DCIT 10(2), MUMBAI V. J.K.T. FABRICS P. LTD, MUMBAI

ITA 5893/MUM/2013

• Counselvise Citation: 589319914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APURVA R SHAH
• Assessee Lawyers: PAWAN KUMAR BIRLA

Judgement Text

, J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , . . , , . . , BEFORE SHRI I.P. BANSAL , J M AND SHRI B.R. BASKARAN , A M . / ITA NO. 5893 / MUM/ 201 3 ( / ASSESSMENT YEAR : 20 1 0 - 11 ) DCIT 10 (2), AAYAKAR BHAVAN, ROOM NO. 432 , 4 TH FLOOR, M.K. ROAD, MUMBAI 400 0 20 .. / APPELLANT V/S M/S. J.K.T. FABRICS PVT. LTD., MEHRA ESTATE, LBS MARG, VIKHROLI, MU MBAI - 4000 79 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAAC J2759E APPELLANT BY : SHRI PAWAN KUMAR B I R L A (DR) REVENUE BY : SHRI APURVA R. SHAH (A R) / DATE OF HEARING 1 6 .0 6 .201 5 / DATE OF ORDER 16 .0 6 .2015 / ORDER . . , / PER B.R. BASKARAN , A .M. THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 08.07.2013 PASSED BY LD CIT(A) - 21 , MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 20 10 - 11 . J .K.T FABRICS 2 2. THE REVENUE I S AGGRIEVED BY THE DECISION OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS. 18.59 LAKHS MADE U/S. 40 ( A ) (IA) OF THE ACT. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE COMPANY IS ENGAG ED IN THE BUSINESS OF MANUFACTURE OF WRAPPER CLOTH AND OTHER CLOTH, WHICH IS USED FOR INDUSTRIAL PURPOSE. THE AO NOTICE D THAT THE ASSESSEE HAS MADE A PAYMENT OF RS.18,59,934/ - TO M/S. VAPI WASTE & EFFLUENT MANAGEMENT COMPANY LTD.(VWEMCL) ON TREATMENT OF EF FLUENTS AND THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE SAID PAYMENT. WHEN QUESTIONED , THE ASSESSEE SUBMITTED M/S. VWEMCL IS A MUTUAL ASSOCIATION PROVIDING SERVICE TO ITS MEMBER. IT H AS SET UP AN EFFLUENT TREATMENT PLANT IN VAPI INDUSTRIAL AREA OUT OF THE CONTRIBUTIONS MADE BY THE MEMBERS . IT WAS FURTHER SUBMITTED THAT ALL THE MEMBERS OF VWEMCL ARE CONTRIBUTING TOWARDS MONTHLY EXPENSES. IT WAS FURTHER SUBMITTED THAT T HE ASSESSEE IS A MEMBER OF THE VWEMCL AND THE ABOVE SAID AMOUNT OF RS.18.59 LAKHS WA S THE CONTRIBUTION MADE BY THE ASSESSEE TO MUTUAL ASSOCIATION. IT WAS FURTHER SUBM ITTED THAT SURPLUS AMOUNT REMAIN ING IN THE H ANDS VWEMCL IS EXEMPT FROM TAX UNDER THE P RINCIPLE OF MUTUALITY. ACCORDINGLY , IT WAS SUBMITTED THAT THERE IS NO REQUIREMENT OF DED UCTION OF TAX AT SOURCE IN RESPECT OF THE ABOVE SAID PAYMENT MADE BY THE ASSESSEE TO VWEMCL . 4. THE AO WAS NOT CONVINCED THE EXPLANATION S OF THE ASSESSEE. THE AO EXPRESSED THE VIEW THAT THE ASSESSEE SHOULD HAVE OBTAINED A NO DEDUCTION CERTIFICATE FROM THE ASSESSING OFFICER AS PER THE PROVISIONS OF THE ACT. FURTHER M/S. VWEMCL ALSO FALLS UNDER THE DEFINITION OF PERSON GIVEN UNDER THE INCOME TAX ACT , AS IT IS INCORPORATED AS A COMPANY . ACCORDINGLY, HE HELD THAT THE PAYMENT MADE BY THE J .K.T FABRICS 3 ASSESSEE WOULD FALL UNDER THE CATEGORY OF FEE FOR PROFESSIONAL OR TECHNICAL SERVICES AND HENCE THE TDS SHOULD HAVE BEEN DEDUCTED U/S 194J OF THE ACT. ACCORDINGLY HE DISALLOWED THE ENTIRE AMOUNT OF RS.18.59 LAKHS U/S.40 ( A ) (IA) OF THE ACT, S INCE THE ASSESSEE HAD F A ILED TO DE DUCT TAX AT SOURCE THEREON. 5. BEFORE THE LD. CIT(A), THE ASSESSEE PLACED RELIAN CE ON THE DECISION RENDERED BY C OORDINATE BENCH IN THE CASE OF MITSUTOR SHIPPING AGENCY P. LTD. VS. DCIT (ITA NO.3103/MUM/2010 - ORDER DATED 08.04.2011 ) , WHEREIN THE TRIBUNAL , WHILE CONSIDERING LIABILITY TO DEDUCT TDS ON THE PAYMENT OF MAINTENANCE CHARGES BY A OWNER OF THE PREMISES TO THE SOCIETY , H AS HELD THAT THE SE PAYMENTS WERE MADE TO DEFRAY COMMON C AUSE AND IT IS A PAYMENT TO COMMON FUND TO BE USED FOR THE BENEFIT OF THE OWNERS OF THE PREMISES. ACCORDINGLY, THE COORDINATE BENCH HELD THAT THE PAYMENT MADE BY A MEMBER TO THE SOCIETY IS GOVERNED BY THE P RINCIPLE OF MUTUALITY AND THE SOCIETY DOES NOT DERIVE ANY INCOME. ACCORDINGLY, THE TRIBUNAL DELETED THE DISALLOWANCE MADE U/ S.40 ( A ) (IA) OF THE A CT FOR NON - DEDUCTION OF TAX AT SOURCE ON THE CONTRIBUTION MADE BY A MEMBER TO THE SOCIETY . THE LD. CIT(A), BY FOLLOWING THE ABOVE SAID DECISION , HELD THAT THE PAYMENT MADE BY THE ASSESSEE ( BEING A MEMBER ) TO VWEMCL ( A MUTUAL CONCERN ) WO ULD NOT BE LIABLE FOR DEDUCTION OF TDS. ACCORDINGLY , THE LD. CIT(A) DELETED THE ADDITION. A GGRIEVED THE REVENUE HA S FILED THIS APPEAL BEFORE US. 6. WE NOTICE THAT M/S. VWEMCL WAS FOR MED AS MUTUAL ASSOCIATION U/S.2 5 OF THE COMPANIES ACT AND IT IS CARR YING ON EFFLUENT TREATMENT ACTIVITIES. IT WAS FURTHER SUBMITTED THAT M/S. VWEMCL WAS FORMED AS BEHEST OF THE HONBLE GUJARAT HIGH COURT AND THE ENT IRE INFRA STRU CTURE J .K.T FABRICS 4 WAS BUILT OUT OF CONTRIBUTION S MADE BY THE MEMBERS. THE QUESTION WHE THER M/S. VWEMCL IS A MUTU AL ASSOCIATION OR NO T, HAS ALSO BEEN ADJUDICA TED BY THE AHMADABAD BENCH OF ITAT IN ITS OWN CASE IN ITA NO.1310/AHM/2010 AND THE QUESTION HAS BEEN D ECIDED IN FAVOUR OF M/S. VWEMCL, I.E., IT HAS BEEN HELD THAT THE SURPLUS GENERATED BY VWECL WAS HELD TO BE NO T TAXABLE UNDER THE PRINCIPLES OF MUTUALITY. 7. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSE E IS A MEMBER OF M/S. VWEMCL AND IT HAS CONTRIBUTED THE ABOVE SAID AMOUNT OF RS.18.59 LAKHS TOWARDS ITS SHARE OF EXPENSES INCURRED BY M/S. VWEMCL. WE FURTHER NOTICE THE CO - ORDINATE BENCH OF TRIBUNAL HAS HELD IN THE CASE OF MITSUTOR SHIPPING AGENCY P. LTD (SUPRA) THAT THE PAYMENT BY A MEMBER OF THE SOCIETY TO DEFRAY THE COMMON EXPENSES IS GOVERNED BY THE PRINCIPLE OF MUTUALITY. IN THE INSTANT CASE , THE ASSESSEE HAS MADE THE PAYMENT TO A MUTUAL ASSOCIATION , W HEREIN IT IS A MEMBER AND THE SAID PAYMENT HAS BEEN MADE IN ORDER TO DEFRAY THE EXPENSES INCURRED BY THE MUTUAL ASSOCIATION. FURTHER THE SAID MUTUAL ASSOCIATION EXISTS FOR THE COMMON CAUSE OF ALL OF ITS MEMBERS. IN THE CASE OF MUTUAL ASSOCIATION, THE MEMBERS AND THE ASSOCIATION REPRESENT ONE AND SAME PERSON AND HENCE THE TRANSACTIONS DONE BETWEEN A MEMBER AND MUTUAL ASSOCIATION ARE CONSIDERED TO BE DEALING WITH SELF. 8. UNDER THE SE S ET OF FA CTS, BY FOLLOWING RATIO OF THE DECISION RENDERED IN THE CASE OF MITSUTOR SHIPPING AGENCY P. LTD. (SUPRA), W E APPROVE THE ORDER OF LD. CIT(A) IN HOLDING THAT THE CONTRIBUTION MADE BY THE ASSESSEE IS NOT NIT BY THE PROVISIONS OF T AX D EDUCTION AT S OURCE . HENCE , THERE IS NO REQUIREMENT TO DISALLOW THE IMPUGNED J .K.T FABRICS 5 PAYMENT U/S.40(A)(IA) OF THE ACT FOR THE FAILURE TO DEDUCT TDS. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 16TH DAY OF JUNE, 2015. SD SD SDSD S / - . . I.P.BANSAL JUDICIAL MEMBER . . B.R. BASKARAN ACCOUNTANT MEMBER MUMBAI, DATED : 16 . 06 .2015 PATEL / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE A SSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER TRUE COPY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI