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आयकर अपील�य अ�धकरण, सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./ITA No.72/SRT/2022 (AY 2019-20) (Hearing in Physical Court) Assistant Commissioner of M/S Vapi Green Enviro Ltd. Income-tax, Vapi Circle, 135, 1st Floor, VIA Vs Room No.704, 7thFloor, Houe,Char Fortune Square-II, Daman Rasta,GIDC,Vapi-396195 PAN No: AAACV 8289 P Road, Chala, Vapi-396191 अपीलाथ�/Appellant ��यथ� /Respondent
�नधा�रती क� ओर से /Assessee by Ms. Arti N.Shah, C.A राज�व क� ओर से /Revenue by Shri Ashok B.Koli, CIT-DR सुनवाई की तारीख/Date of hearing 13.12.2022 उ�घोषणा क� तार�ख/Date of 26.12.2022 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of learned National Faceless Appeal Centre (for short to as “Ld.NFAC”)/Ld.CIT(A) dated 29.12.2021 for assessment year 2019-20, which in turn arises out assessment order passed by Centralized Processing Centre (CPC) Bengalure under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 10.06.2020. The Revenue has raised the following grounds of appeal:-
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. “1. On the facts and in the circumstances of the case in law, the Ld. CIT(A) has erred in allowing the principle of mutuality followed by the assessee. 2. On the facts and in the circumstances of the assessee and in law, the ld. CIT(A) has erred in holding that the income of Rs.53,35,87,238/- is not the business income. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing the depreciation amounting of Rs.91,48,183/-” 2. The perusal of record shows that the order impugned in this appeal is passed by Ld. NFAC on 29.12.2021, however, present appeal was filed on 31.03.2022. Thus, there is a delay of 32 days in filing present appeal before the Tribunal. The Ld. Commissioner of Income-tax, Departmental Representative (“Ld.CIT-DR”) for the Revenue submits that the period of delay is covered by the decision of Hon'ble Apex Court Hon'ble Apex Court in Suo Motu Writ Petition (C) No.3 of 2020, wherein the time limit for filing various appeals under general law as well as under special law were extended till 28.02.2022 and further 90 days’ grace period was allowed with effect from 01.03.2022. Thus, the present appeal filed by Revenue is within the extended period of limitation as prescribed by Hon'ble Apex Court.
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. 3. On the other hand, Ld. Authorized Representative (Ld.AR) for the assessee has not objected against such plea taken by Ld. CIT-DR for the Revenue for condonation of delay in Revenue’s appeal. 4. Considering the submission of both the parties, we find that the Revenue has filed the present appeal, which was within the period covered by the order of Hon'ble Apex Court in Suo Motu Writ Petition (C) No.3 of 2022 dated 10.01.2022. Thus, delay of thirty-two days in the present appeal filed by Revenue is condoned and the appeal is admitted for adjudication on merits. Now adverting to the merits of the case. 5. Brief facts of the case that assessee is a company incorporated as per section 26 of the Companies Act, 1956. The assessee- company was set up on the direction of Hon'ble jurisdictional High Court to Vapi Industries Association (for short to as “VIA”) to take effective steps for treatment of effluent and disposal of hazardous waste in and around Vapi, Gujarat. The assessee-company has been carrying its activities for its members on the members of mutuality. The receipt for effluent charges are received from its members. The assessee filed its 3
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. return of income for assessment year under consideration on 23.10.2019 declaring total income of Rs.4.71 crores. The return of income was processed by CPC, Bengaluru vide order dated 10.06.2020. The CPC Bengaluru while processing the return of income considered Rs.54.27 Crore as income of the assessee by treating as income not covered by mutuality. 6. Aggrieved by the additions / disallowances by CPC, Bengaluru, the assessee filed appeal before Ld. CIT(A) and case of assessee migrated to Ld.NFAC. Before Ld.NFAC/CIT(A) the assessee filed detailed written submission. The submission of assessee are recorded in para-6 and para-8.2 of the order of Ld.NFAC/CIT(A). The assessee in its submission, submitted that assessee-company was incorporated as per Section 26 of the Companies Act, 1956 as per directive of Hon'ble jurisdictional High Court to take effective steps for treatment of effluent and disposal of hazardous waste. The assessee- company works on mutuality for treatment of hazardous waste. The Articles of Association of the assessee-company do not permit distribution of dividend, signifying that assessee was incorporated essentially as a non-profit oriented mutual 4
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. association. While filing return of income for subject assessment year on 23.10.2019, the assessee declared its income at Rs.4.68 crores being bank interest and balances of Rs.2,86,955/- received for effluent treatment charges from its non-members. Moreover, other receipts represented of Rs.53.35 Crores towards effluent treatment charges from its members and Rs.91,48,183/- being deferred grant transferred to mee the depreciation on assets acquired out of grants from Government of India which is considered as relating to mutual activities and hence excluded from the definition of Income Tax chargeable to tax under section 4 of the Act. The intimation under section 143(1) from DCIT (CPC), Bangaluru on 13,.06.2020 determining the income of assessee at Rs.58.98 crores and demand of tax of Rs.16.53 crores. Against the return of income of Rs.4.71 crores, wherein a refund of Rs.2.09 crores was claimed. The assessee reiterated that they are not carrying any business activities and therefore mutuality received on effluent treatment charges from its members were not taxable. However, interest received from banks on the excess funds and received from non-members of 5
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. effluent treatment charges are taxable as being not covered by mutuality and as such those receive were offered for income for taxation. The assessee submitted that issue is covered in favour of assessee by the decision of Tribunal in earlier years for assessment years 2002-03 onwards till the assessment year 2016-17. The copies of order of Ld. CIT(A) and Tribunal were filed. 7. The Ld.NFAC/CIT(A) after considering the submission of the assessee and the orders of Ld. CIT(A) and decision of Hon'ble Tribunal for all previous yeas in various assessment years deleted the entire addition by accepting that assessee is carrying its activities or mutuality and the amount of Rs.54.27 crores is not taxable. Aggrieved by the order of Ld.NFAC/CIT(A) the Revenue has filed present appeal before the Tribunal. 8. We have heard the submission of Ld.CIT-DR for the Revenue and the Ld.AR for the assessee and have gone through the orders of lower authorities carefully. At the outset of hearing, Ld. AR for the assessee submits that grounds of appeal raised by Revenue are squarely covered by the decision of Tribunal in 6
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. assessee’s own case for various assessment years. The Ld. AR for the assessee filed copies of decision of Tribunal for assessment years 2007-08 and 2008-09 in ITA Nos.1310/AHD/2010, 2778/AHD/2011 & 2835/AHD/2011 all dated 20.04.2012, wherein the principle of mutuality was accepted by the Tribunal. The Ld. AR for the assessee submits that in appeal for assessment year 2009-10 in ITA No.1294/AHD/2013 dated 22.08.2016, the Tribunal also followed earlier years (supra) and assessee was again allowed relief by the decision of Co-ordinate Benches of ITAT- Ahmedabad. The Ld. AR for the assessee submits that similar appeals for Revenue for assessment years 2010-11 and 2011- 12 in ITA No.s 833/AHD/2015 and 3295/AHD/2015 dated 22.03.2018 were also dismissed by the Co-ordinate Benches of ITAT Ahmedabad. 9. On the other hand, Ld. CIT-DR for the Revenue submits that the appeals of Revenue in challenging the order passed by Tribunal in earlier years are pending before the Hon'ble jurisdictional High Court. The Ld. CIT-DR for the Revenue submits that to keep the issue alive the Assessing Officer / 7
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. Department has filed present appeal before the Tribunal again. In short rejoinder, the Ld. AR for the assessee submits that mere approaching before Hon'ble jurisdictional High Court is not sufficient reason if the present appeal is on account of settled issue. Moreover, in some of the cases, the appeal of Department is dismissed by Hon'ble jurisdictional High Court though on the issue of tax effect for such years were less than monetary limit fixed by Central Board of Direct Taxes (CBDT) for filing appeal before Hon'ble High Court. 10. We have considered the rival submission of both the parties and perused the materials available on record and have gone through the orders of lower authorities and Tribunal’s orders in earlier years carefully. We find that there is no dispute that assessee was settled / incorporated as per the order of Hon'ble jurisdictional High Court to treat the effluent of hazardous / created in and around of Vapi. Further there is no dispute that the similar receipt from its members was treated as income in various preceding years. However, on appeal before Ld.NFAC/CIT(A) the assessee was granted relief in all
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. preceding years and on further appeals by Department the order of Ld.NFAC/CIT(A) were upheld by Tribunal. 11. We find that this combination, in assessee’s own case for assessment years 2013-14 dated 09.11.2021 on similar grounds of Revenue’s appeals passed the following order, wherein the Tribunal has held: “4.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. 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
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. 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). 7. In the result, ground No.1 raised by Revenue is dismissed.” 12. We further find that by following the order in ITA No.153/SRT/2018 (supra) similar order was passed by co- ordinate Bench of ITAT Surat in ITA No.732/SRT/2018 for assessment year 2014-15 considering the aforesaid factual and legal discussion. Hence, we do not find any infirmity or illegality the order passed by Ld.NFAC/CIT(A). This ground No.1 of Revenue’s appeal is dismissed in above terms. 13. Ground No.2 relates to issue of depreciation. The Ld. AR for the assessee submits that this issue is also covered by the decision of Co-ordinate Bench of this Tribunal in assessee’s own case for earlier years (supra). 14. On the other hand, Ld. CIT-DR for the Revenue supported the order of Assessing Officer. 15. We have considered the rival submission of both the parties and perused the materials available on record. We find that on 10
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. similar issue in assessee’s own case for assessment year 2013- 14 on similar ground of Revenue’s appeal was dismissed with the following direction: “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 11
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. 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 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.” 16. Considering the consistency decision of co-ordinate bench of ITAT Surat, we direct the Assessing Officer to verify the fact in
ITA No.72/SRT/2022 (A.Y 19-20) M/s Vapi Green Enviro Ltd. accordance with direction dated 22.03.2018 and again dated 09.11.2021, and grant appropriate relief to the assessee in terms of above terms (supra). This ground of Revenue’s appeal is allowed for statistical purposes in above terms. 17. In the result, appeal of the Revenue is partly allowed in above terms. Order pronounced in the open court on 26/12/2022 and the result was also placed on the Notice Board.
Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद�य/ACCOUNTANT MEMBER] [�याियक सद�य JUDICIAL MEMBER] Surat, Dated: 26/12/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order //True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat