Utkal Chamber of Commerce, Cuttack V. ITO, Cuttack

ITA 88/CTK/2014

• Counselvise Citation: 8822114 RSA 2014
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: H NAIK R K KAR
• Keywords: Business income; Benefit of exemption
• Section: 133(6); 12A; 147; 68; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO S . 87 TO 91 /CTK/201 4 : (ASST. YEAR S : 200 4 - 0 5,2005 - 06, 2006 - 07,2007 - 08 &2008 - 09 ) UTKAL CINE CHAMBER OF COMMERCE, BISWAL BAGICHA, TELENGA BAZAR, CUTTACK 753008 PAN : AAAAU2690M (APPELLANT) VS. INCOME TAX OFFICER, WARD 2(4), SHELTER CHHAK, CUTTACK 753008. (RESPONDENT) ASSESSEE BY : SHRI H. NAIK /R.K. KAR, A.R . RE VENUE BY : SHRI S.C. MOHANTY, D. R . DATE OF HEARING : 23 /0 4 /2014 DATE OF PRONOUNCEMENT :13 /0 6 /2014 O R D E R PER P.K. BANSAL : ALL THE S E APPEAL S HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF CIT (A), CUTTACK PASSED U/S 250 DATED 02.01 .201 4 . IN THE APPEAL, THE ASSESSEE HAS TAKEN THE FOLLOWING COMMON EFFECTIVE GROUND S OF APPEAL IN THE ASSESSMENT YEAR 2004 - 05 TO 2008 - 09 : - 1. FOR THAT THE ORDER DT. 13.12.2013 AS PASSED BY THE LEARNED CIT(A) , CUTTACK IS NOT JUST AND LEGAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. FOR THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF L EARNED A. O IN INITIATING PROCEEDING U/S. 147 OF THE I.T.ACT PURSUANT TO SURVEY CONDUCTED ON 04.02.2010 WITHOUT APPROVAL OF THE JT. DIRECTOR / JT. COMMISSIONER AS PER PROVISO TO SECTION 133(6) OF THE I.T. ACT AND NON - SERVICE OF THE SAME TO THE APPELLANT IS ILLEGAL AND WITHOUT JURISDICTION ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE. 2 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) 3. FOR THAT THE L EARNED CIT(A) ERRED IN DENYING BENEFIT OF EXEMPTION UNDER CONCEPT OF MUTUALITY CLAIMED BY THE APPELLANT WITHOUT CONSIDERATION TO THE APPELLANTS EXPLANATIONS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE GROUND NO.4 IN EACH OF THE ASSESSMENT YEAR IS DIFFERENT. IN THE ASSESSMENT YEAR 2004 - 05 AND 2008 - 09 THE GROUND NO. 4 IS ALSO COMMON EXCEPT CHANGE IN THE FIGURES : - 4. FOR THAT THE LEARNED CIT(A) ERRED IN CONFIRMING FOLLOWING ADDITIONS AS MADE BY THE LEARNED A.O WITHOUT CONSIDERATION TO THE APPELLANTS EXPLANATIONS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. (1) LIC PREMIUM FOR M EMBERS & STAFF - RS. 5,51,589/ - (2) DONATION BENEVOLENT FUND - RS. 3, 75,000/ - (3) DISTRIBUTORS A/C - RS. 73,786/ - TOTAL : - RS.10,00,375/ - . 3. IN THE ASSESSMENT YEAR 2008 - 09 THE FIGURE OF RS. 6,65,866/ - , RS. 50,000/ - AND RS. 9,500/ - BE READ IN PLACE OF RS.5,51,589/ - , RS.3,75,000/ - AND RS.73,786/ - RESPECTIVELY . 4. IN THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07 GROUND NO.4 IS COMMON EXCEPT CHANGE IN THE FIGURES. THE GROUND FOR ASSESSMENT YEAR 2005 - 06 BE READ AS UNDER : - 4. FOR THAT THE LEARNED C IT(A) ERRED IN CONFIRMING FOLLOWING ADDITIONS AS MADE BY THE LEARNED A.O WITHOUT CONSIDERATION TO THE APPELLANTS EXPLANATIONS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. (1) LIC PREMIUM FOR M EMBERS & STAFF - RS. 6,09,305/ - (2) DISTRIBUTORS A/C - RS. 41 , 000 / - TOTAL : - RS. 6 , 5 0,3 0 5/ - . 5. IN THE ASSESSMENT YEAR 2006 - 07 THE FIGURE OF RS.6,66,277/ - AND RS.60,000/ - BE READ IN PLACE OF RS.6,09,305/ - AND RS. 41,000/ - RESPECTIVELY . 3 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) 6. THE GROUND NO.4 IN ASSESSMENT YEAR 2007 - 08 READ AS UNDER : - 4. FOR THAT THE LEARNED CIT(A) ERRED IN CONFIRMING FOLLOWING ADDITIONS AS MADE BY THE LEARNED A.O WITHOUT CONSIDERATION TO THE APPELLANTS EXPLANATIONS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. (1) LIC PREMIUM FOR M EMBERS & STAFF - RS.6,01,095/ - (2) DONATION BENEVOLENT FUND - RS.1,85,300/ - TOTAL : - RS. 7 , 86 ,3 9 5/ - . 7. GROUND NO.1 IN ALL THE APPEALS IS GENERAL AND THEREFORE IT DOES NOT REQUIRE ANY ADJUDICATION. GROUND NO.2 IN ALL THE APPEALS , SINCE NOT PRESSED STANDS DISMISSED AS NOT PRESSED. 8. GROUND NO. 3 IN ALL THE APPEALS RELATE TO THE COMMON ISSUE RELATING TO THE ASSESSEE IS A MUTUAL ASSOCIATION AND THEREFORE, NOT LIABLE TO INCOME TAX. THE FACTS RELATING TO THIS GROUND ARE THAT THERE HAD BEEN A SURVEY CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 4.2.2010 IN THE COURSE OF SURVEY BOOKS OF ACCOUNTS, DOCUMENTS WERE IMPOUNDED. NOTICE U/S 148 DATED 28.3.2011 FOR INITI ATING THE PROCEEDINGS U/S 147 WERE ISSUED FOR THE ASSESSMENT YEAR 2004 - 05 TO 2008 - 09. THE ASSESSEE FILED THE RETURN IN RESPONSE TO THE NOTICE ON 12.7.2011 ASKING THE ASSESSEE TO COMMUNICATE THE COPY THE REASONS TO BELIEVE. THE COPY OF THE REASONS WERE GIV EN BY THE ASSESSING OFFICER. FROM THE REASONS THE ASSESSEE NOTED THE PROCEEDINGS U/S 147 WAS INITIATED ON THE BASIS THAT M/S ODISHA FILM DISTRIBUTORS SYNDICATE (O FDS .) WHO ARE IN EXISTENCE SINCE 1997 - 98 AND FUNCTIONING UNDER A SOCIETY NAMELY M/S UTKAL C INE CHAMBER OF COMMERCE (UCCC) . THE ASSESSING OFFICER NOTED THAT OFDS WAS HAVING SURPLUS IN EACH OF THE YEAR. THE ASSESSEE FILED THE RETURN IN RESPONSE TO THE NOTICE U/S 148 DURING THE ASSESSMENT YEAR 2004 - 05 A LOSS OF RS. 35,895/ - WERE DISCLOSED UNDER T HE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE TOOK THE PLEA THAT IT IS GOVERNED BY THE PRINCIPLE OF MUTUALITY AS THE MEMBERSHIP OF THE SOCIETY IS MAINLY RESTRICTED TO THE PERSONS ENGAGED IN THE MOVIE BUSINESS AND THERE IS NO 4 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) COLLECTION OR RECEIPT FROM NON - MEMBERS OR DISBURSEMENT TO THE NON - MEMBERS. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE ON THE BASIS THAT THE ASSESSEE IS A TRADE, PROFESSIONAL OR SIMILAR ASSOCIATION AND DERIVED INCOME FROM SPECIFIC SERVICES RENDERED TO ITS MEMBERS WHICH IS CHARGEABLE U/S 28(III) OF THE INCOME TAX ACT. ASSESSEE IS NOT A SOCIAL CLUB AND EXIST FOR THE BENEFIT OF ITS MEMBERS WHO ARE FROM THE FIELD OF MOVIE PRODUCTION, EXHIBITION AND DISTRIBUTION. IT WAS NOTED BY HIM THAT ASSESSEE HAS BEEN GENERATING INC OME FROM CASE FEES, PICTURE REGISTRATION FEES, PENALTY ETC FROM DISTRIBUTORS, EXHIBITORS AND PRODUCERS OF FILMS. IT ALSO ACTS AS AN ARBITRATOR. THE NATURE OF THE INCOME IS OF COMMERCIAL ORGANISATION. ON THE BASIS OF THE CLAUSE 2B AND 2C OF AIMS AND OBJECT S THE A.O OBSERVED THAT ASSESSEE WAS RENDERING SERVICES TO ITS MEMBERS AND NON - MEMBERS AND HAS BEEN CREATED TO PROMOTE, PROTECT AND SAFEGUARD THE INTEREST OF CINEMA INDUSTRY AT LARGE. AS PER THE GUIDELINES OF M/S O FDS THE NON - MEMBER CAN BE ADMITTED FOR SE TTLEMENT OF DISPUTE. THE MUTUAL ASSOCIATION IS ESTABLISHED FOR THE BENEFIT OF ITS MEMBERS. THE ASSESSEE HAS LET OUT THE BUILDING TO NON - MEMBER. RELIANCE WAS PLACED ON THE DECISION OF CIT VS BANKIPUR CLUB LTD, 129 ITR 787 IN WHICH HONBLE SUPREME COURT HAS OBSERVED AS UNDER : - PROFIT ARISING FROM ANY TRANSACTION WITH AN OUTSIDER VITIATES THE CONCEPT OF MUTUALITY AND HENCE IS LIABLE FOR TAXATION. WHEN A BODY OF INDIVIDUAL IS INCORPORATED INTO A COMPANY OR FORMED INTO A REGISTERED SOCIETY,WHAT IS ESSENTIA L IS THAT IT SHOULD NOT HAVE DEALINGS WITH AN OUTSIDE BODY. 9. HE HAS RELIED ON THE DECISION OF AMRITSAR BENCH OF ITAT IN THE CASE OF NODAL INDIA MOTION PICTURES ASSOCIATION V ITO 5, ITD (ASR.) 9. IN WHICH IT WAS HELD THAT PENALTY AND RE - ADMISSION FEE RECEIVED BY A MUTUAL ASSOCIATION FROM ITS MEMBERS OF INFRINGEMENT OF RULES AND REGULATIONS IS NOT BUSINESS INCOME U/S 28(III). IN VIEW OF THE SAID DECISION THE ASSESSING OFFICER TOOK THE VIEW SINCE A SSESSEE ENTERED INTO AN AGREEMENT WITH AN OUTSIDER TO GENERATE SURPLUS THE 5 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) VIOLATED THE PRINCIPLE OF MUTUALITY. THE TOTAL RECEIPT OF M/S OSDF IS RS.9,14,419/ - OUT OF THESE RECEIPTS THE ASSESSEE PAID LIC PREMIUM OF ITS MEMBERS AMOUNTING TO RS.5,51,589/ - IN CHEQUE PAID INDIVIDUALLY. THUS BENEFICIARY OF CONTRIBUTION NOT PARTICIPATED IN THE COMMON FUND AS A COLLECTIVE BODY. THE ASSESSEE APPLIED FOR REGISTRATION U/S 12A ON 26.3.2010 A MONTH AFTER SURVEY OPERATION WHICH WAS REJECTED BY CIT VIDE ORDER DATED 30. 9.2010 THUS THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE IS A TRADE ASSOCIATION NOT A SOCIAL CLUB CREATED FOR THE BENEFIT OF THE PERSONS WHO ARE IN THE LINE OF CINEMA INDUSTRY. HE ALSO NOTED THE QUALIFICATION MADE BY THE AUDITOR AND ULTIMATELY AFT ER POINTING OUT THE VARIOUS DISCREPANCIES ON THE RELIABILITY OF THE BOOK RESULT THE ASSESSING OFFICER REJECTED THE BOOK RESULT AND DETERMINE THE INCOME AT RS.9,65,190/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF TH E ASSESSING OFFICER ON THE ISSUE OF MUTUALITY AS WELL AS DISALLOWANCE OF LIC PREMIUM AND OTHER DISALLOWANCES. THE LEARNED A.R BEFORE US CONTENDED THAT THE ASSESSEE IS A MUTUAL ASSOCIATION AND WHATEVER INCOME IS EARNED IS MERELY A SURPLU S. THE ASSESSEE HAS RECEIVED THE INCOME FROM THE MEMBERS ONLY. NO INCOME HAS BEEN RECEIVED FROM OUTSIDERS. OUT ADDITION WAS DRAWN TO PAGE 6 OF THE PAPER BOOK AND IT WAS CONTENDED THAT THE ASSESSEE SOCIETY IS A BUSINESS ESTABLISHMENT THE RECEIPTS UNDER THE HEAD MEMBERSHIP, PI CTURE REGISTRATION FEE AND SELLING OF FORMS CANNOT BE TREATED AS RECEIPTS FROM COMMERCIAL ACTIVITIES. THERE HAD BEEN SURVEY. NO INCREMENTING MATERIAL WAS FOUND TO PROVE THAT A PARTICULAR PERSON IS A KNOWN MEMBER AND A PARTICULAR RECEIPT IS FROM A NON - MEMB ER. WHILE COMPUTING THE TOTAL INCOME THE ASSESSING OFFICER ACCEPTED THE FIGURES THE FIGURES OF INCOME AND EXPENDITURE DISCLOSED BY THE ASSESSEE IN THE INCOME EXPENDITURE ACCOUNT. 10. THE LD. D.R ON THE OTHER HAND RELIED ON THE ORDER OF THE ASSESSING OFFI CER AND CONTENDED THAT THE ASSESSEE IS NOT A MUTUAL ASSOCIATION. ASSESSEE RECEIVED MONEY FROM EXHIBITORS OF FILM AND REFUND THE SAME TO THE DISTRIBUTORS ON 6 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) SETTLEMENT OF DISPUTE. THE EXHIBITOR NEED NOT BE MEMBER. THE BENEFIT OF LIC PREMIUM WAS GIVEN TO SOME OF THE MEMBERS. 11. WE HEARD THE RIVAL SUBMISSION AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. A MUTUAL ASSOCIATION IS AN AS SOCIATION OF PERSONS WHO AGREE TO CONTRIBUTE FUNDS FOR SOME COMMON PURPOSE MUTUALLY BE NEFICIAL AND RECEIVE BACK THE SURPLUS LEFT OUT IN THE SAME CAPACITY IN WHICH THEY HAVE MADE THE CONTRIBUTIONS. THEREFORE, THE CAPACITY AS CONTRIBUTORS AND PARTICIPANTS REMAINS THE SAME. THE PARTICIPATION ENVISAGED IN THE PRINCIPLE OF MUTUALITY IS NOT THAT THE MEMBERS SHOULD TAKE THE SURPLUS TO THEMSELVES. IT IS ENOUGH IF THEY HAVE A RIGHT OF DISPOSAL OVER THE SURPLUS. THE CONTRIBUTORS CONTRIBUTE NOT WITH AN IDEA TO TRADE BUT WITH AN IDEA OF RENDERING MUTUAL HELP. THEY RECEIVED BACK SURPLUS WHICH IS LEFT AFT ER MEETING THE EXPENDITURE OF THE ASSOCIATION WHICH IS INCURRED FOR THE COMMON PURPOSE IN THE SAME CAPACITY IN WHICH THEY HAVE CONTRIBUTED. THUS THEY RECEIVED BACK WHAT WAS REALLY THERE ON. THE GENERAL LAW IS THAT NO MEN CAN MAKE A PROFIT OUT OF HIMSELF T HEREFORE, THE SURPLUS ACCRUING TO A MUTUAL CONSENT CANNOT BE REGARDED AS INCOME AS A PERSON CANNOT ENTER INTO A TRADE OR BUSINESS WITH HIMSELF. GENERALLY INCOME FROM MUTUALITY IS NOT TAXABLE BUT THERE ARE FOLLOWING EXCEPTIONS : - 1. I NCOME OF MUTUAL INSURANCE COMPANIES, WHICH IS SPECIFICALLY TREATED AS INCOME UNDER THE EXTENDED DEFINITION OF INCOME; 2. INCOME OF TRADE, PROFESSIONAL OR SIMILAR ASSOCIATIONS FROM SPECIFIC SERVICES RENDERED TO ITS MEMBERS; 3. INCOME OF CO - OPERATIVE SOCIETY, EVEN IF IT IS A MUTUAL CONCERN, ENGAGED IN THE BUSINESS OF BANKING OR INSURANCE . 12. HONBLE SUPREME COURT IN THE CASE OF CIT VS KUMBAKONAM MUTUAL BENEFIT FUDN LTD, 53 ITR 241 (SC) TOOK THE VIEW THAT THE ESSENCE OF MUTUALITY LIKE IN THE RETURN OF WHAT ONE HAS CONTRI BUTED TO A COMMON FUND. ALL PARTICIPANTS MUST BE CONTRIBUTORS TO THE COMMON FUND. THERE MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPATORS. IN THE CASE OF CIT VS INDIAN 7 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) PAPER MILL ASSOCIATION, 209 ITR 281, CALCUTTA HIGH COURT TOOK THE VIE W THAT THE MAIN TEST OF MUTUALITY IS COMPLETE IDENTITY OF CONTRIBUTORS WITH RECIPIENTS. THE IDENTITY MUST NOT NECESSARILY BE OF INDIVIDUALS, BECAUSE IT IS AN IDENTITY OF STATUS OR CAPACITY WHICH MATTERS. 13. WE NOTED FROM THE BYE - LAWS OF THE SOCIETY THAT THERE IS NO PROVISION ABOUT THE DISTRIBUTION OF THE SURPLUS DERIVED FROM THE MEMBERS EVEN THERE IS NO PROHIBITION IN THIS REGARD. THE ASSESSING OFFICER TREATED THE ASSESSEE AS A COMMERCIAL ORGANISATION BUT DID NOT POINT OUT ANY SPECIFIC SERVICE WHICH IS RENDERED TO AN OUTSIDER OR TO A MEMBER WHICH IS NOT BEING RENDERED TO ALL THE MEMBERS . IF GUIDELINES STIPULATES FOR THE ADMISSION OF NON - MEMBER AS MEMBER FOR SETTLEMENT OF DISPUTE. THIS IN OUR OPINION CANNOT BE REGARDED RENDERING T HE SERVICES TO THE NON - MEMBER OR RENDERING OF SPECIFIC SERVICE TO A PARTICULAR MEMBER . IT IS A GENERAL SERVICE AVAILABLE TO ALL THE MEMBER S BUT IT CANNOT BE SERVICE RENDERED TO NON - MEMBERS. THERE HAD BEEN A SURVEY IN THE CASE OF THE ASSESSEE ON 4.2.2010. SOME BOOKS OF ACCOUNT, LEDGER, BILLS AND VOUCHERS AND MONEY RECEIPT IN SUPPORT OF THE TRANSACTION WERE IMPOUNDED BY THE DEPARTMENT. THIS FACT IS ALSO VERY CLEAR FROM THE NOTES OF THE AUDIT REPORTS THAT FIGURES APPEARING IN INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET HAVE BE EN COMPILED WITH FROM THE MONTHLY FIGURES OF RECEIPTS AND PAYMENTS ACCOUNT AS REPRODUCED AT PAGE 5 OF THE ASSESSMENT ORDER ON THE BASIS OF WHICH BOOKS OF ACCOUNTS HAS BEEN REJECTED. THE ASSESSING OFFICER ALSO TOOK THE VIEW OF VIOLATION OF PRINCIPLE OF MUTU ALITY AS AN AGREEMENT FOR LETTING OUT PROPERTY OF THE ASSESSEE WAS FOUND DURING SURVEY IN THE YEAR 2009. THE CONTENTION OF THE ASSESSEE IS THAT THIS COULD NOT BE MATERIALISE WHICH COULD BE VERIFIED FROM THE BOOKS OF ACCOUNT AND THE AUDITED INCOME AND EXPEN DITURE AS IMPOUNDED. WE HAVE PURSUED THE CASE OF CIT VS INDIAN CHAMBER OF COMMERCE, 130 ITR 186(SC) IN WHICH IT WAS OBSERVED BY HONBLE SUPREME COURT THAT OWNING AND LE TTING OUT OF BUILDING WILL NOT AMOUNT TO CARRYING ON ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR 8 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) BUSINESS. NEITHER THE ASSESSEE NOR THE REVENUE EXPLAINED WHETHER ASSESSEE HAS GONE IN APPEAL AGAINST THE ORDER PASSED BY CIT U/S 12A. WE HAVE PURSUED THE INCOME AND EXPENDITURE ACCOUNT WHICH HAS BEEN AUDITED BUT IN REALITY THESE ACCOUNTS ARE MERE COMPILATION. THE ASSESSEE HAS RECEIVED CASE FEES, PICTURE REGISTRATION FEES, PENALTY, OTHER INCOME SO FAR IT RELATE TO DISTRIBUTION SECTION THE ASSESSEE RECEIVE INCOME FROM FORM SELLING, TITLE REGISTRATION FEES. THERE IS NOTHING ON RECORD WHETHER THE SE FEES ARE RECEIPTS FROM THE MEMBERS OR NON - MEMBERS OR THESE RELATE TO SPECIFIC SERVICE RENDERED TO MEMBERS SO THAT PROVISION OF SECTION 28 (III) BE APPLIED. THE ASSESSING OFFICER IN OUR OPINION HAS SIMPLY REJECTED THE CLAIM OF THE ASSESSEE AS MUTUAL ASSO CIATION WITHOUT LOOKING TO THE RELEVANT PROVISIONS AND THE CASE LAW S . WE THEREFORE, IN THE INTEREST OF THE JUSTICE AND FAIR PLAY TO BOTH THE PARTIES SET ASIDE THE ASSESSMENT AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL RE - DECIDE THE ISSUE AFTER GOING THROUGH THE RELEVANT PROVISION OF THE LAW AND ASCERTAINING AND VERIFYING FROM MR. RAMESH CHANDRA RAUT OF M/S KALINGA AYURVED PHARMACY PVT. LTD WHETHER THE ASSESSEE HAS RECEIVED ANY RENT FROM T HE BUILDING OR WHETHER THE BUILDING WAS ACTUALLY LET OUT. NO DOUBT THE ASSESSEE WILL CO - OPERATE WITH THE ASS ESSING OFFICER IN THIS REGARD. W HILE DECIDING THE ISSUE WE MAY DIRECT THAT THE ASSESSING OFFICER MUST LOOK INTO THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF CIT VS BAKIPUR CLUB LTD, 226 ITR 97 WHILE HE HAS CONSIDERED HIGH COURT DECISION REPORTED IN 129 ITR 787. THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS STANDING CONFERENCE OF PUBLIC ENTERPRISES, 186 TAXMAN 142 (DEL) FOR THE PROPOSITION THAT SIMPLY BECAUSE SOME INCIDENTAL ACTIVITY OF AN ASSESSEE CLAIMING THE STATUS OF MUTUAL CONCERN WAS REVENUE GENERATING, THAT WOULD NOT PROVIDE ANY JUSTIFICATION TO HOLD THAT IT WAS TAINTED WITH COMMERCIALITY AND REACHED A POINT WHERE RELATIO NSHIP OF MUTUALITY ENDED AND THAT OF TRADING BEGIN. THE FACT THAT ASSESSEE HAS LET OUT A PART OF ITS PREMISES TO ITS MEMBERS AND WAS RECEIVING RENT AND HAD ALSO ALLOWED NON - MEMBERS TO USE ITS CONVENTION CENTRE FOR A 9 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) CONSIDERATION, WAS NOT SUFFICIENT TO CLO TH THE ACTIVITIES OF THE ASSESSEE AS COMMERCIAL ACTIVITIES. THUS, THIS GROUND IN ALL THE YEARS IS ALLOWED FOR STATISTICAL PURPOSES. 14. SO FAR THE GROUND NO.4 IN ALL THE YEARS ARE CONCERNED, THE FIRST ISSUE RELATE TO THE ADDITION MADE FOR LIC PREMIUM FOR MEMBERS AND THE STAFF, THE OTHER ISSUE, SOME OF THE YEARS ISSUE RELATE TO THE ADDITION OF DONATION - BENEVOLENT FUND AND IN SOME OF THE YEAR THE ISSUE RELATE TO THE ADDITION ON ACCOUNT OF RECEIPT FROM DISTRIBUTOR TAKEN AS INCOME. AFTER HEARING THE RIVAL SUB MISSION IN ALL THESE THREE ISSUES, WE ARE OF THE VIEW THAT THE ADDITION ARE MADE ON THE BASIS THAT ALL THE RECEIPTS RELATING TO DONATION ARE THROUGH CASH AND ADDRESS ARE GIVEN IN THE LEDGER BUT ARE UNVERIFIABLE IN THE ABSENCE OF COPY OF THE RECEIPTS ISSUED , SIMILARLY IN RESPECT OF ADDITION FOR DISTRIBUTOR THE PURPOSE OF THESE RECEIPTS WAS NOT GIVEN AND ARE NOT ACCOUNTED FOR. SO FAR THE DONATIONS ARE CONCERNED WE ARE OF THE VIEW IN CASE ASSESSEE IS HELD BY THE ASSESSING OFFICER AS MUTUAL ASSOCIATION, AND IF THESE DONATIONS ARE RECEIVED FROM THE MEMBERS, THEY CANNOT BE ADDED TO THE INCOME. NO DOUBT THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE DONATIONS ARE RECEIVED FROM THE MEMBERS. IF ASSESSEE IS NOT HELD TO BE A MUTUAL ASSOCIATION, THE ASSESSEE IN OUR OPINI ON IS BOUND TO PROVE TO THE SATISFACTION OF THE ASSESSING OFFICER NATURE AND SOURCE OF THE RECEIPT. OTHERWISE THE SAME WILL BE ADDED U/S 68 OF THE INCOME TAX ACT. SIMILARLY, IN RESPECT OF RECEIPTS FROM DISTRIBUTORS THE ASSESSEE HAS TO PROVE IN EACH OF THE YEAR THAT THESE RECEIPTS ARE DULY ACCOUNTED AND ARE FROM THE MEMBERS IN CASE ASSESSEE IS HELD TO BE MUTUAL ASSOCIATION ONCE IT IS PROVED NO ADDITION CAN BE MADE OTHERWISE IN OUR OPINION IN THE ABSENCE ONUS NOT BEING DISCHARGED BY THE ASSESSEE, THE ADDIT ION SHOULD BE SUSTAINED IN EACH OF THE ASSESSMENT YEAR. SO FAR THE ISSUE RELATING TO CONTRIBUTION FOR LIC PREMIUM FOR THE MEMBERS, THE ASSESSING OFFICER SHOULD VERIFY WHETHER THE PREMIUM HAS BEEN PAID FOR TAKING THE LIFE INSURANCE IN RESPECT OF THE MEMBER S WHO HAVE OPTED FOR IT. IN CASE IT IS FOUND THAT ASSESSEE IS 10 ITA NOS. 87 TO 91/C T K /201 4 (ASST. YEARS : 2004 - 05,2005 - 06,2006 - 0 7, 2007 - 08 & 2008 - 09 ) A MUTUAL ASSOCIATION, THE PREMIUM SO PAID SHALL ONLY BE APPLICATION OF THE INCOME AS THERE IS NO PROHIBITION IN THE BYE - LAWS OF THE ASSESSEE THAT INCOME CANNOT BE DISTRIBUTED TO THE MEMBERS. TAK ING THE LIFE INSURANCE AGAINST THE LIFE OF THE MEMBERS WILL TANTAMOUNT APPLYING THE SURPLUS FOR THE BENEFIT OF THE CONTRIBUTORS. IN CASE ASSESSEE IS HELD NOT TO BE A MUTUAL ASSOCIATION, THE AMOUNT SO SPEND IS BOUND TO BE DISALLOWED WHILE DETERMINING THE IN COME OF THE ASSESSEE. ACCORDINGLY, THE GROUND NO.4 IN ALL THE YEAR ARE STATISTICALLY ALLOWED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ALL THE YEAR S ARE STATISTICALLY ALLOWED. 16 . ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT R ULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK ON 13 / 06 /201 4 . SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 13 / 06 /2014 * A * COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER