TaxTMI 
TaxTMI 
2011 (9) TMI 44
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....in deleting the additions in respect of corpus donation at Rs.6,18,750/- and excess of income over expenditure at Rs.3,29,919/- because the same were duly taxable in view of the fact that registration u/s 12A was not available to the assessee. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground (s) of appeal at any time before or during the hearing of this appeal." 2. The assessee is a society registered at Sl. No. S-33947 of 1998 by the Certificate of Registration granted by Registrar of Societies, Government of NCT, Delhi, dated 1st December, 1998. Copy of certificate is filed at page 11 of the paper book. Copy of Memorandum of Association and Rules and Regulations are filed at pages 12-24 of the paper book. The activities of the society are stated in the assessment order by the Assessing Officer as under:- "The Society is an association of Hologram Industries and working for anti piracy in security holograms, organizing seminar for facilitation of hologram industries and other related activities." 3. During the year under consideration, the assessee has shown surplus of income and expendi....
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....; 1572823.00 1572823.00 Less: Exemptions u/s 11 Set apart for the future 235923.45 Amount applied for charitable or religious purposes Net Taxable Income 1242904.00 1478827.45 94000.00 5. It may be mentioned here that another copy of computation of income is also filed by the assessee at page 6 of the paper book showing income therein at Rs.1,18,633/- which is interest received on FDR and in that computation the assessee had claimed the benefit of Section 44A but the said computation has not been described by the Assessing Officer in the assessment order and it may have been filed during the course of assessment proceedings. 6. The Assessing Officer initiated assessment proceedings against the aforementioned return filed by the assessee and has mentioned the fact that claim of the assessee regarding registration u/s 12AA was rejected by the Director of Income-tax (Exemptions) vide the order dated 8th May, 2007. He asked the assessee to explain as to why the corpus donation of Rs.6,18,650/- should not ....
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....mitted that the case of the assessee is governed by the principle of mutuality, as such, no part of the income of the assessee could be assessed. After considering all these submissions, learned CIT (A) had deleted both the additions, namely, of income excess over expenditure of Rs.3,29,919/- and the corpus donation in the shape of membership of Rs.6,18,750/-. The revenue is aggrieved, hence, in appeal and has raised the aforementioned grounds of appeal. 8. After narrating the facts, it was vehemently pleaded by the learned DR that the learned CIT (A) was wrong in considering the alternative claim of the assessee regarding principal of mutuality and on that basis he was totally wrong in granting the relief to the assessee, as, on that basis even the income returned by the assessee has not been looked into. He submitted that the case of the Assessing Officer rest upon the provisions of Section 28(iii). He submitted that the amount received by the assessee from its member was with regard to specific services rendered, hence, the same will fall within the ambit of Section 28(iii). He submitted that the assessee also could not claim the benefit of Section 44A. The assessee al....
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.... being in the nature of capital expenditure) solely for the purposes of protection or advancement of the common interests of its members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions of this section, be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under the head "Profits and gains of business or profession" and if there is no income assessable under that head or the deficiency allowable exceeds such income, the whole or the balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under any other head. (2) In computing the income of the association for the relevant assessment year under sub-section (1), effect shall first be given to any other provision of this Act under which any allowance or loss in respect of any earlier assessment year is carried forward and set off against the income for the relevant assessment year. (3) The amount of deficiency to be allowed as a deduction under this section shall in no case exceed one-half of the t....
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....d by the assessee solely for the purpose of protection or advancement of the common interest of its members provided the same is not allowable under any other provisions of the Act and it is not in the nature of capital expenditure. 14. Therefore, it has to be examined that whether provisions of Section 44A are applicable to the case of the assessee. Firstly, it is an association related to trade and, therefore, it is not outside the scope of Section 44A of the Act. Secondly, it is an admitted fact that the assessee is not an association or institution referred to in clause 23A of Section 10 as the said clause of Section 10 governs the institution specified by the Central Government by notification in the official gazette and it is not even the case of the department that the assessee falls within the ambit of Section 10 (23A). The careful perusal of receipt and expenditure of the assessee will reveal that the expenses incurred by the assessee are not in the nature of capital expenditure. The details of expenditure will reveal that they have been incurred solely for the purpose of protection or advancement of common interest of its members as it is not the case of the Ass....
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....t does not arise from specific services rendered to its members. The annual subscription received by it is in accordance with the clauses of Memorandum of Association and Rules and Regulations and the amount received by it in respect of international conference was in respect of interested members and it is not with respect to any specific services provided to the members on the basis of some cost. No material whatsoever has been brought on record by the revenue to show that any of the amount collected by it from its member was in respect of specific services performed by the assessee for its members. The words 'performing specific services' was also found place in Section 10(6) of 1922 Act (corresponding provisions was considered by Hon'ble Supreme Court in the case of CIT vs. Calcutta Stock Exchange Association Ltd. (36 ITR 222) and the relevant observations of their lordships from the said decision are as under:- "The words 'performing specific services' [in section 10(6)] in our opinion, mean, in the context,' conferring particular benefits' on the members. The word 'services' is a term of a very wide import, but in the context of Section 10 of the Act, its use exclud....
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....ase of the assessee that its income is exempt as per the principle of mutuality as in the return of income it did not claim so. The computation of income filed by the assessee was on the basis of claim of charitable institution. The said claim of charitable institution has been rejected by the department, therefore, the income of the assessee has to be computed as per the other provisions of the Act which include Section 44A and if the department wants to assess the resultant income, then, it has to be computed under the normal provisions of the Act. Out of surplus of Rs.3,29,999/-, the amount earned by the assessee on FDRs of Rs.1,18,633/- is to be removed as the same, as per the provisions of Income-tax Act, is assessable under the head 'Income from other sources' and this has so been done by the assessee in the computation purported to be filed before the Assessing Officer, the copy of which has been placed at page 6 of the paper book wherein taxable income has been shown at Rs.1,18,630/-. The rest of the amount has been claimed by the assessee u/s 44A of the Act. In our opinion, Section 44A does not grant the exemption to the assessee with regard to the surplus shown by it bein....