TMI Blog2015 (6) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue by : Shri Ramakrishna Bandi Assessee by : None ORDER PER BENCH.: These appeals by department are directed against separate orders of ld. CIT(A)-2, Hyderabad, all dated 30/01/2015, for the AY 2007-08, 2008-09, 2009-10 2011-12. As the facts and issues involved in these appeals are common, they were clubbed and heard together, therefore, the same are being disposed of by way of this common order for the sake of convenience. 2. It is seen from record that notice of hearing was served on respondent-assessee on 20/04/2015. However, at the time of hearing no one is present for assessee. Even assessee has also not filed any petition seeking adjournment of the case. In the aforesaid circumstances, considering the nature of dispute, we proceed to dispose of the appeals after hearing learned DR and on merits. 3. The effective grounds raised by the department, which are common in all the appeals, are as under: 1. On the facts and in the circumstances of the case, the order of CIT(A)-II is against the provisions of IT Act, 1961 and therefore is unsustainable in law. 2. The CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest cannot be taxed at the hands of assessee, but, at the same time, he observed that as the department has challenged the order of ITAT before the Hon ble AP High Court, addition made may be sustained. When ld. CIT(A) invited assessee s objection on the remand report submitted by AO, it was stated by assessee that since the issue is covered by the decision of the coordinate bench in assessee s own case for the preceding AYs, judicial discipline demands that the order of the Tribunal has to be followed. Ld. CIT(A) after considering the submissions of assessee and the comments of the AO as well as going through the order of ITAT passed in assessee s own case for the preceding AYs held that since the order of the Tribunal has not been stayed by Hon ble High Court, interest amount cannot be taxed at the hands of assessee in view of the order of the Tribunal. Accordingly, he deleted the addition of ₹ 76,78,387 made by AO. Being aggrieved, revenue is before us. 7. Ld. DR relying upon the grounds raised submitted before us, since the interest has accrued on the deposits made by assessee it is taxable at the hands of assessee. Further, it was submitted, neither assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides that, the bank shall permit withdrawal from the special savings fund account by the assessee-society of such amounts as may be authorized by the corporation through a letter of authority to be signed by the nominated officers of M/s REC. It provides that the amounts shall be transferred from savings bank account to fixed deposit account automatically in excess of ₹ 1,000 for the minimum period attracting the maximum rate of interest and that the assessee-society shall hand over all the FD receipts in original to the chief project manager of M/s REC in the concerned states. The cl. (1) of the said special fund rule provides that the amount deposited by the assessee-society in the special fund should be strictly utilized for the purpose which are approved by M/s REC. Under these rules, the special fund shall be managed and operated by the society subject to the rules framed by M/s REC. Clause 1.2 of the said rules provides that no amount out of the special fund shall be withdrawn or paid without specific written permission by the corporation for bona fide purposes as specified under these rules. Clause 2.1.4 of the said rule provides that special fund account (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (3) of the said rules provides that the first charge on the special fund shall be that of M/s REC. The amount not exceeding 60 per cent of the said amount has to be kept in 61 months FD in a co-operative bank/Nationalized Bank and it could be used only on the express written instructions of M/s REC and the first charge on it shall be the outstanding loan on the society. We find that cl. (4) provides for utilization of upto 40 per cent of the amount available on special fund only with the permission of M/s REC for specific purposes detailed therein and these purposes merely improved the efficiency of the assessee-society directly or through its members but in our considered opinion, it does not confirm the ownership right over the said fund amount to the assessee-society and, accordingly, it could not be said that the interest on such special fund has accrued to the assesseesociety. Merely because the management of the special fund has been assigned to the assessee-society with the previous prior written permission from REC, it could not be the said that the ownership of the special fund vest in the assessee society. We find that the decision of the Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the assessee is merely a custodian of the amount in the special fund created as per instructions and rules framed by M/s REC. In these facts of the case, we held that there is no diversion of income at source by overriding due by M/s REC in favour of the assesseesociety and the ownership at the special fund remains with M/s REC and, therefore, the income from the special fund amount does not accrue to the assessee. In this view of the matter, we hold that the interest accrued on the special fund amount including the FDs made therefrom does not accrue to the assessee-society and the assessee is accordingly not liable to pay tax thereon. Accordingly, the grounds of appeal taken by the assessee in its appeals are allowed. A reading of the extracted portion from the order of the Tribunal, as aforesaid, clearly indicates that the issue in dispute is squarely covered by the said decision. AO, as it appears from the remand report, has not followed the decision of ITAT simply for the reason that department has challenged the decision of ITAT before the Hon ble High Court. However, in our view, that cannot be a ground to not follow the decision of the Tribunal, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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