Income Tax Appellate Tribunal - Kolkata
Pioneer Co-Operative Car Parking ... vs Department Of Income Tax on 21 October, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "C", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C, KOLKATA
[सम¢ ौी एन ǒवजयकुमारन,
मारन Ûयायीक सदःय एवं ौी सी.
सी. डȣ.
डȣ. राव,
राव, लेखा सदःय ]
Before Sri N.Vijayakumaran, Judicial Member & Sri C.D. Rao, Accountant Member
आयकर अपील संÉया / ITA No. 1672 (Kol) of 2009
िनधॉरण वषॅ/Assessment Year 2004-05
Dy.Commissioner of Income-tax -वनाम- Pioneer Co-Operative Car
Circle-35, Kolkata. -Versus- Parking Servicing & Construction
Society Ltd. (PAN-AADHP0932K)
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
अपीलाथȸ कȧ ओर से/ For the Appellant: ौी/Sri P.K.Chakraborty
ू×यथȸ कȧ ओर से/For the Respondent: ौी/Sri M. Ghosh
सुनवाई कȧ तारȣख/Date of
Hearing : 14/09/2011
घोषणा कȧ तारȣख/Date of Pronouncement : 21/10/2011
आदे श/ORDER
सी.
सी.डȣ.
(सी डȣ.राव), राव लेखा सदःय (C.D. Rao), Accountant Member :
The department has filed this appeal against the order dated 29.07.2009 of ld. C.I.T.(A)-XX, Kolkata pertaining to assessment year 2004-05. The only ground raised in this appeal by the department reads as under :-
"Ld. CIT(A) erred both in fact and in law in allowing the deduction u/s 80(P)(2)(a)(vi) and directing to assess the assessee as a co-operative society without proper appreciation of observation of AO and the materials brought on record by the AO during the course of assessment as well as not considering the remand report dated 20.03.2008 containing the decision of Hon'ble ITAT Amritsar Bench in the case of Assessing Officer Vs. Ganesh Co-operative (L&C) (1998) 67 ITD 436."
2. The assessee is registered under the West Bengal Co-operative Societies Act and run by an elected Governing Body. It is engaged in the business of car parking service. Parking spaces in Kolkata and other adjacent areas are taken on lease from different authorities and the assessee realizes car parking fees from car owners from these parking spaces. There are two types of clients from whom the assessee collects car parking fees. One is fixed customers who pay monthly rental normally by cheque for 1 their use of car parking space and the others are flying customers who pay parking fees in cash. The assessee pays a fixed amount for a specific period of time to the lessors as per rates, terms & conditions with the respective lessors. In addition, the assessee also maintains/runs a Pay and Use Toilet in Entally. The assessee follows mercantile system of accounting. For the assessment year under appeal, return was filed showing total income Nil after claiming deduction of Rs. 18,72,761/- u/s. 80P(2)(a)(vi) of the Act. The A.O. observed that the assessee's turnover from daily collection of parking fees was Rs.1,80,14,486 (in cash) and monthly collection of parking fees from its fixed clients of Rs.1,15,41,803/- (mainly by cheque). During the course of assessment proceedings, the A.O. collected from the office of Dy. Director of Co-operative Societies a copy of the co-operative society's audit report in respect of the system of maintenance of books of account followed by the assessee and on perusal of the same, he found that the assessee was not maintaining its books of account in proper, fair and in transparent manner. The A.O. considered the observation/ remarks of the Auditor of Registrar of Co-operative Society in respect of maintenance of the accounts by the co- operative societies, which are given on page-4 of the assessment order as under :-
"GENERAL REMARKS. OBSERVATIONS AND SUGGESTIONS
1. From the previous year the society has introduced computerized system for keeping accounts and submitted computerized cash book, general ledger and bank transactions. But the society has not written the cash book up to date. The society authority is advised to write the cash book regularly and daily closing cash balance should authenticated by the competent authority of the society. At the same time, it is also advised to prepare Monthly Cash Account.
2. The society is suggested to maintain a party-wise ledger for details records of monthly parking fees collection.
3. The society is advised to maintain a register of collectors as per contract money and according to area; spot and agreement-wise. Ceiling of cash holding is to be fixed up. Insurance coverage for retaining/cash in transit should be made.
4. In view of the huge volume of transactions the society authority is suggested to introduce internal control and checking system.
5. All the above mentioned observations had already been made in the last year's audit report but proper steps yet to be taken by the board in this respect. The Board should immediately follow these suggestions for the benefit of the society."2
On the basis of the above advice/remarks of the Auditor of Registrar of Co-operative Society, the A.O. observed that the assessee's system of maintenance of books of accounts was not proper and transparent so as to enable it to claim deduction u/s. 80P of the Act. He further observed that there was no internal control system for monitoring of car parking fees collected in cash. He, therefore, rejected the books of account of the assessee as unreliable. The A.O. further rejected the assessee's contention that it employed 43 persons for managing its five offices and property by expressing doubt that it was not understandable to him as to how these employees were utilized in assessee's two small offices and their nature of duties in so far as car parking services are concerned. The A.O. also recorded statement u/s. 131 of the Act from the Secretary of the assessee-society and worked out the average daily man power requirement for carrying out its core activity at 214. He has also stated that the founder members of the society, which was formed in 1977, are in the age group of 50 or above and some of them have either retired or died. According to him further, rest of the members is not physically fit for performing outdoor duties. He, therefore, presumed that at least 1/3rd of the members are not in a position to perform outdoor works and on this analysis he presumed the number of workable members to be not more than 100 in number. On the above presumption of facts, the A.O. was of the opinion that the society did not have sufficient strength of its members and was, therefore, largely dependent on the outsiders for carrying out its core activity. He stated that for claiming deduction u/s. 80P(2)(a)(vi) of the Act, the income must be earned from 'collective disposal of the labour of its members'. In the above circumstances, the A.O. treated the assessee as an A.O.P. and relying on the decision in the case of Nilgiri Engineering Co-operative Society Ltd. vs. CIT [208 ITR 326 (Ori)] held that the assessee was not entitled to deduction u/s. 80P(2)(a)(vi) of the Act.
3. The assessee came in appeal before the Ld. C.I.T.(A). The assessee filed a written submission with evidences thereof before him countering all the allegations of the A.O., who has denied deduction u/s. 80P(2)(a)(vi) of the Act, which are elaborately discussed on pages 6 to 8 of the appellate order. The ld. C.I.T.(A) disapproved the 3 rejection of books of account and denial of deduction u/s. 80P(2)(a)(vi) of the Act made by the A.O. The observations/ findings of the Ld. C.I.T.(A) are summarized as under:-
a) The A.O. has not pointed out any specific defect in the audited books of account of the assessee-society. The A.O. raised doubts about internal control system followed by the assessee in preparing the accounts for the cash receipts from car parking without pointing out a single instance to substantiate his doubt, more so when he himself has accepted the receipts shown by the assessee.
b) The ld. C.I.T.(A) found force in the assessee's submission that the observations/ remarks made by the Registrar of Co-operative Societies in respect of the audit report referred to by the A.O. are mere suggestions aimed at improving the system of maintenance of books of accounts followed by the assessee, but the same does not indicate any defect in the assessee's books and the A.O. himself relying on the assessee's books of accounts determined the total income of the assessee.
c) The A.O. did not deny the facts that the assessee employed 43 persons during the year for the purpose of managing its offices etc. and the voting rights are restricted to the members only. The assessee filed details of 43 persons with their nature duties employed in its five offices. The A.O. failed to establish that deployment of these 43 persons was excessive. The ld. C.I.T.(A) rejected the A.O.'s finding that the assessee was having only two offices. He stated that details of five offices along with one use and pay toilet were filed before the A.O. According to him, the A.O. acted more on suspicion than the actual facts.
d) The A.O. could not bring on record to show that some of the members are not capable of performing outdoor duties or they are not actually engaged in car parking activities of the assessee. He, therefore, held that the A.O. was not justified in holding that the assessee-society did not have the strength of its members to carry out its core activities.
e) The ld. C.I.T.(A) has stated that the A.O. has misinterpreted the statement recorded u/s. 131 from the Secretary of the assessee-society. Referring to the question posed by the A.O. and reply thereon by the Secretary, the ld. C.I.T.(A) pointed out that there was no mention in the statement to the effect that in case of shortage, outsiders are 4 engaged, rather it was stated by the Secretary that in that situation assessee takes help from its members who works for the society.
f) The ld. C.I.T.(A) further pointed out that the scrutiny assessment of the assessee for assessment year 2001-02 was completed taking the status of the assessee as that of co-operative society.
In view of the above observations/analysis of facts, the ld. C.I.T.(A) directed the A.O. to assess the assessee as a co-operative society and allow the deduction u/s. 80P(2)(a)(vi) of the Act by concluding as under :-
"6.3.7. In view of the above discussions, I am of the opinion that there was no basis or material on record for the AO to hold that the appellant Society did not have sufficient strength of its members and was therefore largely dependent on the outsiders for carrying out its core activity. The AO was not justified in changing the status of the appellant and in denying it the benefits of section 80P(2)(a)(vi). The case law relied upon by the AO is distinguishable on facts and is therefore not applicable in the case of the appellant. The AO is directed to assess the appellant as a co-operative society and allow the claim of deduction u/s 80P(2)(a)(vi). The grounds raised by the appellant are allowed."
Hence this appeal by the department.
4. At the time of hearing before us, the ld. Departmental Representative reiterated the observations/findings of the A.O. made in the impugned assessment order. He has pointed out the shortfalls in maintaining the books of account by the assessee, which are already referred to in the impugned assessment order and submitted that in such circumstances the ld. C.I.T.(A) erred in directing the A.O. to treat the status of the assessee as that of co-operative society instead of 'AOP' justifiably taken by the A.O. and consequentially directing to allow deduction as claimed by the assessee u/s. 80P(2)(a)(vi) of the Act. He, therefore, submitted that the order of the ld. C.I.T.(A) should be reversed and that of A.O. be upheld.
5. The learned counsel for the assessee, on the other hand, relied on the order of the ld. C.I.T.(A) and reiterated the submissions made before him. He has also filed a paper book compiling therein various papers in support of the claim that the status of the assessee, as in the past years, is that of a co-operative society and, therefore, deduction u/s. 80P(2)(a)(vi) of the Act has been rightly claimed by the assessee and allowed by the 5 ld. C.I.T.(A). He further submitted that the ld. C.I.T.(A) has discussed all the defects and/or doubts raised by the A.O. for disallowing the claim of the assessee and countered the same with reasons. Referring to the letter dated 13/1/2009 (Annexure A-6 of the paper book), which was a letter of the ld. C.I.T.(A) to the A.O., the learned counsel submitted that the ld. C.I.T.(A) called for assessment record for the assessment year under consideration from the A.O. and after verifying all these records, he has arrived at a rightful conclusion directing the A.O. to treat the status of the assessee as a co- operative society and to allow deduction u/s. 80P(2)(a)(vi) of the Act and, therefore, his order should be upheld.
6. We have heard the rival submissions of the parties and carefully gone through the orders of the authorities below as well as other evidences placed on record. The issue in question is as to whether on the facts and in the circumstances of the case, the assessee as a co-operative society fulfilled the conditions to get deduction u/s. 80P(2)(a)(vi) of the Act or the assessee did not satisfy the condition contained in clause
(vi) of Sec. 80P(2)(a) of the Act and it is to be treated as an AOP in status not entitled to claim deduction under the said section. Sec. 80P(2)(a)(vi) of the Act reads as under :-
"80P.(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2), in computing the total income of the assessee.
(2) The sums referred to in sub-section (1) shall be the following, namely :-
(a) in the case of a co-operative society engaged in -
(i) ............
..............
(vi) the collective disposal of the labour of its members,"
According to the aforesaid sub-clause (vi) to sec. 80P(2)(a), an assessee-cooperative society is entitled to 100% deduction under the said section if the members of the society earn some income by giving their collective labour to their society. The A.O. was not impressed upon the contention of the assessee that it employed 43 persons only to manage its five offices and its 206 members worked for the core activity of the society and they did not work in the offices of the society. The A.O. further alleged that most of the members were of the age group of 50 years or above and they were 6 physically unfit to perform the outdoor duties of the society. According to him further, for carrying out the core activity, the society was required to engage at least 214 persons and he thus suspected deployment of outsiders to perform the society's core activity. In support of his presumption, the A.O. referred to the statement of the Secretary of the assessee-society dated 27/12/2006 allegedly stating that the society takes help of the other members of other co-operatives who are working besides them in adjacent areas.
During the course of assessment proceedings, the A.O. obtained specimen of audit report in respect of the system of maintenance of books of account from the Dy. Director of Co-operative Societies and alleged that the assessee was not maintaining its books of account according to the specification enumerated by the said authority. He, therefore, rejected the books of account of the assessee and treated the assessee as an AOP.
6.1. We observe that the A.O. has alleged that the assessee employed 43 persons to carry out the core activities of the assessee and they were not working in the offices of the assessee, which according to him was only two. The assessee before the authorities has filed a list of 43 persons indicating the nature of duties assigned to them office-wise and payments made to each of them and these evidences are also filed in the paper book before us. The same is also appearing on page-7 of the appellate order. Further, we observe that the assessee maintains five offices and one Pay and Use Toilet in the city (and not two offices as alleged by the A.O.), the details of which are given in A-11 of the paper book. It is not denied to the fact that for running the establishments, the assessee is required to employ persons. In the list the assessee has given office-wise deployment of employees with their allotment of various nature of duties. The A.O. could not deny this factual position by bringing on record any contrary evidence to establish his suspicion that these 43 employees were also used for core activities of the assessee-society. He rather expressed surprise over employment of 43 employees in two offices, whereas as per details available with him as also before the ld. C.I.T.(A) and filed before us as well, the assessee maintains five offices. In these circumstances, the A.O.'s doubt about excess strength of employees and their deployment in core activities of the assessee-society is factually and logically incorrect. In our considered opinion, 7 the ld. C.I.T.(A) has rightly stated that it was for the A.O. to establish that employment of 43 persons by the assessee was excessive, which the A.O. failed to discharge. Therefore, for running/maintaining the car parking spaces and realization of the fees therefrom, it can be said that the assessee has deployed its members to do such duties, more so when the A.O. himself has stated that for such job approximately 214 man power is required, whereas admittedly the assessee's members strength during the year under consideration was 206. In our considered opinion further, the A.O. has drawn a general conclusion without any proof/positive evidence that most of the members of above 50 years of age were unfit for providing outdoor services to the assessee-society. This observation of the A.O. based on suspicion and in absence of any concrete evidence, in our opinion, cannot be accepted. We further observe that the A.O. took the statement of the Secretary of the assessee-society dated 27/12/2006 in proof of his observation that the assessee-society in case of shortage takes help of other members of other co-operatives of adjacent areas. On the basis of this alleged assertion, the A.O. held that the assessee employed outsiders and hence not entitled to deduction u/s. 80P(2)(a)(vi) of the Act. The relevant question and reply of the Secretary is appearing on pages 10 & 11, para 6.3.5 of the appellate order, which read as under :-
"In question no. 11, the AO asked - "in case of shortfall in members in a day, how you manage your parking lots with reduced manpower? The Secretary replied - "we do not deploy outsiders but in case of shortage, we take help from our society members who works beside us."
The ld. C.I.T.(A) on plain reading of the aforesaid question and reply thereof found that the Secretary was referring to his own members and not to members of other co- operative societies, as interpreted by the A.O. On the above question put by the A.O. and reply of the Secretary, we are of the considered opinion that the ld. C.I.T.(A) has correctly considered/interpreted the contents of that statement of the Secretary, which, in fact, supports the contention of the assessee.
6.2. The A.O. obtained copy of the co-operative society's audit report in respect of the system of maintenance of books of account from the office of Dy. Director of Co- operative Societies. On the basis of the contents therein, the A.O. alleged that the assessee was not maintaining its books of account in proper, fair and in transparent 8 manner, which has resulted in rejection of books of account of the assessee. We observe that the Registrar of Co-operative Society on introduction of computerized system of keeping the accounts, has made some remarks, observations and suggestions and the A.O. himself has quoted the same under the heading 'General Remarks, Observations and Suggestions'. Vide item 4 reproduced above, it is stated that in view of the huge volume of transactions the society authority is suggested to introduce internal control and checking system. The learned counsel has stated that the books of account of the assessee-society are duly audited by Govt. Auditors as per Co-operative Societies Rules & Regulations and the A.O. did not dispute the same. We also find substantial force in the contention of the assessee's learned counsel that observations made in the Registrar of Co-operative Society's Audit Report are only in the nature of suggestions given with a view to bring about improvements in the system of maintenance of books of account, cash book uptodate etc. But by these suggestions/ observations it cannot be said that the Registrar of Co-operative Society has specified or pointed out any mistake or irregularity in the books of account of the assessee, which are duly audited by the Govt. Auditors. Therefore, the action of the A.O. in having rejected the assessee's books of account solely on the basis of above observations/ suggestions and treating the assessee's status as that of AOP, in our considered opinion, was not justified and we find no infirmity in the order of the ld. C.I.T.(A) in rejecting such action of the A.O. Our above conclusion is also backed by the fact that for assessment year 2001-02, the A.O. has treated the status of this very assessee as 'Co- operative Society' and as there was loss in that year, no deduction u/s. 80P(2)(a)(vi) of the Act was claimed or considered. A copy of the said assessment order dated 29.8.2003 in placed in the paper book at A-5. Further, during the course of hearing, the learned counsel for the assessee has also filed a copy of assessment order dated 30/12/2009 for assessment year 2007-08 which was passed by the same D.C.I.T., who filed the appeal before the Tribunal. We observe that the A.O. in this assessment year after taking the status of the assessee as Co-operative Society has allowed the deduction of Rs.18,83,815/- u/s. 80P(2)(a)(vi) of the Act from the net profit as per P/L Account, assessing the total income at Nil. The ld. Departmental Representative could not bring 9 on record any incidence or evidence on record to establish that the nature of activities in those two assessment years, i.e. A.Ys 2001-02 & 2007-08, were different than those of the assessment year under consideration. It is pertinent to mention here that the A.O. in the assessment order for A.Y. 2007-08 has allowed the claim of the assessee by stating as under :-
"In view of above, as the issues involved are same, following the order of CIT(A) for A.Y. 2004-05, assessee's status is considered as a co-operative society and deduction u/s. 80P(2)(a)(vi)."
In view of the above, once the department has accepted in A.Y. 2007-08 that the facts of this year are identical to those of assessment year under consideration, in our considered opinion, there remains no case for the department to take the status of the assessee as an AOP and consequentially deny the deduction u/s. 80P(2)(a)(vi) of the Act. 6.3. We further observe that the A.O. while denying the deduction u/s. 80P(2)(a)(vi) of the Act relied on the decision in the case of Nilgiri Engineering Co-op. Society Ltd. vs. CIT (supra). However, we find that the facts and circumstances in the above case are totally different than those of the assessee's case. In the said case the assessee, which was formed by graduate engineers, undertook labour contract and claimed benefit of sec. 80P(2)(a)(vi) of the Act. The contribution of the member-engineers was confined only to overall supervision in the office and the actual supervision of the works in the field was done by the paid employees of the society. The income declared by the society was earned by undertaking contract works and getting them executed through engagement of sub-contractors and by deployment of outside labour. On the above facts, it was held that no labour was exercised by the members and that they had acted like any other businessmen. However, in the case before us, as already stated above, the facts are different. There was no sub-contract of the assigned job and actual labour is exercised by the members of the society. Therefore, the aforesaid decision of Hon'ble Orissa High Court is not applicable to the case of the assessee.
6.4. Before parting, we may state that though it is mentioned in the grounds of appeal that the remand report containing the decision of ITAT, Amritsar Bench in the case of Assessing Officer vs. Ganesh Co-operative (L&C) Society Ltd. [67 ITR 436] has not 10 been considered by the ld. C.I.T.(A), but however the ld. Departmental Representative has not filed any remand report before us on which the revenue is placing reliance. On the other hand, we observe from the papers placed in the paper book under A-6 that the ld. C.I.T.(A) vide his letter dated 13/1/2009 sought from the A.O. assessment record in the case of the assessee for the assessment year under consideration and the A.O. vide his reply dated 21/1/2009 has complied with the requirement as made by the ld. C.I.T.(A). Therefore, we are of the opinion that this assertion of the department in the grounds of appeal is misplaced and out of the context. Even otherwise also, the decision of the Tribunal in the case of Assessing Officer vs. Ganesh Co-operative (L&C) Society Ltd. (supra) is not applicable to the facts and circumstances of the assessee's case. In that case the Tribunal held the deduction u/s. 80P(2)(a)(vi) not allowable on the reasonings that the bye-laws of the co-operative society laying down rules for membership and voting rights violated proviso to sec. 80P(2)(a)(vi) and further the major contribution of individual labour to contract work undertaken by the society was from non-members. But so far as the case of the assessee is concerned, the department could not establish any violation of bye-laws and further we have already held that core activity of the assessee-society has been performed by the members of the society without engagement of outsiders. In that view of the matter the aforesaid decision of the Tribunal is also not applicable to the facts of the assessee's case. 6.5. In view of the above facts and circumstances of the case, we are of the considered opinion that the ld. C.I.T.(A) has dealt with each and every objection raised by the A.O. and thus correctly directed him to take the status of the assessee as co- operative society and to allow deduction u/s. 80P(2)(a)(vi) of the Act, as claimed by the assessee. We uphold his order on this issue and the ground of appeal of the department is dismissed.
7. In the result, the appeal of the department is dismissed.
Sd/- Sd/-
ौी एन ǒवजयकुमारन)
(ौी मारन Ûयायीक सदःय सी.
सी.डȣ.
(सी डȣ.राव)
राव लेखा सदःय
(N.Vijayakumaran) Judicial Member (C.D. Rao), Accountant Member
(तारȣख)
तारȣख) Date: 21-10-2011
11
आयकर अपील संÉया / ITA No. 1672 (Kol) of 2009
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. अपीलाथȸ / The Appellant : D.C.I.T., Circle-35, Kolkata.
2 ू×यथȸ / The Respondent : Pioneer Co-operative Car Parking Servicing & Const.
Society Ltd., 33/1, N.S. Road, Kolkata-700 001.
3. आयकर किमशनर (अपील) : The CIT(A)-XX, Kolkata.
4. आयकर किमशनर/The CIT, Kol-
5. वभािगय ूितनीधी / DR, ITAT, Kolkata Benches, Kolkata
6. Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
(dkp)
Asstt. Registrar.
12