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TMI Blog2002 (2) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Assessing Officer that the appellant union was not entitled for exemption under section 10(24) of the Income-tax Act, 1961. 3. That without prejudice to both the foregoing grounds of appeal and in the alternative, the Ld. CIT(A) has erred in not accepting the ground of appeal before him, being No. 2(f) that the appellant Trade Union in any event being a mutual concern, and the principle of mutuality being applicable, its income in any event/case is not liable to tax under the provisions of the I.T. Act, 1961. 4. That without prejudice to all the three foregoing grounds of appeal and in the alternative, the Ld. CIT(A) has erred in fact and in law in not allowing ground No.3 before him that the Ld. Assessing Officer in any event was wrong in treating the entire collection of the appellant as income liable to tax, which was inclusive of capital receipts like admission fee of members and voluntary contribution towards corpus. 5. That in case of failure of ground Nos.1 to 3 above, the Ld. CIT(A) has erred in maintaining the disallowance of various expenses made by Ld. Assessing Officer while computing the taxable income of the appellant on the ground that these were the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble at the relevant time in the office of the appellant. Since such notices were willingly accepted by the person available in the office at a later date it cannot be said that the notice under section 148 was not validly served upon the appellant. The appellant was well aware about such notices and such objections were not raised before the Assessing Officer during the assessment proceedings. Therefore the CIT(A) held that the notice validly served upon the appellant and the Assessing Officer had rightly invoked the provisions of section 147 of the Act. 4. The Ld. A.R. made the following submissions: In ground No.1, first of all, the Ld. A.R. objected to reopening of the assessments under section 147 of the Act on mere change of opinion on the same facts. For the assessment year 1989-90 it was submitted that the return of income was filed on 28-6-1990. Therefore, the issuance of notice under section 148 was without jurisdiction as it was only on account of change of opinion on the existing facts or record on the basis of which no action under section 148/147 could be taken. The return of income for this assessment year stated to have been filed on 28-6-1990 was not found in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year" 7. In the cases where scrutiny assessments under section 143(3) of the Act are completed and the assessee had disclosed fully and truly all material facts for that assessment year, the Assessing Officer cannot initiate proceedings under section 147 after the expiry of four years from the end of the relevant assessment year. Therefore it is only when the case falls under the proviso to section 147 then the question of non-disclosure of material facts would become relevant. In such cases, if the assessee made full disclosure of material facts, then even if such income has escaped assessment, no action can be initiated by the Assessing Officer under section 147. On proper interpretation of section 147 it would appear that the power to make assessment or re-assessment where the initiation has been made under the proviso to section 147, i.e., where the initiation has been made within four years of the end of the relevant assessment year, would be attracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Principal Officer or any member of the AOP and notices under section 148 were neither addressed to the Principal Officer nor any member of the Union. The notice was also not served on any Principal officer, Member or on any authorized person to receive such notices. The CIT(A) has held that it was not correct for the appellant to raise such objection when it has been complying with the notices served upon the employees in the past. It was submitted by the ld. A.R. that the CIT(A) had given an unlawful finding waiver of service of notice on the President/Member of the appellant Union. He submitted that there cannot be a waiver or acquiescence to the jurisdiction. 10. We have considered the rival submissions. We find the sub-section (1) of section 282 provides for service of a notice on a person therein named, either by post or as if it were a summon issued by a Court under the Code of Civil Procedure, 1908(5 of 1908). The appellant had never objected on this ground before the Assessing Officer and the appellant had been receiving notices through the employee of the union and all the notices had voluntarily been complied with. Therefore, we conclude that the service on the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men and employers. The Assessing Officer had referred to the definition of workman as given in Industrial Disputes Act, 1947 in order to conclude that members of the appellant union are not workmen within such definition. It was also held by him that the appellant is a union of truck owners which are in fact not employees and employers in true sense of the term. It was inferred by the Assessing Officer that the conditions set out in section 10(24) of the Act are not satisfied by the appellant. Therefore it was not entitled to the benefit of section 10(24) of the Act. The Assessing Officer had relied upon in the decision of CIT v. Indian Sugar Mills Association [1974] 97 ITR 486(SC), CIT v. Calcutta Hydraulic Press Association [1980] 121 ITR 414(Cal.) and Indian Jute Mills Association v. CIT[1992] 194 ITR 60 (Cal.) in support of his conclusion that the appellant is not a union which is formed primarily for the purpose of regulating relations between workmen and employers or between workmen and workmen. As such the appellant's income is not exempt from tax in view of section 10(24) of the Income-tax Act, 1961. 13. The CIT(A) held that the Assessing Officer was justified in holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income must be either from house property or from other sources. This condition is satisfied as the Ld. Assessing Officer admitted that the income of appellant is from other sources only. (b) The Trade Union concerned must be registered under the provisions of the T.U. Act, 1926. This condition is also complied with, which the Ld. Assessing Officer has also admitted. (c) The Trade Union concerned should be formed primarily for the purpose of regulating the relation between either the workmen and employers or between the workmen and workmen. This condition as per the Ld. Assessing Officer was not satisfied for the reasons and view stated above i.e., there is no workmen and accordingly there is no regulation of relation as provided. 16. He submitted that the term "Workmen" had not been defined in the Income-tax Act, 1961. Therefore this term will have to be understood as defined in the Trade Union Act. Section 2(g) of the Trade Union Act defines two terms, These are "trade dispute" and "workmen". This definition is reproduced as under; - 2(g) "trade dispute" - means any dispute between employers and workmen or between workmen and workmen, or between employers and employer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween these two, it only acts to regulate the relation between them, i.e., employers and workmen and nothing else. If the objects of this appellant union are perused or its manner or method of working or operation or the manner of collecting money from its members are considered, or the activities and the purposes etc. on which the union fund is to be spent, there will remain no doubt that neither of the objects nor the manner of working nor the objects or the purposes for which the union money is required to be spent and are spent or is being spent is neither against and nor beyond the object provided in T.U. Act. These all are meant and aimed to regulate the relation between the workmen and others as explained above. 19. Therefore, judging from this angle it is established that seeking permission and paying charges by the members of the union to the union is only aimed to regulate the conduct and relation of the members and it in no manner can be held as a restriction. 20. The appellant union is a union of its members and it is working under its rules and regulations which are jointly made by them and recorded in their constitution. 21. The conclusion of the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght charges to be paid by the business community in Sumerpur for transporting goods outside and for protecting the interest of the truck owners operating in such areas. First of all we agree with the view of the authorities below that this union has not been formed for regulating the relation between workman and employers or between workman and workman. In the two sense of the term the truck owners are not employers. Even if it is conceded that it is an association of employers then this association has been formed to regulate relation between employers and employers. 27. Even if it is conceded that it is an association of employers though it is not an association of employers in the true sense of the term. In Indian Sugar Mills Association v. CIT[1984] 150 ITR 593(Cal), it was held that section 10(24) of the Act grants immunity only to those trade unions which are formed primarily for the purpose of regulating the relation between the workmen and employers or between the workmen and workmen. It is significant that the Associations which are formed for the purpose of regulating the relation between the employers and employers or imposing restrictive conditions on the conduct of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mutuality. In the case of the appellant it was not possible to identify the truck operators who come from outside and operate at Sumerpur in the sense that the transport of goods from Sumerpur after making payment to appellant union. Parchi payment is mandatory charge on every truck which comes to take load from Sumerpur whether it is a member or not. So identity of truck operators cannot be established from various parchi payments received from various trucks during the year which goes away running all over India and it may come only once or twice to Sumerpur. So the principle of mutuality is not found applicable to the activities of the appellant's case. The CIT(A) concurred with the view of Assessing Officer and held that the income of the appellant was not exempt from levy of tax because the principle of mutuality is not found applicable to the activities of the appellant being pursued at Sumerpur. By holding so, he relied upon the decision of the Hon'ble Delhi High Court in the case of Truck Operators Union v. CIT[1981] 132 ITR 62. 30. The Ld. A.R. submitted that alternatively the appellant's income in any event was also not taxable on the principle of mutuality. It was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise to profits which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise." 32. The Hon'ble Supreme Court had also an occasion to reiterate the meaning of mutual concern and principle of mutuality in the case of Chelmsford Club v. CIT [2000] 243 ITR 89 as under: "Under the Income-tax Act, 1961, what is taxed is, the "income profits or gains" earned or "arising", "accruing" to a "person". Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits which are chargeable to tax. Where the trade or activity is mutual, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Hon'ble Supreme Court in the case of CIT v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551 and the CIT v. Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241 laid down the broad proposition that if the object of the assessee-company claiming to be a 'mutual concern' is to carry on a particular business and monies realized both from members and non-members for the same consideration by providing the same and similar facilities to all alike in respective of one and the same business carried on by it, the dealings as a whole, disclose the same profit earning motive and tainted with commerciality. Hence the income of the mutual concern under such circumstances is not exempt. We find that the judgment of the Hon'ble Gujarat High Court in the case of Adarsh Co-operative Housing Society Ltd. is of no help to the assessee as the facts of this case are distinguishable from the facts of the case of the assessee. Therefore, keeping in view the legal and factual discussion, we decline to interfere with the order of the CIT(A). 34. Ground No.4 is regarding without prejudice to all foregoing grounds of appeal and in the alternative the appellant agitated on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as defined under section 2(24) of the Income-tax Act, 1961. In view of the fact-situation and the availability of explanation on record the Assessing Officer as well as the Ld. CIT(A) both have erred in treating the entire receipts of the appellant as its income liable to tax. Therefore, in any event in case the ground Nos.1 to 3 fail then the receipts, collection of which is based on loading of goods can only be treated as income and out of this the expenses incurred are necessarily to be deducted. 36. We have considered the rival submissions. It has already been submitted by the Ld. A.R. as mentioned above that the appellant trade union is not at all engaged in business activity and the Assessing Officer had also held that the assessee derives income from other sources. The assessee has himself mentioned that the net surplus as per the income and expenditure general fund account comes to Rs. 1,62,206 under the head "Income from other sources". The Ld. A.R. has contended that in the alternative the income may be treated as business income and deduction for all expenses should be allowed. In view of the above factual position and as admitted by the Ld. A.R. himself the income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as AOP. The income of this AOP is being assessed as income from other sources. Deduction for any expenses laid out or expended wholly and exclusively for the purpose of making or earning such income are to be allowed under section 57 of the I.T. Act. We agree with the view of the CIT(A) that the Assessing Officer has already discussed the details of the expenses in the order and he has correctly disallowed the expenses wherever called for. Therefore we decline to interfere with the order of the CIT(A) on this count. 40. Ground No.6 the appellant agitated against the levy of interest under sections 234A and 234B of the Act. The Ld. A.R. relying upon the judgment of Hon'ble Supreme Court in the case of CIT v. Ranchi Club Ltd. [2001] 247 ITR 209 submitted that it is clear that in the absence of any specific direction in the asst. order no interest under sections 234A, 234B and 234C could levied. Therefore, it was contended that the levy of interest for the year 1989-90 may be cancelled. Apart from the above illegality in levy of interest and non-considering the ground by CIT(A) in assessment years 1990-91 to 1992-93 and 1994-95 the calculation of interest under section 234A was e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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