MEHTA JAISING DEVELOPERS, MUMBAI V. ASST CIT CIR 15(2), MUMBAI

ITA 7391/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83506 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 13-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V R PATIL
• Assessee Lawyers: SAMIR DALAL
• Keywords: Charitable institution

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.7391/MUM/2012 (A.Y.2008-09) MEHTA JAISING DEVELOPERS, 398, KIRTI KUNJ, 14 TH ROAD, KHAR (WEST), MUMBAI 400052 PAN: AABTM 0713F THE ADDL. COMMISSIONER OF INCOME TAX, RG.15(2), MATRU MANDIR, MUMBAI 400007 ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI SAMIR DALAL ()$% * + * + * + * + /RESPONDENT BY :SHRI V.R.PATIL ' * ,-' / / / / DATE OF HEARING : 14.8.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 14.08.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-26, MUMBAI DATED 17/10/2012 FOR ASSESSMENT YEAR 2008-09 GROUNDS OF APPEAL READ AS UNDER: THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN UPHOLDING DISALLOWANCE MADE ON ACCOUNT OF PROFESSIONAL FEES P AID RS.7,05,000 TO THE MEMBERS OF A.O.P. U/S.40(BA) OF INCOME-TAX ACT, 1961. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S WRONGLY CONSIDERED STATUS OF YOUR APPELLANT AS AN A.O.P., IN FACT YOUR APPELLANT IS AN INDIVIDUAL. FOR TAXATION PURPOSE SAME IS TREATED AS AN A.O.P. 2. AT THE OUTSET IT WAS POINTED OUT BY LD. AR THAT SIMILAR ADDITION WAS MADE IN RESPECT OF A.Y 2006-07 AND TRIBUNAL HAS DELETED SUC H ADDITION VIDE ORDER DATED 19/9/2013 IN ITA NO.286/MUM/2011. THE COPY OF THE ORDER WAS PLACED ON OUR RECORD AND WAS ALSO GIVEN TO LD.DR. THE CONTENTS O F THE SAID ORDER AS UNDER: THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE O RDER OF THE CIT(A)-26, MUMBAI, DATED 27/12/2010, PERTAINING TO A.Y.2006-07. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUNDS NO. 1 RELATES TO THE DISALLOWANCES ON ACCOUNT OF PROFESSI ONAL FEES PAID RS.4 LAKHS AND GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.6 LA KHS. BOTH THE DISALLOWANCES ARE BEING MADE U/S 40(BA) OF THE ACT. ITA NO.7391/MUM/2012 (A.Y.2008-09) 2 3. THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRU CTION FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING IN THE STATUS OF A.O.P. DURIN G THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAS DEBITED A TOTAL AMOUNT OF RS.4,90,500/- UNDER THE HEAD OF PROFESSIONAL FEE S. THE DETAILS ARE EXHIBITED AT PAGE 2 OF THE ASSESSMENT ORDER. THE AO OBSERVED THAT TH E ASSESSEE HAS PAID RS.4 LAKHS TO THE FIVE MEMBERS OF THE A.O.P AT THE RATE OF RS.80, 000/- PER MEMBER. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE AS TO WHY THIS PAYMEN T 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 C ASE 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 PAYM ENT IS COVERED BY THE PROVISIONS OF SECTION 40(BA) OF THE ACT. THE AO FURTHER OBSERVED THAT SINCE THE ASSESSEE HAS NOT CLAIMED THE EXPENSES IN THIS YEAR, THEREFORE, THE D ISALLOWANCE 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 CASE OF KODAGU ACADEMY FOR EDUCATION & CULTURE139 ITD 221 ( BANG). THE COUNSEL FURTHER SUBMITTED THAT THE TRUSTEES CANNOT BE TREATED AS ME MBERS OF THE A.O.P. PER CONTRA, 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 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 TRIBU NAL RELIED UPON. WHILE CONSIDERING THE ISSUES ON IDENTICAL FACTS, THE TRIBUNAL HAS HELD 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 SOCIE TY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860(2) OF 1860), OR UN DER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA], ANY PAYMEN T OF INTEREST, SALARY, BONUS, 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 EVEN IF THE TRUST IS TO BE ASSESSED AS AN AOP FOR RATE PURPOSES. THE RELATIONSHIP BETWEEN THE SET TLER OF THE TRUST, THE TRUSTEES AND THE BENEFICIARIES IS NOT THAT OF A MEMBERSHIP O F A COMMON ASSOCIATION. PROVISIONS OF SECTION 40(BA) CANNOT BE INVOKED TO D ISALLOW THE INTEREST 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 APPL IED THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF SHARADA BEN BHAGUSHER MAFATLAL PUBLIC CHARITABLE TRUST (SUPRA) TO CONCLUDE THAT TH E TRUSTEES CANNOT BE CONSIDERED AS MEMBERS OF THE AOP. IN FACT, HON'BLE HIGH COURT OF KARNATAKA N THE CASE OF ITA NO.7391/MUM/2012 (A.Y.2008-09) 3 CIT VS. SHYAMARAJU (189 ITR 1) HAS ALSO HELD THAT T HE TRUSTEES AS REPRESENTATIVE ASSESSEES CANNOT BE HELD ASSESSABLE AS AOP. THEREFO RE, WHETHER OR NOT THE ASSESSEE IS ASSESSED IN THE STATUS OF AOP OR INDIVI DUAL, IT DOES NOT MATTER. THE DISALLOWANCE UNDER SECTION 40(BA) OF THE ACT, CAN B E MADE ONLY WITH REGARD TO THE INTEREST PAID TO THE MEMBERS OF THE AOP. THE TR USTEES OF THE ASSESSEE TRUST CANNOT BE DESCRIBED AS MEMBERS OF THE AOP BY ANY ST RETCH OF IMAGINATION. HENCE, WE FIND THAT THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE IS IN ACCORDANCE WITH LAW AND THEREFORE CONFIRM THE SAME. FACTS ARE BEING IDENTICAL, FOLLOWING THE FINDINGS O F THE COORDINATE BENCH; THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.4 LAKHS. GRO UND NO. 1 IS ACCORDINGLY ALLOWED. 8. SINCE NO ADDITION WAS MADE ON ACCOUNT OF SALARY OF RS.6 LAKHS BY THE AO, THE CIT(A) GROSSLY ERRED IN SUSTAINING THE ADDITION WH ICH IS UNCALLED FOR YEAR UNDER CONSIDERATION. TO THIS EXTENT, ORDER OF THE CIT(A) IS VACATED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 3. LD. DR DID NOT CONTEST TO THE SUBMISSIONS OF LD. AR THAT THE FACTS AND CIRCUMSTANCES LEADING TO IMPUGNED ADDITION ARE IDEN TICAL TO THE FACTS FOR A.Y 2006- 07. THEREFORE, RESPECTFULLY FOLLOWING AFOREMENTION ED ORDER OF THE TRIBUNAL, WE DELETE THE ADDITION AND ALLOW THE APPEAL FILED BY THE ASSE SSEE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH AUG., 2014. 1 * ./0 2'3 14.08.2014 / * 9 SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 14TH AUG. 2014. VM. 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0, 1 * (,: ; :0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. <() / THE CIT, MUMBAI. 4. < / CIT(A)-13, MUMBAI 5. :?9 (,' , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. 1' 1' 1' 1' / BY ORDER, ):, (, //TRUE COPY// B BB B/ // /C C C C (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI