TMI Blog2012 (7) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... quashed. - Tax Appeal No. 13 OF 2007, Tax Appeal No. 18 OF 2007, Tax Appeal No. 36 OF 2008 - - - Dated:- 25-6-2012 - A P Lavande And U V Bakre, JJ. For Appellant : Mrs. Asha Dessai, Adv JUDEGEMENT Per : U V Bakre, J : This common judgment and order shall dispose of the above three appeals filed against the orders, of the Income Tax Appellate Tribunal, Panaji Branch (I.T.A.T.), dated 6/9/2006 in I.T.A. No. 214 to 217/PANJ/2005; 2/1/2006 in I.T.A. No. 29/PANJ/1998; and 9/7/2007 in I.T.A. No. 92/PNJ/2007, thereby holding that the principle of mutuality applies and that the income earned from members is liable to be exempted from tax. 2. The respondent is the assessee, which is a Co-operative Society registered under the Co-operative Societies Act, engaged in trading in consumer goods to its members as well as non-members. 3. Facts relevant for the disposal of the Tax Appeal no. 13 of 2007 may be stated as under: The assessment years relevant for the purpose of this appeal are 1997-1998, 1998-1999, 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 Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment was completed by the Assessing Officer and by order dated 30/11/2004, the said claim of exemption in respect of Rs. 3,76,382/- was rejected. Being aggrieved by the above orders of the Assessing Officer, the assessee filed four appeals before the Commissioner of I.T. (Appeals), hereinafter referred to as CIT(A). C.I.T.(A) by separate orders dated 23/09/2004, dismissed the appeals, holding that the general concept of mutuality will not apply in the case of consumer co-operative society doing business and earning profit and such co-operative societies are more like companies where the members own shares and are entitled to dividends. Aggrieved by the orders of the C.I.T.(A), the assessee filed four appeals before the I.T.A.T. and the I.T.A.T. by joint order dated 06/09/2006, allowed all four appeals filed by the assessee, thereby reversing the findings of the Assessing Officer and C.I.T.(A), on the ground that the principle of mutuality does apply and the income earned from members is liable to be exempted from tax. 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 App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following common substantial questions of law namely: A) Whether on the facts and in the circumstances of the case, the ITAT was justified in law in holding that income earned by the assessee from its members is exempted by applying principle of mutuality, without considering that the assessee society is trading with members and non-members alike, selling consumers goods to all ? B) Whether on the facts and in the circumstances of the case, the finding of the ITAT that the assessee society is eligible to exemption on the principle of mutuality, is without any finding that the facility provided to members is a matter of convenience and therefore valid in law, particularly, in the light of the law laid down by the Hon'ble Supreme Court in CIT v/s. Bankipur Club Ltd., reported in 226 ITR 97? 7. Heard Ms. Asha Dessai, learned counsel for the appellant. None is present on behalf of the respondent though duly served. 8. The learned counsel for the appellant has pointed out 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-Operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional or similar association (other than an association or institution referred to in clause (23A) of section 10) from its members, whether by way of subscription or otherwise (not being remuneration received for rendering any specific service to such members) falls short of the expenditure incurred by such association during that previous year (not being expenditure deductible in computing the income under any other provision of this Act and not being in the nature of capital expenditure) solely for the purposes of protection or advancement of the common interests of its members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions of this section, be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under the head "Profits and gains of business 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kipur Club Ltd. (Supra), the principles of mutuality have been thoroughly discussed. The question was whether the assessee mutual clubs were entitled to exemption for the receipts or surplus arising from the sale of drinks, refreshments etc. or amount received by way of rent for letting out the buildings or amounts received by way of admission fees, periodical subscriptions and receipts of similar nature, from its members. The Hon'ble Supreme Court, relying upon various decisions, has observed that these decisions lay down the broad proposition that if the object of the assessee company claiming to be a mutual concern or club , is to carry on a particular business and money is realized both from the members and from non-members, for the same consideration by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole disclose the same profit earning motive and 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 ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the claim of the assessee on the ground that the Co-operative Society is a separate legal entity more like company where members own shares and are entitled to dividend. The C.I.T. (A) further held that the principles of mutuality have been recognized in the Act in relation to trade, professional or similar associations which are not profit making bodies and since this society is making profit by selling goods, deduction under Section 80(P) is available to the society and therefore general concept of mutuality will not be applicable. The C.I.T. (A) held that the concept of mutuality will not be applicable to the assessee. 16. On considering the rival submissions of the parties, the learned I.T.A.T., however, held that the assessee deserves to succeed. The learned I.T.A.T. held that the 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. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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