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TMI Blog2023 (8) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... years. In sum and substance, 15th of capital contribution received during the year is to be subjected to tax in the impugned year, and all capital contributions received in preceding years which are to be subjected to tax on deferred basis in the impugned year are also to be included in the income of the assessee. The issue is, therefore, restored to the AO to re-work the amount of capital contribution to be brought to tax in accordance with the order of the ITAT in the case of the assessee for Asst. Year 2001-02. Ground No.2 and 3, therefore, are allowed for statistical purpose. Addition of capital contribution which the assessee has pleaded consistently is only in the nature of advance and therefore cannot be subjected to tax in the impugned year - Additional evidences filed in the case of all the parties from whom the purported advances were received, the assessee has sought to demonstrate and substantiate its pleading that the amount received from them was only in the nature of advances by way of capital contribution, which was refunded to them on account of approval of GPCB not being obtained in their cases. These evidences, undoubtedly being generated post the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, only 20% of the total contribution received is liable to tax and balance 80% is to be deferred in succeeding years. It is submitted that the 80% of addition of the total contribution, be deleted now. 3. The learned C.I.T.(Appeals) has erred in enhancing the income by Rs. 39,19,484/- being 15th of contribution relating to Asst. Year 2007-08, 2008-09 and 2009-10. Your appellant submits that the said amount is not liable to tax. It is submitted that it be so held now. 3. Brief facts relating to the case are that the assessee company is a cooperative venture of member industries looking after disposal of effluent discharged by the companies into 55 km. long channel from their respective industrial sites leading to Gulf of Cambay (Khambat); the assessee-company was set up to create a facility of Common Effluent Disposal System by five major industrial companies, GSFC, IPCL, IOCL, GAIL GIDC, under the directive of the Gujarat High Court. These five companies are the shareholders of the assessee, and are also the initial users of the Common Effluent Disposal system, who have contributed towards the cost of the construction Common Effluent Disposal system by introducing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, he had held the entire capital receipt of the impugned year to be brought to tax. Following this decision of the ld. CIT(A) in Asst. Year 2009-10 for the impugned year, the ld.CIT(A) held the entire amount of capital contribution to be subjected to tax. Further, he noted that since the assessee had not returned to tax deferred capital contribution of the preceding years, he directed the AO to subject the same to tax in the impugned year, thus resulting in enhancing the assessee s income to the extent of Rs. 39,19,848/-. Aggrieved by this order of the ld.CIT(A) the assessee has come in appeal before the Tribunal raising the grounds as noted above. 8. At the outset, ld.counsel for the assessee pointed out that the issue raised in ground no.2 and 3 of the entire capital contribution received by the assessee during the impugned year being subjected to tax by the ld.CIT(A) following the decision of the ld.CIT(A) in the case of the assessee for Asst. Year 2009-10 should be taken up first for adjudication, since the assessee s appeal against the order passed by the ld.CIT(A) in Asst. Year 2009-10 also stood adjudicated by the ITAT in its order passed in ITA No.1420/Ahd/2012 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 have not been offered by the appellant to tax. Besides, the capital contribution of Rs. 3,11,86,450/- received in FY 2010-11, 15th of contribution received in assessment years from 2007-08 to 2009-10 totaling to Rs. 39,19,848/- should also be taxed in AY 2011-12. Thus, the appellant did not follow the decision of the Hon'ble ITAT Ahmedabad which was given in its own case for AY 2001-02 and for subsequent years. 5.6 Considering all these facts, the Ld. CIT(A)-1, Baroda, i.e. my predecessor while deciding the appeal of the appellant for AY 2009-10 on similar issue has held that in absence of offer by the appellant to stagger/defer it over the years as done in earlier years, taxation of entire capital contribution in the year of receipt as made by the AO for such assessment year 2009-10 was justified. Accordingly, the Ld. CIT(A)-1 Baroda vide his order in appeal no. CAB-1/201/11-12 dated 20/04/2012 upheld the addition of capital contribution of Rs. 39,00,000/- as received by the appellant during FY 2008-09 relevant to above AY 2009-10. As stated in earlier paragraphs that in assessment years 2001-02, 2004-05 and 2005-06, the Hon'ble ITAT Ahmedabad by following d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration and therefore a show-cause noticed u/s 251(2) of the Act bearing No. CAB-1/123/14-15/ECPL/2014-15 dated 09/01/2015 was issued to it and such show-cause notice is reproduced hereunder for reference: You have filed an appeal in your case against the order u/s 143(3) of the IT Act dated 12/02/2014 as passed by ACIT, Circle -l(2), Baroda for AY 2011-12. The appeal has been filed by you for this assessment year in respect of addition made by the AO of Rs. 3,11,86,450/- by treating capital receipt of members' contribution as received by you as revenue receipt On perusal of details and records as filed by you, it is seen that from AY 2001-02 up till AY 2007-08, you had offered to tax capital contribution received from the members in each year on deferred revenue basis, i.e. 15th for each year beginning year of receipt. However, such 15th capital contribution received in FYs 2007-08, 2008-09 and 2009-10 have not been offered to tax in AY 2011-12, i.e. for the year under consideration. Besides, the capital contribution of Rs. 3,11,86,450/- received in FY 2010-11, 15th of contribution received in Financial Years from 2007-08 to 2009-10, totaling to Rs. 39,19,848/- sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of contribution of assessment years 2007-08, 2008-09 and 2009-10 of Rs. 39,19,484/- was not offered for taxation in AY 2010-11. The submission of AR of the appellant is that this non offering of l/5th of capital contributions of these three assessment years was due to negligence. But the fact remains that the decision/direction of Hon'ble ITAT, Ahmedabad has not been fully complied with by the appellant and therefore the AO is directed to enhance the assessment for AY 2011-12 accordingly by Rs. 39,19,484/-. Since the appellant has failed to offer/disclose this amount of Rs. 39,19,484/- (being 15th of capital contributions received in AYrs 2007-08, 2008-09 and 2009-10) in the return of income for AY 2011-12 and therefore penalty proceedings u/s 271(1)(c) r.w.s. 274 for concealment of particulars of income are also initiated in respect of above enhanced income of Rs. 39,19,484/-. 11. We have heard the rival contentions. It is undisputed and admitted fact that the issue of treatment of capital contribution received by the assessee for taxation has already been decided by the ITAT in the case of assessee in Asst. Year 2001-02 holding that it is to be treated as revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- as made for the year under consideration) as not taxable being the same as advance received from the persons to whom membership were not allotted and they were not allowed to get the benefit of disposal system. As per the AR such amount of Rs. 61,50,000/- is not taxable item as membership was not allotted to such industries and remaining amount of Rs. 2,50,36,450/- crore was to be deferred in 5 years. But this submission of the appellant is not found to be tenable. In my opinion, the entire receipt of Rs. 3,11,86,450/- as got by the appellant from different persons/industries are taxable item. The appellant has filed a chart showing name of industries, amount received from such industries as fee for membership and the year in which such amounts have been received. It is observed that this entire amount of Rs. 61,50,000/- is shown to have been received by the appellant in FY 2010-11. As per the AR, if the membership was not allotted to the persons/industries from whom this amount of Rs. 61,50,000/- was received, then such amount was required to be refunded to these persons/industries. However, till date i.e. almost after four years also neither this amount has been claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Board (GPCB) which was a condition explicitly stated in the letter of intent issued to these parties; that since the approval of GPCB was not obtained, therefore, all amounts received by way of advances from these parties was refunded in 2016. The ld. counsel for the assessee stated that the assessee was now in possession of evidence of refund of all these advances by way of letters issued to the respective parties refunding their amounts, copies of cheques issued to the parties, as also bank statement of the assessee, reflecting the issuance of cheques to these parties in the year 2016-17, refunding the advance received from them towards capital contribution. The ld.counsel for the assessee contended that he was also in possession of letter of intent issued to these parties mentioning the fact of receipt of a portion of capital contribution as advance for the membership to the venture being subjected to approval of GPCB, in the cases of all parties. All the above, the ld.counsel for the assessee stated, were being placed before us as additional evidence, and since they were not available at the time the order was passed by the ld.CIT(A) they could not be placed before him. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout taking into consideration the additional evidence sought to be adduced. 5. Applying the law laid down by this Court in the aforesaid decision to the facts of the case on hand, we are of the opinion that while considering the application for additional evidence, the High Court has not at all adverted to the aforesaid relevant consideration, i.e., whether the additional evidence sought to be adduced would have a direct bearing on pronouncing the judgment or for any other substantial cause-As observed herein above, except sale deed 29.12.1987, which as such was rejected, there was no other material available on record to arrive at a fair market value of the acquired land. Therefore, in the facts and circumstances of the case, the High Court ought to have allowed the application for additional evidence. However, at the same time, even after permitting to adduce the additional evidence, the applicant has to prove the existence, authenticity and genuineness of the documents including contents thereof, in accordance with law and for the aforesaid purpose, the matter is to be remanded to the Reference Court. 15. The ld.counsel for the assessee stated that in view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said evidence which is necessary to controvert those findings could not be produced before the lower authorities. 3. In this view of the matter, it is most humbly submitted that, above mentioned additional evidences are extremely important pieces of evidence, to prove the bona fides of the Applicant. The additional evidences sought to be adduced, removes the cloud of doubt cast upon the Applicant and such evidences have direct and important bearing on the issue impugned under the first ground of the present appeal. Thus, it is requested that, the aforesaid evidences may kindly be admitted for the substantial cause of justice and also in light of the recent judgment of Hon'ble Supreme Court in case of Sanjaykumar Singh vs. State of Jharkhand (Civil Appeal No.1760 of 2022 dated 10.03.2022) (copy attached herewith). All these evidences are going to the root of the controversy, and hence, are integral for the proper and fair dispensation of justice. 17. The ld.DR strongly objected to the admission of additional evidences pointing out that no reason has been brought out by the ld.counsel for the assessee for not furnishing this additional evidence earlier. Further taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the ld.CIT(A), therefore, could not be filed before him, and at the same time, undoubtedly, they do substantiate the assessee s plea that the amount received from these parties was not full and final payment of these parties towards capital contribution, but was only portion of the capital contribution to be made by them given by way of advance towards membership of the assessee-company subjected to approval by GPCB. Since these evidences throw light and bring out the nature of the purported amount, they are relevant for adjudicating the controversy before us, whether the impugned amounts were in the nature of advance for capital contribution or not. The Revenue authorities have no basis for holding the entire receipts not being in the nature of advance except for the fact that they were retained by the assessee for a very long period of time. These evidences shedding light on the nature of receipts therefore we hold,need to be admitted for fair and proper dispensation of justice as per the principle laid down by the Hon ble apex court for admission of additional evidences in the case of Sanjay Kumar Singh Vs. The State of Jharkhand, Civil Appeal No.1760 of 2022 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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