M/s Standing Conference of Public Enterprises (SCOPE),, New Delhi v. ITO, New Delhi

CO 27/DEL/2010 | 2007-2008
Pronouncement Date: 24-05-2010 | Result: Allowed

Appeal Details

RSA Number 2720123 RSA 2010
Assessee PAN AAPFS7390N
Bench Delhi
Appeal Number CO 27/DEL/2010
Duration Of Justice 3 month(s) 20 day(s)
Appellant M/s Standing Conference of Public Enterprises (SCOPE),, New Delhi
Respondent ITO, New Delhi
Appeal Type Cross Objection
Pronouncement Date 24-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 24-05-2010
Date Of Final Hearing 24-05-2010
Next Hearing Date 24-05-2010
Assessment Year 2007-2008
Appeal Filed On 03-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI R.P.TOLANI AND SHRI K.D.RANJAN ITA NOS.4691 4692 4693& 4694/DEL/2009 ASSESSMENT YEARS : 2001-02 2002-03 2006-07 & 200 7-08 INCOME TAX OFFICER WARD 31(1) NEW DELHI. VS. M/S STANDING CONFERENCE OF PUBLIC ENTERPRISES (SCOPE) 7 LODI ROAD CORE NO.8 NEW DELHI. PAN AAPFS7390N (APPELLANT) (RESPONDENT) C.O.NOS.24 25 26 & 27/DEL/2010 (IN ITA NOS.4691 4692 4693& 4694/DEL/2009) ASSESSMENT YEARS : 2001-02 2002-03 2006-07 & 200 7-08 M/S STANDING CONFERENCE OF PUBLIC ENTERPRISES (SCOPE) 7 LODI ROAD CORE NO.8 NEW DELHI. PAN AAPFS7390N VS. INCOME TAX OFFICER WARD 31(1) NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GAJANAND MEENA CIT DR ASSESSEE BY : S/SHRI VED JAIN AND RANU JA IN C.A. ORDER PER BENCH: THESE APPEALS BY THE REVENUE AND CROSS OBJECTIONS B Y THE ASSESSEE ARISE OUT OF COMMON ORDER PASSED BY THE LD. CIT(A)- XXVI NEW DELHI. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE DISPOSED OF BY THIS COMMON ORDER. 2 2. FOR ASSESSMENT YEARS 2001-02 2002-03 2006-07 A ND 2007-08 THE REVENUE HAS RAISED IDENTICAL GROUNDS. EXCEPT DIFFER ENCE IN FIGURES THE ISSUES ARE IDENTICAL. FOR THE SAKE OF CONVENIENCE GROUNDS RAISED BY THE REVENUE IN ITA NO.4691/DEL/2009 FOR ASSESSMENT YEAR 2001-02 AR E REPRODUCED AS UNDER: 1. LD.CIT(A) HAS ERRED ON FACTS ND IN LAW IN DECIDI NG THAT THE ADDITIONS MADE BY THE A.O. OF RS.8 78 416/- AS BUSI NESS INCOME AND OF RS.4 08 64 189/- AS INCOME FROM OTHER SOURCE S WERE EXEMPT FROM TAXATION BY HOLDING THE APPLICABILITY O F THE PRINCIPLE OF MUTUALITY WITHOUT CONSIDERING THE FAC T THAT THE A.O. HAD SPECIALLY DISCUSSED THE OBJECTIVE OF THE S OCIETY WHICH EXPLICITLY STATES THAT IN CASE OF WINDING UP OF SOC IETY THE SURPLUS SHALL NOT BE PAID TO OR DISTRIBUTED AMONGST THE MEM BERS OF SOCIETY BUT SHALL BE GIVEN OR TRANSFERRED TO SOME O THER INSTITUTION OR INSTITUTIONS THEREFORE PRINCIPLE OF MUTUALITY IS NOT MAINTAINABLE IN THE CASE OF ASSESSEE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DIRECTING THAT THE ADDITION MADE BY THE A.O. OF RS.81 76 312/- AS INCOME FROM HOUSE PROPERTY BE BIFURCATED AND ONLY THE NET RENT RECEIPT FROM NON MEMBERS AFTER ALLOWING NECESSARY EXPENSES BE BROUGHT TO TAX AND ALSO IN HOLDING THAT THE TERM N ON MEMBERS SHALL MEAN AND INCLUDE ANY PERSON OTHER THAN THE ME MBERS LIKE PSU AND ALSO COVERS IN ITS AMBIT EVEN MINISTR IES/DEPTT. OF CENTRAL AND STATE GOVERNMENTS WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED THE ACCOUNT OF INCOME AND EXPENSE MEMBER AND NON MEMBER-WISE. 3. THE ISSUES FOR CONSIDERATION RELATE TO DELETING THE ADDITION MADE BY ASSESSING OFFICER OF RS.8 78 416/- FOR ASSESSMENT Y EAR 2001-02 (RS.2 66 221 FOR ASSESSMENT YEAR 2002-03; RS.1 13 3 9 361 FOR ASSESSMENT YEAR 2006-07; AND RS.1 67 24 835 FOR ASSESSMENT YEA R 2007-08) AS BUSINESS INCOME AND RS.4 08 64 189/- FOR ASSESSMEN T YEAR 2001-02 (RS.1 98 05 674 FOR ASSESSMENT YEAR 2002-03; RS.1 8 2 04 580 FOR 3 ASSESSMENT YEAR 2006-07; AND RS.2 62 85 202/- FOR A SSESSMENT YEAR 2007- 08) AS INCOME FROM OTHER SOURCES AS ALSO RENTAL INC OME FROM LETTING OUT THE SPACE IN THESE YEARS BY HOLDING THAT THESE INCOMES WERE EXEMPT FROM TAXATION BY HOLDING APPLICABILITY OF THE PRINCIPLE OF MUTUALITY. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT ASSESSEE HAD RE CEIVED INTEREST ON DEPOSITS ON FDRS/BANK DEPOSITS RENT FROM CONVENTION CENTRE AND FROM BANKS AND THE SPACE LET OUT TO OTHER COMMERCIAL ENTERPRISES. THE ASSESSEE CLAIMED THESE RECEIPTS EXEMPT UNDER THE CONCEPT OF MUTUALITY. THE ASSESSING OFFICER TREATED THE INTEREST INCOME UNDER THE HEAD OTHER S OURCES ON THE GROUND THAT INCOME HAD ARISEN FROM NON MEMBERS AND BY INVE STMENT OF SURPLUS FUNDS. THE ASSESSING OFFICER TREATED THE LICENSE FE ES RECEIVED FROM CONVENTION CENTER UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER TREATED THE SURPLUS ARISING FROM SCOPE SECRETARIAT AS BUSINESS INCOME. THE ASSESSING OFFICER THUS TREATED THE FOLLOWING INCOME LIABLE TO TAX AS UNDER: ASSESSMENT YEAR INCOME FROM HOUSE PROPERTY AFTER DEDUCTION U/S 24 (RS.) INCOME FROM BUSINESS (RS.) INCOME FROM OTHER SOURCES. (RS.) 2001-02 81 76 305/- 8 78 416/- 4 08 64 189/- 2002-03 83 67 744/- 2 66 221/- 1 98 05 674/- 2006-07 1 64 18 716/- 1 13 39 361/- 1 82 04 580/- 2007-08 1 85 86 886/- 1 67 24 835/- 2 62 85 202/- 5. ON APPEAL THE ASSESSEE PLEADED THAT ABOVE INCOM ES WERE EXEMPT FROM TAXATION ON THE PRINCIPLE OF MUTUALITY. LD. CI T(A) EXAMINED THE MATTER IN DETAIL AND FOLLOWING THE DECISION OF I.T.A.T. D ELETED THE ADDITION BY OBSERVING AS UNDER: 4 11. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS IN THE MATTER. IT I S SEEN THAT SIMILAR ADDITIONS WERE MADE IN ASSESSMENT YEAR 1999 -2000 ON ACCOUNT OF; (I) PRINCIPLE OF MUTUALITY (II) INTERE ST INCOME AND (III) RENTAL INCOME. HOWEVER VIDE THEIR ORDER DATE D 31.3.2008 THE HONORABLE ITAT IN ITA NO.5015/DEL/2007 HAD HELD THAT THE CLAIM OF MUTUALITY IN THE ASSESSEES CASE CANNOT BE DENIED. SUBSEQUENTLY VIDE A COMMON ORDER DATED 28.7.2008 F OR ASSESSMENT YEARS 2000-01 2004-05 AND 2005-06 MY PREDECESSOR LD.CIT(A)-XXVI NEW DELHI HAD ALSO ACC EPTED THE PRINCIPLE OF MUTUALITY IN THE CASE OF APPELLANT . WITH REGARD TO INTEREST INCOME THE HON'BLE ITAT HAD HELD THAT THE ASSESSEE WOULD BE ENTITLED FOR EXEMPTION ON ACCOUNT OF INTER EST INCOME. WITH REGARD TO RENTAL INCOME THE HON'BLE ITAT HAD A LSO CERTIFIED THAT ONLY THE NET RENTAL INCOME FROM NON- MEMBERS CAN BE TAXED AFTER EXCLUDING THE EXPENSES INCURRED IN R ELATION TO EARNING OF RENTAL INCOMNE. 11.1 RELYING ON THE ABOVE ORDER OF THE HON'BLE ITAT THE GROUNDNO.4 IS DECIDED IN FAVOUR OF THE APPELLANT BY ACKNOWLEDGING THE PRINCIPLE OF MUTUALITY IN THE CAS E OF THE APPELLANT. 11.2 WITH REGARD TO GROUND NO.5 AND 6 IT IS HELD T HAT THE RENTAL INCOME HAS TO BE BIFURCATED INTO RENT RECEIVED FROM MEMBES AND RENT RECEIVED FROM NON-MEMBERS. RELYING ON THE ABOVE ORDER OF ITAT DATED 31.3.2008 IT IS HELD THAT THE RECEIPT OF RENT FROM NON-MEMBERS WOULD BE TAXABLE. HOWEVER IT IS H ELD THAT THE TERM NON-MEMBERS SHALL MEAN AND INCLUDE ANY P ERSON OTHER THAN THE MEMBER PSU AND HENCE SHALL ALSO C OVER ITS AMBIT EVEN MINISTRIES/DEPARTMENTS OF CENTRAL AND S TATE GOVERNMENTS AS WELL IRRESPECTIVE OF THE FACT THAT A PARTICULAR PSU MAY BE UNDER A PARTICULAR MINISTRY AS A MINISTR Y IS DISTINCT FROM A PSU. THE LETTING OUT OF THE CONVENTION CENTR ES SURPLUS SPACE TO VARIOUS NON-MEMBERS IS DEPENDENT ON AVAILA BILITY AND LIMITED TO ORGANIZING CONFERENCES/MEETINGS ETC. BU T SUCH LETTING THE APPELLANT INTENDS TO REDUCE THE COST OF MAINTENANCE OF CONVENTION CENTER WHICH IS MADE AVAILABLE TO TH E MEMBERS AT A HIGHLY SUBSIDIZED COST. THUS THE LETTING IS PA RT OF BUSINESS AND INCOME FROM NON-MEMBES WHICH IS SPORADIC CANNO T BE TREATED AS INCOME FROM HOUSE PROPERTY. THE A.O. I S DIRECTED 5 TO ALLOW EXPENSES ATTRIBUTABLE TO LETTING OUT THE C ONVENTION CENTER TO NON-MEMBERS AND DETERMINE TAXABLE AMOUNT THEREAFTER. THE EXPENSES ATTRIBUTABLE TO NON-MEMBER S SHALL BE DETERMINED BASED ON PROPORTIONATE USE IN TIME TERMS AND NOT ON A PRO-RATA BASIS OF EXPENSES VIS--VIS THE RECEIPTS SINCE CHARGES FOR LETTING OUT CONVENTION CENTER ARE HIGHLY SUBSID IZED FOR THE MEMBERS AND SAME AMOUNT RECEIVED FROM MEMBERS VIS- -VIS NON-MEMBERS WILL ENTAIL HIGHER EXPENSES FOR THE USE OF CONVENTION CENTER. 11.3 WITH REGARD TO GROUND NO.7 RELYING ON THE ORDE R OF THE HON'BLE ITAT REFERRED TO ABOVE THE INTEREST INCOME IS HELD TO BE EXEMPT. 6. BEFORE US LD. SR. D.R. SUBMITTED THAT RENT AND INTEREST AND AMOUNT RECEIVED FOR CIVIC FACILITIES PROVIDED TO NON-MEMBE RS CANNOT BE TREATED AS EXEMPT ON THE PRINCIPLE OF MUTUALITY. THE ASSESSEE HAD RECEIVED RENT FROM DENA BANK STATE BANK OF HYDERABAD BALMARLORI AND A CATERING AGENCY. THEY ARE NOT MEMBERS THEREFORE THE RENT RECEIVED IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SIMILARLY THE RENT INTEREST AND SPACE LET OUT TO OTHER COMMERCIAL ENTERPRISES CANN OT BE TREATED ALLOWED AS EXEMPT ON THE PRINCIPLE OF MUTUALITY. 7. ON THE OTHER HAND LD. A.R. OF THE ASSESSEE SUBM ITTED THAT THESE ENTITIES ARE MEMBERS AND THEREFORE THE INTEREST RENT AND CHARGES RECEIVED FROM NON-MEMBERS IS EXEMPT ON THE PRINCIPLE OF MUTU ALITY. IT HAS BEEN SUBMITTED THAT I.T.A.T. IN ASSESSMENT YEAR 1999-200 0 IN ITA NO. 5015/DEL/2007 DATED 31/3/2008 HAS DEALT WITH THE IS SUE IN DETAIL. HE ALSO SUBMITTED THAT THIS ORDER HAS BEEN UPHELD BY THE HO N'BLE DELHI HIGH COURT VIDE ORDER DATED 25/9/2009. FOR ASSESSMENT YEARS 20 00-01 2004-05 AND 2005-06 THE ORDER OF THE I.T.A.T. HAS BEEN FOLLOWE D BY THE TRIBUNAL WHERE EXACTLY THE SAME GROUNDS WERE RAISED BY THE REVENUE IN THEIR APPEAL. 6 THEREFORE ALL THE GROUNDS RAISED BY REVENUE IN ITS APPEAL FOR ASSESSMENT YEARS 2001-02 2002-03 2006-07 AND 2007-08 ARE TO BE DISMISSED. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT TRIBUNAL FOR ASSE SSMENT YEAR 1999-2000 IN ITA NO.5015/DEL/2007 HAS HELD THAT ASSESSEE HAD NOT DONE ANY BUSINESS. IT HAD ONLY ALLOWED THE USE OF PREMISES TO NON-MEM BERS WHEN THE SAME WERE LYING IDLE WITH A VIEW TO MAKE PROPER UTILIZAT ION OF FACILITIES. MERELY ON THIS GROUND IT WOULD NOT BE APPROPRIATE TO TREA T THE ACTIVITIES OF THE ASSESSEE SOCIETY AS COMMERCIAL ACTIVITIES. AS REGAR DS THE APPLICABILITY OF PRINCIPLE OF MUTUALITY IN RELATION TO INTEREST INCO ME FROM SURPLUS FUNDS AND RENTAL INCOME RECEIVED FROM NON-MEMBERS THE TRIBUN AL HAD HELD THAT THE SURPLUS WAS GENERATED MOSTLY OUT OF THE FUNDS RECEI VED FROM MEMBERS. ONLY A VERY SMALL FRACTION OF TOTAL FUNDS HAD BEEN RECEI VED AS RENT FROM NON- MEMBERS FOR USE OF CONVENTION CENTER AND AFTER EXCL UDING THE EXPENSES INCURRED THE CONTRIBUTION TO THE SURPLUS GENERATED BY NON-MEMBERS AND PARTICULARLY THE INTEREST RECEIVED OUT OF SUCH SURP LUS WOULD BE NEGLIGIBLE. THEREFORE THE INTEREST INCOME WAS TREATED ENTITLED FOR EXEMPTION IN VIEW OF DECISION OF JURISDICTIONAL HIGH COURT. THE DECISION OF THE I.T.A.T. FOR ASSESSMENT YEAR 1999-2000 HAS BEEN UPHELD BY THE HO N'BLE DELHI HIGH COURT VIDE ORDER DATED 25/9/2009 IN ITA NO.1409/DEL /2008 WHEREIN PARAGRAPH 20 OF THE ORDER OF THE HON'BLE COURT HAS HELD AS UNDER: 20. THUS SUCH COMPANY CLAIMING TO BE MUTUAL CONCE RN OR CLUB WHOSE OBJECT IS TO CARRY ON PARTICULAR BUSINESS OR WHERE THE INCOME IS GENERATED FROM THE MEMBERS AND NON-MEMBERS THROUGH THE BUSINESS CARRIED ON BY IT THEN ONLY IT WOULD BE TREATED AS TAINTED WITH COMMERCIALITY. PROFIT HAS TO BE THE PRIME MOTIVE BE HIND SUCH ACTIVITIES WHICH ARE BUSINESS LIKE ACTIVITIES. OBV IOUSLY IN THE PRESENT CASE THIS CANNOT BE ATTRIBUTED TO THE ASSESSEE. TH E ASSESSING OFFICER GOT INFLUENCED BY THE FACT THAT THE ASSESSEE HAD LE T OUT PART OF THE 7 PREMISES TO ITS MEMBERS AND WAS RECEIVING RENT AND ALSO GIVING THE CONVENTION CENTER TO NON-MEMBERS. THAT WAS NOT SUFF ICIENT TO CLOTHE THE ACTIVITY OF THE ASSESSEE AS COMMERCIAL ACTIVITY WHICH IS NOT THE OBJECT WITH WHICH THE ASSESSEE SOCIETY IS FORMED. P RE-DOMINANT OBJECT IS TO RENDER APPROPRIATE ASSISTANCE AND HELP TO ITS MEMBERS FOR IMPROVING THEIR PERFORMANCE AND ROLE. THUS ALL THE THREE INGREDIENTS LAID DOWN BY THE HON'BLE SUPREME COURT IN CHEMSFORD CLUB WOULD BE APPLICABLE IN THE PRESENT CASE. 9. HON'BLE DELHI HIGH COURT THUS DECIDED THE ISSUE RELATING TO RENTAL INCOME RECEIVED BY THE ASSESSEE FROM NON-MEMBERS AN D INTEREST RECEIVED BY ASSESSEE ON FDRS/DEPOSITS IN FAVOUR OF THE ASSESSE E WHILE HOLDING THAT THE SAME WERE EXEMPT ON THE PRINCIPLE OF MUTUALITY. 10. IN THE CASE BEFORE US THE ASSESSING OFFICER HA S TREATED THE INTEREST INCOME UNDER THE HEAD OTHER SOURCES AND INCOME FR OM LETTING OUT OF SPACE UNDER THE HEAD HOUSE PROPERTY INCOME. SINCE THESE HAVE BEEN TREATED EXEMPT BY THE TRIBUNAL IN ASSESSMENT YEAR 1 999-2000 AND THE DECISION OF THE TRIBUNAL HAD BEEN UPHELD BY THE HON 'BLE DELHI HIGH COURT IN OUR CONSIDERED OPINION THE LD. CIT(A) HAS RIGHT LY ALLOWED EXEMPTION ON PRINCIPLE OF MUTUALITY IN RESPECT OF THESE INCOMES. 11. THE ASSESSEE IN CROSS OBJECTIONS FOR THESE YEAR S HAS RAISED THE FOLLOWING GROUND WHICH IS COMMON IN ALL THE YEARS : ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THAT THE EXPENSES ATTRIBUTABLE TO NON MEMBERS SHALL BE DETERMINED ON TIME BASIS AN D NOT ON PRO RATA BASIS OF EXPENSES VIS--VIS THE RECEIPTS. 12. LD.CIT(A) NOTED THAT RENTAL INCOME RECEIVED FRO M CONVENTION CENTER HAS TO BE BIFURCATED BETWEEN RENT RECEIVED FROM MEM BERS AND RENT RECEIVED FROM NON-MEMBERS. RELYING ON THE ORDER OF I.T.A.T. DATED 31/3/2008 HE 8 HELD THAT RENT RECEIVED FROM NON-MEMBERS WOULD BE T AXABLE. HE FURTHER OBSERVED THAT THE TERM NON-MEMBERS SHALL MEAN AND INCLUDE ANY PERSON OTHER THAN MEMBER PSU AND HENCE SHALL COVER IN ITS AMBIT EVEN MINISTRIES/DEPARTMENTS OF CENTRAL/STATE GOVERNMENT AS WELL IRRESPECTIVE OF THE FACT THAT THE PARTICULAR PSU MAY BE UNDER PARTI CULAR MINISTRY AS A MINISTRY IS DISTINCT FROM A PSU. THE LETTING OUT OF THE SURPLUS SPACE TO VARIOUS NON-MEMBERS IS DEPENDENT ON AVAILABILITY AN D LIMITED TO ORGANIZING CONFERENCES AND MEETINGS. BY SUCH LETTING THE ASSES SEE INTENDED TO REDUCE THE COST OF MAINTENANCE OF CONVENTION CENTER WHICH WAS MADE AVAILABLE TO MEMBERS AT A HIGHLY SUBSIDIZED COST. THUS THE LETT ING IS PART OF BUSINESS AND INCOME FROM NON-MEMBERS WHICH IS SPORADIC COULD NO T BE TREATED AS INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER THEREFO RE WAS DIRECTED TO ALLOW EXPENSES ATTRIBUTABLE TO LETTING OUT THE CONVENTION CENTER TO NON-MEMBERS AND DETERMINE THE TAXABLE AMOUNT THEREAFTER. THE EX PENSES ATTRIBUTABLE TO NON-MEMBERS WERE TO BE DETERMINED BASED ON PROPORTI ONATE USE IN TIME TERMS AND NOT ON A PRO RATA BASIS OF THE EXPENSES V IS--VIS THE RECEIPTS. SINCE THE CHARGES FOR LETTING OUT CONVENTION CENTER WERE HIGHLY SUBSIDIZED FOR THE MEMBERS AND THE SAME AMOUNT RECEIVED FROM MEMBERS V IS--VIS NON- MEMBERS WOULD ENTAIL HIGHER EXPENSES FOR THE USE OF CONVENTION CENTER. ACCORDINGLY LD. CIT(A) DIRECTED THE ASSESSING OFFI CER TO APPORTION THE EXPENSES BETWEEN THE MEMBERS AND NON-MEMBERS IN TER MS OF TIME USED BY THE MEMBERS AND NON-MEMBERS. 13. BEFORE US LD. A.R. OF THE ASSESSEE SUBMITTED T HAT THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 WHILE DECIDING THE APPEAL A GAINST PENALTY ORDER U/S 271(1)(C ) HAS HELD THAT LD. CIT(A) HAD FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE TOTAL HIRE CHARGES WERE OF RS.22 .58 LACS WHEREAS THE DIRECT EXPENDITURE WITHOUT APPORTIONMENT OF PROPORTIONATE DEPRECIATION WAS TO THE 9 TUNE OF RS.26.63 LACS WHICH SHOWED THAT THERE WAS IN FACT NO INCOME TO THE ASSESSEE FROM ITS CONVENTION CENTER. THE EXPENDITUR E OF MAINTENANCE OF THE CONVENTION CENTER BEING TOO HIGH IT WAS BEING LET OUT TO NON-MEMBERS ON HIRE. HE ALSO SUBMITTED THAT THE TRIBUNAL IN EARLIE R ORDER HAD DIRECTED THE ASSESSING OFFICER TO TAX ONLY THE NET INCOME AFTER EXCLUDING THE EXPENSES INCURRED IN RELATION TO THE EARNING OF RENTAL INCOM E. SUCH DIRECTIONS WERE NOT FOLLOWED BY THE ASSESSING OFFICER AND ALL EXPENSES INCURRED IN RELATION TO EARNING OF RENTAL INCOME FROM NON-MEMBERS FOR THE U SE OF CONVENTION CENTER HAD NOT BEEN ALLOWED BY THE ASSESSING OFFICER. LD. CIT(A) HOWEVER HAD DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDI TURE ON THE BASIS OF TIME FOR WHICH THE CONVENTION CENTER WAS USED BY THE MEM BERS AND NON- MEMBERS. LD. A.R. OF THE ASSESSEE FILED THE DETAILS OF HIRE CHARGES RECEIVED AND EXPENDITURE INCURRED. IN ASSESSMENT YEARS 2001- 02 AND 2007-08 THE EXPENDITURE EXCEEDED THE INCOME AND THEREFORE NO INCOME WAS TAXABLE. HOWEVER IN ASSESSMENT YEARS 2002-03 AND 2006-07 T HE HIRE CHARGES EXCEEDED THE EXPENDITURE. THEREFORE THOUGH THE SMA LL SURPLUS WAS LEFT WHICH IS CHARGEABLE TO TAX AS BUSINESS INCOME BUT S AME WILL BE SET OFF AGAINST THE BROUGHT FORWARD LOSSES FROM ASSESSMENT YEAR 2001-02 AND THEREFORE NOTHING WILL BE TAXABLE IN ANY OF THE YE ARS UNDER CONSIDERATION. 14. ON THE OTHER HAND LD. CIT DR SUBMITTED THAT LD . CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO APPORTION THE EXP ENDITURE ON TIME BASIS AND NOT ON PRO RATA BASIS. 15. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL IN A SSESSMENT YEAR 1999- 2000 IN ITA NO.5015/DEL/2007 DATED 21/3/2008 HAS HE LD THAT THE RENTAL INCOME RECEIVED FROM NON-MEMBERS WAS NOT ENTITLED F OR EXEMPTION ON THE 10 PRINCIPLE OF MUTUALITY. HOWEVER A DIRECTION WAS GI VEN TO THE ASSESSING OFFICER TO TAKE THE NET INCOME AFTER EXCLUDING THE EXPENSES INCURRED IN RELATION TO EARNING OF RENTAL INCOME. FURTHER THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 IN ITA NO.4305/DEL/2009 DATED 22/1/201 0 WHILE DEALING THE ISSUE OF LEVY OF PENALTY HAD HELD THAT THE LD. CIT( A) HAD FAILED TO TAKE INTO CONSIDERATION THE FACT THAT THE TOTAL HIRE CHARGES WERE OF RS. 22.58 LACS WHEREAS THE DIRECT EXPENDITURE WITHOUT APPORTIONMEN T OF PROPORTIONATE DEPRECIATION WAS TO THE TUNE OF RS.26.63 LACS. THER EFORE THERE WAS NO INCOME TO THE ASSESSEE FROM THE CONVENTION CENTER. THE TRIBUNAL HAD ALSO NOTED THAT LD. CIT(A) HAD ADMITTED/AGREED THAT AS P ER THE DIRECTION OF I.T.A.T. ONLY NET INCOME AFTER EXCLUDING THE EXPENS ES INCURRED IN RELATION TO EARNING OF RENTAL INCOME WAS TO BE ASSESSED. FROM T HE TABLE GIVEN IN WRITTEN SYNOPSIS BY THE LD. COUNSEL FOR THE ASSESSEE WE FI ND THAT IN ASSESSMENT YEAR 2001-02 THE HIRE CHARGES RECEIVED ARE AT RS.14 36 178/- AS AGAINST EXPENDITURE OF RS.21 04 680/- LEAVING EXCESS EXPEND ITURE OF RS.6 68 502/-. SIMILARLY FOR THE ASSESSMENT YEAR 2007-08 THERE I S EXCESS EXPENDITURE OF RS.22 797/-. HOWEVER THERE ARE SOME SURPLUS IN ASS ESSMENT YEARS 2002-03 AND 2006-07 BY RS.1 80 359/- AND RS.68 156 RESPECT IVELY. THE EXPENDITURE RELATING TO USE OF CONVENTION CENTER OF NON-MEMBERS HAS TO BE DEDUCTED FROM THE HIRE CHARGES. SINCE AS HELD BY THE TRIBUNAL THA T THERE WAS NO INCOME IN ASSESSMENT YEARS 2001-02 AND 2007-08 THEN THERE WI LL NOT BE ANY SURPLUS LEFT. HENCE NO INCOME WILL BE LIABLE TO BE TAXED IN THESE YEARS. THERE IS NO DISPUTE THAT SPACE HAS BEEN USED BY MEMBERS AND NON MEMBERS. THE HIRE CHARGES FOR MEMBERS ARE HIGHLY SUBSIDIZED. THEREFOR E ALLOCATION OF EXPENSES ON TIME USE BASIS WILL RESULT IN ABSURD RE SULTS. THEREFORE IN OUR CONSIDERED OPINION LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOCATE THE EXPENDITURE ON TIME BASIS. HOWEVER WE WOULD LIKE TO MENTION THAT ONCE THE INCOME FROM NON-MEMBERS HAS B EEN TREATED AS 11 BUSINESS INCOME THE LOSS CARRIED FORWARD FROM ASSE SSMENT YEAR 2001-02 WILL ABSORB THE PROFIT IN ASSESSMENT YEARS 2002-03 AND 2006-07. HENCE NOTHING WILL BE TAXABLE IN THOSE YEARS ALSO. IN VIE W OF ABOVE WE FIND FORCE IN THE SUBMISSIONS MADE BY A.R. OF THE ASSESSEE THA T INCOME IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. 16. ACCORDINGLY THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED AND APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 2010. SD/- SD/- (R.P.TOLANI ) (K.D.RANJAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24.05.2010. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT DEPUTY REGISTRAR