ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE,, VAPI vs. M/S VAPI GREEN ENVIRO LTD., , VAPI

आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the Revenue, pertaining to Assessment Years (AYs) 2017-18 and 2018-19, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], Surat, which in turn arise out of separate assessment orders passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

4. When these appeals called out for hearing, the Ld. Counsel for the assessee invited our attention to the order dated 09.11.2021, passed by the Division Bench of this Tribunal in assessee’s own case in & 732/SRT/2018, for AYs.2013-14 and 2014-15, whereby the issue relating to principle of mutuality and depreciation have been discussed and adjudicated. The Ld. Counsel for the assessee submitted that the present appeals are squarely covered by the aforesaid order of Tribunal, a copy of which is also placed before the Bench.

3. 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 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.

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 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.

5. 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.

6. We have considered the rival submission of both the parties and perused the order of lower authorities. The Assessing Officer 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 ITA Nos.152 & 153/SRT/2023 Vapi Green Enviro Ltd. brought to our notice to take other view. Thus, we affirm the order of Ld. CIT(A).

7. In the result, ground No.1 raised by Revenue is dismissed.

8. 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 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 (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 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.”

& 153/SRT/2023 Vapi Green Enviro Ltd.

Registry is directed to place one copy of this order in all appeals folder / case file(s).

Order pronounced on 31/05/2023 in the open court.