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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH & DR. ARJUN LAL SAINI
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA Nos.153 & 732/SRT/2018 (Assessment Years: 2013-14 & 2014-15) (Hearing in Virtual Court) Assistant Commissioner of Income M/s Vapi Green Enviro Tax / Dy. Commissioner of Income Ltd. (formerly known as Vs tax, Vapi Circle, Room No. 704, 7th Vapi Waste & Floor, Fortune Square-II, Chala- Management Co. Ltd.) Plot Daman Road, Vapi No. 135, 1st Floor, VIA House, Char Rasta, GIDC, Vapi [PAN : AAACV 8289 P] Appellant/ Revenue Respondent/ revenue
Assessee by Ms. Arti N. Shah, C.A Revenue by Shri Ritesh Mishra, CIT-DR & Ms Anupama Singla, Sr. DR Date of hearing 05/10/2021 Date of pronouncement 09/11/2021
O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by Revenue are directed against the separate order of learned Commissioner of Income Tax (Appeals)-Valsad, dated 11.12.2017 & 24.09.2018 for Assessment Years (AY) 2013- 14 & 2014-15 respectively. In both the appeals, the Revenue has raised certain common grounds of appeal except variance of amount, facts in both the appeals are almost similar, therefore with the consent of both the parties both the appeals, clubbed, heard together and are decided by the consolidated order. For appreciating the fact, the Revenue has raised the following grounds in ITA No.153/SRT/2018 for AY 2013-14 are treated as ‘lead’ case. The revenue has raised following grounds of appeal;
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. “i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the benefits of principle of mutuality to the assessee in the instant case despite the fact that the activity carried out by the assessee is not a charitable one and the assessee is earning heavy surplus by charging the members as per its discretion and is indulged in transactions with non-members which vitiates the principle of mutuality on the first place. ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,61,25,254/- made on account of disallowance of depreciation ignoring the fact that the assessee-company had not reduced the contribution of members towards acquisition of assets before computing depreciation for the year under consideration. iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.24,25,715/- made on a disallowance of loss on sale of fixed assets on the basis of applicability of principle of mutuality despite the fact that the principle of mutuality itself is not applicable in the first place in the instant case. iv) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.60,455/- and Rs.52,961/- made on account of disallowance of late payment of TDS and penalty charges respectively, by allowing these deductions considering them to be claimed on the basis of principle of mutuality despite the fact that the principle of mutuality itself is not applicable in the first place in the instant case.” 2. Brief facts of the case are that assessee-company is a Public Limited Company, engaged in the treatment of effluent and waste emanating out of various industries in Vapi region. The assessee- company was set-up by various members of the Vapi Industries Association and took over Common Effluent Treatment Plant (CETP) from Gujarat Industrial Development Corporation. The assessee filed its return of income for assessment year 2013-14 on 28.09.2013 declaring income of Rs.2.18 crores. The case was selected for scrutiny. The assessment was completed under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on 2
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. 30.03.2016. The Assessing Officer while passing assessment order assessed total income of Rs.2.44 crores as business income by making addition of the loss on sale of fixed asset, and capital contribution of Rs.24,25,715/-. The Assessing Officer disallowed the interest on late payment of Tax Deducted at Source (TDS) of Rs.60,455/-and penalty charges of Rs.52,961/- respectively. The assessee claimed it as a mutual association and claimed that effluent treatment charges collected from members is exempted. The Assessing Officer denied the mutuality and assessed the treatment charges as ‘business income’ and also disallowed the claim of depreciation of Rs.2.61 crore by taking view that assessee has not correctly worked out by deducting the contribution received from its members from written down value (WDV). Before Assessing Officer the assessee contended that on similar set of fact the concept mutuality, the exemption was allowed by Tribunal in earlier year. The Assessing Officer not accepted the contention of assessee by recording that the appeal of Revenue is pending before Hon'ble jurisdictional High Court.
Aggrieved by the treatment denying the concept of mutuality and various additions, the assessee filed appeal before Ld. CIT(A).The Ld. CIT(A) by following the order of earlier year on identical fact accepted the contention of assessee on the concept of mutuality. Since the concept of mutuality was accepted therefore, treatment of ‘business income’ of treatment charges collected from members, was also reversed. The Ld. CIT(A) also deleted the disallowance on
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. account of late payment of TDS and penalty charges by holding that late payment of TDS and penalty charges were not claimed as deduction. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal.
We have heard the submission of Ld. Commissioner of Income Tax-Departmental Representative (CIT-DR) and Ld. Sr. DR for the Revenue and Ld. Authorized Representative (AR) for the assessee. At the outset of hearing the Ld. AR for the assessee submits that grounds of appeal raised by Revenue are covered in favour of assessee. The Ld. AR for the assessee submits that ground No.1 of appeal is covered in favour of assessee by series of decisions in assessee’s own case in earlier year, wherein the assessee has been accepted as mutual association. The Ld. AR for the assessee submits that Ld. CIT(A) while allowing the relief to the assessee followed the order of Tribunal in ITA No.833/AHD/2015 and ITA No.3295/AHD/2015 for assessment years 2010-11 & 2011-12. Ld. AR for the assessee submits that copy of decision in ITA No.833/AHD/2015 is placed on record.
On the other hand, Ld. CIT-DR for the Revenue supported the order of Assessing Officer. Ld. CIT-DR submits that assessee is engaged in the business activity and having surplus from the alleged contribution by its members.
We have considered the rival submission of both the parties and perused the order of lower authorities. The Assessing Officer
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. denied the benefit of concept of mutuality by taking view that the department has already filed against the earlier decision of Tribunal in various years. We find that Ld. CIT(A) allowed relief to the assessee by following the decision of Tribunal in assessee’s own case for earlier year (supra). We note that assessee’s own case for AY 2010-11, the co-ordinate bench of Tribunal while following the order in earlier year accepted the status of assessee as a mutual association in order dated 22.03.2018 in ITA No.833/AHD/2015 (supra). No contrary facts or law is brought to our notice to take other view. Thus, we affirm the order of Ld. CIT(A).
In the result, ground No.1 raised by Revenue is dismissed.
Ground No.2 relates to disallowance of depreciation by not reducing the contribution of members for acquisition of assets while computing depreciation. The Ld. AR for the assessee submits that member’s contribution for acquisition of assets are shown under member’s fund in the liability as capital which is utilized for acquisition of assets of the assessee and in no way, can be reduced in cost for asset by applying of section-43. The ld. AR for the assessee submits that Ld. CIT(A) appreciated the fact and granted relief to the assessee. 9. On the other hand, Ld. Sr-DR of the Revenue supported the order of Assessing Officer. The Ld. Sr. DR for the revenue submits that Assessing Officer disallowed the depreciation on the ground that the contribution received from the members for cost of asset 5
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. should be reduced from WDV for calculation of depreciation allowable. On the other hand, the assessee’s stand was depreciation was debited to the income and expenditure account in its books and deduction for such depreciation was not claimed for taxable income shown in the return of income as the assessee has shown only from ‘other sources’. The assessee is also deleting with such entity which are not its members earning from non- members as well and acquisition of asset of the company cannot in no way be taken for deduction in cost of asset by applying provision of section-43 of the Act. 10. We have considered the contention of both the parties and gone through the orders of authorities below. We find that in earlier year on similar submission of parties the authorities below recorded that the assessee is also getting services from non- members which has to be taxed accordingly. However on disallowance of depreciation, it was held that there is principle of mutuality in case of assessee, therefore, the allowance of depreciation has no bearing as the principle of mutuality was accepted by Tribunal. However, the issue was remitted back for limited purposes with the following direction in ITA No833/AHD/2015 (supra) which is reproduced below:- “12. In the light of findings given by the Tribunal in the appellant’s own case, we find that the issue is covered against the Revenue and we have no reason to deviate from the said finding recorded by the co-ordinate bench of the Tribunal. Accordingly, following the same, we hold that the principle of mutuality has accepted by the Tribunal on earlier 6
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. years is also hold good in the assessment under consideration. Therefore, the same is allowed. However, the Assessing Officer is directed to verify the claim of assessee whether any outsider is getting services or not from non- members which as to be taxed accordingly after giving full opportunity to the assessee. So far allowances of depreciation and prior period expenses are concern, as we held the principle of mutuality in the case of assessee, therefore, the allowances of depreciation and prior period expenses by Assessing Officer has no bearing as the principle of mutuality has been accepted by the Tribunal. In the result, appeal of the assessee is set aside and disposed of for statistical purposes.” 11. Considering the order of co-ordinate Bench (supra), we direct the Assessing Officer to verify the fact that in accordance with direction in order dated 22.03.2018 (supra) and passed the order in accordance with law. In the result, ground No.2 raised by Revenue is allowed for statistical purposes in above terms. 12. Ground No.3 & 4 relate to deleting the addition of Rs.24,25,715/- on account of disallowance of loss on sale of fixed asset and deleting the addition on account of Rs.60,445 and Rs.52,961/-on account of late payment of TDS and penalty charges respectively. The Ld. AR for the assessee submits that assessee has not claimed the deduction of such expenses on the basis of principle of mutuality. The Ld. AR for the assessee submits that Ld. CIT(A) appreciated the fact that and held that there is no case of disallowance and the assessee has not shown any business income on the ground of concept of mutuality principle. Similarly,
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. no deduction on delay payment of TDS or penalty charges were claimed. 13. On the other hand, Ld. Sr. DR of the Revenue supported the order of Assessing Officer. 14. We have considered the rival submission of both the parties and have gone through the orders of the lower authorities. We find that Assessing Officer disallowed the expenses on account of loss on sale of fixed asset and interest on late payment of TDS and penalty charges. The Ld. CIT(A) allowed relief to the assessee by taking view that the assessee has not claimed deduction of such items. We find that assessee has not claimed deduction of such claim on the basis of principle of mutuality. The Ld. CIT(A) accepted the contention of assessee that once the expenses is not claimed as the deduction of no disallowance is sustainable. Ld. CIT(A) has accepted the contention of the assessee that no disallowance was claimed is permissible. Thus, we find that order of Ld. CIT(A) is affirmed. In the result, ground No.3 & 4 raised by Revenue are dismissed. 15. In the result, the appeal of the revenue is partly allowed. ITA No.732/SRT/2018 A Y 14-15 16. The Revenue has raised similar grounds of appeal as raised in appeal for assessment year 2013-14, which we have already dismissed, except restoring the part of Ground No.2 to the assessing officer, therefore, following the principle of consistency, the grounds of appeal raised by Revenue in AY 2014-15 is also
ITA No. 153 & 732/SRT/2018 AYs.13-14 &14-15 M/s Vapi Green Enviro Ltd. allowed with similar observation. Thus, the order passed in appeal for AY 2013-14, will apply mutatis mutandis. 17. In the result, the both the appeals of the revenue are partly allowed. A copy of this instant common order be placed in the respective case file(s). The order pronounced on in open Court on 09.11.2021 and also placed result on notice board.
Sd/- Sd/- (DR. A. L. SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 09/11/2021 Dkp Outsourcing Sr.P.S Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR