VENKATESH PREMISES CO-OP SOC, MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 6684/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1672 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 19-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Source of fund; Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.6684/M/2011 ASSESSMENT YEAR: 2008-2009 M/S. VENKATESH PREMISES CO-OP. SOCIETY LTD., HOECHST HOUSE, 193, BACKBAY RECLAMATION, NARIMAN POINT, MUMBAI 400 021. PAN: AADFV 1309 E VS. INCOME TAX OFFICER, WARD-12(3)(2), 102, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NILESH PATEL RESPOND ENT BY : SHRI O.P. MEENA, DR DATE OF HEARING: 19.2.2013 DA TE OF ORDER: 8.3.2013 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 5.10.2011 IS A GAINST THE ORDER OF THE CIT (A)-23, MUMBAI DATED 15.7.2011 FOR THE ASSESSMENT Y EAR 2008-2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. THAT THE ORDER PASSES U/S 250(6) OF THE ACT IS B AD IN LAW AND ON FACTS. IT IS CONTENDED THAT THE ASSESSMENT FRAMED U/S 143( 3) OF THE IT ACT, 1961 IS BARRED BY LIMITATION , AS THE AO IS PASSED AFTER 31.12.2010. 2. THAT THE LD CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DISH- ANTENNA CHARGES OF RS. 9 LACS RECEIVED FROM THE MEMBE RS OF SOCIETY. 3. THAT THE LD CIT (A) HAS WRONGLY CONFIRMED THE DI SALLOWANCE OF DEDUCTION OF INTEREST OF RS. 2,57,950/-. 3. AT THE OUTSET, LD COUNSEL MENTIONED THAT GROUND NO.1 IS NOT PRESSED, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. REGARDING GROUND NO.2, LD COUNSEL MENTIONED THAT THE SAID GROUND RELATES TO APPLICABILITY OF THE PRINCIPLE OF MUTUALITY TO THE DISH-ANTENNA CHARGES OF RS. 9 LACS. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ASSESSEE EARNED THE SAID CHARGES FROM THE MEMBERS OF THE SOCIETY, WHICH IS UNDISPUTED, AND THE ISSUE TO BE DECIDED BY THE TRIBUNAL RELATES TO IF THE SAID AMOU NTS BEING CHARGES COLLECTED FROM 2 MEMBERS OF THE SOCIETY SHOULD BE COVERED BY THE PR INCIPLE OF MUTUALITY. AO TREATED THE SAID EXPENSES ARE NOT COVERED BY THE PRINCIPLE OF MUTUALITY RELYING ON THE HONBLE KERALA HIGH COURT JUDGMENT IN THE CASE OF C IT VS. TRIVANDRUM CLUB (2006) 282 ITR 505 (KERALA) WHICH WAS DECIDED ON THE FACTS OF EARNING OF INCOME FROM LETTING OUT OF MARRIAGE HALL. IN THIS CASE, THE HALL IS LET TO ALL AND SUNDRY AND NOT NECESSARILY TO THE MEMBERS. THE CIT (A) UPHELD THE DECISION OF THE AO VIDE HIS FINDING IN PARA 4.3 OF THE IMPUGNED ORDER WHICH REA D AS UNDER: 4.3 THE ASSESSMENT ORDER, SUBMISSIONS MADE FOR THE APPELLANT AND MATERIALS ON RECORD HAVE BEEN CONSIDERED. THE AO HA S GIVEN A FINDING THAT RECEIPTS ARE COLLECTED FROM FEW MEMBERS ONLY AND TH AT SOCIETYS PREMISES ARE COMMERCIALLY EXPLOITED BY A FEW MEMBERS ONLY. THE DISH-ANTENNA CHARGES HAVE BEEN RECEIVED FROM A FEW MEMBERS WHO HAVE USED THE SOCIETY PREMISES FOR COMMERCIAL ACTIVITIES. THUS, THE AO IS RIGHT I N HOLDING THAT IT CANNOT BE SAID THAT THE COMMON INTEREST OF ALL THE MEMBERS ARE INV OLVED. THE ACTIVITY IS TAINTED BY COMMERCIALLY AND CANNOT BE HELD TO COME UNDER THE SCOPE OF THE PRINCIPLE OF MUTUALITY. THE CASE LAWS CITED BY THE APPELLANT DO NOT COVER THE ISSUE OF COLLECTION OF DISH ANTENNA CHARGES, AND TH US ARE OF NO AVAIL. AS REGARDS THE CASE LAWS RELIED UPON BY THE APPELLANT, THE CASE OF CANARA BANK JUBILEE STAFF WELFARE FUND (SUPRA) DEALS WITH THE I SSUE OF INVESTMENT OF SURPLUS FUND AND IS NOT ON THE ISSUE RAISED IN THIS GROUND OF APPEAL. AS REGARDS THE DECISION OF STANDING CONFERENCE OF PUBLIC ENTERPRIS ES (SUPRA), THE PREDOMINANT OBJECT WAS FOUND TO BE TO RENDER APPROPRIATE ASSIST ANCE AND HELP TO ITS MEMBERS TO IMPROVE PERFORMANCE AND ROLE OF ITS MEMB ERS WHICH WAS NOT FOUND TAINTED WITH COMMERCIALITY, WHEREAS THE FACTS OF THE PRESENT CASE SHOW OTHERWISE. THE CHARGES RELATE TO FEW SELECTED MEMB ERS AND ARE HELD TO BE FOR COMMERCIAL EXPLOITATION OF THE APPELLANTS PREMISES . THUS THE APPELLANTS RELIANCE ON THE CASE LAWS CITED IS INAPT. IN VIEW OF THE AFORESAID DISCUSSION, THE AOS ACTION IN BRINGING TO TAX THE DISH ANTENNA CHARGES IS CONFIRMED. 5. IN THE PROCESS, THE CIT (A) IS OF THE OPINION THA T UNLESS ALL THE MEMBERS OF THE SOCIETY SHARE THE BENEFITS OF THE DISH-ANTENNA, THE PRINCIPLE OF MUTUALITY CANNOT BE INVOKED. THE CIT (A) DISTINGUISHED CERTAIN DECI SIONS IE THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS DCIT (2009) (308 ITR 202) (KARN) AN D THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. STANDING CONFERE NCE OF PUBLIC ENTERPRISES (2009) (319 ITR 179) (DEL). AGGRIEVED WITH THE ABOVE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US AS WELL AS THE DECISIONS CITED BY THE LD COUNSEL. DUR ING THE PROCEEDINGS BEFORE US, LD COUNSEL FILED COPIES OF THE ABOVE CITED JUDGMENTS O F THE HONBEL HIGH COURT OF KARNATAKA AND THE HONBLE HIGH COURT OF DELHI AND M ENTIONED THAT THE LOWER AUTHORITIES HAVE NOT APPRECIATED THE RATIO LAID BY THE HIGH COURTS IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND (SUPR A) AND STANDING CONFERENCE OF PUBLIC ENTERPRISES (SUPRA). HELD PORTIONS FROM THE SAID JUDGMENTS ARE REPRODUCED HERE UNDER: CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS D CIT HELD, ALLOWING THE APPEAL, THAT THE SOURCE OF FUNDS WAS ONLY FROM THE MEMBERS OF THE ASSESSEE AND IT HAD NOT RECEIVED ANY DONATIO NS OR OTHER MONETARY GRANTS FROM ANY OUTSIDE SOURCE APART FROM THE MEMBE RS DURING THE TWO RELEVANT ASSESSMENT YEARS. THE BANK IN WHICH THE SU RPLUS FUNDS WERE DEPOSITED, NO DOUBT FORMED A THIRD PARTY, BUT THE I DENTITY BETWEEN THE CONTRIBUTORS AND THE RECIPIENTS WAS NOT LOST. THE F UNDS HAD BEEN APPLIED FOR THE BENEFIT OF THE MEMBERS WHO CONTRIBUTED IT. THE INTEREST ON INVESTMENTS AND DIVIDEND EARNED ON SHARES WAS ONLY A PORTION OF THE TOTAL INCOME EARNED BY INVESTMENT OF THE SURPLUS FUNDS WHOLLY CONTRIBUT ED BY THE MEMBERS OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS. THE INC OME EARNED ON INTEREST ON INVESTMENT AND DIVIDEND ON SHARES WAS DEEMED INCOME FROM THE PROPERTY OF THE ASSESSEE AND WAS GOVERNED BY THE PRINCIPLE OF M UTUALITY AND, THEREFORE, WAS NOT TAXABLE FOR THE RELEVANT ASSESSMENT YEAR. CHELMSFORD CLUB V. CIT [2000] 243 ITR 89 (SC) AND CI T V. NATRAJ FINANCE CORPORATION [1988] 169 ITR 732 (AP) APPLIED . CIT VS. STANDING CONFERENCE OF PUBLIC ENTERPRISES HELD, DISMISSING THE APPEAL, THAT THE ASSESSING OFF ICER GOT INFLUENCED BY THE FACT THAT THE ASSESSEE HAD LET OUT PART OF THE PREM ISES TO ITS MEMBERS AND WAS RECEIVING RENTS AND ALSO GIVING THE CONVENTION CENT RE TO NON-MEMBERS. THAT WAS NOT SUFFICIENT TO CLOTHE THE ACTIVITY OF THE AS SESSEE AS COMMERCIAL ACTIVITY WHICH WAS NOT THE OBJECT WITH WHICH THE ASSESSEE-SO CIETY WAS FORMED. THE PRE-DOMINANT OBJECT WAS TO RENDER APPROPRIATE ASSIS TANCE AND HELP TO ITS MEMBERS FOR IMPROVING THEIR PERFORMANCE AND ROLE. T HEREFORE, SIMPLY BECAUSE SOME INCIDENTAL ACTIVITY OF THE ASSESSEE WAS REVENU E GENERATING, THAT DID NOT PROVIDE ANY JUSTIFICATION TO HOLD THAT IT WAS TAINT ED WITH 'COMMERCIALITY' AND REACHED A POINT WHERE RELATIONSHIP OF MUTUALITY END S AND THAT OF TRADING BEGAN. CHELSMFORD CLUB V. CIT [2000] 243 ITR 89 (SC ) APPLIED. 8. FROM THE ABOVE, IT IS EVIDENT THAT SO LONG AS TH E FACILITIES LIKE THE DISH- ANTENNAE IS PROVIDED BY THE MEMBERS AND THE SAME IS ONLY FOR THE MEMBERS OF HE SOCIETY, AND THE FACILITIES ARE NOT OPEN TO THE NON -MEMBERS OF THE SOCIETY, UNLIKE THE CASE, WHIERE THE MARRIAGE HALL IS LET TO OTHER THAN MEMBERS TOO, RELEVANT IN THE 4 CASE OF TRIVANDRUM CLUB, IN OUR OPINION, THE PRINCI PLE OF MUTUALITY APPLIES TO THE RECEIPTS FROM THE MEMBERS. IN OUR OPINION, THE ABOV E RATIOS APPLY TO THE FACTS OF THE PRESENT CASE. PRINCIPLE OF MUTUALITY IS ADEQUA TELY EXPLAINED BY THE APEX COURT IN THE CASE OF BANGALORE CLUB 29 TAXMANN.COM 29 (SC) TOO. ACCORDINGLY, GROUND NO.2 IS ALLOWED . 9. GROUND NO.3 RELATES TO THE DISALLOWANCE OF DEDUC TION OF INTEREST OF RS. 2,57,950/-. HOLDING THAT THE SAID RECEIPTS ARE OUT SIDE THE SCOPE OF PRINCIPLE OF MUTUALITY, LD COUNSEL RELIED ON VARIOUS DECISIONS I N SUPPORT OF HIS ARGUMENT. 10. ON THE OTHER HAND, LD DR FILED COPY OF THE HON BLE SUPREME COURT IN THE CASE OF BANGALORE CLUB VS. CIT [2013] 29 TAXMANN.COM 29 (SC). 11. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUES A ND PERUSED THE MATERIAL PLACES BEFORE US AS WELL AS THE JUDGMENTS RELIED ON BY THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES. IN THIS REGARD, THE CIT (A) CONF IRMED THE ACTION OF THE AO BY HOLDING AS UNDER: 6.3. THE ASSESSMENT ORDER, SUBMISSIONS MADE FOR THE APPELLANT AND MATERIALS ON RECORD HAVE BEEN CONSIDERED. ACCORDIN G TO SOM VIHAR APARTMENT OWNERS HOUSING MAINTENANCE SOCIETY VS. CIT (1997) 6 0 ITD 392 (DEL), THE INTEREST FROM BANK IN RESPECT OF SURPLUS SUMS RECEI VED FROM MEMBERS KEPT AS DEPOSITS IN BANK, IS NOT A MUTUAL ACTIVITY AND AS S UCH IT WOULD BE EXIGIBLE TO TAX ON THE BASIS OF DECISION OF GUJARAT HIGH COURT IN SPORTS CLUB OF GUJARAT VS. CIT (1998) 171 ITR 504 (GUJ). IN VIEW OF THIS POSI TION, THE AOS ACTION IS CONFIRMED. 12. CONSIDERING THE ABOVE, WE ARE OF THE OPINION TH AT THIS INTEREST OF RS. 2,57,950/- BEING EARNED FROM NON-MEMBERS OF THE SOC IETY IE ICICI / IDBI / INCOME TAX ETC, THE SAID RECEIPTS HAVE TO BE TREATED AS TA XABLE RECEIPTS OF THE SOCIETY. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS DISMISSED . 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH 2013. SD/- SD/- (VIVEK VARMA) (D. KARUNAKA RA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 8.03.2013 AT :MUMBAI 5 OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR F, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI