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TMI Blog2011 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... donation at Rs.6,18,750/- and excess of income over expenditure at Rs.3,29,919/- because the same were duly taxable in view of the fact that registration u/s 12A was not available to the assessee. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of this appeal." 2. The assessee is a society registered at Sl. No. S-33947 of 1998 by the Certificate of Registration granted by Registrar of Societies, Government of NCT, Delhi, dated 1st December, 1998. Copy of certificate is filed at page 11 of the paper book. Copy of Memorandum of Association and Rules and Regulations are filed at pages 12-24 of the paper book. The activities of the society are stated in the assessment order by the Assessing Officer as under:- "The Society is an association of Hologram Industries and working for anti piracy in security holograms, organizing seminar for facilitation of hologram industries and other related activities." 3. During the year under consideration, the assessee has shown surplus of income and expenditure at Rs.3,29,919/-. The receipts and expenses of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat another copy of computation of income is also filed by the assessee at page 6 of the paper book showing income therein at Rs.1,18,633/- which is interest received on FDR and in that computation the assessee had claimed the benefit of Section 44A but the said computation has not been described by the Assessing Officer in the assessment order and it may have been filed during the course of assessment proceedings. 6. The Assessing Officer initiated assessment proceedings against the aforementioned return filed by the assessee and has mentioned the fact that claim of the assessee regarding registration u/s 12AA was rejected by the Director of Income-tax (Exemptions) vide the order dated 8th May, 2007. He asked the assessee to explain as to why the corpus donation of Rs.6,18,650/- should not be treated as income being voluntary contributions u/s 2 (24) (iia) of the Act. In response, it was submitted that the said amount relates to membership granted to the members in terms of clause 12 of the Rules and Regulations and this represent various categories of members and this represent corpus fund as per terms of clause 14.2 of the Association. It was claimed that the association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, in appeal and has raised the aforementioned grounds of appeal. 8. After narrating the facts, it was vehemently pleaded by the learned DR that the learned CIT (A) was wrong in considering the alternative claim of the assessee regarding principal of mutuality and on that basis he was totally wrong in granting the relief to the assessee, as, on that basis even the income returned by the assessee has not been looked into. He submitted that the case of the Assessing Officer rest upon the provisions of Section 28(iii). He submitted that the amount received by the assessee from its member was with regard to specific services rendered, hence, the same will fall within the ambit of Section 28(iii). He submitted that the assessee also could not claim the benefit of Section 44A. The assessee also was held not entitled for the benefit of registration u/s 12AA of the Act. Therefore, he pleaded that the assessee was to be assessed under the normal provisions of the Act and, therefore, the Assessing Officer was right in making the assessment and learned CIT (A) has wrongly deleted the addition. 9. On the other hand, relying upon the submissions made before the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or profession" and if there is no income assessable under that head or the deficiency allowable exceeds such income, the whole or the balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under any other head. (2) In computing the income of the association for the relevant assessment year under sub-section (1), effect shall first be given to any other provision of this Act under which any allowance or loss in respect of any earlier assessment year is carried forward and set off against the income for the relevant assessment year. (3) The amount of deficiency to be allowed as a deduction under this section shall in no case exceed one-half of the total income of the association as computed before making any allowance under this section. (4) This section applies only to that trade, professional or similar association the income of which or any part thereof is not distributed to its members except as grants to any association or institution affiliated to it.]" 13. Section 44A is the special provision for grant of deduction in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it is not outside the scope of Section 44A of the Act. Secondly, it is an admitted fact that the assessee is not an association or institution referred to in clause 23A of Section 10 as the said clause of Section 10 governs the institution specified by the Central Government by notification in the official gazette and it is not even the case of the department that the assessee falls within the ambit of Section 10 (23A). The careful perusal of receipt and expenditure of the assessee will reveal that the expenses incurred by the assessee are not in the nature of capital expenditure. The details of expenditure will reveal that they have been incurred solely for the purpose of protection or advancement of common interest of its members as it is not the case of the Assessing Officer that the expenses shown by the assessee have been incurred for any purpose other than in the advancement of its object. If it is so, then, the amount expended by the assessee for the purpose of protection or advancement of the common interest of its member will be allowable as deduction. Therefore, the claim of the department can only be restricted to the amount of Rs.3,29,919/- which also comprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought on record by the revenue to show that any of the amount collected by it from its member was in respect of specific services performed by the assessee for its members. The words 'performing specific services' was also found place in Section 10(6) of 1922 Act (corresponding provisions was considered by Hon'ble Supreme Court in the case of CIT vs. Calcutta Stock Exchange Association Ltd. (36 ITR 222) and the relevant observations of their lordships from the said decision are as under:- "The words 'performing specific services' [in section 10(6)] in our opinion, mean, in the context,' conferring particular benefits' on the members. The word 'services' is a term of a very wide import, but in the context of Section 10 of the Act, its use excludes its theological or artistic usage. With reference to a trade, professional or similar association, the performing of specific services must mean conferring on its members some tangible benefit which otherwise would not be available to them as such, except for payment received by the association in respect of those services." 19. If the aforementioned observations of their lordships are kept in mind, then, it will be clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to assess the resultant income, then, it has to be computed under the normal provisions of the Act. Out of surplus of Rs.3,29,999/-, the amount earned by the assessee on FDRs of Rs.1,18,633/- is to be removed as the same, as per the provisions of Income-tax Act, is assessable under the head 'Income from other sources' and this has so been done by the assessee in the computation purported to be filed before the Assessing Officer, the copy of which has been placed at page 6 of the paper book wherein taxable income has been shown at Rs.1,18,630/-. The rest of the amount has been claimed by the assessee u/s 44A of the Act. In our opinion, Section 44A does not grant the exemption to the assessee with regard to the surplus shown by it being receipt excess of expenditure. It only describe that if such receipts fall short of expenditure, then, deduction regarding expenditure has to be allowed. But, in the present case, there is a surplus in the account of the assessee which exceed the expenditure. Therefore, if there is a surplus which cannot be claimed under the provisions of Section 44A of the Act. However, the resultant surplus is allowable on the basis of principle of mutuality as no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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