TMI Blog2015 (5) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... is covered against the assessee by the decision of the Honble jurisdictional High Court in the case of Indian Oil Corporation Ltd. [2014 (10) TMI 262 - BOMBAY HIGH COURT ] dated 12th Sept 2012. Following the decision of the Hon’ble jurisdictional High Court, we decide this issue against the assessee. - In the result, the Revenue’s appeal and the assessee’s cross objection stand dismissed. - ITA No. 572/Mum/2010 & CROSS OBJECTION No.159/Mum/2010 - - - Dated:- 14-11-2012 - SHRI R S SYAL, AM SHRI VIJAY PAL RAO, JJ. For the Appellant : Shri S E Dastur Mr Nitesh Joshi For the Respondent : Shri Mahesh Kumar ORDER PER VIJAY PAL RAO, JM This appeal by the revenue and the Cross Objection by the assessee are directed against the order dated 29.10.2009 of the Commissioner of Income Tax(Appeals) for the Assessment Year 2006-07. 2 The revenue has raised the following grounds in this appeal: 1 On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the assessee is covered by the principle of mutuality without appreciating the fact that: i) the assessee was having transactions with the non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the net income of the appellant company is NIL as it recovers at cost. Accordingly the appellant company did not have any taxable income. 8 The learned ADIT erred in not allowing depreciation allowance under Section 32 of the Act while computing the net income of the appellant company. 9 The learned ADIT erred in not allowing the deduction under section 80-lA of the Act in computing the total income of the appellant company. Interest under section 234D of the Act 10 The learned CIT(A) erred in not directing the learned ADIT to delete the interest charged of ₹ 5,75,035 under section 234D of the Act. 3 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue involved in the revenue s appeal as well as in the Cross Objection of the assessee are considered and decided by the Tribunal in assessee s own case for the Assessment Year 1996-97 vide order dated 26.9.2012. 4 The only issue raised by the revenue is regarding the principle of mutuality, which has been decided by the Tribunal in assessee s own case for the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and income there from will enjoy exemption. d. When individuals join and form an association and such association sells/provides goods/services/facilities ONLY TO public at large, that is, NON-MEMBERS, there may or may not be profit motive. When there is profit motive and profits actually follows, such profit is liable to tax. If there is no profit motive but still profit follows, such a profit is also chargeable to tax. If, however there is no profit motive and no profit results, there will not be any tax because of no income and not because of principle of mutuality. Obviously in such a case, the contributors to the profit, being the customers as a class, will be different from the participators in the profit, being the members of the association as a class, thereby breaching the principle of mutuality. e. If, in a case of association of the nature as discussed in point no. d. above, there are by and large transactions with non-members, but there are only a few transactions with members as well, the nature of the organization as non-mutual, will remain as such. Whereas profits from transactions with non-members will be liable to tax, profit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its members at 99.93% of its total operations. This fact evidences that nonmembers availed the facilities provided by the assessee to a very limited extent, less than even 0.1% of total. 3.15. At this moment, we will try to ascertain if the assessee was set up with a profit motive. We have perused Articles of association of the assessee, a copy of which is placed at page 116 onwards of the paper book. Objects of the assessee are contained in Article 3. Main object of the assessee as per clause a) of Article 3 is :`to foster all communication and information processing, matters directly or indirectly connected with the transmission and processing of all categories of information required in the operation of the air transport industry and to study the problems relating to them with the aim of promoting in al countries safe and regular air transport . Other objects of the assessee are on the same lines. There is no reference to any profit motive in such objects. It has been consistently claimed by the assessee that it has not earned any profit from its transactions and the consideration so received represents only cost recoveries. 3.16. The abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuality is lost by reason of a member resigning or retiring from the society and not getting any share in the reserves. In other words, the larger question is whether the contributors to the fund and participators in the fund should be the same persons on an individual level or a class level. The Hon ble jurisdictional High Court in the case of Sind Co-operative Housing Society (supra) considered the question of mutuality on the transfer fees received by the co-operative society from its members. In this case, the Hon ble jurisdictional High Court recognized `class of members as participators as well as contributors for mutuality, instead of the `individual members. It has been held in this case that the fact that only some members from those who contributed may participate in the surplus, is irrelevant as long as the class is same. 3.20. The learned Departmental Representative also relied on the judgment of the Hon ble Supreme court in the case of Kumbakonam Mutual Benefit Fund Ltd. (supra) to contend that the principle of mutuality fails if the persons who contribute to the income are not the same persons who participate in the surplus of the organization. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and thereafter recorded a positive conclusion granting the status of mutual organization to the assessee. Same is true in respect of the creation of reserves as well. The learned AR has pointed out that the reserves so referred to by the learned Departmental Representative were created many years ago in accordance with the Belgian statutory requirements or arose due to revaluation or refurbishment cost or due to capitalization of refurbishment cost. The question of reserves has also been discussed in the order for assessment years 1974-75 and 1975-76. In view of the conclusion arrived at by the Tribunal in earlier years holding that the mutuality is not disturbed by reason of Article 20 and 50 of the assessee or the creation of reserves, we do not deem it necessary to dive deep into the arguments of the ld. DR with a view to bring out any decision contrary to what has already been taken by the Tribunal in earlier years on the same facts and circumstances. 3.24. We, therefore, sum up our conclusion on ground no.1 taken by the Revenue in its appeal by holding that the assessee is covered by the principle of mutuality to the extent of its transactions with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical. 7.1 The issue raised in ground no.1 and 2 of the CO has been dealt by the Tribunal for the Assessment Year 1996-97 in paras 5.4 5.5 as under: 5.4. We have heard the rival submissions and perused the relevant material on record. There can be no dispute about the fact that any amount received by way of reimbursement, not containing any element of profit, is not liable to tax. This principle has been laid down by the Hon ble jurisdictional High Court in CIT v. Siemens Aktiongesellschaft [(2009) 177 Taxman 81 (Bom.)] and the Special Bench of the Tribunal in the case of Mahindra and Mahindra Ltd. v. DCIT [(2009) 313 ITR (AT) 263 (Mum) (SB)]. In these cases, it has been held that when a particular amount of expenditure is incurred and the same sum is reimbursed as such, that cannot be considered as having any part of it in the nature of income. This brings us to the principle that if there is certain reimbursement of expenses as such, without there being any markup included in such reimbursement, there cannot be any question of earning any income liable to tax from such reimbursement. We agree with the learned AR on this principle that the reimbursement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a case in which both the sides of the assessee s Income and expenditure account are tallying paisa to paisa. The learned AR submitted that the cost and revenues are matched and if there is any net over-recovery or net under-recovery, the same is carried forward and at the end of the year the audited accounts reflect cumulative under-recovery or over-recovery for the year. This submission was made by reading from the assessee s aforesaid letter dated 05.02.2005 addressed to the CIT(A). On a specific question as to what is the amount of under-recovery or over-recovery in the accounts of the assessee for this year or any earlier or later year, the learned AR failed to point out any such amount. We have perused the Income and expenditure account and balance sheet of the assessee. It is observed that both the sides of the assessee s Income and expenditure are matching paisa to paisa and there is no under-recovery or over-recovery shown as an asset or a liability in its balance sheet. Further, when we consider the fact that the accounts of the assessee were maintained at the HO level, there remains nothing to doubt the correctness view taken by the learned CIT(A) that the accounts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was more than justified in estimating the income at 5% of the gross receipts from non-members. These grounds taken by the assessee are not allowed. 8 Following the earlier order of the Tribunal, we find no merit in the ground no 1 to 9 of the CO raised by the assessee; accordingly, the same are dismissed. 9 Ground no.10 is regarding levy of interest u/s 234D. 10 We have heard the ld AR as well as the DR and considered the relevant material on record. At the outset, we find that this issue is covered against the assessee by the decision of the Honble jurisdictional High Court in the case of CIT vs Indian Oil Corporation Ltd in Income Tax Appeal No. 2012 of 2011 vide order dated 12th Sept 2012. The relevant part of the order of the Hon ble High Court in paras 25 to 27 are as under: 25) The aforesaid decision was rendered prior to the introduction of Explanation-2 to section 234D of the Act. The Kerala High Court which had no occasion to consider Explanation 2 held that as the provision of interest is not introduced with reference to any assessment year, it must be taken to apply only with effect from 1/06/2003. This submission of the respondent-assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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