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TMI Blog2012 (9) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is a capital receipt and is not liable to tax. Taxability depends upon whether it was received from members or nonmembers is not correct because as per the provisions of Income tax charging of tax comes into picture only when the nature of receipt is revenue and no capital receipts are taxed. Decision in favour of assessee. Addition on account of interest income – Assessee had claimed that it is following cash system of accounting - Booked income as and when it is received - Held that - In view of existence of concept of mutuality and in view of various judicial pronouncements relied upon by assessee, the interest income whether booked on cash basis or on receipt basis is exempt in the case of assessee is a society. Decision in favour of assessee. - ITA No. 4228 & 4489/Del/09 - - - Dated:- 6-7-2012 - SHRI R.P. TOLANI, AND SHRI T.S. KAPOOR, JJ. Appellant by : Shri Sachin Vasudeva, C.A. Respondent by : Shri R.S. Gill, Sr. DR. ORDER PER TS KAPOOR, AM: These are cross appeals filed by assessee and revenue against the impugned order of Ld CIT(A) dated 16.9.2009. The grounds of appeal filed by assessee and revenue are as under:- I.T.A. No.4228/Del/2009: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of Hon'ble Supreme Court s decision in the case of CIT v. Bankipur Club 226 ITR 97 (SC). 2. On the facts and in the circumstances of the case, the Ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 19,37,500/- made by the Assessing Officer on account of membership contribution even though the assessee society was not covered by the doctrine of mutuality and this amount was taxable. 3. On the facts and in the circumstances of the case, the Ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 1,34,234/- made by the Assessing Officer on account of interest income even though the assessee society was not covered by the doctrine of mutuality and this amount was taxable. 4. On the facts and in the circumstances of the case, the Ld CIT(A) has erred on facts and in law in deleting the addition of Rs. 3,57,681/- made by the Assessing Officer on account of misc. income even though the same was not added twice as the same had been substracted from the total income, thus there was no double addition of Rs. 3,57,681/-. 5. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder AISDE Scheme of Govt. of India. Rs. 20,00,0000/- 3. Aggrieved, the assessee filed appeal before Ld CIT(A) and submitted the following submissions:- 1) That assessment u/s 144 was not warranted as various notices sent by the Assessing Officer were not received by the assessee and final notice dated 19.12.2008 fixing the hearing for 22.12.2008 was received by the assessee on 24.12.2008 and thereafter the representative of assessee appeared before Assessing Officer on 26.12.2008 and on that date he was informed that assessment has already been completed. 2) That there has to be failure on the part of the assessee to comply with the terms of notices issued u/s 142(1) or section 143(2) of the Act. The assessee should have received the notice and then only question of non compliance would arise. It was for the Department to prove that the notices issued were properly served on the assessee or not. Reliance was placed on the following cases:- 1. AA Kochandi v. ITO 110 ITR 406 (Ker.). 2. Lakshmi Narain Prashad Bhagat v. State of Wsst Bengal 118 ITR 454 (Cal.). 3. CIT v. K.C. Verma, 226 ITR 476 (Del.). 3. That the Assessing Officer had assess to the audited account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards addition of Rs. 2,70,619/- as interest income from Corporation Bank and OBC Bank, it is submitted that appellant has not earned any interest from these banks as appellant was not having any bank account with these banks. 9. That based upon principles of mutuality, misc. incomeRs. 3,57,681/- is not taxable as the Assessing Officer had taken the income twice. 10. That the main object of the appellant was setting up of a common integrated waste management facility for all the members and for this the appellant had approached Govt. for assistance in funding the project. The appellant received a grant from Govt. of India amounting to Rs. 2 crores being 50% of cost of project. This was a capital grant which was received towards cost of setting up integrated waste management facility. Reliance was placed in the judgment of Hon'ble Supreme Court in the case of Sahni Steels v. CIT 228 ITR 253 in which it was held that amount received from Govt. towards meeting the cost of asset is a capital receipt. The Hon'ble court had held that in order to decide the nature of subsidy, whether the same is capital subsidy on a revenue receipt, what is material is the purpose for which the subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncept of mutuality. In view of the above findings, the Ld CIT(A) deleted the addition on account of membership subscription amounting to Rs. 19,37,500/- and interest amounting to Rs. 1,34,234/- on the basis of concept of mutuality. 5. As regards interest from Corporation Bank amounting to Rs. 2,47,113/- and interest from OBC Bank amounting to Rs. 23,506/-, the Ld CIT(A) held that these are taxable as during the year it had accrued to the assessee. The assessee had claimed that it is following cash system of accounting and interest as and when is received is booked as income. However, the ld CIT(A) did not agree with the contention of Ld AR and upheld the additions made by the Assessing Officer in respect of Rs. 2,47,113/- and Rs. .23,506/- earned from City Bank and OBC Bank. The Assessing Officer inadvertently mentioned the name of Corporation Bank instead of City Bank which he rectified in the remand report. 6. As regards receipt of Rs. 2 crores as grant for meeting part cost of project, the Ld CIT(A) upheld the decision of Assessing Officer. The relevant portion of Ld CIT(A) s order is reproduced below:- On careful consideration of the above position, it is held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or past member and moreover on winding up or on dissolution the surplus remains the property of the members. Therefore, he pleaded that all necessary contentions for applying doctrine of mutuality as laid down by the Hon'ble Supreme Court in the case of Chelmsford Club 243 ITR 89 exists in the case of assessee. In this respect he invited our attention towards clauses XXII XXIII of Memorandum of Association. 11. As regards interest income earned by society whether on cash basis or accrual basis, the Ld AR argued that in view of various judicial pronouncements these are not taxable. He specifically brought before our notice the case of DIT v. All India Oriental Bank of Commerce Welfare Society 130 Taxaman 575 (Del.) wherein it was held that interest income derived by the assessee cooperative society from deposits made by it out of contribution made by members is exempt. 12. As regards taxability of Govt. grant of Rs. 2 crore, the Ld AR pleaded that amount was part of setting up of the project and is of capital nature. In this respect, he invited our attention to Explanation 10 to the provisions of section 43(1)of the Act wherein it is mentioned that where a portion of cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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