS. THEREFORE, PRINCIPAL OF MUTUALITY IS MAINTAINED IN THE INSTANT CASE AS THERE IS COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATORS. THEY ARE, THEREFORE, NOT TAXABLE I N THE HANDS OF THE SOCIETY. ITA 4884(DEL)09 2 2. THE FACTS AS NARRATED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND AS ALSO AVAILABLE FROM THE ASSESSMENT ORDER ARE THAT T HE ASSESSEE IS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE SOCIETIES RE GISTRATION ACT, 1860. IT WAS INCORPORATED ON 9.5.1985. ITS MAIN OBJECT IS THE MAINTENANCE AND MANAGEMENT OF ADMINISTRATION OF THE COLONY KNOWN AS SOM VIHAR APARTMENT (SVA FOR SHORT), CONSISTING OF BLOCKS O F RESIDENTIAL APARTMENTS (A TO J) AND CENTRAL FACILITIES. THE BYE-LAWS OF THE ASSESSEE SOCIETY HAVE BEEN DRAFTED ON THE BASIS OF MODEL BYE-LAWS WHICH R EGISTRAR OF CO-OPERATIVE SOCIETIES HAD FRAMED FOR EACH CLASS OR SUB-CLASS OF CO-OPERATIVE SOCIETY, IN ACCORDANCE WITH RULE 14 OF THE DELHI CO-OPERATIVE S OCIETIES RULES, 1973. THE APARTMENTS WERE CONSTRUCTED AND ALLOTTED BY ARM Y WELFARE HOUSING ORGANIZATION (AWHO FOR SHORT), WHICH ITSELF IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860. THE ALLOTME NT WAS MADE TO THE ORIGINAL OWNERS/SERVICE OFFICERS ON THE BASIS OF A BREAK UP OF COST DEPENDING UPON THE AREA OF EACH FLAT AND UNDER DIFFERENT HEAD S LIKE APARTMENT + LAND AND LIFT, DEVELOPMENT COST, DEPARTMENTAL CHARGES, TAXES AND STATUTORY PAYMENTS AND COMMUNITY CENTER BUILDING. THE RESIDE NTIAL COMPLEX OF SVA CONSISTS OF 10 BLOCKS, I.E., THE AFORESAID BLOCKS A TO J, HAVING, IN ALL 422 RESIDENTIAL UNITS. THERE IS ONE BLOCK, I.E., BLO CK K, MEANT FOR PROVIDING ITA 4884(DEL)09 3 COMMON FACILITIES AND BANKING FACILITIES TO THE RES IDENTS OF SVA. SOFAR AS REGARDS BLOCK K, ALL THE OWNERS OF THE RESIDENTIA L FLATS WERE CHARGED A UNIFORM AMOUNT OF RS.4,650/- PER OWNER. AFTER THE CONSTRUCTION OF THE FLATS AND ALLOTMENT THEREOF TO 422 OWNERS AND AFTER THEY TOOK POSSESSION OF THE FLATS, A USER COMMITTEE WAS SET UP TO MANAGE THE AF FAIRS TEMPORARILY UNTIL THE SOCIETY ITSELF WAS CONSTITUTED IN APRIL, 1985. IT IS THE OBLIGATION OF THE ASSESSEE SOCIETY TO UPKEEP AND MAINTAIN THE LAND, T O OPERATE, MAINTAIN ALL COMMON SERVICES LIKE LIFTS, GENERATORS, PUMPING SET S, ROADS, PARKS, SEWERS, STREET LIGHTS, STAIR CASES, GALLERIES, COMMON PATHS , DRAINS, EXTERNAL REPAIRS OF THE PROPERTY. THE ASSESSEE SOCIETY IS AUTHORIZED TO RECOVER FROM MEMBERS AND PAY ALL GROUND RENTS, FEE AND TAXES. FOR THE PERFORMANCE OF ITS FUNCTIONS, THE ASSESSEE CAN COLLECT MONTHLY CONTRIB UTION FROM THE MEMBERS. 3. DURING THE YEAR, THE RECEIPTS OF THE ASSESSEE CO NSISTED OF CONTRIBUTION FROM MEMBERS LIKE MEMBERS CHARGES, NON SELF OCCUPAN CY CHARGES, CAR PARKING CHARGES, WATER CHARGES, INTEREST RECEIVED F ROM MEMBERS, AMORTIZATION CHARGES, ETC. AND INTEREST FROM BANK O F RS. 4,67,819/-, INTEREST ON IT REFUND RS. 20,746/-(TOTAL INTEREST RS. 4,88 ,665/-) AND LICENCE FEE FROM STALL HOLDERS OF RS. 18,20,825/-, FOR WHICH, RS. 11,18,704/- WAS BY WAY OF RENT. ITA 4884(DEL)09 4 4. THE AO OBSERVED THAT THE ASSESSEE HAD NOT OFFERE D ITS RENTAL INCOME OF RS. 11,18,704/-, EARNED BY WAY OF RENT, FOR TAXATIO N, SINCE IT WAS CLAIMED AS BEING PART OF LICENCE FEE AND ELECTRICITY CHARGES E XEMPT AS PER ITAT ORDER DATED 19.11.1996 IN ITA NO. 7337(DEL)91, IN THE ASS ESSEES CASE FOR ASSESSMENT YEAR 1989-90. 5. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE A LIST CONTAINING NAMES, ADDRESS, NATURE OF PROFESSIO N, RENTAL AMOUNT AND AMOUNT OF TDS OF THE PARTIES TO WHOM THE PREMISES O F THE SOCIETY WERE GIVEN ON RENT. THE ASSESSEE SUBMITTED A LIST CONT AINING THE SAID DETAILS CONCERNING FIVE PARTIES. THE AO ISSUED NOTICES U /S 133(6) OF THE INCOME TAX ACT TO FOUR OF THE SAID FIVE PARTIES. 6. AS PER THE RESPONSE OF THE ABOVESAID PARTIES, T HEY WERE ALSO PROVIDING SERVICES TO OUTSIDERS OF SVA, I.E., THE GENERAL P UBLIC. 7. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO T HE ASSESSEE, TO SHOW CAUSE AS TO WHY THE RENT RECEIVED FROM THE SAID PAR TIES BE NOT TREATED AS TAXABLE RENTAL INCOME PROPORTIONATELY AS FOLLOWS:- ITA 4884(DEL)09 5 PARTIES NAME TOTAL RENT RECEIVED PROPORTIONATE SERVICES PROVIDED TO OUTSIDERS PROPORTIONATE TAXABLE RENT INDIAN HOLIDAY 1,69,800 50% APPROX. 84,900 UCO BANK 5,64,600 2801/4662 3,39,220 INTERSTATE FINANCE 1,32,000 100% 1,32,000 PATHFINDERS INTL. 2,40,000 130/130 2,40,000 TOTAL: 7,96,120 8. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE STATED THAT THE ASSESSEE WAS A CO-OPERATIVE SOCIETY DOING THE MAINT ENANCE OF SVA ON THE PRINCIPLE OF MUTUALITY WHICH FACT WAS ALSO ACCEPTED BY THE TRIBUNAL IN ITS ORDER (SUPRA) FOR ASSESSMENT YEAR 1989-90; THAT AS SUCH, THE LICENCE FEE RECEIVED BY THE ASSESSEE WAS EXEMPT ON THE BASIS OF MUTUALITY, AS THE CONTRIBUTORS AND RECIPIENTS WERE BOTH HOLDING THE M EMBERSHIP STATUS; THAT IT DID NOT MAKE ANY DIFFERENCE IF THE SERVICES WERE PR OVIDED BY THE TENANTS PARTLY TO THE MEMBERS OF SVA AND PARTLY TO THE OUTS IDERS, TILL THE CONTRIBUTORS AND RECIPIENTS WERE BOTH HOLDING THE M EMBERSHIP STATUS ON THE PRINCIPLE OF MUTUALITY. 9. THE AO WAS NOT SATISFIED. HE OBSERVED THAT THE ASSESSEES REPLY DID NOT INCLUDE ANY COMMENTS/OBJECTION TO THE REPLIES O F THE PARTIES RECEIVED IN RESPONSE TO NOTICES U/S 133(6) OF THE I.T. ACT; THA T THE ARGUMENT OF THE ASSESSEE COULD NOT BE ACCEPTED, SINCE IN THE TRIBUN AL ORDER, IT WAS MENTIONED THAT K-BLOCK OF THE SOCIETY PROVIDED COMMON FACILIT IES, WHEREAS NEW FACTS ITA 4884(DEL)09 6 HAD EMERGED DURING THE ASSESSMENT PROCEEDINGS, THAT THE SERVICES PROVIDED FROM THE PREMISES WERE NOT OF COMMON NATURE; THAT H AD IT BEEN THAT THE PREMISES WERE PROVIDING COMMON SERVICES TO THE RESI DENTS OF THE SOCIETY, THE RECEIPTS OF LICENCEE WOULD HAVE BEEN FROM THE R ESIDENTS OF THE SOCIETY AND THE LICENCE FEE AND ELECTRICITY CHARGES PAID TO THE SOCIETY WOULD HAVE BEEN PAID OUT OF THE RECEIPTS OF THE RESIDENTS; THA T AS SUCH, THE IDENTITY OF THE CONTRIBUTOR AND RECIPIENT WOULD HAVE BEEN COMPLETE AND THE SURPLUS INCOME GENERATED FROM THE ACTIVITY WOULD HAVE BEEN COVERED BY THE PRINCIPLE OF MUTUALITY; THAT HOWEVER, THINGS WERE DIFFERENT; THA T THE PARTIES WHO HAD BEEN GIVEN THE PREMISES ON RENT/LICENCE WERE PROVIDING S ERVICES TO THE GENERAL PUBLIC/OUTSIDERS ALSO; THAT THEREFORE, THE LICENCE FEE AND ELECTRICITY CHARGES/RENT PAID BY THESE PARTIES WERE NOT FROM TH E SOLE CONTRIBUTION OF THE RESIDENTS OF THE SOCIETY; THAT SINCE THE IDENTITY B ETWEEN THE CONTRIBUTOR AND RECIPIENTS STOOD BROKEN, THIS PART OF THE INCOME OF THE SOCIETY HAD COME OUT FROM THE AMBIT OF THE PRINCIPLE OF MUTUALITY; AND T HAT THEREFORE, THE PROPORTIONATE INCOME GENERATED FROM THE RENT WAS A TAXABLE INCOME, AS WAS THE CASE OF INTEREST INCOME FROM THE BANK. 10. IT WAS IN THIS MANNER THAT AN AMOUNT OF RS.7,96 ,120/- WAS TREATED BY THE AO AS TAXABLE RENTAL INCOME OF THE SOCIETY. ITA 4884(DEL)09 7 11. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN F IRST APPEAL BEFORE THE LD. CIT(A), WHO, BY VIRTUE OF THE IMPUGNED ORDER, DISMI SSED THE ASSESSEES APPEAL. THIS BRINGS THE ASSESSEE IN FURTHER APPEA L BEFORE US. 12. CHALLENGING THE IMPUGNED ORDER, THE LEARNED COU NSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE RENT WAS PAID BY THE STALL HOLDERS OF K-BLOCK OF SVA TO 422 MEMBERS OF SVA SINCE THE PROPERTY BELONGED T O THEM; THAT THIS RENT WAS COLLECTED BY THE SOCIETY AS A MATTER OF CONVENI ENCE; THAT ADDITION OF ANY PORTION OF THE RENT ON ACCOUNT OF THE FUNDS COLLECT ED FROM THE SOCIETY FROM THE MEMBERS FOR PROVIDING VARIOUS SERVICES IS NOT J USTIFIED; THAT THE RENTALS ARE CONTRIBUTIONS FROM THE MEMBERS TO THE SOCIETY F UND; THAT THEREFORE, THE PRINCIPLE OF MUTUALITY IS MAINTAINED, AS THERE IS C OMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATORS; THAT THEREF ORE, THESE RENTALS ARE NOT TAXABLE IN THE HANDS OF THE SOCIETY; THAT THE LD. C IT(A) HAS ERRED IN HOLDING THE TRIBUNAL ORDER IN THE ASSESSEES CASE FOR ASSES SMENT YEAR 1989-90 (SUPRA) TO BE PER INCURIAM THE SUPREME COURT DECISIONS IN CIT V. ROYAL WESTERN INDIA TURF CLUB LTD., 24 ITR 551(SC) AND IN CHELM SFORD CLUB V. CIT 243 ITR 89(SC); THAT AS PER ACIT V. SREEJA HOSIE RIES 122 TTJ 849 (COPY PLACED ON RECORD) AND NATIONAL TEXTILE CORPORATION LTD. V. CIT 171 TAXMAN 339(MP)(COPY PLACED ON RECORD), NO SUBORDINA TE COURT OR AUTHORITY CAN DUB AN ORDER OF A SUPERIOR AUTHORITY OR COURT T O BE PER INCURIAM; THAT AS ITA 4884(DEL)09 8 SUCH, THE LD. CIT(A) WAS WRONG IN REFUSING TO FOLLO W THE TRIBUNAL ORDER(SUPRA) ON THE SAID BASIS; THAT THE FACTS BEFO RE THE TRIBUNAL IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 1989-90 (SUPRA) WERE EXACTLY SIMILAR TO THOSE PRESENT FOR THE YEAR UNDER CONSIDERATION; THA T SO, IN THE ABSENCE OF PROVING THE CONTRARY, NO STAND INCONSISTENT TO THE POSITION AS HELD BY THE TRIBUNAL IN THE ASSESSEES CASE IN THE ASSESSMENT Y EAR 1989-90, COULD HAVE BEEN TAKEN; AND THAT THEREFORE, THE ORDER OF THE LD . CIT(A) IS LIABLE TO BE QUASHED, WHICH BE QUASHED ON ALLOWING THE ASSESSEE S APPEAL. 13. THE LEARNED DR, ON THE OTHER HAND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT FIRSTLY , IN THE YEAR UNDER CONSIDERATION, AS OBSERVED BY THE AO, NEW FACTS HAV E EMERGED; THAT IN THE YEAR UNDER CONSIDERATION, THE PREMISES LET OUT WER E USED FOR PROVIDING SERVICES TO OUTSIDERS OF SVA, WHICH WAS NOT THERE I N THE MATTER BEFORE THE TRIBUNAL FOR ASSESSMENT YEAR 1989-90; THAT MOREOVER , AS RIGHTLY OBSERVED BY THE LD. CIT(A), THE PRINCIPLE OF MUTUALITY, AS AFFI RMED IN CIT V. ROYAL WESTERN INDIA TURF CLUB LTD.(SUPRA), AND CHELMSFO RD CLUB V. CIT (SUPRA) WAS NOT CONSIDERED BY THE TRIBUNAL, WHICH F ACT HAS NOT BEEN CONTROVERTED; AND THAT THEREFORE, THERE BEING NO ME RIT THEREIN, THE APPEAL OF THE ASSESSEE BE DISMISSED. ITA 4884(DEL)09 9 14. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. FIRST OFF, IT IS SEEN, THAT THE LD. CIT(A) HAS DISAGREED WITH THE AO CONCERNING THE AOS OBSERVATION OF THE SERVICES REN DERED BY THE LESSEES/LICENCEES OF OUTSIDERS OF SVA/THE GENERAL P UBLIC AFFECTING THE PRINCIPLE OF MUTUALITY BETWEEN THE ASSESSEE SOCIETY AND THE RESIDENTS OF SVA. THE LEARNED CIT(A) HAS, IN THIS REGARD, OBSE RVED AS FOLLOWS:- 11. HOWEVER, I AM INCLINED TO ALSO DISENGAGE FROM THE ORDER OF THE LEARNED ASSESSING OFFICER, TO THE EXTENT, THAT THE FOUR ENTITIES IN QUESTION, HAD ALSO PROVIDED SERVICES TO NON-MEMBERS OF THE SOCIETY, FOR THE PURPOSE OF NOT ACCEPTING THE PRINCIPLE OF M UTUALITY. THE ISSUE HERE IS ONLY WITH REGARD TO THE LICENCE FEE EARNED FROM THE FOUR ENTITIES, WHICH WENT INTO THE COMMON FUND OF THE AS SESSEE SOCIETY. SERVICE TO MEMBERS OUTSIDE THE SOCIETY, WOULD NOT A FFECT THE PRINCIPLE OF MUTUALITY, AS INCORRECTLY HELD BY THE LEARNED AS SESSING OFFICER. 15. THE DEPARTMENT IS NOT IN APPEAL ABOUT THE OBSER VATIONS OF THE LD. CIT(A), THUS ACCEPTING THE CIT(A)S OBSERVATIONS AN D FINDINGS. 16. THE ASSESSEE IS IN APPEAL, IT IS SEEN, AGAINST THE FOLLOWING OBSERVATIONS OF THE LD. CIT(A):- I HAVE GONE THROUGH THE ENTIRE ORDER OF THE HONBL E TRIBUNAL, WHICH WAS RENDERED IN ITA NO. 7337(DEL)1991 FOR THE ASSES SMENT YEAR 1989-90. THIS DECISION WAS RENDERED ON 19.11.1996 . AN ORDER OF THE TRIBUNAL, IS BINDING ON ME. ON A CAREFUL READING O F THE ORDER OF THE HONBLE ITAT, HOWEVER, IT IS OBSERVED THAT THE PRIN CIPLE OF MUTUALITY, AS AFFIRMED BY THE SUPREME COURT IN THE CASE OF CI T V. ROYAL WESTERN INDIA TURF CLUB LTD.(SUPRA) WAS NOT CONSID ERED BEFORE ITA 4884(DEL)09 10 ADJUDICATION. THE SUBSEQUENT DECISION RENDERED BY THE APEX COURT IN CHELMSFORD CLUB V. CIT(SUPRA) ONLY REAFFIRMS THE PRINCIPLE OF MUTUALITY. AS SUCH, THE DECISION OF THE HONBLE S UPREME COURT, ON THE PRINCIPLE OF MUTUALITY, WOULD PREVAIL OVER THE HONBLE ITAT DECISION AS IT WAS PER INCURIAM. AS HELD IN KANE L OIL & EXPORT INDS. LTD. V. JCIT[2009] 30 DTR (AHD)(TM) (TRIB)13 0, A JUDGMENT RENDERED WITHOUT NOTICING A PREVIOUS BINDING PRECED ENT OR A RELEVANT STATUTORY RULE IS CONSIDERED TO HAVE BEEN RENDERED PER INCURIAM. IT IS EVEN SAID THAT SUCH A JUDGMENT NEED NOT BE GIVEN EFFECT TO BY A LOWER COURT. IN OTHER WORDS, I HAVE VERY RESPECTFU LLY AND WITH THE UTMOST HUMILITY, NOT FOLLOWED THE DECISION OF THE H ONBLE TRIBUNAL FOR WHICH I HAVE THE HIGHEST REGARD, IN DECIDING THE CA SE. 17. THE REASONS RECORDED BY THE AO IN THE ASSESSMEN T ORDER FOR DECIDING THE ASSESSEE ARE, IT IS OBSERVED, NO LONGER UNDER CHALLENGE, THE AOS ORDER HAVING MERGED INTO THAT OF THE ORDER PASSED BY THE LD. CIT(A). 18. THE LEARNED CIT(A), HAS GONE ENTIRELY ON A TANG ENT. HE HAS ILLEGALLY HELD THE TRIBUNAL ORDER(SUPRA) IN THE ASSESSEES CA SE FOR ASSESSMENT YEAR 1989-90 TO BE PER INCURIAM THE SUPREME COURT VER DICTS IN CIT V. ROYAL WESTERN INDIA TURF CLUB LTD.(SUPRA), AND CHELMSFO RD CLUB V. CIT (SUPRA). IT IS JURISPRUDENTIAL THAT NO LOWER AUTHO RITY/COURT CAN STATE ANY ORDER OF A HIGHER AUTHORITY/COURT PER INCURIAM. T HAT IS THE SYSTEM OF HIERARCHY OF LAW COURTS IN INDIA. 19. IN SREEJA HOSIERIES(SUPRA), IT HAS BEEN HELD THAT THE TRIBUNAL HAS NO JURISDICTION TO HOLD A PARTICULAR DECISION OF THE J URISDICTIONAL HIGH COURT TO HAVE BEEN RENDERED PER INCURIAM OR SUB SILENTIO AND THAT IT DOES NOT CREATE ANY BINDING PRECEDENT. ITA 4884(DEL)09 11 20. IN NATIONAL TEXTILE CORPORATION LTD.(SUPRA), IT HAS BEEN HELD THAT IT IS NEITHER PERMISSIBLE, NOR LEGAL FOR ANY COURT OR TRIBUNAL TO COMMENT UPON THE DECISION OF THE SUPREME COURT/HIGH COURT; THAT SIMILARLY. IT IS ALSO NOT PERMISSIBLE FOR THE TRIBUNAL TO COMMENT UPON THE MA NNER IN WHICH A PARTICULAR DECISION WAS RENDERED BY THE SUPREME COU RT/HIGH COURT; THAT IT IS ALSO NOT PERMISSIBLE FOR THE TRIBUNAL TO SIDETRAC K OR/AND IGNORE THE DECISION OF THE HIGH COURT ON THE GROUND THAT IT DID NOT TAK E INTO CONSIDERATION A PARTICULAR PROVISION OF LAW; AND THAT IF SUCH AN AP PROACH IS RESORTED TO BY SUBORDINATE COURTS/TRIBUNALS, IT WOULD NOT BE IN CO NFORMITY WITH THE LAW LAID DOWN BY THE SUPREME COURT. 21. AS SUCH, THE ORDER OF THE LD. CIT(A) IN THIS RE GARD IS ENTIRELY UNSUSTAINABLE IN THE EYE OF LAW. TO SAY OTHERWISE WOULD LEAD TO A CHAOTIC SITUATION INASMUCH AS, THEN, NO SUBORDINATE AUTHORI TY OR COURT WOULD BE BOUND BY THE ORDERS OF THE HIGHER AUTHORITIES OR CO URTS, WHICH ORDERS ARE DEEMED TO HAVE BEEN PASSED BY THE HIGHER AUTHORITIE S/COURTS IN THEIR HIGHER WISDOM. 22. APROPOS KANEL OIL & EXPORT INDS. LTD. V. JCIT 30 TTR (AHD)(TM)(TRIB) 130, QUOTED BY THE LD. CIT(A), THIS DECISION IS ENTIRELY INAPPLICABLE. THEREIN, THE THIRD MEMBER OF THE TR IBUNAL HAS HELD, INTER ALIA, AS FOLLOWS:- ITA 4884(DEL)09 12 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS PRESENTE D BEFORE ME BY BOTH THE SIDES. IT ALL BOILS DOWN TO THIS, NAMELY, WHETHER THE ORDER OF THE SPECIAL BENCH UPHOLDING THE LEVY OF INTEREST IN LIGHT OF SUB-S. (4) OF S. 115JA SHOULD BE FOLLOWED OR THE JUDGMENT OF THE BOMBAY HIGH COURT IN SNOWCEM INDIA LTD.(SUPRA), ALSO RENDERED IN THE CONTEXT OF S.115JA, HAS TO BE APPLIED. BOTH THE DECISIONS ARE UNDER S. 115JA WITH WHICH WE ARE CONCERNED. ONE IS OF A SPECIAL B ENCH OF THE TRIBUNAL, AHMEDABAD AND THE OTHER IS OF A HIGH COUR T, THOUGH NOT THE JURISDICTIONAL HIGH COURT. A SIMPLE ANSWER WOULD BE THAT THE JUDGMENT OF A HIGH COURT, THOUGH NOT OF THE JURISDI CTIONAL HIGH COURT, PREVAILS OVER AN ORDER OF THE SPECIAL BENCH EVEN THOUGH IT IS FROM THE JURISDICTIONAL BENCH (OF THE TRIBUNAL) ON THE BASIS OF THE VIEW THAT THE HIGH COURT IS ABOVE THE TRIBUNAL IN THE JU DICIAL HIERARCHY. BUT THIS SIMPLE VIEW IS SUBJECT TO SOME EXCEPTIONS. IT CAN WORK EFFICIENTLY WHEN THERE IS ONLY ONE JUDGMENT OF A HI GH COURT ON THE ISSUE AND NO CONTRARY VIEW HAS BEEN EXPRESSED BY AN Y OTHER HIGH COURT. BUT WHEN THERE ARE SEVERAL DECISIONS OF NON -JURISDICTIONAL HIGH COURTS EXPRESSING CONTRARY VIEWS, IT HAS BEEN RECOGNIZED THAT THE TRIBUNAL IS FREE TO CHOOSE TO ADOPT THAT VIEW W HICH APPEALS TO IT. IN RISHI ROOP CHEMICAL CO.(P)LTD. V. ITO[1991] 39 TTJ (DEL)(SB) 660: [1991] 36 ITD 35(DEL)(SB), IT WAS HELD BY THE SPECIAL BENCH, DELHI THAT IF THERE WERE CONFLICTING DECISIONS OF THE HIGH COURTS, OTHER THAN THE JURISDICTIONAL HIGH COURT, THE BENCH ES OF THE TRIBUNAL WERE FREE TO ADOPT THE VIEW WHICH TO THE BENCHES AP PEAR TO BE BETTER AND THAT IN CERTAIN CIRCUMSTANCES THE VIEW WHICH WA S FAVOURABLE TO THE TAXPAYER SHOULD BE ADOPTED. FOLLOWING THIS C ASE THE AHMEDABAD BENCH IN CHANDULAL VENICHAND V. ITO [19 91] 40 TTJ (AHD) 358: [1991] 38 ITD 138(AHD), WHICH WAS CITED BEFORE ME ON BEHALF OF THE ASSESSEE, CAME TO THE CONCLUSION THAT AMONGST THE SEVERAL DECISIONS CITED BEFORE IT, THE DECISION OF THE PATNA HIGH COURT APPEARED TO BE BETTER AND FOLLOWED IT. THE BENCH ALSO OBSERVED THAT INCIDENTALLY IT WAS ALSO IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL DID NOT APPLY THE RULE THAT IF DIFFERENT VIEWS ARE EXPR ESSED ON AN ISSUE THE VIEW THAT IS FAVOURABLE TO THE ASSESSEE SHOULD BE A DOPTED. THE VIEW EXPRESSED BY THE PATNA HIGH COURT APPEARED TO THE T RIBUNAL TO BE THE BETTER OF THE DIFFERENT VIEWS EXPRESSED BY DIFFEREN T HIGH COURTS AND WAS HENCE FOLLOWED. ITA 4884(DEL)09 13 8. THE OTHER EXCEPTION IS WHERE THE JUDGMENT OF THE NON- JURISDICTIONAL HIGH COURT, THOUGH THE ONLY JUDGMENT ON THE POINT, HAS BEEN RENDERED WITHOUT HAVING BEEN INFORMED ABOUT CE RTAIN STATUTORY PROVISIONS THAT ARE DIRECTLY RELEVANT. A JUDGMENT RENDERED WITHOUT NOTICING A PREVIOUS BINDING PRECEDENT OR A RELEVANT STATUTORY RULE IS CONSIDERED TO HAVE BEEN RENDERED PER INCURIAM. I T IS EVEN SAID THAT SUCH A JUDGMENT NEED NOT BE GIVEN EFFECT TO BY A LO WER COURT. IN THE PRESENT CASE, THE ATTENTION OF THE BOMBAY HIGH COUR T IN SNOWCEM INDIA LTD.(SUPRA) WAS NOT DRAWN TO SUB-S. (4) OF S . 115JA, AS HAS BEEN POINTED OUT BY THE LEARNED AM IN HIS DISSENT. THE HIGH COURT THEREFORE HAD NO OCCASION TO EXAMINE THE QUESTION W HETHER THE DECISIONS OF THE KARNATAKA HIGH COURT AND THE SUPRE ME COURT IN KWALITY BISCUITS LTD.(SUPRA), RENDERED IN THE CON TEXT OF S.115J WHICH DID NOT HAVE A SUB-SECTION SIMILAR TO SUB-S.( 4) OF S.115JA WOULD STILL BE APPLICABLE AS BINDING PRECEDENT. IN A CAS E WHICH ARISES UNDER S. 115 JA. THIS ASPECT HAS ALSO BEEN HIGHLIGHTED BY THE LEARNED AM. THE ARGUMENT ON BEHALF OF THE ASSESSE BEFORE ME WAS THAT THE SECTION IN ITS ENTIRETY WAS BEFORE THE BOMBAY HIGH COURT IN SNOWCEM INDIA LTD.(SUPRA), WHICH INCLUDES SUB-S. (4), I AM UNABL E TO ACCEPT THIS ARGUMENT BECAUSE THE SUB-SECTION IS CONSIDERED CRUC IAL AND IT IS THE CONTENTION OF THE DEPARTMENT THAT IT HAS MADE ALL T HE DIFFERENCE BETWEEN S. 115J ON THE ONE HAND AND SS. 115 JA AND 115JB ON THE OTHER, AND THEREFORE, NON-ADVERTENCE TO THE SAME MA KES IT IMPOSSIBLE FOR THE ASSESSEE TO RELY ON THE JUDGMENT AS AUTHORI TY ON THE INTERPRETATION OF THE SUB-SECTION. IT IS FUTILE TO SPECULATE WHAT WOULD HAVE BEEN THE DECISION IF SUB-S.(4) OF S. 115JA HAD BEEN BROUGHT O THE NOTICE OF THE HONBLE BOMBAY HIGH COURT , BUT SUFFI CE TO SAY, FOR THE PRESENT PURPOSE, THAT THE JUDGMENT CANNOT BE RELIED UPON BY THE ASSESSEE AS BEING ENTIRELY IN ITS FAVOUR ON ALL THE ASPECTS OF S. 115JA OR, MORE PARTICULARLY, ON THE INTERPRETATION OF SUB -S.(4) OF THAT SECTION AND THEREFORE, IT CANNOT BE SAID THAT IT SHOULD BE FOLLOWED IN PREFERENCE TO THE ORDER OF THE SPECIAL BENCH IN AS HIMA SYNTEX LTD.(SUPRA). 23. KANEL OIL & EXPORT INDS. LTD.(SUPRA) IS, IT I S SEEN, DEALING WITH AN ENTIRELY DIFFERENT SITUATION, I.E., THE PRECEDENT V ALUE FOR THE TRIBUNAL OF THE JUDGMENT OF A NON-JURISDICTIONAL HIGH COURT VIS--V IS THE ORDER OF THE ITA 4884(DEL)09 14 SPECIAL BENCH OF THE TRIBUNAL. IT HOLDS THAT A JUD GMENT OF A HIGH COURT, THOUGH NOT OF THE JURISDICTIONAL HIGH COURT, PREVAI LS OF AN ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL, EVEN THOUGH THOSE FR OM THE JURISDICTIONAL BENCH OF THE TRIBUNAL; THAT HOWEVER, WHEN THERE ARE SEVERAL DECISIONS OF NON-JURISDICTIONAL HIGH COURTS EXPRESSING CONTRARY VIEWS, THE TRIBUNAL IS FREE TO CHOOSE TO ADOPT THAT VIEW WHICH APPEALS TO IT; AND THAT FURTHER, WHERE THE JUDGMENT OF THE NON-JURISDICTIONAL HIGH COURT, THOUGH THE ONLY JUDGMENT ON THE POINT, HAS BEEN RENDERED WITHOUT HAVING BEEN INFORMED ABOUT CERTAIN STATUTORY PROVISIONS THAT ARE DIRECTLY RELEVANT, IT CANNOT BE FOLLOWED. 24. THE ABOVE POSITION, IT CANNOT BE GAINSAID, NOWH ERE APPLIES TO THE CASE AT HAND. KANEL OIL & EXPORT INDS. LTD.(SUPRA), IS NOT A VERDICT AVAILABLE TO THE LD. CIT(A) TO TRY TO TAINT A TRIBUNAL ORDER, I.E., AN ORDER RENDERED BY A DIRECTLY SUPERIOR AUTHORITY, AS PER INCURIAM. 25. THE LEARNED COUNSEL FOR THE ASSESSEE, FURTHER H AS STATED THAT THERE IS NO DISPUTE TO CIT V. ROYAL WESTERN INDIA TURF CLUB LT D.(SUPRA), AND CHELMSFORD CLUB V. CIT (SUPRA). INASMUCH AS THE P RINCIPLE LAID DOWN THEREIN IS THAT WHERE A NUMBER OF PERSONS COMBINE T OGETHER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE OR OBJECT AND IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTS IDE BODY, THEN ANY SURPLUS RETURNED TO THOSE PERSONS CANNOT BE REGARDED IN ANY SENSE AS PROFIT; THAT THERE ITA 4884(DEL)09 15 MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPATORS; AND THAT WHERE THE TRADE OR ACTIVITY IS MUTUAL, THE FACT THAT AS REGARDS CERTAIN ACTIVITIES, CERTAIN MEMBERS ONLY OF THE ASSOCIATION TAKE ADVANTAGE OF THE FACILITIES WHICH IT OFFERS, DOES NOT AFFECT THE MUT UALITY OF THE ENTERPRISE. 26. THE LEARNED COUNSEL HAS SUBMITTED THAT THE ABOV E PRINCIPLE HAS DULY BEEN RECOGNIZED BY THE TRIBUNAL IN ITS DECISION(SUP RA) IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 1989-90; AND THAT THEREFORE ALS O, THE SAID TRIBUNAL DECISION IS NOT AT ALL PER INCURIAM EITHER CIT V. ROYAL WESTERN INDIA TURF CLUB LTD.(SUPRA), OR CHELMSFORD CLUB V. CIT (SUP RA). 27. WE NEED NOT COMMENT ON THIS ASPECT OF THE MATTE R, SINCE WE HAVE HELD THE ORDER OF THE LD. CIT(A) TO BE ILLEGAL FOR THE A BOVE DISCUSSION CONCERNING THE CIT(A) HAVING HELD THE TRIBUNALS ORDER TO BE P ER INCURIAM. MOREOVER, WE ARE NEITHER SETTING ANY APPEAL OVER THE SAID TRI BUNAL ORDER, NOR ARE WE EXERCISING THE JURISDICTION FOR RECTIFICATION THERE OF. 28. ON FACTS, HOWEVER, IT IS SEEN THAT THE SITUATIO N OBTAINING IN THE YEAR UNDER CONSIDERATION IS NO DIFFERENT FROM THAT BEFOR E THE TRIBUNAL FOR ASSESSMENT YEAR 1989-90. IT IS PERTINENT TO NOTE T HAT AS AVAILABLE FROM THE SAID TRIBUNAL ORDER, IN THAT YEAR ALSO, ONE OF THE LICENCEES/TENANTS WAS A BANK WHICH, UNDOUBTEDLY, WAS FOR PROVIDING SERVICES TO O UTSIDERS AS WELL. THE TRIBUNAL, FOR ASSESSMENT YEAR 1989-90, HAS HELD AS FOLLOWS:- ITA 4884(DEL)09 16 12. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO TH E SUBMISSIONS ADVANCED BY THE LEARNED REPRESENTATIVES OF THE PART IES. ON THE BASIS OF DECISIONS/JUDGMENTS RELIED UPON ON BEHALF OF THE ASSESSEE AS ALSO KEEPING IN VIEW THE OBJECTS AND AIMS OF THE ASSESSE E, IT IS CLEAR THAT THE APPELLANT-ASSESSEE FULLY SATISFIED THE CONDITIO NS FOR EXEMPTION ON THE PRINCIPLE OF MUTUALITY IN REGARD TO INCOME COVE RED BY SUCH PRINCIPLE. AS ALREADY SEEN, OUT OF ITS TOTAL RECEI PTS OF RS.36,61,027/- FOR THE RELEVANT PREVIOUS YEAR A SUM OF RS. 18,43,7 77/- REPRESENTS CONTRIBUTION MADE BY THE MEMBERS OF THE SOCIETY THE MSELVES AND AS SUCH THIS AMOUNT IS CLEARLY EXEMPT FROM TAX ON THE PRINCIPLE OF MUTUALITY. WE HAVE ALSO NOTICED THAT K-BLOCK WHICH PROVIDES COMMON FACILITIES HAS ALSO BEEN PAID FOR BY 422 MEM BERS OF THE SOCIETY AT RS. 4,650/- PER MEMBER, FORMING PART OF TOTAL COST OF ACQUISITION OF THE FLATS IN EACH CASE. THE DELHI M UNICIPAL CORPORATION HAS ALSO TAKEN THE VIEW THAT RATEABLE V ALUE OF K-BLOCK WOULD BE CALCULATED ON THE BASIS OF EACH FLAT BY D IVIDING SUCH RATEABLE VALUE BY 422 BEING THE NUMBER OF RESIDENT S WHO ARE JOINT OWNERS OF K-BLOCK PROPERTY. THIS BEING SO THE LI CENCE FEE AND ELECTRICITY CHARGES IN RESPECT OF PROPERTY BEING K- BLOCK JOINTLY OWNED BY 422 RESIDENTS, AMOUNTED TO RS. 16,62,484/- COLLE CTED FROM LICENCEES BY THE SOCIETY INSTEAD OF BY THE INDIVIDU AL FLAT OWNERS MORE AS A MATTER OF CONVENIENCE, WOULD ALSO AMOUNT TO CO NTRIBUTION BY THE SEPARATE FLAT OWNERS TO THE MUTUAL ASSOCIATION AND WOULD, THUS, BE EXEMPT ON THE PRINCIPLE OF MUTUALITY. REGARDING I NTEREST OF RS. 1,54,766/- WE AGREE WITH THE SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE THAT SUCH INTEREST IS NOT FROM A MUT UAL ACTIVITY AND AS SUCH IT WOULD BE EXIGIBLE ON THE BASIS OF DECISION OF GUJARAT HIGH COURT IN SPORTS CLUB OF GUJARAT V. CIT, 171 ITR 5 04. ANY EXPENDITURE THE APPELLANT HAD INCURRED WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF EARNING THE INTEREST WOULD, OF COURSE, B E DEDUCTIBLE AS EXPENDITURE. WE, THEREFORE, DIRECT THE AO TO DETE RMINE EXPENDITURE AS COULD BE RELATED TO EARNING OF INTEREST OF RS. 1 ,54,766/- AND TAX THE BALANCE AS ASSESSEES INCOME. SUBJECT TO ABOVE DI RECTIONS, ASSESSEES APPEAL IS ALLOWED, IN PART. 29. THE DEPARTMENT HAS THUS NOT SHOWN THE FACTS PRE SENT BEFORE US TO BE ANY DIFFERENT FROM THOSE BEFORE THE TRIBUNAL FOR AS SESSMENT YEAR 1989-90. ITA 4884(DEL)09 17 30. ACCORDINGLY, THE GRIEVANCE OF THE ASSESSEE IS J USTIFIED AND IS ACCEPTED AS SUCH. THE ORDER OF THE LD. CIT(A) IS REVERSED . 31. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON .07.2010. SD/- SD/- (G.E. VEERABHADRAPPA) ( A.D. JAIN) VICE PRESIDENT JUDICIA L MEMBER DATED: 16.07.2010 *RM COPY FORWARDED TO: 1. SOM VIHAR APARTMENT OWNERS HOUSING MAINTENANCE CO-OP. SOCIETY LTD. K- BLOCK, SOM VIHAR APT. SANGAM MARG, R.K. PURAM, NEW DELHI. 2. ITO, WARD 24(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DY. REGISTRAR