Income Tax Appellate Tribunal - Pune
Taloja Cetp Society Ltd.,, vs Department Of Income Tax on 19 August, 2016
आयकर अपील य अ धकरण]] iq.ks यायपीठ "बी" iq.ks म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
एवं ी वकास अव थी, या"यक सद य के सम#
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.1776 & 1777/PN/2014
"नधा%रण वष% / Assessment Years : 2004-05 & 2007-08
ITO, Ward-2,Panvel .......... अपीलाथ /
Raigad District Appellant
बनाम v/s
Taloja CETP Society Ltd., .......... यथ /
Plot No.24, MIDC Industrial Estate, Respondent
Taloja, Dist. Raigad - 410 208
PAN : AAAJT0588L
अपीलाथ क ओर से / Appellant by : Shri P.L. Kureel
यथ क ओर से / Respondent by : Shri Raja B. Singh
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :17.08.2016 Date of Pronouncement:19.08.2016
आदे श / ORDER
PER VIKAS AWASTHY, JM :
These two appeals by the Department are directed against the order of the Commissioner of Income Tax (Appeals)-I, Thane dated 27-06-2014 common for the Assessment Years 2004-05 and 2007-08. Since the issues raised in both the appeals are identical and are arising from same set of facts the appeals are taking up together for adjudication and are decided by this common order.
2. The brief facts of the case as emanating from the records are : The assessee is a Cooperative Society set up for treatment of industrial effluents generated by its members engaged in manufacturing and other industrial processes. The assessee filed its return of income for the 2 ITA Nos.1776 & 1777/PN/2014 assessment year 2004-05 on 27-10-2004 declaring NIL income after claiming deduction u/s.80IA of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').
3. The case of the assessee was selected for scrutiny and assessment order u/s.143(3) was passed by the AO on 31-05-2006 accepting the claim of deduction u/s.80IA and admitting NIL income returned by the assessee. Thereafter, the provisions of section 263 were invoked and assessment order u/s.143(3) r.w.s. 263 was passed on 29-12-2009 denying the claim of deduction u/s.80IA of the Act.
4. Aggrieved by the assessment order, the assessee preferred appeal before CIT(A)-I, Thane. The CIT(A)-I, Thane confirmed the findings of the AO. The assessee carried the matter in second appeal before the Tribunal, Mumbai Benches, Mumbai in ITA No.2162/Mum/2011. The Tribunal vide order dated 11-01-2012 set aside the findings of the CIT(A) on the issue of mutuality and remitted the matter back to the AO for consideration and adjudication, in accordance with law. It is in the second round of litigation that the assessment order for A.Y. 2004-05 u/s.143(3) r.w.s. 254 was passed. The AO held that the principle of mutuality does not apply in the case of assessee and made addition of Rs.1,05,88,365/-, claimed by the assessee as deduction u/s.80IA of the Act.
Against the assessment order dated 28-03-2013 for A.Y. 2004-05 the assessee preferred appeal before the CIT(A).
5. Similarly, in the A.Y. 2007-08 the AO vide order dated 28-03-2012 passed u/s.143(3) r.w.s. 147 of the Act disallowed the claim of the assessee in respect of deduction u/s.80IA on the ground that the principles of mutuality does not apply in the case of assessee society. 3
ITA Nos.1776 & 1777/PN/2014 Against the said assessment order, the assessee filed appeal before the CIT(A).
6. The CIT(A) vide impugned order, common for A.Yrs. 2004-05 and 2007-08 reversed the findings of the AO and allowed the appeals of the assessee by following the decision of Hon'ble Bombay High Court in the case of CIT Vs. Common Effluent Treatment Plant (Thane-Belapur) Association reported as 328 ITR 362 (Bom.)
7. Against the order of CIT(A) now the Department is in appeal before the Tribunal.
8. Sri P.L. Kureel representing the Department vehemently submitted that the AO had rejected the claim of the assessee in claiming deduction u/s.80IA primarily on the ground that the assessee is receiving contribution from Central/State Governments in the form of subsidy. Since the assessee is receiving contribution of funds from non members, the principle of mutuality will not apply. The Ld. Departmental Representative contended that as the funds of the assessee are not exclusively from the members and the non-members have also contributed to the funds, the ingredients of mutuality are missing. The assessee is an association of traders and the activities of the assessee are adventure in the nature of trade.
The second ground for denying the benefit of mutuality is that at the time of winding up, any surplus arising from disposal of assets would not be distributed among the members of the society alone. Neither the assessee nor its members have complete control over its funds and is subject to the provisions of Maharashtra Cooperative Societies Act and Rules framed thereunder. Therefore, the principle of mutuality is diluted. 4
ITA Nos.1776 & 1777/PN/2014 The Ld. Departmental Representative vehemently supported the findings of the AO and prayed for setting aside the impugned order.
9. On the other hand, Sri Raja B. Singh appearing on behalf of the assessee vehemently defending the findings of the CIT(A). The Ld. Authorised Representative submitted at the outset that the AO in A.Y. 2005-06 accepted the contention of the assessee with respect to 'principle of mutuality'. The AO followed the decision of Hon'ble Bombay High Court in the case of CIT Vs. Common Effluent Treatment Plant (Thane-Belapur) Association (Supra) and allowed the claim of deduction u/s.80IA(4) of the Act vide order dated 31-08-2012 passed u/s.143(3) r.w.s. 254 of the Act.. The Ld. Authorised Representative submitted that the appeals filed by the Department are liable to be dismissed as the grounds raised in the appeals/additional grounds are not arising from the assessment proceedings. The Ld. Authorised Representative asserted that the revenue in the grounds of appeal/additional grounds has wrongly alleged that the assessee has received drainage and treatment charges during the A.Yrs. 2004-05, 2005-06, 2006-07 & 2007-08 from Dombivili, MIDC which is not a member of the society. The Authorised Representative of the assessee stated at the Bar that no amount has been received by the assessee from Dombivili MIDC for treatment of any effluent. Dombivili, MIDC is not a member. No effluent is generated by the MIDC. Dombivili, MIDC is providing water supply to the assessee to be used in the treatment of effluents. The Authorised Representative contended that the list of all the members and the collection of funds from members during the relevant period was furnished to the AO before the assessment proceedings. In the said list the name of Dombivili, MIDC does not figure. The Authorised Representative placed on record a copy of the list of members from whom collections were made during the period relevant to the A.Y. 2007-08. 5
ITA Nos.1776 & 1777/PN/2014 The Authorised Representative further submitted that the Hon'ble Supreme Court of India in the case of National Thermal Power Company Ltd. Vs. CIT reported as 229 ITR 383 (SC) has held that the Tribunal can consider a question of law arising from the facts which are on record in the assessment proceedings. The Authorised Representative further placed reliance on the decision of Hon'ble Kolkata High Court in the case of Indian Steel and Wire Products Ltd. Vs. CIT and submitted that the Tribunal is supposed to decide only issues which were the subject matter of first appeal, otherwise the Tribunal would be reduced to the first appellate authority which is against the intent of legislature to provide 2 stages of appellate authorities under the provisions of the Income Tax Act. The Authorised Representative further submitted that this is a fit case for levy of costs under the provisions of Rule 32A of the ITAT Rules, 1963 as the Department has filed frivolous appeals on the ground that were never raised before the authorities below nor it is emanating from the assessment proceedings.
10. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The grounds raised by the Department assailing the order of CIT(A) are as under :
"1. On the facts and in the circumstances of the case, and in law, the Ld.CIT(A)-I, Thane has erred in holding that the principles of mutuality applies in the case of the assessee relying on the order of ACIT, Panvel for the A.Y. 2005-06 which was based on misrepresentation of facts by the assessee that it did not receive any receipt from other than members of the society, whereas the fact was that the assessee received drainage & treatment charges of Rs.75,51,473/-, Rs.78,58,545/-, Rs.82,73,119/- & Rs.98,93,887/- during A.Y's 2004-05, 2005-06, 2006-07 & 2007-08 respectively from Dombivili, MIDC which is not a member of the society.
2. On the facts and in the circumstances of the case, and in law, the Ld.CIT(A)-I, Thane has erred in holding that the principle of Mutuality, which does not apply as there are receipts from entities other than members of the society and there is a clear motive of profit."6
ITA Nos.1776 & 1777/PN/2014 In both the assessment years identical grounds have been raised by the Department in the grounds of appeals. A perusal of the appeal file shows that initially the above mentioned grounds were raised by the Department as grounds of appeal. Subsequently, the grounds were amended and the same were raised as additional grounds of appeal. The main contention of the Department is that the principle of mutuality does not apply on the assessee as the assessee has accepted funds from non- members of the society. The ground raised by the Department in the grounds/additional grounds of appeal is that the assessee is receiving drainage and treatment charges from Dombivili, MIDC who is not a member of the society. A perusal of the assessment order shows that the MIDC collects service charges/fees from the members of the society towards effluent disposal. There is no observation of the AO in either of the assessment years under appeal that the assessee receives any amount from MIDC as subscription or towards any other service or assistance/grant. The issue relating to receipts from Dombivili, MIDC was never raised by the Department during assessment proceedings or before first appellate authority. Even otherwise what has been urged before the Tribunal on behalf of Revenue is a factual issue which is not borne out from the records.
11. We find merit in the submission of the Ld. Authorised Representative that fresh grounds of appeal can be raised before the Tribunal only if it is a question of law arising from the facts which are on record in the assessment proceedings. The Hon'ble Apex Court in the case of NTPC Vs. CIT (Supra) has held that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the income-tax authority and have bearing on the taxability of the assessee. However, in the instant case, we find that no question of law has been 7 ITA Nos.1776 & 1777/PN/2014 raised by the Department which is borne out of facts on record during the assessment proceedings. The Ld. Authorised Representative of the assessee has filed a detailed list of collection from members during the period relevant to the A.Y. 2007-08. We observe that the said list does not include the name of Dombivili, MIDC. The list which has been placed before the Tribunal was purportedly placed before the AO as well. In our considered view the appeal of the Department is liable to be dismissed on this ground alone.
12. Before parting with the order, we deem it appropriate to observe that the AO while finalizing the assessment for A.Y. 2005-06 had accepted that Doctrine of Mutuality applies in the case of assessee. The Hon'ble Bombay High Court in the case of CIT Vs. Common Effluent Treatment Plant (Thane-Belapur) Association (Supra) has answered the question with respect to eligibility of similarly placed assessee to claim exemption from income tax on the principle of mutuality in affirmative. One of the question before the Hon'ble High Court in the said case was :
"(A) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the excess of income over expenditure in respect of the effluent treatment receipts is exempt from income-tax on the principle of mutuality?"
The Hon'ble Court after appreciating the facts of the case & various case laws cited held :
"Applying the principle which has been enunciated by the Supreme Court, there can be no manner of doubt that the surplus generated by the assessee representing the excess of its income over expenditure would fall within the purview of the doctrine of mutuality. For the purposes of the first issue, it must be noted that this income is exclusive of interest which is earned on fixed and other deposits and on refund of income-tax which would be dealt with separately. The income of the assessee is contributed by its members. The assessee has been formed specifically with the object of providing a common effluent facility to its members. The income is not generated out of dealings with any third party. The entire contribution originates in its members and is expended only in furtherance of the objects of the association, for the benefit of the members. On these facts, both the Commissioner (Appeals) and the Tribunal were justified in coming to the conclusion that the surplus so generated falls within the purview of the doctrine of mutuality and was not 8 ITA Nos.1776 & 1777/PN/2014 exigible to tax.". The first question of law would accordingly have to be answered in favour of the assessee and against the Revenue."
13. The facts of the present case are similar to the facts of the case adjudicated by the Hon'ble Jurisdictional High Court. The activities of the assessee are identical to the activities undertaken by Common Effluent Treatment Plant (Thane-Belapur Association. The Ld. Departmental Representative has not been able to convert the findings of the CIT(A) in accepting the appeal of the assessee.
Thus in view of the facts of the case, we are of the considered view that the appeals filed by the Department are misconceived and the grounds raised in the appeals are against the facts on record. Accordingly, both the appeals filed by the Department have to fail.
14. In the result, the appeals of the Department are dismissed being devoid of any merit.
Order pronounced on Friday, the 19th day of August, 2016.
Sd/- Sd/- (R.K.PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER iq.ks Pune; दनांक Dated : 19th August, 2016. lrh'k
आदे श क( )"त+ल प अ,े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. CIT(A)-I, Thane
4. CIT-I, Thane
5. #वभागीय &त&न'ध, आयकर अपील य अ'धकरण, "बी" iq.ks / DR, ITAT, "B" Pune;
6. गाड, फाईल / Guard file.
आदे शानुसार/ BY ORDER,स स या#पत &त //True Copy// व.र/ठ &नजी स'चव / Sr. Private Secretary आयकर अपील य अ'धकरण, iq.ks / ITAT, Pune