SANDVIK ASIA EMPLOYEES MUTUAL BENEFIT FUND,PUNE V. EXEMPTION WARD 1(2), PUNE

ITA 998/PUN/2025

AI Insights

The case involves the Sandvik Asia Employees Mutual Benefit Fund, which appealed against the order of the CIT(A) denying them the benefit of exemption under section 10(23AAA) of the Income Tax Act for the Assessment Year 2018-19. The Fund, established by employees of Sandvik Asia, argued that their activities and the funds received were solely for the benefit of their members and should not be taxed as gross receipts. The Tribunal noted that the Fund had previously enjoyed approval under section 10(23AAA) but had not for the year in question. The Tribunal found that the CIT(A) had not adequately considered the Fund's arguments and directed a re-examination of the case by the JAO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 707138 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 17-04-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK KUMAR KEDIA
• Assessee Lawyers: DEEPA KHARE
• Keywords: Set aside; Capital receipt
• Section: 11; 12A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “SMC” BENCH : PUNE BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A.No.998/PUN/2025 (Assessment Year 2018-19) Sandvik Asia Employees Mutual Benefit Fund, Pune Road, Dapodi, Pune. PAN : AACTS 8402 N vs. ITO (Exemption), Ward-1(2), Pune. (Appellant) (Respondent) For Assessee : Smt. Deepa Khare, Advocate For Revenue : Shri Deepak Kumar Kedia, JCIT-DR Date of Hearing : 07.07 .2025 Date of Pronouncement : 09.07.2025 ORDER This appeal filed by the assessee is directed against the order passed by the Ld. ADDL/JCIT (Appeals)/NFAC-1, Guwahati [“CIT(A)”], dated 19/03/2025 for the Assessment Year (“AY”) 2018-19. 2. The assessee has raised the following grounds of appeal:- “1. Whether on facts and in law, the income of the assessee is eligible for exemption u/s 10(23AAA) being a mutual Benefit Fund? 2. Whether the principle of mutuality applies to income of the assessee and held to be not chargeable to tax. 3. Without prejudice to the above, whether on facts and circumstances the income computed at Rs. 18,26,751/- being gross receipts is correct without allowing deduction from the gross receipts? 4. The appellant craves leave to add alter, modify, or substitute any ground of appeal at the time of hearing.” 3. Brief facts of the case are that assessee is a mutual benefit fund established on 15/11/2005 by the employees of Sandvik Asia 2 ITA.No.998/PUN./2024 (Sandvik Asia Employees Mutual Benefit Fund.) for their mutual benefit. The objects of the fund, is to provide a combination of welfare, social security and charitable benefits of its members. Though, assessee had applied for approval u/s. 10(23AAA) of the Act, but no such certificate stands granted for the period under consideration. In the past, Ld. Commissioner of Income-tax-5 vide its order dated 14/02/2005, extended the approval of the trust u/s. 10(23AAA) of the Act for the A.Ys. 2005-06 to 2007-08. For A.Y. 2018-19, the assessee inadvertently filed its return in ITR-7 which is meant for the trusts registered u/s. 12A of the Act, and in this return which is furnished on 31/10/2018, assessee has claimed application of income at Rs.17,79,994/- against the gross receipts of Rs. 18,26,751/-. Since, assessee is not registered u/s. 12A of the Act, the CPC denied the benefit of sec. 11 and assessed the income at Rs.18,26,751/-. Aggrieved, assessee preferred appeal before the Ld.CIT(A), who observed that assessee failed to fulfill the conditions in respect of exemption claimed in the return of income and the assessee has simply furnished copy of account which itself is not sufficient to ascertain the correctness of the accounts. Now the assessee is in appeal before this Tribunal. 4. Learned counsel for the assessee submitted that assessee is a mutual benefit fund and it only carries-out the activities for its members and the funds received from its members are utilized for the benefit of its members as per the conditions enumerated in the trust deed, placed at page No. 32-45 of the paper book. She further submitted that Ld.CIT(A) has even not considered the contention 3 ITA.No.998/PUN./2024 (Sandvik Asia Employees Mutual Benefit Fund.) that only the net income deserves to be treated as income, in case the benefit of sec. 10(23AAA) is not granted. 5. On the other hand, ld. DR supported the order of the Ld.CIT(A). 6. I have heard the rival submissions and perused the material placed before me. Admittedly, the assessee is a mutual benefit fund and in the past, has been enjoying approval u/s. 10(23AAA) of the Act. Such approval has not been extended for the year under consideration. Return of income has been wrongly filed in ITR-7. The trust deed is placed at page Nos. 32-45 of the paper book and primary object of the fund is to provide combination of welfare, social security and charitable benefit of its members and the detailed objects are mentioned at para 6 of the trust deed. Books of accounts are also maintained; audited balance sheet and income & expenditure account are placed before me. As per the income & expenditure account, the excess of income over expenditure is Rs.46,757/-, but the CPC has made the addition of total gross receipts of Rs. 18,26,751/- which includes the members’ contribution and interest on fixed deposits and savings bank accounts. Learned counsel for the assessee has stated that members’ contribution and the retirement benefit given to them are in the nature of the capital receipt transaction and amount spent for members is shown as income & expenditure account. However, in given facts and circumstances, I am of the considered view that the issue needs to be restored to the file of Jurisdictional Assessing Officer (JAO) for necessary examination of facts and even if the 4 ITA.No.998/PUN./2024 (Sandvik Asia Employees Mutual Benefit Fund.) assessee-fund is not approved u/s. 10(23AAA), even then the assessee if assessed as an association of person (AOP), then also the net income earned during the year should be subjected to tax and not gross receipts. The assessee shall place all the relevant details before the JAO, who after examining the books as well as audited financial statements should allow the benefit of expenditure as well as amounts spent for the benefit of members against the contribution received from them and the surplus, if any, remaining from such activities carried out during the year should only be subjected to tax. In other words, only the net income should be subject to tax and not gross receipts. Ld. JAO is directed to provide a reasonable opportunity of hearing to the assessee. Finding of Ld.CIT(A) is set aside and the effective grounds of appeal raised by the assessee are allowed for statistical purposes. 7. In the result, appeal of the Assessee is allowed for statistical purposes. Order pronounced in the open Court on 09.07.2025. /- Sd/- [MANISH BORAD] ACCOUNTANT MEMBER Pune, Dated : 09th July, 2025 vr/- 5 ITA.No.998/PUN./2024 (Sandvik Asia Employees Mutual Benefit Fund.) Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune concerned. 4. D.R. ITAT, “C” Bench, Pune. 5. Guard File. By Order //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune. "