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TMI Blog2012 (9) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That the Ld CIT(A) has erred both on facts and in law in treating the capital subsidy amounting to Rs. 2 crore received from the State Government under the ASIDE Scheme as a revenue receipt as against the contention of the appellant that the same is a capital receipt which has to be reduced from the cost of the asset. The Ld CIT(A) has added the amount of subsidy while computing the taxable income on the alleged contention that the same has been received from a non member without giving credence to the fact that the same is a capital receipt and its treatment has to be in accordance with the provisions of the Act. 4. That the Ld CIT(A) in this connection has ignored the terms and conditions on the basis of which the amount of subsidy had been received which require that the amount so received cannot be utilized without the prior approval of the Haryana State Pollution Control Board and therefore the appellant was only a custodian of the amount so received. The overriding title of the said amount being with Haryana State Pollution Control Board, it could not have been treated as an income of the appellant. 5. That the Ld CIT(A) has erred in observing that all the amounts so r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that assessee had received income by way of membership fee, interest, misc. income and financial assistance under ASIDE Scheme of Govt. of India. The Assessing Officer proceeded to add the whole of receipt of assessee to its income without allowing any expenses considering non applicability of concept of mutuality by making following observations:- 1) That the assessee has not furnished its Memorandum of Association and copy of aims and objects and in the absence of which the Constitution of Society and its aims and objects cannot be verified. 2) No where in the return, it has been mentioned that assessee society is being run on the concept of mutuality. 3) That the arrangement and relationship between the society and its members should be non trading of character and in the present case no such relationship has been found as no information with regard to the constitution of the society and aims and objects for which it was formed has been brought on record. 4) That principle of mutuality is not applicable in the assessee's case because there has to be complete identity between the contributors and the participators for following the concept of mutuality as held by Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have come together for a common cause of building up an Integrated Waste Disposal Management System. 5. That it is clear from the provisions of Memorandum of Association Rules & Regulations of the appellant that there is a prohibition on distribution of profit to any current and any past members on winding up of the appellant and the surplus remains at the disposal of its members as they can transfer the surplus funds to a society having similar objects. The clauses in the memorandum of the appellant meet the criteria as laid down by the Supreme Court in the case of Eccentric Club with regard to applicability of doctrine of mutuality. Reliance was also placed in the case of Chelmsford Club 243 ITR 89 (SC) where the Hon'ble court had laid down three conditions for applicability of doctrine of mutuality. The assessee meets all the three conditions which are that the assessee is a registered society, the members of which has come together for fulfillment of a common cause, secondly the appellant exists for the benefit of members only and thirdly there is prohibition on distribution of profit to any past or current members and on winding up, the surplus remains the properly of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant portion of Ld CIT(A)'s order in this respect is reproduced below:- "On careful consideration of the above facts, I find force in the arguments of the Ld counsel for the appellant that the appellant is a mutual concern and there is complete identity between the contributors and participators. There is force in the arguments of the Ld counsel for the appellant that the memorandum filed before the Assessing Officer clearly states that the objects for which the appellant was formed. The appellant is a society of industries of Haryana and the object is the treatment of waste produced by these industries to keep the environment clean. The argument of the Assessing Officer that it is not mentioned in the return that the principle of mutuality applies to the appellant has no merit because what is important is the actual conduct of the appellant and even if this is not mentioned in the return, it makes no difference to the status of appellant. Another argument of the Assessing Officer is that the appellant has earned income from persons other than members which show that the appellant is not covered by the concept of mutuality. This again is without any merit. The pre-dominant ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m non members, the receipt of Rs. 2 crores is clearly taxable. The Assessing Officer in the remand report has rightly mentioned that the case laws cited by the appellant relates to business assets and where profit motive is the main consideration and in the appellant's case there is no such profit motive and hence it is not a business asset. 7. As regards misc., income, Ld CIT(A) held that it has been added twice to the income of the assessee and therefore he ordered it to be deleted. 8. Aggrieved, the assessee as well as revenue has filed separate appeals against the impugned order. 9. The Ld DR at the very outset stated that nowhere in the return it was mentioned that principle of mutuality applies to the assessee and moreover, the assessee had received contributions from other than members in the form of Govt. assistance and therefore concept of mutuality is not applicable. Therefore, he argued that order of ld CIT(A) be reversed and that of Assessing Officer be upheld and consequently the deletion made by the Ld CIT(A) be reversed. As regards double addition of Rs. 3,57,681/-, the Ld Dr argued that though addition of Rs. 3,57,681/- has been made to the declared income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f industry goes towards reducing the cost of project and does not par take the character of a revenue receipt. 13. The Ld DR in his rejoinder relied upon the order of the Assessing Officer. 14. We have heard the rival submissions of both the parties and have gone through the material available on record. We have observed from the reading of Memorandum of Association placed at pages 54 to 69 of paper book that the assessee is a cooperative society with a common purpose and for the benefit of its members only and with a prohibition of distribution of profits to past or present members and as per clause -X, XXIII of Memorandum of Association, upon winding up the members has the final say of transferring surplus to another society with similar objects and therefore the concept of principle of mutuality squarely applies to the assessee society and therefore we agree with the order of ld CIT(A) in so far as mutuality is concerned. 15. The judgment of the Ld CIT(A) in respect of treatment of interest income are contradictory. He has deleted interest income of Rs. 1,34,234/- and has upheld the addition of interest income of Rs. 2,47,113/- and Rs. 23,506/- which is not correct. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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