MEHTA JAISING DEVELOPERS, MUMBAI V. ADDL CIT RG 15(2), MUMBAI

ITA 571/MUM/2012

• Counselvise Citation: 57119914 RSA 2012
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.571/MUM/2012 ASSESSMENT YEAR: 2007-08 MEHTA JAISING DEVELOPERS, 398, KIRTI KUNJ, 14 TH ROAD, KHAR (WEST), MUMBAI-400052 / VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-15(2), MATRU MANDIR, MUMBAI-400007 ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AABTM0713F ! ' / ASSESSEE BY SHRI SAMEER DALAL # / REVENUE BY SHRI YOGESH KAMAT $ #% & ' ' / DATE OF HEARING : 16/06/2015 & ' ' / DATE OF ORDER: 01/07/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 07/12/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, UPHOLDING DISALLOWANCE, OF RS.6 LAKH MADE ON ACCOUN T OF MEHTA JAISING DEVELOPERS ITA NO.571/MUM/2012 2 PROFESSIONAL FEES PAID TO THE MEMBERS OF AOP, U/S 4 0(BA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) WRON GLY CONSIDERING THE STATUS OF THE ASSESSEE AS AOP, WHER EAS, THE ASSESSEE IS AN INDIVIDUAL BUT FOR TAXATION PURP OSES TREATED AS AN AOP. 2. DURING HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE, SHRI SAMEER DALAL, CONTENDED THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASS ESSEE FOR ASSESSMENT YEAR 2006-07 (ITA NO. 286/MUM/2011) ORDE R DATED 19/09/2013. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY SHRI YOGESH KAMAT, LD. DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, IN ALL FAIRNESS, WE ARE REPRODUCING HEREUNDE R THE RELEVANT PORTION FROM THE AFORESAID ORDER OF THE TR IBUNAL DATED 19/09/2013 FOR READY REFERENCE:- 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUNDS NO. 1 RELATES TO THE DISALLOWANCES ON ACCOUNT OF PROFESSIONAL FEES PAID RS.4 LAKHS AND GR OUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.6 LAKHS. B OTH THE DISALLOWANCES ARE BEING MADE U/S 40(BA) OF THE ACT. 3. THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRU CTION FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING IN TH E STATUS OF A.O.P. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED A TOTAL AMOUNT OF RS.4,90,500/ - MEHTA JAISING DEVELOPERS ITA NO.571/MUM/2012 3 UNDER THE HEAD OF PROFESSIONAL FEES. THE DETAILS A RE EXHIBITED AT PAGE 2 OF THE ASSESSMENT ORDER. THE A O OBSERVED THAT THE ASSESSEE HAS PAID RS.4 LAKHS TO T HE FIVE MEMBERS OF THE A.O.P AT THE RATE OF RS.80,000/ - PER MEMBER. THE AO SOUGHT EXPLANATION FROM THE ASSESSE E AS TO WHY THIS PAYMENT OF RS.4 LAKHS SHOULD NOT BE DISALLOWED. IN VIEW OF THE PROVISIONS OF SECTION 4 0(BA) OF THE ACT, ASSESSEE FILED A DETAILED REPLY DATED 12.04.2008. THE AO WAS OF THE FIRM BELIEF THAT PROVISIONS OF SECTION 40(BA) SQUARELY APPLY ON THE FACTS OF THE CASE AND ACCORDINGLY DISALLOWED RS.4 LAKHS. THE AO FURTHER DISCUSSED DISALLOWANCE OF RS.6 LAKHS ON ACCOUNT OF SALARY PAID TO THE MEMBER OF THE A.O.P. HOLDING THAT THIS PAYMENT IS COVERED BY THE PROVIS IONS OF SECTION 40(BA) OF THE ACT. THE AO FURTHER OBSER VED THAT SINCE THE ASSESSEE HAS NOT CLAIMED THE EXPENSE S IN THIS YEAR, THEREFORE, THE DISALLOWANCE WILL BE MADE IN THE ASSESSMENT YEAR OF THE PROJECT IS FINALLY COMPLETED AND WHEN THE ASSESSEE CLAIMS SUCH EXPENSES. 4. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BU T WITHOUT ANY SUCCESS. 5. AGGRIEVED BY THIS ASSESSEE IS BEFORE US. 6. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PROVISIO NS OF SECTION 40(BA) ARE NOT APPLICABLE IN VIEW OF THE DECISION OF THE TRIBUNAL BANGALORE BENCH IN THE CAS E OF KODAGU ACADEMY FOR EDUCATION & CULTURE139 ITD 221 (BANG). THE COUNSEL FURTHER SUBMITTED THAT THE TRU STEES CANNOT BE TREATED AS MEMBERS OF THE A.O.P. PER CON TRA, SUPPORTING THE FINDINGS OF THE LOWER AUTHORITIES, T HE LD. DR STRONGLY CONTENDED THAT THERE IS NO DIFFERENCE BETWEEN TRUSTEES AND MEMBERS OF THE A.O.P. AND MEHTA JAISING DEVELOPERS ITA NO.571/MUM/2012 4 THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISION OF THE TRIBUNAL RELIED UPON. WHILE CONSIDE RING THE ISSUES ON IDENTICAL FACTS, THE TRIBUNAL HAS HEL D AS UNDER:- THE FIRST ISSUE RELATES TO THE DISALLOWANCE MADE UNDER SECTION 40(BA) OF THE ACT. THE PROVISIONS OF SECTION 40(BA) READ AS UNDER : 40(BA) IN THE CASE OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS [OTHER THAN A COMPANY OR A CO-OPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860(2) OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT ACT I N FORCE IN ANY PART OF INDIA], ANY PAYMENT OF INTEREST, SALARY, BO NUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH ASSOCIATION OR BODY TO A MEMBER OF SUCH ASSOCIATION OR BODY. 6.3 FROM A PLAIN READING OF THE AFORESAID PROVISION S, IT BECOMES CLEAR THAT THE INTEREST PAID TO A MEMBER OF AN AOP REQUIRES TO BE DISALLOWED IN TERMS OF THE AFORESAID PROVISIONS. THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE ON PAGE 4 OF HIS ORDER IS AS UNDER : IN VIEW OF THE ABOVE DECISION OF THE HON'BLE COURT I HOLD THAT THE TRUSTEES CANNOT BE TREATED AS MEMBERS OF THE AOP EV EN IF THE TRUST IS TO BE ASSESSED AS AN AOP FOR RATE PURPOSES. THE RELATIONSHIP BETWEEN THE SETTLER OF THE TRUST, THE TRUSTEES AND THE BENEFICIARIES IS NOT THAT OF A MEMBERSHIP OF A COMMON ASSOCIATION. P ROVISIONS OF SECTION 40(BA) CANNOT BE INVOKED TO DISALLOW THE IN TEREST PAID TO THE TRUSTEES IF THE TRUST DEED SO PROVIDES FOR. IN OTHER WORDS, THE LEARNED CIT(A) HAS NOT HELD THA T THE ASSESSEE MUST BE ASSESSED IN THE STATUS OF INDIVIDUAL. HE HAS APPLIED THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF SHARADABEN BHAGUSHER MAFATLAL PUBLIC CHARITABLE TRU ST (SUPRA) TO CONCLUDE THAT THE TRUSTEES CANNOT BE CONSIDERED AS MEMBERS OF THE AOP. IN FACT, HON'BLE HIGH COURT OF KARNATAKA N THE CASE OF CIT VS. SHYAMARAJU (189 ITR 1) HAS ALSO HELD THAT THE TRUST EES AS REPRESENTATIVE ASSESSEES CANNOT BE HELD ASSESSABLE AS AOP. THEREFORE, WHETHER OR NOT THE ASSESSEE IS ASSESSED IN THE STATUS OF AOP OR INDIVIDUAL, IT DOES NOT MATTER. THE DISALLOW ANCE UNDER SECTION 40(BA) OF THE ACT, CAN BE MADE ONLY WITH RE GARD TO THE INTEREST PAID TO THE MEMBERS OF THE AOP. THE TRUSTE ES OF THE ASSESSEE TRUST CANNOT BE DESCRIBED AS MEMBERS OF TH E AOP BY ANY STRETCH OF IMAGINATION. HENCE, WE FIND THAT THE ORD ER OF THE LEARNED CIT(A) ON THIS ISSUE IS IN ACCORDANCE WITH LAW AND THEREFORE CONFIRM THE SAME. MEHTA JAISING DEVELOPERS ITA NO.571/MUM/2012 5 FACTS ARE BEING IDENTICAL, FOLLOWING THE FINDINGS O F THE COORDINATE BENCH; THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.4 LAKHS. GROUND NO. 1 IS ACCORDINGL Y ALLOWED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL AND T HE ORDER OF THE TRIBUNAL DATED 19/09/2013, IF KEPT IN JUXTAP OSITION AND ANALYZED, WE NOTE THAT IN THE AFORESAID ORDER, THE TRIBUNAL ON IDENTICAL FACTS/ISSUES, BY FOLLOWING TH E ANOTHER DECISION FROM THE BANGLORE BENCH OF THE TRIBUNAL IN THE CASE OF KODAGU ACADEMY FOR EDUCATION AND CULTURE 139 ITD 221 (BANG.) DECIDED IN THE FAVOUR OF THE ASSESSEE. SINC E, THE FACTS AND THE ISSUE ARE IDENTICAL, FOLLOWING THE FINDING OF CO- ORDINATE BENCH, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION, THUS, THE APPEAL OF THE ASSESSEE IS ALLOW ED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON16/06/2015. SD/ - (RAJENDRA) S D/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 01/07/2015 F{X~{T? P.S/. . . MEHTA JAISING DEVELOPERS ITA NO.571/MUM/2012 6 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1' ( *+ ) / THE CIT, MUMBAI. P4. 0 0 $ 1' / CIT(A)- , MUMBAI 5. 3#4 .' , 0 *+' * 5 , $ % / DR, ITAT, MUMBAI 6. 6 % / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI