9911796707
TMI Blog2012 (7) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, 1999-2000 and 2000-2001. For the assessment year 1997-1998, the assessee had filed return of income on 15/10/1997 which was processed under Section 143(1) of the Income Tax Act, 1961 (I.T. Act, for short) and proposal under Section 151(2) of I.T. Act 1961 was sent by the Assessing officer to the office of J.C.I.T., Range- 2, Panaji for approval to issue notice under Section 148 of the I.T. Act. Accordingly, notice under the said provision was issued on 15/07/2003, in response to which the assessee filed the return of income on 21/10/2003 in which the assessee claimed the deduction of Rs. 2,25,963/-, under section 80P(2A)(d) of the I.T. Act, on account of sale of consumable goods to its members. The assessment was completed by the Assessing Officer and by order dated 30/11/2004 the said claim of assessee came to be rejected. For the assessment year 1998-1999, the assessee had filed the return of income on 28/10/1998 which return was processed under Section 143(1) of the I.T. Act on 23/03/1999 and notice under Section 148 of the I.T. Act was issued on 15/07/2003, in response to which the assessee filed return of income on 26/10/2003. The assessee claimed exemption in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. The Tax Appeal no. 13 of 2007 has been filed under Section 260-A of the I.T. Act against the said order dated 06/09/2006 passed by the I.T.A.T. 4. Facts in Tax Appeal No. 18 of 2007 may be stated as under: the assessee filed return of income for the assessment year 1994- 1995 claiming that out of the total sales, 46.94% of the sales to the members amounting to Rs. 3,87,876/- is liable to be exempted under the concept of mutuality. The Assessing Officer completed the assessment by order dated 27/03/1997, by disallowing the said claim of exemption holding that there is no concept for mutuality as the assessee trades with public by making profit. The appeal filed by the assessee before the C.I.T. (A), was dismissed by order dated 23/01/1998 by C.I.T.(A), holding that the general concept of mutuality will not apply in the case of Consumer Co-operative Society which is earning profit. In an appeal filed by the assessee before the I.T.A.T., by order dated 02/01/2006, the I.T.A.T. allowed the said appeal holding that the principles of mutuality does apply and the income earned from members is liable to be exempted from tax. Aggrieved by the above order dated 02/01/2006 of the I.T.A.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that there is no Section 80P(2A)(d) in existence in the I. T. Act. According to her, section 44A of the I.T Act deals with the concept of mutuality and that the same is not applicable to Co-Operative societies. She submitted it is Section 80P of the I.T. Act, which is applicable to the Co- Operative Societies. She submitted that the concept of mutuality is for benefit of non-profit making societies and if there is element of profit making, involving non-members, then mutuality cannot apply. She read out Section 80P(2)( c) and stated that this provision does not at all speak about mutuality. Relying upon "Sind Coop. Hsg. Society Versus Income Tax Officer" [(2009) 3 TaxCorp (DT) 43705 (BOMBAY)], the learned counsel for the appellant argued that the tests regarding the concept of mutuality laid down by this Court, in that case have not been satisfied in the present case. According to her, the sales to members and non-members could not have been separated since contribution by each is different. She has relied upon the case of "Commissioner of Income Tax, Bombay City versus Royal Western India Turf Club Limited" (CDJ 1953 SC 025) and "Commissioner of Income Tax versus M/s. Bankipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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. 11. From the above provision of section 44A of the I.T. Act, it appears that the doctrine of mutuality applies only to the trade, professional or similar associations, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d are alike tainted with is commerciality. In other words, the activity carried out by the assessee in such cases, claiming to be a "mutual concern" or " Members' club" is a trade or an adventure in the nature of trade and the transactions entered into with the members or non-members alike is a trade / business/ transaction and the resultant surplus is certainly profit - income liable to tax. 13. In the case of "Sind Coop. Hsg. Society" (supra), a Division Bench of this Court, relying upon "Bankipur Club Ltd." (supra), "Royal India Turf Club Ltd.", (supra) and various other cases, has laid down following tests for applying the principle of mutuality to a case of a cooperative housing society: (1) Is there any commerciality involved; (2) From the moneys received are the services offered in the nature of profit sharing or previleges, advantages and conveniences; and (3) Are the participants and contributors identifiable and belong to the same class in the case of cooperative housing society. (4) Do the members have the right to share in the surplus and do they have a right to dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income arising from members is exempted as the principle of mutuality applies. The I.T.A.T. was of the view that the claim of the assessee that its income exclusively arising from members should be exempt on the basis of concept of mutuality and the income earned on business with non-members should be taxed, is a concept covered by the decision of the Hon'ble Supreme Court in Bankipur Club Ltd. (Supra). The I.T.A.T has not held that what is being offered by sale of consumable goods to the members as well as nonmembers are usual privileges, advantages and conveniences that would attract the principle of mutuality. 17. In our considered opinion, the learned I.T.A.T. has misconstrued the principles laid down by the Apex Court in "Bankipur Club Ltd.", (supra). A true interpretation of the principles relating to the doctrine of mutuality laid down in the case supra and application of the tests laid down by this Court in "Sind Coop. Hsg. Society" (supra), would certainly lead to the conclusion that the respondent-assessee is involved in commerciality and that from the moneys received from the members, services are offered to members and non-members, in the nature of profit sharing by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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