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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Pawan Singh (JM)
This appeal by the Revenue is directed against the order of learned CIT(A) dated 15.6.2018 and pertains to A.Y. 2013-14.
The grounds of appeal read as under :- “Whether on the facts and in the circumstance of the case and in law, the Id. CIT (A) was justified in deleting the addition of Rs. 77,41,592/- made by the AO holding that the contribution received from Members and invested in Mutual Funds is not the object of the Association, without appreciating the fact that there is no Official Gazette which covers the professional Air cargo Agents as specified in section 10(23A) of the Income Tax Act and further provisions of Section 44A of the Income Tax-Act are not applicable in the assessee's case ? The appellant prays that the order of CIT (A) on the above grounds be set aside and that of Assessing Officer be restored”.
3. At the outset learned Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the ITAT decision in assessee’s own case and also that from Hon'ble Bombay High Court decision in assessee’s own case.
2 M/s. The Air Cargo Agents Association of India
Upon careful consideration W note that in assessee’s own case, ITAT has decided the issue in favor of the assessee. The Assessing Officer has noted this. However, he has decided against the assessee on the ground that the department has not accepted the ITAT decision. Be as it may we find that this issue stands covered in favour of the assessee by the decision of ITAT in assessee’s own case. The same has also been confirmed by Hon'ble Bombay High Court. In this view of the matter learned CIT(A) has followed Hon'ble High Court decision in assessee’s own case and found that there is no difference in the fact for the present year. We may gainfully refer to the order of learned CIT(A) as under, wherein Hon'ble Bombay High Court decision is quoted as under :- “3.1.3 All these grounds of appeal are regarding treatment of the contributions received from the members of the appellant association as an income chargeable to tax under the Income Tax Act, 1961 and holding that the 'Concept of Mutuality' is not applicable in case of the assessee.
3.1.4 The assessing officer has treated the amount of Rs. 77,41,592/- received by the appellant during the year on account of Membership Subscription, Members' Annual Convention and Members' Training Programme as income of appellant. In making this addition, the assessing officer has observed at para 4.6 of his order, "Although, on this issue, the decision of the appellate authorities are in favour of the assessee, but since the decision of the appellate authorities are not acceptable to the Department and presently in this case, on the same issue for AY 2007-08, the appeal before the Hon'ble High Court, Mumbai has been filed by the Department, which is pending for decision. Therefore, the contention of the assessee that principle of mutuality is applicable in its case is not acceptable."
3.1.5 The above issue has now been decided by Hon'ble High Court in the appellant's own case for A.Y.2007-08 vide Income Tax Appeal No.2455 of 2013 dated 31.03.2016 wherein the Hon'ble Court held that :-
We find that the contributions made by the members to the respondent-assessee cannot be a subject matter of tax merely because the part of its excess of income over expenditure is invested in mutual fund. If is also not the case of the Revenue that the dividend received from mutual funds have not been offered to tax by the respondent- assessee. The concept of Mutual concerns not being subject to tax is based on the principle of no man can profit out of itself. Therefore the test to be satisfied before an association can be classified as a Mutual concern are complete identity between the members i.e. contributors and the participants, the action of the mutual concern must be in furtherance of its 3 M/s. The Air Cargo Agents Association of India objectives and there must be no scope of profiteering by the contributors from a fund. These tests have in fact been reiterated in Bangalore Club case (supra). However, the facts therein are completely distinguishable. Amongst the members of the Bangalore Club were certain banks. The Bangalore Club have invested its excess funds in member banks as well as non member banks in form of fixed deposits and earned interest thereon. The assessee thereon paid tax on the interest earned on fixed deposit with non member banks. However, so far as interest earned from member banks was concerned, the assessee therein sought to apply the doctrine of mutuality to contend that the interest on the fixed deposit received from the member banks would not be assessable to tax as the dealing was with members only. The Apex Court held that no sooner any amount is invested by an association claiming to be mutual concern in a fixed deposit with the banks the complete identity between the contributors and the participants and contributor in the fund on the amounts invested in member banks is ruptured. It held that till the surplus funds were generated and was used only amongst the members/contributors, the complete identity between contributors and participants continued. However the moment the funds are invested in fixed deposits with the banks and the funds are used for advancing loans etc. by the Bank to its customers, the identity of participants and contributors is sapped. Thus the interest earned on fixed deposits is to be brought to tax. However, it is to be noted that it did not result in the Bangalore Club being taxed on all contributions of its members. The case of the Revenue here is that having invested excess amounts in mutual funds the concept of mutuality would not extend to the contribution made by the members of the association even though the contributions are used to achieve the objectives of the association. In fact as pointed out above the Apex Court in Bangalore Club (supra) did not hold so but only brought to tax the interest earned on fixed deposit with member banks. In this case it is not disputed that the income earned on account of investments made in Mutual Funds has been offered to tax. The respondent has in effect followed the decision of the Apex Court in Bangalore Club (supra). However as held in Bangalore Club (supra), it cannot result in the respondent being charged to tax on the contribution received from its members. In fact the decision of this Court in Common Effluent (supra) concludes the issue in favour of the respondent -assessee.
3.1.6 Since the facts and circumstances of the instant appeal being identical to the above A.Y.2007-08 which has been decided by Hon'ble Bombay High Court, therefore respectfully following the decision of Hon'ble Bombay High Court for A.Y.2007-08,1 also decide this appeal in the favour of the appellant. These grounds of appeal are allowed.”
5. Since the issue stands covered in favour of the assessee by Hon'ble Bombay High Court decision, accordingly, we uphold the order of learned CIT(A).
4 M/s. The Air Cargo Agents Association of India
In the result, appeal filed by the Revenue is dismissed. Order has been pronounced in the Court on 6.8.2019.