GAYATRI COMMERCIAL PREMISES CO-OP SOCIETY LTD,MUMBAI vs. CPC/ITO.22(1)(4), MUMBAI

ORDER

PER ABY T. VARKEY, JM:

2. The Ld. CIT(A) erred in not granting deduction under Mutuality Principal.”

3. The regarding ground no. 1, the Ld. CIT(A) has dismissed the ground of appeal of the assessee by observing as under: - “The Ld. CIT(A) has rejected the assessees’s the ground of appeal by observing at para no. 7 of the impugned order as under:-

2 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. “The appellant society has wrongly filled up details in 'Exemption schedule' i.e. Schedule EI of Return of Income. In 'Schedule -BP computation of Income from business and profession' of Return of Income vide Column A5 which reads as 'Income credited to profit and loss account which is exempt Rs 93,20,286 is mentioned. Appellant society was supposed to give details of such exempt income credited to profit and loss account in 'Exemption schedule of Return of Income. But in Exemption schedule (item 4(1)) appellant society mentioned maintenance charges from members which are exempt from tax" as Zero. Thus there is discrepancy in information between schedule BP & Schedule EI." Hence CPC, Bengaluru issued letter to appellant society vide letter number CPC/1920/G22/1971720995 dated 31-12-2019 calling for explanation for variation found i.e. why exemption claimed in profit and loss account is higher than Total exempt income earned by appellant society during the year as per 'Exemption schedule'. The Appellant society admittedly failed to give clarification to CPC within time allowed. If any new claims are made by assesses using 'Return data correction' option, the same will not be considered for rectification. In the present case, appellant used 'Return data correction' option to reduce taxable income by correcting data mentioned in 'Exemption schedule". New exemption claim of Rs 93,20,286/- was made in the 'Rectified data correction' form contrary to 'Nil' exempt income claim made in the same schedule in the original return which drastically brought out change in Total income admitted in the original return. As the claim made by the appellant society by way of rectification is beyond the scope of corrections entertained by way of 'Return data correction', CPC, Bengaluru disregarded the data correction 3 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. made in the schedule, consequently not rectified order passed u/s 143(1).

4 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. b).CIT v/s Archana R Dhanwatey 136 ITR 355 (Bom) c). Wipro Ltd v/s DCIT 382 ITR 179 (Karn) d).Smt Snehlata Jain v/s CIT 192 CTR 50 (J&K) e). TATA INDUSTRIES LTD vs. ITO dated 20th July, 2016,181 TTJ 0600 (Mumbai) Hon'ble bench has held in para 30 of the order as under:-

; however, the inclusion of the said amount of interest was not challenged. The inclusion of the said amount of interest was not objected to even in the grounds of appeal as originally filed before the Tribunal. However, the assessee by way of subsequent letter raised the additional ground in relation to the said inclusion of interest in the income of the assessee. In the above circumstances, the question before the Hon'ble Supreme Court was "Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of 5. A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. the assessee, whether the Tribunal has jurisdiction to examine the same?" The Hon'ble Supreme Court while answering the said question observed that under section 254 of the Act, the power of the Tribunal in dealing with the appeals is expressed in the widest possible terms; the power of the Tribunal under section 254 is not restricted only to decide the grounds which arise from the order of the Commissioner of Income Tax (Appeals); that both the assessee as well as the department have a right to file an appeal/cross objection before the Tribunal and the Tribunal is not prevented from considering questions of law arising in assessment proceedings although not raised earlier. While answering the question in affirmative, the Hon'ble Supreme Court concluded that the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. The Ld. AR also cited the full bench decson of the Hon'ble Bombay High Court in the cases of "Ahmedabad Electricity Company Ltd. vs. CIT" and "Godavari Sugar Mills Ltd. vs. CIT" 199 ITR 351 wherein it has been observed that the basic purpose of an appeal procedure in an income tax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stages, either by the Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and consider the material on record before it for the purpose of determining the correct tax liability of the assessee. Thus, according to the Ld. AR, the Ld CIT (Appeals) erred in not granting deduction 6 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. under Mutuality principal which ought to have been allowed. According to him, the assessee had collected from members Rs. 93,20,286 on account of various expenses such as Property tax, Maintenance Charges, Repairs & Sinking funds, Common Electricity charges, Water charges etc and the same was spent for the purpose for which it was collected, which fact is discernable from profit & loss account. Hence according to him, Rs. 93,20,286 (Maintenance Charges) claimed as exempt on the principle of Mutuality was not taxable, as per the law laid by Hon'ble Supreme Court in the case of in ITO vs. VENKATESH PREMISES CO- OPERATIVE SOCIETY LTD. 402 ITR 670 (SC) wherein at para 10 held ‘…….The income of the assessee is contributed by its members. The assessee has been formed specifically with the object of providing a common effluent facility to its members. The income is not generated out of dealings with any third party. The entire contribution originates in its members and is expended only in furtherance of the object of the association for the benefit of the members. On these facts. both the CIT(A) and the Tribunal were justified in coming to the conclusion that the surplus so generated falls within the purview of the doctrine of mutuality and was not exigible to tax’.

for non-grant of benefit under the principle of mutuality while taxing of Rs. 93,20,286/- as business income. However, the Ld CIT(A) dismissed the 9 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. grounds of appeal raised against the action of the CPC not rectifying order passed u/s 143(1)(a) of the Act.

11. Coming to the ground of appeal regarding application of principle of the mutuality, the Ld. CIT(A) held that it was question of fact and which requires examination of facts and documents. Therefore, he declined to adjudicate the ground of Mutuality. Aggrieved, by the action of the Ld. CIT(A) of the assessee is before us.

12. We note that the Ld. CIT(A) has correctly noted that assessee society in the return of income at schedule BP (computation of income from business and profession at columns A5) shown as income credited to profit and loss account which is exempt shown of Rs. 93,20,286/-. However, in the schedule EI it mentioned maintenance charges received from members which are exempt from tax as zero. Therefore, the CPC after noticing that assessee failed to give explanation in respect of the variation had treated amount of RS. 93,20,286/- as taxable business income of the assessee, since, it was not shown as exempt in the schedule EI. We note that the assessee is premises society named as Gayatri Commercial Premises Co-Op Society Ltd. And while uploading the return of income it made certain mistakes in the columns to be filed by it viz, it wrongly filed up details in “Exemption Schedule” i.e. Schedule EI of return of income. Taking note of this discrepancy (i.e. exemption claimed in profit and loss account is higher than total exempt income earned by appellant society during the year as per “Exemption schedule’), the CPC not getting any explanation from assessee on this discrepancy, was pleased to disallow Rs.93,20,286/-. After getting the intimation order of CPC u/s 143(1)(a) of the Act. The assessee tried to correct the same by electronically ‘rectified data correction” which was 10 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. dismissed, since it (rectified data correction) was only for limited purpose and not for making any new claim. This action of the CPC was challenged before the Ld. CIT(A) who was pleased to dismissed the appeal of the assessee by noting as under: - “Since it is appeal against 154, scope is limited to adjudicating whether CPC, Bengaluru erred in not rectifying the order passed u/s 143(1) basing on ‘Rectified data correction’ filed by the appellant u/s 154 or not and whether rectification sought by the appellant society falls within the scope of 154 or not but the scope does not extend to examine whether a new claim can be made by the appellant otherwise than by filing revised return and whether or not it can be entertained since the appeal under consideration is not an appeal against 143(1) order.”

13. And the Ld. CIT(A) has dismissed the ground of appeal of the assessee regarding, it is claim of ‘Mutuality’ by holding as under: - “8. Vide second Ground of appeal it is contended by the appellant that the CPC erred in not giving benefit of ‘Mutuality’ in its order passed u/s 154. The question is whether the appellant claimed applicability of ‘Mutuality concept’ in its rectification application filed before CPC or not before deciding whether CPT erred in not giving that benefit to the appellant. It is beyond doubt that there is no separate rectification application filed by the appellant apart from ‘Rectified data correction’ filed in which details in exemption schedule were modified. Request for ‘Mutuality benefit’ was not possible in rectified data correction’ and has not been made by the appellant. Rectification order passed by CPC, Bengaluru was passed taking only ‘rectified data correction’ into consideration. Therefore, Order passed u/s 154 by CPC, Bengaluru can’t be faulted for not considering a request that was never made by the Appellant. Further 11 A.Y. 2019-20 Gayatri Commercial Premises Co-Op Society Ltd. applicability of mutuality is a question of fact which requires examination of documents like bye laws of assesse premises society details of members, actual usage of funds etc. Hon'ble Bombay High court in case of CIT Vs Bombay oil seeds &oil exchange Ltd. 202 ITR 198 held as under: - “The cardinal principle to apply the test of mutuality is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund. In other words, there must be complete identity between the contributors and the participators. The question whether all the members were contributors or not is a question of fact, which has to be decided in each case by the authorities concerned. In the facts of that case, the Tribunal was held justified in holding that the test of mutuality was satisfied with regard to laga receipts and the said receipts did not constitute income of the assesse” Hence examination of applicability Mutuality concept in case of a society is a question of fact which is beyond scope of 154. Hence Ground 2 of appellant is also dismissed.”

14. We do not countenance the impugned action of Ld. CIT(A) because the assessee’s plea regarding the amount in question being disallowed i.e. Rs.93,20,286/- as not taxable has not been examined on its merits. As per the Article 265 of the Constitution of India ‘No tax shall be levied or collected except by Authority of Law”. It must be borne in mind that Rules of procedure are not by themselves an end but to achieve the ends of justice. Rules of procedure are tools forged to achieve justice and not hurdles to obstruct the pathways to justice. Technicalities should not come in the way of substantial justice. Refer