ITO 10(3)(4), MUMBAI v. COMMON EFFLUENT MUMBAI, TREATMENT PLANT (THANE-BELAPU) ASSOCIATION, NAVI MUMBAI

ITA 2437/MUM/2009 | 2005-2006
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 243719914 RSA 2009
Assessee PAN AABCC4712H
Bench Mumbai
Appeal Number ITA 2437/MUM/2009
Duration Of Justice 10 month(s) 1 day(s)
Appellant ITO 10(3)(4), MUMBAI
Respondent COMMON EFFLUENT MUMBAI, TREATMENT PLANT (THANE-BELAPU) ASSOCIATION, NAVI MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 18-02-2009
Assessment Year 2005-2006
Appeal Filed On 16-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 2437/MUM/2009 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER 10(3)(4) M/S. COMMON EFFLUENT TR EATMENT PLANT ROOM NO. 452 4TH FLOOR (THANE-BELAPUR) ASSOCIATION AAYAKAR BHAVAN M.K. ROAD VS. KOPAR KHAIRANE THANE- BELAPUR RD. MUMBAI 400020 NAVI MUMBAI 400709 PAN - AABCC 4712 H APPELLANT RESPONDENT ITA NO. 2545/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. COMMON EFFLUENT TREATMENT PLANT INCOME TAX OFF ICER 10(3)(4) (THANE-BELAPUR) ASSOCIATION ROOM NO. 452 4TH FLOOR KOPAR KHAIRANE THANE-BEALAPUR RD. VS. AAYAKAR BHAVAN M.K. ROAD NAVI MUMBAI 400709 MUMBAI 400020 PAN - AABCC 4712 H APPELLANT RESPONDENT REVENUE BY: SHRI S.S. RANA ASSESSEE BY: SHRI RAJA B. SINGH O R D E R PER B. RAMAKOTAIAH A.M. THESE ARE CROSS APPEALS BY THE REVENUE AND THE ASSE SSEE AGAINST THE ORDER OF THE CIT(A)-X MUMBAI DATED 25.02.2009. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN ASSO CIATION INCORPORATED UNDER SECTION 25 OF THE COMPANIES ACT 1956 WITH TH E MAIN OBJECT TO ENGAGE ITSELF IN THE POLLUTION CONTROL PROCESS BY GIVING T REATMENT TO EFFLUENTS GENERATED BY THE MEMBERS OF THE ASSOCIATION. THE AS SESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME AT NIL ON THE PRINC IPLE OF MUTUALITY. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E AS IT WAS NOT QUALIFIED FOR EXEMPTION FROM THE INCOME-TAX LIABILITY AS WELL AS PAYMENTS MADE BY THE MEMBERS TOWARDS COST OF EFFLUENT TREATMENT WERE CLA IMED AS BUSINESS EXPENSES TO SUCH PERSONS HENCE PROFIT EARNED BY T HE ASSESSEE WAS INCOME ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 2 LIABLE TO BE TAXED. THE MAIN OBJECTS OF THE MEMORAN DUM OF ASSOCIATION OF THE COMPANY AND RESTRICTIONS IMPOSED ON THE DISTRIB UTION/ALIENATION OF INCOME/PROPERTY OF THE COMPANY HELD THAT THE ASSESS EE COMPANY WAS A NO PROFIT NO LOSS ENTITY AND PRINCIPLE OF MUTUALITY AP PLIED TO IT. ACCORDINGLY THE LEARNED CIT(A) HELD THAT EXCESS OF INCOME OVER EXPE NDITURE (EXCLUDING INTEREST ON FIXED DEPOSIT WITH BANKS AND OTHERS) WA S NOT LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY. IN RESPECT OF TA XABILITY OF INTEREST IT WAS PLEADED BY THE ASSESSEE THAT AS PER CLAUSE V(6) OF THE MEMORANDUM OF ASSOCIATION THE PROPERTY WAS NOT LIABLE TO BE DISTR IBUTED AMONGST THE MEMBERS HENCE PRINCIPLE OF MUTUALITY WOULD APPLY. HOWEVER THE LEARNED CIT(A) HELD THAT AFTER THE SATISFACTION OF DEBTS AN D LIABILITIES IN PROPERTY WAS TO BE DISTRIBUTED AMONGST THE MEMBERS HENCE INTER EST INCOME WAS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES . AGGRIEVED BY THIS BOTH REVENUE AND ASSESSEE ARE IN APPEAL. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THE EXCESS OF I NCOME OVER EXPENDITURE IN RESPECT OF EFFLUENT TREATMENT RECEIP TS OF THE ASSESSEE COMPANY AMOUNTING TO RS.90 15 302/- AS EXEMPT FROM INCOME TAX ON THE PRINCIPLE OF MUTUALITY TREATING THE SAME AS NOT BEING PART OF THE TOTAL INCOME OF THE ASSESSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THE INTEREST IN COME OF THE ASSESSEE COMPANY AMOUNTING TO RS.56 87 216/- AS EXE MPT FROM INCOME-TAX ON THE PRINCIPLE OF MUTUALITY TREATING T HE SAME AS NOT BEING PART OF THE TOTAL INCOME OF THE ASSESSEE COMP ANY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE IN COME HELD BY THE ASSESSEE COMPANY IS NOT COVERED BY SECTION 11 TO 13 OF THE I.T. ACT FOR HOLDING SUCH INCOME AS EXEMPT FROM INCOME TAX L IABILITY AND AS PER PROVISIONS U/S. 2(24)(V) R.W.S. 28(III) PRINCI PLE OF MUTUALITY IS NOT APPLICABLE. 4. ALL THE ISSUES RAISED IN THIS APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT A BENCH MUM BAI IN ASSESSEES OWN CASE IN ITA NO. 8135/MUM/2003 AND ITA NO. 152/MUM/2 004 DATED 06.02.2007: - ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 3 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS A NON-PROFIT COMPANY FORMED BY CERT AIN PERSONS ENGAGED IN INDUSTRIAL ACTIVITIES AT THANE WITH THE OBJECT O F TREATING THE EFFLUENTS DISCHARGED BY SUCH UNITS. THIS ASSOCIATION IS NOT R ENDERING ANY SERVICES TO OUTSIDERS I.E. OTHER THAN THE MEMBERS. THE COMPA NY HAS PLACED ON RECORD THE COPIES OF MEMORANDUM OF ASSOCIATION AS W ELL AS THE FINANCIAL STATEMENTS IN SUPPORT OF ITS CONTENTION THAT IT WAS A NON-PROFIT MAKING BODY. ALSO THERE IS IDENTITY BETWEEN THE CONTRIBUTO RS AND THE PARTICIPATORS. IN THE LIGHT OF THESE FACTS WE ARE OF THE VIEW THAT PRINCIPLE OF MUTUALITY APPLIED TO THE COMPANY AND INCOME GENE RATED BY WAY OF TREATMENT OF EFFLUENTS IS NOT CHARGEABLE TO TAX. TH US BOTH THE GROUNDS OF THE REVENUE STAND REJECTED. 5. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO ORDINATE BENCH WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL OF THE REVENUE. 6. THE ISSUE IN ASSESSEES APPEAL IS WITH REFERENCE TO THE ISSUE OF LEVY OF TAX UNDER SECTION 115JB. ASSESSEES GROUNDS ARE AS UNDER: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-X MUMBAI IS BAD IN LAW AND CONTRARY TO THE FACTS OF THE CASE AND EVIDENCE ON RECORD. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-X MUMBAI EARED IN HOLDING THAT SECTION 115JB IS APPLICABLE I N THE CASE OF THE APPELLANT EVEN AFTER CONFIRMING THAT THE INCOME OF THE APPELLANT (INCOME GENERATED BY WAY OF TREATMENT OF EFFLUENTS AS WELL AS THE INTEREST INCOME) IS NOT CHARGEABLE TO TAX IN VIEW O F THE APPLICABILITY OF THE PRINCIPLE OF MUTUALITY. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-X MUMBAI EARED IN NEGATING THE PRINCIPLE OF MUTUALITY APPLIC ABLE IN THE CASE OF THE APPELLANT BY HOLDING THAT SECTION 115JB IS APP LICABLE IN THE CASE OF THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-X MUMBAI EARED IN FAILING TO FOLLOW THE DECISIONS IN THE CAS E OF THE APPELLANT BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IN ALL THE EARLIER YEARS BEING ASSESSMENT YEARS 1997-98 TO 2004-05 TO THE E FFECT THAT THE INCOME OF THE APPELLANT IS NOT EXIGIBLE TO TAX BY HOLDING THAT SECTION 115JB IS APPLICABLE IN THE CASE OF THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-X MUMBAI EARED IN OVERRIDING THE PRINCIPLE OF MUTUALITY MER ELY ON THE REASONING THAT SECTION 115JB HAS AN OVERRIDING EFFE CT UPON THE OTHER PROVISIONS OF THE INCOME TAX ACT. 7. THE A.O. HAS HELD IN PARA 10 OF HIS ORDER THAT THE PROVISIONS OF SECTION 115JB WOULD APPLY IN THE CASE OF THE ASSESSEES BOO K PROFIT OF ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 4 RS.1 47 02 518/-. THE A.O. WAS OF THE OPINION THAT PROVISIONS OF SECTION 115JB BEGINS WITH A NON-OBSTANTE CLAUSE THAT NOTWI THSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT. THE A.O. HELD THAT THIS WOULD MEAN THAT THE OTHER PROVISIONS OF THE I.T. ACT WHIC H GO TO EFFECT THE TOTAL INCOME WOULD NOT BE APPLICABLE WHILE DETERMINING TH E BOOK PROFITS SAVE FOR INCOME EXEMPT U/S. 10 11 & 12. IN THE CIRCUMSTANCE S THE A.O. HELD THAT THE BOOK PROFITS WOULD BE LIABLE FOR TAX U/S. 115JB. TH E CIT(A) HAS CONSIDERED THAT THE PROVISIONS OF SECTION 115JB DOES NOT EXCLU DE COMPUTATION OF BOOK PROFIT AND RELYING ON THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT 225 ITR 273 HE STATED THA T THE A.O. HAS NO OPTION THAN TO COMPUTE THE BOOK PROFIT ON THE BASIS OF THE P & L ACCOUNT SUBMITTED AND THEN HE WENT ON TO STATE AS UNDER:- 4.5 FROM THE ABOVE IT IS EVIDENT THAT THE AO HAS TO ACCEPT THE AUTHENTICITY OF THE ACCOUNTS MAINTAINED IN ACCORDAN CE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI T O THE COMPANIES ACT WHICH ARE CERTIFIED BY THE AUDITORS AND PASSED BY T HE COMPANY IN THE GENERAL MEETING. THE AO HAS ONLY THE POWER OF EXAMI NING WHETHER THE BOOKS OF ACCOUNTS ARE DULY CERTIFIED BY THE AUTHORI TIES UNDER THE COMPANIES ACT AND WHETHER SUCH BOOKS HAVE BEEN PROP ERTY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE AO DOES N OT HAVE THE JURISDICTION TO GO BEYOND THE NET PROFIT SHOWN IN T HE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLAN ATION. THEREAFTER THE AO HAS TO MAKE ADJUSTMENT PERMISSIBLE UNDER THE EXP LANATION GIVEN IN SECTION 115JB OF THE 1961 ACT. 4.6 NOW THERE IS NO PROVISIONS IN SECTION 115JB FOR EXCLUDING INCOME ON THE BASIS OF MUTUALITY. THE SECTION HAS SPECIFIC ALLY PROVIDED FOR EXEMPTION OF INCOME COVERED BY SECTION 10 11 & 12. IT IS AN ESTABLISHED FACT THAT IN THE AUDITED ACCOUNTS OF THE COMPANY A UDITED BY R.K. KHANNA & ASSOCIATES THAT PROFIT OF RS.1 47 02 518/ - HAS BEEN SHOWN. I THEREFORE SEE NO REASON WHY THE PROVISIONS OF SECT ION 115JB WOULD NOT APPLY AS THERE IS NO PROVISION FOR EXEMPTING MUTUA LITY FROM THE PURVIEW OF SECTION 115JB. THIS GROUND OF APPEAL IS THEREFOR E DISMISSED. 8. THE LEARNED COUNSEL SUBMITTED THAT THE COMPANY IS N OT EXIGIBLE TO TAX ON THE PRINCIPLES OF MUTUALITY AND SO THE PROVISION S OF SECTION 115JB CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE AS THE INCOM E IS NOT TO BE TAXED AT ALL ON THE PRINCIPLE OF MUTUALITY. ACCORDINGLY IT WAS S UBMITTED THAT THE PROVISIONS OF SECTION 115JB DOES NOT APPLY WHEREAS THE LEARNED D.R. RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) TO SUBMIT THAT THERE IS NO SPECIFIC ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 5 EXCLUSION OF ANY COMPANY UNDER SECTION 115JB AND TH E ASSESSEE A DEEMED COMPANY IS COVERED BY THE PROVISIONS OF SECTION 11 5JB. 9. WE HAVE HEARD BOTH THE SIDES IN DETAIL. AS PER THE SCHEME OF MINIMUM ALTERNATE TAX THE NUMBER OF COMPANIES OTHER WISE EARNING PROFIT AND DECLARING DIVIDEND WERE BROUGHT UNDER THE PURVI EW OF MAT PROVISIONS WHEN THEY ARE MAINTAINING THEIR AFFAIRS IN SUCH A W AY THAT THEY ARE NOT PAYING INCOME TAX BY AVAILING VARIOUS BENEFITS UNDE R THE ACT BY WAY OF TAX PLANNING. IN ORDER TO OVERCOME THE SITUATION THE DE EMING PROVISIONS OF MINIMUM ALTERNATE TAX WAS BROUGHT INTO INCOME TAX A CT WHEREBY THE COMPANIES ARE BOUND TO PAY TAX EITHER ON NORMAL PR OFITS OR ON THE BOOK PROFIT COMPUTED UNDER THE PROVISIONS. IT IS OBVIOUS THAT THE PROVISIONS OF SECTION 115JB DEAL WITH SUCH COMPANIES EARNING NORM AL BUSINESS PROFITS. IT IS APPLICABLE TO THE COMPANIES WHICH ARE PREPARING P & L ACCOUNT IN ACCORDANCE WITH PARA 2 AND PARA 3 OF SCHEDULE VI OF TO THE COMPANIES ACT 1956. 10. IN ASSESSEES CASE THE ASSESSEE IS A DEEMED COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT 1956 CARRYING ON AC TIVITIES OF MUTUAL INTEREST. THE PRINCIPLE OF MUTUALITY IS THAT NO ONE CAN MAKE PROFIT OUT OF HIMSELF. WHERE A NUMBER OF PERSONS COMBINED TOGETH ER AND CONTRIBUTE TO A COMMON FUND FOR THE FINANCING OF SOME VENTURE OR OB JECT AND WILL IN THIS RESPECT HAVE NO DEALINGS OR RELATIONS WITH ANY OUTS IDE BODY THEN ANY SURPLUS RETURNED TO THOSE PERSONS CANNOT BE REGARDE D IN ANY SENSE AS PROFIT. THERE MUST BE COMPLETE IDENTITY BETWEEN THE CONTRIB UTORS AND THE PARTICIPATORS. IF THESE REQUIREMENTS ARE FULFILLED IT IS IMMATERIAL WHAT PARTICULAR FORM THE ASSOCIATION TAKES. TRADING BETW EEN PERSONS ASSOCIATING TOGETHER IN THIS WAY DOES NOT GIVE RISE TO PROFITS WHICH ARE CHARGEABLE TO TAX. WHERE THE TRADE OR ACTIVITY IS MUTUAL THE FACT THA T AS REGARDS CERTAIN ACTIVITIES CERTAIN MEMBERS ONLY OF THE ASSOCIATION TAKE ADVANTAGE OF THE FACILITIES WHICH IT OFFERS DOES NOT AFFECT THE MUTU ALITY OF THE ENTERPRISE. MEMBERS CLUBS ARE AN EXAMPLE OF A MUTUAL UNDERTAKI NG; BUT WHERE A CLUB EXTENDS FACILITIES TO NON-MEMBERS TO THAT EXTENT T HE ELEMENT OF MUTUALITY IS WANTING THUS A MEMBERS CLUB IS ASSESSABLE IN RES PECT OF PROFITS DERIVED ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 6 FROM AFFORDING ITS FACILITIES TO NON-MEMBERS. IN TH E CASE OF CIT VS. BANKIPUR CLUB LTD. (1997) 226 ITR 97 102 (SC) IT WAS HELD THAT WHERE THE APPELLATE TRIBUNAL AS ALSO THE HIGH COURT HAVE FOUND THAT THE AMOUNTS RECEIVED BY THE MUTUAL CLUBS WERE FOR SUPPLY OF DRINKS REFRESHMENT S OR OTHER GOODS AS ALSO THE LETTING OUT OF BUILDING FOR RENT OR THE AMOUNTS RECEIVED BY WAY OF ADMISSION FEES PERIODICAL SUBSCRIPTIONS ETC. FRO M THE MEMBERS OF THE CLUBS WERE ONLY FOR/TOWARDS CHARGES FOR THE PRIVILEGES C ONVENIENCES AND AMENITIES PROVIDED TO THE MEMBERS WHICH THEY WERE ENTITLED T O AS PER THE RULES AND REGULATIONS OF THE RESPECTIVE CLUBS; AND WHERE IT H AS ALSO BEEN FOUND THAT DIFFERENT CLUBS REALISED VARIOUS SUMS ON THE ABOVE COUNTS ONLY TO AFFORD TO THEIR MEMBERS THE USUAL PRIVILEGES ADVANTAGES CON VENIENCES AND ACCOMMODATION WITHOUT ANY PROFIT MOTIVE AND WITHOUT TAINTED WITH COMMERCIALITY IT NECESSARILY FOLLOWS THAT THE RECE IPTS FOR THE VARIOUS FACILITIES EXTENDED BY THE CLUBS TO THEIR MEMBERS A S PART OF THE USUAL PRIVILEGES ADVANTAGES AND CONVENIENCES ATTACHED TO THE MEMBERSHIP OF THE CLUB CANNOT BE SAID TO BE A TRADING ACTIVITY. TH E HON'BLE SUPREME COURT HAS FURTHER CONSIDERED THAT THE SURPLUS EXCESS OF RECEIPTS OVER THE EXPENDITURE AS A RESULT OF MUTUAL AGREEMENT CANNO T BE SAID TO BE INCOME FOR THE PURPOSE OF THE ACT. 11. WHEN THE SURPLUS ARISING OUT OF ASSESSEES TRANSACT ION IS NOT CONSIDERED AS INCOME FOR THE PURPOSE OF THE ACT THE PROVISIONS OF SECTION 4 IN BRINGING TO TAX THE AMOUNT DOES NOT APPLY. ACCOR DINGLY THE ASSESSEE BEING A MUTUAL CONCERN IS OUT OF THE PURVIEW OF THE INCOM E TAX ACT. THE LOGIC OF THE A.O. AND THE CIT(A) IN INVOKING THE PROVISIONS OF SECTION 115JB IS NOT CORRECT ACCORDING TO THE LAW SINCE THESE PROVISIONS ARE APPLICABLE ONLY WHEN THERE IS A NORMAL COMPUTATION OF INCOME UNDER THE R EGULAR PROVISIONS OF THE ACT. IN A MUTUAL CONCERN IT IS ALREADY HELD THAT TH E PROVISIONS OF INCOME TAX ACT TO THE EXTENT OF BRINGING TO TAX THE SURPLUS AR ISING OUT OF THE ACTIVITIES IS NOT EVEN INCOME FOR THE PURPOSE OF THE ACT. THEREFO RE AS A COROLLARY EVEN THE DEEMING PROVISIONS OF SECTION 115JB ARE ALSO NOT AP PLICABLE. ACCORDINGLY THE ACTION OF THE CIT(A) IN CONSIDERING THE PROVISIONS OF SECTION 115JB AFTER GRANTING THE ASSESSEE THE BENEFIT OF MUTUALITY IS N OT CORRECT. ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 7 12. THIS ISSUE CAN ALSO BE LOOKED INTO IN ANOTHER ANGLE . COMPANIES ARE REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT 19 56 EITHER FOR CARRYING ON CHARITABLE PURPOSES OR FOR CARRYING ON ACTIVITIES O F MUTUAL INTEREST. A COMPANY INCORPORATED UNDER SECTION 25 IS PROHIBITED FROM DECLARING DIVIDENDS OR DISTRIBUTING PROFITS TO ITS MEMBERS. T HE CONSTITUENT OF A COMPANY REGISTERED UNDER SECTION 25 ARE KNOWN AS ME MBERS AND NOT AS SHAREHOLDERS. THIS DIFFERENCE IS ALSO TO BE NOTED . IN FACT MUTUAL CONCERNS LIKE THE ASSESSEE DOES NOT EVEN PREPARE THE P & L ACCOUNT BUT ONLY INCOME EXPENDITURE STATEMENT. IN SUCH CIRCUMSTANCES WHERE A COMPANY NOT SUPPOSED TO MAKE PROFIT AND DECLARE DIVIDENDS OR DI STRIBUTE PROFITS IS ANYHOW EXEMPT FROM LEVY OF TAX PROVIDED THEY DO NOT COME UNDER THE PURVIEW OF TAX SO LONG AS THEY ARE SATISFYING OTHER CONDITIONS PRESCRIBED. IN THE CASE OF CHARITABLE INSTITUTIONS IT MUST ANSWER TO THE LAW STATED IN SECTIONS 11 AND 12. WHEN THOSE CONDITIONS ARE SATIS FIED THE INCOME ITSELF IS EXEMPT FROM TAXATION. IN SUCH CIRCUMSTANCES WHERE IS THE SCOPE OF SECTION 115JB TO PLAY? THIS PROPOSITION IS EQUALLY APPLIES TO A MUTUAL CONCERN. INCOME TAX LAW HAS ACCEPTED THE PRINCIPLE OF MUTUAL ITY TO EXEMPT FROM THE LEVY OF TAXATION. THIS IS BECAUSE A MUTUAL CONCERN IS WORKING WITHIN THEMSELVES ON THE PRINCIPLE OF MUTUALITY AND THERE FORE ALL THE ACTIVITIES ARE CONSIDERED TO BE CARRIED OUT WITH AND BY THE MEMBER S CONSTITUTING ASSOCIATION. WHERE THE MUTUAL ASSOCIATION LIKE THE ASSESSEE DOES NOT CARRY ON ANY SUCH BUSINESS AND ALMOST THE ENTIRE INCOME I S DERIVED FROM MUTUAL ACTIVITIES IT IS EXEMPT FROM THE TAX. IT IS ONLY W HERE SUCH A COMPANY COMES OUT OF THE TAX EXEMPTION BY INDULGING IN ACTIVITIES OF EARNING PROFITS AND DISTRIBUTING THE SAME THAT THE QUESTION OF ASSESSIN G IT LIKE ANY OTHER COMPANY ARISES. IN SUCH A SITUATION SEC. 115JB MAY COME INTO PLAY. BUT SO LONG AS THE ASSESSEE-COMPANY IS ENJOYING THE IMMUNI TY FROM TAX ON THE GROUND OF MUTUALITY THE QUESTION OF TAXATION DOES NOT ARISE EXCEPT FOR CERTAIN INCOME THAT THE ASSESSEE MAY EARN INCIDENTA L TO CARRYING ON ITS OBJECTIVES. 13. SIMILAR OPINION IS EXPRESSED IN THE CASE OF TRAVEL AGENTS ASSOCIATION OF INDIA VS. ACIT 118 ITD 255 (MUM) WHEREIN THE IS SUE UNDER SECTION 115JA WAS CONSIDERED AND IT WAS HELD AS UNDER: - ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 8 15. BUT IN THE PRESENT CASE THE ASSESSEE IS A PRO FESSIONAL ASSOCIATION. THERE IS NO CASE OF NON-MEMBERS INVOLV ING IN THE AFFAIRS OF THE ASSESSEE-COMPANY. THE ASSESSEE-COMPANY IS MEANT ONLY FOR THE TRAVELLING AGENTS WORKING IN INDIA. THE ASSESSEE-CO MPANY ADMITS ONLY SUCH TRAVEL AGENTS AS ITS MEMBERS. THEREFORE INVAR IABLY THE ACTIVITIES CARRIED ON BY THE ASSESSEE-COMPANY ARE MEANT FOR TH E MEMBERS TRAVEL AGENTS ALONE AND OBVIOUSLY MUTUAL IN CHARACTER. THE REFORE IN THE PRESENT CASE NO CONTINGENCIES EXIST AS APPREHENDED IN THE PARAGRAPH ABOVE. 16. THE ASSESSEE IS A MUTUAL CONCERN IN ITS STRICT SENSE. ALL THE MEMBERS ARE TRAVEL AGENTS IN INDIA. THEY HAVE NO AC TIVITY OTHER THAN MUTUAL ACTIVITIES. THE TRIBUNAL HAS HELD FOR THE EA RLIER ASSESSMENT YEARS THAT CONVENTION RECEIPTS MEMBERSHIP AND SUBSCRIPTI ON FEES AND INTEREST THEREON ARE EXEMPTED RECEIPTS BEING IN THE NATURE O F MUTUAL RECEIPTS. ONCE THOSE RECEIPTS ARE TAKEN OUT OF THE COMPUTATIO N OF EXCESS OF INCOME OVER EXPENDITURE WHAT IS LEFT OVER IS MINIMAL IN T HE NATURE OF INCIDENTAL RECEIPTS. SUCH INCIDENTAL RECEIPTS WILL NOT DECIDE THE CHARACTER OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE-COMPANY. THER EFORE TO CONCLUDE WE HE TO HOLD THAT THE ASSESSEE IS A MUTUAL CONCERN CARRYING ON THE ACTIVITIES OF EARNING RECEIPTS AND MAKING PAYMENTS ALL FOR MUTUAL ACTIVITIES. IT IS NOT FOR PROFIT OR INCOME. THE ASS ESSEE DOES NOT DECLARE DIVIDENDS. THE ASSESSEE DOES NOT DISTRIBUTE ITS INC OME. THEREFORE IN SUCH CIRCUMSTANCES IT DOES NOT COME UNDER THE MAT REGIME. THEREFORE SEC. 115JA IS NOT APPLICABLE IN THE CASE OF THE ASS ESSEE-COMPANY. 14. SINCE THE ASSESSEE COMPANY IS A DEEMED COMPANY CARR YING THE ACTIVITIES ON MUTUAL INTEREST AND THE PRINCIPLE OF MUTUALITY WAS ALSO ACCEPTED IN ASSESSEES CASE WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 115JB ARE NOT APPLICABLE. ACCORDINGLY THE O RDER OF THE CIT(A) TO THAT EXTENT IS MODIFIED. ASSESSEES GROUNDS ARE ALLOWED. 15. IN THE RESULT REVENUE APPEAL IS DISMISSED AND ASSE SSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 18 TH FEBRUARY 2010 ITA NO. 2437&2545/MUM/2009 M/S. COMMON EFFLUENT TREATMENT PLANT 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X MUMBAI 4. THE CIT X MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.