TMI Blog2012 (6) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... er fees stand deleted and since no part of other expenditure are in nature of capital expenditure, hence 100% of expenses are allowed as deduction. Also, net surplus of income over expenditure will not be taxable because the income of the assessee by way of interest from co-operative bank is exempt u/s 80P[ii] - Decided against the Revenue - Tax Appeal No. 1847 of 2010, 1848 of 2010 - - - Dated:- 7-5-2012 - Bhaskar Bhattacharya, J B Pardiwala, JJ. For Appellant : Mr K M Parikh For Respondent : Mr S N Soparkar, Sr Counsel with Mrs Swati Soparkar JUDGEMENT Per : Bhaskar Bhattacharya, CJ: 1. These Appeals under Section 260A of the Income Tax Act, 1961 [ the Act ] are at the instance of the Revenue and are directed against order dated March 5, 2010 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench B , Ahmedabad [ the Tribunal ] in ITA No. 2133/Ahd/2006 and C.O. No. 262/Ahd/2006 in respect of the Assessment Year 2003-04 by which the Tribunal dismissed the appeal preferred by the Revenue and allowed the Cross-Objection filed by the assessee. 2. Being dissatisfied, the Revenue has come up with these appeals. 3. In Tax Appeal No.1847 of 2010, the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be disallowed as it was deriving income from other sources . It was further asked to show cause that why the expenses claimed by the assessee should not be disallowed and added to the total income of the assessee. 5.6 Vide letter dated March 17, 2006, the authorized representative of the assessee filed written submissions which is as under:- That by the mistake the income is shown under the head income from other sources. In fact the income is income from business and profession. In my earlier submission I have already requested to consider the income under the head business income and secondly on the ground of principles of mutuality all expenses claimed be allowed in toto. So far as transfer fees income i.e. premium on transfer of plot is concerned I have given my submission earlier that premium on transfer paid by the transferor and in past Hon'ble ITAT Ahmedabad had also deleted additions on account of transfer premium and also Hon'ble Gujarat High Court has also decided the case of Adarsh Coop Society in favour of the society that premium on transfer is not taxable income. 5.7 The Assessing Officer, by his order dated March 24, 2006 passed an order u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the other expenses claimed by the assessee, i.e. advertisement expenses of Rs. 28,342/-, service tax of Rs. 16,998/-, staff medical expenses of Rs. 5,250/-, municipal tax of Rs. 77,036/-, audit fees of Rs. 5,000/-, legal fees of Rs.64,000/-, 80% of stationary and printing expenses of Rs. 13,865/-, insurance premium of Rs. 4,474/- depreciation on electrical fittings of Rs. 243/-, depreciation on dead stock and furniture of Rs. 22,287/- and depreciation on substation construction of Rs. 3,190/- should be allowed as deduction against the income from hiring of Sanskrutik Hall and decorators and caterer's commission. As regards the other sources of income, i.e., interest from banks, the CIT [Appeals] held that as there was surplus of Rs. 10,870/-, the same should be taxed as income from other sources. 5.12 As regards the other ground of appeal against the addition of Rs. 2.00 Lac being transfer fees received by the assessee on transfer of plots as income of the assessee, the first appellate authority was of the view that the same should be deleted. 5.13 Being dissatisfied, the Revenue preferred an appeal before the Tribunal being ITA No. 2133/Ahd/2006 by which the Revenue challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of an assessee, the disputed issues arise in more than one assessment year, appeal shall be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals will be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one year, appeal shall be filed in respect of all assessment years even if the tax effect is less than the prescribed monetary limits in any of the year[s], if it is decided to file appeal in respect of the year[s] in which the 'tax effect' exceeds the monetary limit prescribed. [Emphasis supplied by us] 10. After hearing the learned counsel for the parties and after taking into consideration the Instruction No.5 of 2008, we find that by virtue of the said Instruction, the Revenue was prohibited from preferring any appeal before this Court under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of the income which it received from its members should held to be not liable to be taxed . It appears that the Supreme Court in the subsequent decision in the case of C helmsord Club v. Commissioner of Income-tax, reported in [2000] 243 ITR 89 has adopted the same principle. As pointed out in the above decision, under the Income-tax Act, 1961, what is taxed is, the income, profits or gains'' earned or arising'', accruing'' to a person''. According to the said decision, where a number of persons combine and contribute to a common fund for the financing of some venture or object and in this respect, have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. The Supreme Court further pointed out that there must be complete identity between the contributors and the participators. If these requirements are fulfilled, the Supreme Court proceeded, it is immaterial what particular form the association takes. Trading between persons associating together in this way, according to the said decision, does not give rise to profits, which are chargeable to tax. Where the trade or activity is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, we find that the CIT [Appeals] and the Tribunal below rightly applied the above principles so far as the addition of Rs. 2 Lac as transfer fees are concerned as all the three conditions indicated above are satisfied. However, so far as the finding of the CIT[Appeals] as regards the amount of Rs. 10,870/- as surplus from the interest income of Rs. 4,83,449/- are concerned, we are of the view that there was no justification on the part of the CIT [Appeals] in limiting the deduction to 90% of the expenditures in terms of Section 57[iii] of the Act instead of 100%. It is not the finding of the CIT [Appeals] that any of the expenditure was of the nature of capital expenditure so as to bring the case within the purview of exceptions as indicated in Section 57[iii] of the Act. Thus, if 100% deduction is given to the expenditure, a sum of Rs. 4,02,182/- remains as net surplus of income over expenditure. But the above amount of Rs. 4,02,182/- will not be taxable because the income of the assessee by way of interest from co-operative bank of Rs. 4,78,317/- is exempt under Section 80P[ii] of the Act which is more than Rs. 4,02,182/-. Therefore, we find that the ultimate conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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