Activities performed by the assessee are regulatory functions for the public good, and any collection of fees or charges in the course of discharging these regulatory functions cannot be viewed as a consideration for rendering these services

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Activities performed by the assessee are regulatory functions for the public good, and any collection of fees or charges in the course of discharging these regulatory functions cannot be viewed as a consideration for rendering these services

 

HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTION CONTROL BOARD vs. COMMISSIONER OF INCOME TAX

ITAT, CHANDIGARH ‘B’ BENCH

Pramod Kumar, A.M. & Joginder Singh, J.M.

ITA No. 74/Chd/2009

28th August, 2009

(2009) 28 CCH 0515 ChdTrib

(2009) 125 TTJ 0098 : (2009) 28 DTR 0289 : (2010) 42 SOT 0343 : (2011) 9 ITR 0604

Legislation Referred to

Section 2(15), 12A, 12AA

Case pertains to

Asst. Year -,

Decision in favour of:

Assessee

Charitable trust—Registration under s. 12AA—Object of general public utility vis-a-vis pollution control—Charging of fees vis-a-vis profit motive—Assessee, is a State Board constituted under law for prevention, control and abatement of pollution—CIT held that since the assessee was engaged in a regulatory function, it could not be said to be engaged in charitable purposes and, therefore, withdrew registration granted under s. 12AA—Not justified—There is no conflict in assessee being a regulatory body and its pursuing an ‘object of general public utility’ which qualifies to be a charitable activity under s. 2(15)—Scope of the expression ‘any other object of general public utility’ is very wide—Thus, the objects of the assessee trust are of general public utility and the objections taken by the CIT are devoid of any legally sustainable basis—Further, assessee is now covered by the new specific category viz., “preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of artistic or historic interest”, set out under s. 2(15) as a result of retrospective amendment by the Finance (No. 2) Act, 2009, and, therefore, residuary clause does not come into play—Residuary clause no longer being applicable, proviso to s. 2(15) does not come into play at all—Thus, it is wholly immaterial as to whether or not the assessee was rendering a service to the trade, commerce or business—In any case, insertion of proviso to s. 2(15) does not mean that an assessee would be hit by the proviso in case it is to receive any payment for anything done for trade, commerce or business—Where an object of general public utility is not a mere mask to hide true purpose or rendering of any service in relation thereto, and where such services are rendered as purely incidental to or as subservient to the main object of ‘general public utility’, the carrying on of bona fide activities in furtherance of such objects is not hit by the proviso to s. 2(15)—Since the expression ‘rendering of any service to business, trade or commerce’ is used in conjunction with the words ‘business, trade or commerce’, these two expressions must be interpreted in their cognate sense—Thus, in order to invoke second limb of proviso to s. 2(15), ‘rendering of service to trade, commerce or business’ must be such that it has a profit motive—Activities performed by the assessee are regulatory functions for the public good, and any collection of fees or charges in the course of discharging these regulatory functions cannot be viewed as a consideration for rendering these services—There is no substance in the CIT’s stand that the income earned by the assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business—These are not the services with a profit motive—Assessee is admittedly pursuing the objects for which it was established and it cannot be said that its activities are not genuine—Therefore, withdrawal of registration under s. 12AA in exercise of power under s. 12AA(3) cannot be sustained

Held:

There is no conflict in an assessee being a regulatory body and its pursuing an ‘object of general public utility’ which qualifies to be a charitable activity under s. 2(15). The scope of expression ‘any other object of general public utility’ is indeed very wide, though it would indeed exclude the object of private gain such as an undertaking for commercial profit even as the undertaking may sub-serve general public utility. It is not appropriate to proceed on the basis, as the CIT has chosen to proceed, that regulatory functions are not activities for charitable purposes, for the elementary reason that the expression ‘charitable purpose’, under s. 2(15), includes ‘any other object of general public utility’ which is an expression of wide import. In the scheme of things which operate in the contemporary society, many of these regulatory functions are entrusted to the bodies independent of the Government and the object of the bodies so entrusted with the regulatory functions are, clearly pursuing objects of general public utility. The connotations of ‘charitable purposes’, in view of specific provisions of the Act, are significantly wider than connotations of this expression in common parlance. Viewed in this perspective, and bearing in mind the fact that assessee is admittedly engaged in the activities for the purposes of “prevention, control or abatement of pollution”, the objects of the assessee trust are of general public utility. The objections taken by the CIT that since assessee is performing regulatory functions, the assessee cannot be treated as pursing objects of general public utility are devoid of any legally sustainable basis.—CIT vs. Bar Council of Maharashtra (1981) 22 CTR (SC) 106 : (1981) 130 ITR 28 (SC) relied on.

(Paras 9 & 10)

No doubt until the asst. yr. 2009-10, the assessee Board was covered only by this residuary clause of definition of ‘charitable purpose’, but, as a result of the retrospective amendment introduced by the Finance (No. 2) Act, 2009, a new category of activity entitled to be treated as charitable activity under s. 2(15) has been introduced which extends the definition of charitable purposes to “preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of artistic or historic interest”. The assessee is now covered by this specific category set out under s. 2(15), and, therefore, residuary clause does not come into play. It is only elementary that a general provision has to give way to the specific provision, as aptly summed up in the maxim ‘generalia speialbus non derogant’. A special provision thus normally excludes the operation of general provision, and the said principle will have application here as well. The assessee being covered by the specific clause, and the residuary clause no longer being applicable, the proviso to s. 2(15) does not come into play at all. Therefore, it is wholly immaterial as to whether or not the assessee was rendering a service to the trade, commerce or business. Given the present legal position, and on the facts of the present case, even this objection taken by the CIT is wholly irrelevant.—South India Corpn. (P) Ltd. vs. Secretary, Board of Revenue AIR 1964 SC 205 applied.

(Para 12)

It is also important to bear in mind that the insertion of proviso to s. 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. As Circular No. 11 of 2008, dt. 19th Dec., 2008 which is binding on the CIT under s. 119(1)(a), aptly puts it, whether the assessee has, as its object, advancement of any other object of general public utility is essentially a question to be decided on the facts of the assessee’s own case and where object of general public activity is only a mask or device to hide the true purpose of trade, business or commerce, or rendering of any service in relation thereto, the assessee cannot be said to be engaged in a charitable activity within meanings of s. 2(15). As a corollary to this approach adopted by tax administration, it cannot be open to the CIT to contend that where an object of general public utility is not merely a mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of ‘general public utility’, the carrying on of bona fide activities in furtherance of such objectives of ‘general public utility’ will also be hit by the proviso to s. 2(15). As far as assessee being engaged in trade, commerce or business is concerned, it is not even the CIT’s case that running an organization, set up under the statute law, for controlling, preventing and abating pollution, is pursuing trade, commerce or business. Obviously, a trade, commerce or business implies an activity with profit motive even though public good may be a secondary benefit from such an activity. That is not the case here. The legal framework under which the assessee is set up is quite clear and unambiguous and it reflects will of the lawmakers in no uncertain terms, which is to prevent pollution.

(Paras 13 to 15)

It is important to bear in mind the fact the expression ‘rendering of any service to business, trade or commerce’ is used in conjunction with the words ‘business, trade or commerce’ and, therefore, following the principles of nosciter a soccis, these two expressions must be interpreted in their cognate sense and as if they take colour from each other. A profit motive is surely the essence of trade, commerce or business, and, therefore, in a situation in which services are rendered without a profit motive, such rendering of service will not have anything in common with trade, business or commerce. The application of the principle of noscitor a sociis, therefore, will require that in order to invoke second limb of proviso to s. 2(15), ‘rendering of service to trade, commerce or business’ must be such that it has a profit motive. On a perusal of its objectives, as sanctioned by the statue, it is obvious that the activities performed by the assessee trust are regulatory functions for the public good, and any collection of fees or charges, in the course of discharging these regulatory functions, cannot be viewed as a consideration of rendering these services of pollution control measures. There is no substance in the CIT’s stand that the income earned by assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business. What is termed as consent fees is in fact fees accompanying the application for obtaining consent (i.e., permission) of the assessee Board to set up a new unit. It cannot be anybody’s case that the processing of applications by itself has a commercial motive, or that fees for processing of application is a fees collected for rendering of service of pollution control which is undisputed sole object of the assessee trust. Similarly, fees for testing charges and licence fees are not also towards rendering of any services of pollution control either. These are not the services with a profit motive but essentially only to recoup the costs of getting the samples tested or processing of licences. In any event, these activities, if these can at all be construed as rendering of services, these are wholly subservient to the public utility objective of pollution control, and, it cannot be anyone’s case that even though the State Pollution Boards like the assessee are set up under an Act of the Parliament, but, to use the words employed in the CBDT circular “the object of ‘general public utility’ will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business”.

(Paras 16 & 17)

In any event, as a plain reading of s. 12AA(3) would indicate that a registration granted under s. 12AA can only be withdrawn when the CIT is satisfied that (a) the activities of the trust or the institution are not ‘genuine’; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reasons for cancelling or withdrawing the registration granted under s. 12AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursing the objects for which it was established. When the assessee is engaged in bona fide activities, within the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. The CIT has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. Under these circumstances, the withdrawal of registration granted under s. 12AA cannot be sustained in law. The CIT has extensively referred to as to why the assessee is not eligible for exemption under s. 11 as the activities of the assessee cannot be said to be for ‘charitable purposes’ defined under s. 2(15), but then this aspect of the matter is relevant for the assessment proceedings and not in the context of exercise of CIT’s powers under s. 12AA(3). The impugned order passed by the CIT is thus vitiated in law on this count as well. For the detailed reasons set out above, the order of the CIT is quashed.

(Paras 19 & 20)

Conclusion:

Assessee, a State Board constituted under law, engaged in the activities of prevention, control and abatement of pollution is clearly pursuing objects of general public utility and collection of fees or charges in the course of discharging these regulatory functions cannot be viewed as a consideration for rendering these services with a profit motive; further, assessee being covered by the new specific category of ‘preservation of environment’ set out in s. 2(15) as a result of amendment by the Finance (No. 2) Act, 2009, residuary clause of s. 2(15) and consequently proviso to s. 2(15) is not applicable; registration granted under s. 12AA to the assessee could not therefore be withdrawn.

In favour of:

Assessee

Case referred to

K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC)

Circular No. 11 of 2008, dt. 19th Dec., 2008

Counsel appeared:

Ashwani Kumar & R.K. Kaushal, for the Appellant : S.P. Khutan, for the Respondent

ORDER

PRAMOD KUMAR, A.M. :

ORDER

By way of this appeal, the assessee appellant has called into question correctness of learned CIT’s decision dt. 26th Dec., 2008, withdrawing registration granted under s. 12AA of the IT Act, 1961. Grievance of the assessee is that the learned CIT erred in so withdrawing or cancelling the registration.

  1. To adjudicate upon assessee’s grievance, it is necessary to take note of some material facts and developments leading to this litigation before us. The assessee before us is a State Board, constituted under law, for playing a key role in the prevention, control or abatement of pollution of streams and wells in the State and other allied activities. The assessee is also engaged in dealing with matters relating to prevention of air pollution.
  2. On 11th Oct., 2007, the assessee was granted registration under s. 12AA of the IT Act, 1961, w.e.f. 5th Dec., 1974. It is an admitted position that “in (so) granting the registration, it was noted that the Board is concerned with the prevention and control of pollution, and, therefore, could be said to be engaged in the advanced of an object of general public utility”, and that “having regard to the functions of the Board, as laid down in s. 17 of the Water (Prevention and Control of Pollution) Act, 1974, and the definition of charitable objects as it then stood in s. 2(15) of the IT Act, the objects of the Board were considered to be charitable in nature”.
  3. On 27th Oct., 2008, however, learned CIT served a notice on the assessee requiring him to show cause as to why, in view of the fact that the assessee was earning income from various kinds of fees and charges and in view of restricting the scope of ‘an object of general public utility’ by amending s. 2(15), the registration granted to the assessee should not be withdrawn. It was pointed out that, with effect from the asst. yr. 2009-10 and by the virtue of amendment to s. 2(15) vide Finance Act, 2008, ‘advancement of any object of general public utility’ cannot be treated as a charitable purpose if ‘it involves the carrying out of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fees or any other consideration, irrespective of nature of use or application of the income from such an activity’. Learned CIT’s case was that since the assessee was “earning income over the years in the nature of licence fees, consent fees, testing charges, etc.” and “since the basic objective of the protection of environment pursued by the Board involves the carrying on of such activities and the earning of such income, the object pursued cannot be considered to be a charitable purpose with effect from the asst. yr. 2009-10. In response to the show-cause notice, and the proposition thus put to the assessee, it was, inter alia, submitted by the assessee that the assessee is neither carrying out any activity in the nature of trade, commerce or business, nor is it rendering any service in relation to such trade, commerce or business. It was also submitted that the assessee is performing such regulatory functions as assigned to the assessee by legislation. It was also explained that apart from the financial grants that the assessee receives, the assessee had also received the consent fees from industrial undertaking in consideration of grant of licence to establish and operate the undertaking, but, by no stretch of logic, this receipt could be said to be for the services rendered by the assessee. The consent fees so received, according to the assessee, were to meet the costs incurred by the assessee, including the costs incurred for supervising and monitoring the pollution emissions by the enlisted units. It was pointed out that there was no understanding, express or implied, that the assessee will render any specific services to the enlisted units and, as such, the consent fees could not be said to be in consideration for any services to be rendered by the assessee. Learned CIT noted that the assessee had also moved an application for exemption under s. 10(23C)(iv) before the Chief CIT and that the learned Chief CIT had rejected the same by holding that the assessee was carrying out a regulatory activity and not a charitable activity. In the light of this finding of his supervisory authority, i.e., the Chief CIT, learned CIT further required the assessee to show cause as to why the registration under s. 12AA not be withdrawn even for years prior to the asst. yr. 2009-10. It was submitted by the assessee that the findings of the learned Chief CIT, while dealing with assessee’s application for exemption under s. 10(23C)(iv), should not influence learned CIT’s decision regarding registration under s. 12AA of the Act, as these are two independent provisions which should be considered on standalone basis. The assessee also made submissions on merits and submitted that the facts and circumstances of the case did not warrant or justify withdrawal of registration under s. 12AA, as the assessee was always engaged in, and continued to engage in, a charitable activity within meanings assigned to that expression under s. 2(15) of the Act. It was also pointed out the powers of withdrawing registration under s. 12AA(3) could only be exercised when it is found that the activities of the assessee are not genuine or when the same are not being carried out in accordance with the objects of the institution. It was assessee’s case that the objects and activities of the assessee were examined at the point of time when the assessee was granted registration and since there was no change in the situation as it prevailed at the time the registration was granted vis-a-vis the situation prevailing now, there was no cause of action for withdrawing the registration. The assessee also submitted that regulatory function being carried out by the assessee was only incidental to the main object which is prevention and control of pollution, which is certainly an object of general public utility and, therefore, qualifies to be termed as ‘charitable activity’ for the purposes of s. 2(15). It was also pointed out that registration cannot be withdrawn with retrospective effect. The submissions made earlier were also reiterated.
  4. None of these submissions, however, impressed the learned CIT. He proceeded to withdraw the registration under s. 12AA with effect from the date from which the same was granted. Without prejudice to the withdrawal from the date from which the registration was originally granted, the CIT further held that, in any event, due to amendment of definition of charitable activities under s. 2(15) w.e.f. 1st April, 2009, the registration is to be withdrawn w.e.f. 1st April, 2009. The reasoning adopted by the learned CIT to support the above action can be summed up as follows :

(I) The registration under s. 12AA was granted on the basis of the objects and functions stated by the assessee, which qualified to be treated as object of general public utility, but when on subsequent examination of its activities, the assessee has accepted that it was a regulatory agency, it is indeed a fit case for withdrawal of registration which was granted on wrong assumption of facts.

(II) The functions of the assessee Board do indicate that the Board is engaged in advancement of objects of general public utility and that precisely was the reason of registration under s. 12AA having been granted. However, it is now found that the assessee is an inspecting and regulatory agency, and, therefore, it cannot be treated as engaged in a charitable activity.

(III) The assessee is like a regulatory arm of the Government through which the Government seeks to execute its policies.

(IV) The existence of surplus every year shows that “no efforts are made by the Board to apply the accumulated profits towards the objects of the Board”.

(V) There is no substance in the plea that registration cannot be withdrawn retrospectively. Since the expression used in s. 12AA(3) is ‘cancelling’ the registration, it would imply that the registration once cancelled would be deemed to have never been given.

(VI) In view of the above, “it is held that that the H.P. Pollution Control Board is not carrying out the activities for which the registration under
s. 12AA was granted” and that “the Board has been functioning only as a regulatory authority and its actual activities carried out are essentially in the nature of monitoring and supervision of pollution control mechanism installed in various industrial units and projects”. “The Board, therefore, cannot be said to be engaged in the pursuit of charitable purposes”.

Accordingly, registration granted under s. 12AA(3) is cancelled.

(VII) Without prejudice to the above, “the Board is actually carrying out activities in a commercial manner with a view to earn profits”. “By inspecting and monitoring the pollution control systems installed at various units and projects, and by giving proper guidance and directions for modification to such systems, the Board is actually rendering a service to the industrial units and helping them comply with the environmental norms necessary for running such units”. “The facts on record prove that that the activities of the Board involve the rendering of services in relation to carrying on of a commerce or business, and hence in the case of the Board, even if considered to be engaged in advancement of a general public utility, is clearly covered by the new proviso to s. 2(15)”. In any event, therefore, the assessee cannot be treated to be engaged in a charitable activity, with effect from asst. yr. 2009-10 onwards, and the registration is to be cancelled with effect from asst. yr. 2009-10 at least.

  1. Aggrieved by the stand so taken by the learned CIT, the assessee is in appeal before us.
  2. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
  3. We have noted that the learned CIT has proceeded on the assumption that the scope and connotations of ‘regulatory function’ and ‘charitable purposes under the IT Act’ are mutually exclusive. While holding that the assessee was not engaged in an activity for charitable purposes, learned CIT has held that since the assessee was engaged in a regulatory function, it could not be said that the assessee was engaged in an activity which could be said to be for charitable purposes. We must, therefore, consider whether or not merely because an assessee is engaged in a regulatory activity, could it be said that the assessee is not involved in activity for charitable purposes.
  4. We are unable to see any conflict in an assessee being a regulatory body and its pursuing an ‘object of general public utility’ which qualifies to be a charitable activity under s. 2(15) of the Act. The scope of expression ‘any other object of general public utility’ is indeed very wide, though it would indeed exclude the object of private gain such as an undertaking for commercial profit even as the undertaking may sub-serve general public utility. Hon’ble Courts have taken a very broad view of the connotations of ‘objects of general public utility’. In the case of CIT vs. Bar Council of Maharashtra (1981) 22 CTR (SC) 106 : (1981) 130 ITR 28 (SC), Hon’ble Supreme Court has held that a State Bar Council, which is clearly a regulatory body under the Advocate Act, is primarily and predominantly for the purposes of ‘advancement of an object of general public utility within meanings of s. 2(15)’. It is not appropriate to proceed on the basis, as the learned CIT has chosen to proceed, that regulatory functions are not activities for charitable purposes, for the elementary reason that the expression ‘charitable purposes’, under s. 2(15), includes ‘any other objects of general public utility’ which, as we have noted above, is an expression of wide import. In the scheme of things which operate in the contemporary society, many of these regulatory functions are entrusted to the bodies independent of the Government and the object of the bodies so entrusted with the regulatory functions are, in our humble understanding, clearly pursuing objects of general public utility. We must emphasize once again that the connotations of ‘charitable purposes’, in view of specific provisions of the Act, are significantly wider than connotations of this expression in common parlance.
  5. Viewed in this perspective, and bearing in mind the fact that assessee is admittedly engaged in the activities for the purposes of “prevention, control or abatement of pollution”, we are of the considered view that the objects of the assessee trust are of general public utility. We have already noted that the objections taken by the learned CIT that since assessee is performing regulatory functions, the assessee cannot be treated as pursing objects of general public utility are devoid of any legally sustainable basis. In the light of these discussions, we hold that the assessee was indeed pursuing objects of general public utility.
  6. The other aspect of the matter is the impact of amendment made by the Finance Act, 2008, w.e.f. 1st April, 2009, in s. 2(15) which provides that ‘advancement of any object of general public utility’ cannot be treated as a charitable purpose if ‘it involves the carrying out of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fees or any other consideration, irrespective of nature of use or application of the income from such an activity’. It is thus undisputed position that so far proviso to s. 2(15) is concerned, it can be applied only to the entities whose purpose is ‘advancement of any other object of general public utility’.
  7. No doubt until the asst. yr. 2009-10, the assessee Board was covered only by this residuary clause of definition of ‘charitable purposes’, but, as a result of the retrospective amendment introduced by the Finance Act, 2009, a new category of activity entitled to be treated as charitable activity under s. 2(15) has been introduced which extends the definition of charitable purposes to “preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of artistic or historic interest”. In our considered view, the assessee is now covered by this specific category set out under s. 2(15), and, therefore, residuary clause does not come into play. It is only elementary that a general provision has to give way to the specific provision, as aptly summed up in the maxim ‘generalia speialbus non derogant’. In the case of South India Corpn. (P) Ltd. vs. Secretary, Board of Revenue AIR 1964 SC 205 @ 215, Hon’ble Supreme Court has observed that, “a special provision should be given effect to the extent of its scope, leaving general provisions to cover the cases where specific provisions do not apply”. A special provision thus normally excludes the operation of general provision, and the said principle will have application here as well. The assessee being covered by the specific clause set out above, and the residuary clause no longer being applicable, the proviso to s. 2(15) does not come into play at all. Therefore, it is wholly immaterial as to whether or not the assessee was rendering a service to the trade commerce or business. Given the present legal position, and on the facts of the present case, even this objection taken by the learned CIT is wholly irrelevant.
  8. It is also important to bear in mind that the insertion of proviso to s. 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. It may be recalled that elaborating the scope of this amendment, CBDT, vide Circular No. 11, dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows :

“3. The newly amended s. 2(15) will apply only to the entities whose purpose is ‘advancement of any other object of general public utility’ i.e., the fourth limb of definition of ‘charitable purpose’ contained in s. 2(15). Hence, such entities will not be eligible for exemption under s. 11 or under s. 10(23C) of the Act, if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activity.

3.1 There are industry and trade associations who claim exemption from tax under s. 11 or on the ground that their objects are for charitable purposes as these are covered under the ‘any other object of public utility’. Under the principle of mutuality, if trading takes place between the persons who are associated 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 the surplus returned to such persons is not chargeable to tax. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual members, these would not fall under the purview of s. 2(15) owing to the principle of mutuality. However, if such organizations have dealings with the non-members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to s. 2(15).

3.2 In the final analysis, whether the assessee has for its object ‘the advancement of any other object of general public utility’ is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes. In such a case, the object of ‘general public utility’ will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business. Each case would, therefore, have to be decided on its own facts, and generalizations are not possible. An assessee who claims that their object is ‘charitable purpose’ within the meaning of s. 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business.

(Emphasis, italicized in print, supplied by us)

  1. As the above CBDT circular, which is binding on the CIT under s. 119(1)(a) of the Act, aptly puts it, whether the assessee has, as its object, advancement of any other object of general public utility is essentially a question of to be decided on the facts of the assessee’s own case and where object of general public activity is only a mask or device to hide the true purpose of trade, business or commerce, or rendering of any service in relation thereto, the assessee cannot be said to be engaged in a charitable activity within meanings of s. 2(15) of the Act. As a corollary to this approach adopted by tax administration, in our considered view, it cannot be open to learned CIT to contend that where an object of general public utility is not merely a mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of ‘general public utility’, the carrying on of bona fide activities in furtherance of such objectives of ‘general public utility’ will also be hit by the proviso to s. 2(15).
  2. As CBDT rightly puts it, sweeping ‘generalizations are not possible’ and ‘each case will have to decided on its facts’. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. As far as assessee being engaged in trade, commerce or business is concerned, it is not even learned CIT’s case that running an organization, set up under the statute law, for controlling, preventing and abating pollution, is pursuing trade, commerce or business. Obviously, a trade, commerce or business implies an activity with profit motive even though public good may be a secondary benefit from such an activity. That is not the case before us. The legal framework under which the assessee is set up is quite clear and unambiguous and it reflects will of the lawmakers in no uncertain terms, which is to prevent pollution.
  3. The next question is whether the learned CIT is justified in taking a stand that the assessee “earning income over the years in the nature of licence fees, consent fees, testing charges, etc.” and “since the basic objective of the protection of environment pursued by the Board involves the carrying on of such activities and the earning of such income”, the assessee is hit by second limb of proviso to s. 2(15) i.e., “rendering of service to trade, commerce or business”. It is important to bear in mind the fact the expression ‘rendering of any service to business, trade or commerce’ is used in conjunction with the words ‘business, trade or commerce’ and, therefore, following the principles of nosciter a soccis, we must interpret these two expressions in their cognate sense and as if they take colour from each other. Broom’s Legal Maxims (10th Edn.) observes that “it is a rule laid down by Lord Bacon that copulation verborum indicat accepetationem in eodem sensu, i.e., the coupling of words that they are to be understood in the same sense”. A profit motive is surely the essence of trade, commerce or business, and, therefore, in a situation in which services are rendered without a profit motive, such rendering of service will not have anything in common with trade, business or commerce. The application of the principle of noscitor a sociis, therefore, will require that in order to invoke second limb of Explanation to s. 2(15), ‘rendering of service to trade, commerce or business’ must be such that it has a profit motive. As a matter of fact, learned CIT has taken a stand that ‘the basic objective of the protection of environment pursued by the Board involves the carrying on of such activities and the earning of such income’, but then we are unable to approve this stand of the CIT. Let us not lose sight of the fact that the assessee is a regulatory body, with statutory funding of the State Government and Central Government, and its activities, under s. 17 of the Act, are as follows :

“(1) Subject to the provisions of this Act, the functions of a State Board shall be—

(a) to plan a comprehensive programme for the prevention, control or abatement of pollution of streams and wells in the State and to secure the execution thereof;

(b) to advise the State Government on any matter concerning the prevention, control or abatement of water pollution;

(c) to collect and disseminate information relating to water pollution and the prevention, control or abatement thereof;

(d) to encourage, conduct and participate in investigations and research relating to problems of water pollution and prevention, control or abatement of water pollution;

(e) to collaborate with the Central Board in organising the training of persons engaged or to be engaged in programmes relating to prevention, control or abatement of water pollution and to organise mass education programmes relating thereto;

(f) to inspect sewage or trade effluence, works and plants for the treatment of sewage and trade effluents and to review plans, specifications or other data relating to plants set up for the treatment of water, works for the purification thereof and the system for the disposal of sewage or trade effluents or in connection with the grant of any consent as required by this Act;

(g) to lay down, modify or annual effluent standards for the sewage and trade effluents and for the quality of receiving waters (not being water, in an inter-State stream) resulting from the discharge of effluents and to classify waters of the State;

(h) to evolve economical and reliable methods of treatment of sewage and trade effluents, having regard to the peculiar conditions of solids, climate and water resources of different regions and more especially the prevailing flow characteristics of water in streams and wells which render it impossible to attain even the minimum degree of dilution;

(i) to evolve methods of utilisation of sewage and suitable trade effluents in agriculture;

(j) to evolve efficient methods of disposal of sewage and trade effluents on land, as are necessary on account of the predominant conditions of scant stream flows that do not provide for major part of the year the minimum degree of dilution;

(k) to lay down standards of treatment of sewage and trade effluents to be discharged into any particular stream taking into account the minimum fair weather dilution available in that stream and the tolerance limits of pollution permissible in the water of the stream, after the discharge of such effluents;

(l) to make, vary or revoke any order—

(i) for the prevention, control or abatement of discharges of waste into streams or wells;

(ii) requiring any person concerned to construct new systems for the disposal of sewage and trade effluents or to modify, alter or extend any such existing system or to adopt such remedial measures as are necessary to prevent, control or abate water pollution;

(m) to lay down effluent standards to be complied with by persons while causing discharge of sewage or sullage or both and to lay down, modify or annual effluent standards for the sewage and trade effluents;

(n) to advise the State Government with respect to the location of any industry the carrying on of which is likely to pollute a stream or well;

(o) to perform such other functions as may be prescribed or as may, from time to time, be entrusted to it by the Central Board or the State Government.

(2) The Board may establish or recognise a laboratory or laboratories to enable the Boards to perform its functions under this section efficiently, including the analysis of samples of water from any stream or well or of samples of any sewage or trade effluents.”

  1. On a perusal of these objectives, as sanctioned by the statue, it is obvious that the activities performed by the assessee trust are regulatory functions for the public good, and any collection for fees or charges, in the course of discharging these regulatory functions, cannot be viewed as a consideration of rendering these services of pollution control measures. We are unable to see any substance in learned CIT’s stand that the income earned by assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business. What is termed as consent fees is in fact fees accompanying the application for obtaining consent (i.e., permission) of the assessee Board to set up a new unit. It cannot be anybody’s case that the processing of applications by itself has a commercial motive, or that fees for processing of application is a fees collected for rendering of service of pollution control which is undisputed sole object of the assessee trust. Similarly, fees for testing charges and licence fees are not also towards rendering of any services of pollution control either. These are not the services with a profit motive but essentially only to recoup the costs of getting the samples tested or processing of licences. In any event, these activities, if these can be at all be construed as rendering of services, these are wholly subservient to the public utility objective of pollution control, and, it cannot be anyone’s case that even though the State Pollution Boards like the assessee before us are set up under an Act of the Parliament, but, to use the words employed in the CBDT circular (supra) “the object of ‘general public utility’ will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business”.
  2. In the case of K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC), Hon’ble Supreme Court has observed that the circulars issued by the Board, issued at the time when relevant legislative provision is introduced, are a good guide to the scope of the legal provisions. As we have noted earlier in this order, based on our reading of circular, that the proviso to Explanation s. 2(15) can only be pressed into service when pursuing objects of ‘general public utility’ is only a mask to cover the “true purpose” of “trade, business or commerce, or rendering of any service in relation to such trade, business or commerce”. Learned CIT has also followed this line of reasoning by suggesting that the activities of the assessee trust involved “earning income over the years in the nature of licence fees, consent fees, testing charges etc.” and “the basic objective of the protection of environment pursued by the Board involves the carrying on of such activities and the earning of such income”. However, as we have held earlier it was not an object, though it may have been incidental or subservient to the objects of the assessee trust, to earn money by regulatory functions set out above. We, therefore, see no substance in the stand of the learned CIT.
  3. In any event, as a plain reading of s. 12AA(3) would indicate that a registration granted under s. 12AA can only be withdrawn when the CIT is satisfied that (a) the activities of the trust or the institution are not ‘genuine’; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reasons for cancelling or withdrawing the registration granted under s. 12AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursing the objects for which it was established. When the assessee is engaged in bona fide activities, within the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. Learned CIT has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. Under these circumstances, the withdrawal of registration granted under s. 12AA cannot be sustained in law. Learned CIT has extensively referred to as to why the assessee is not eligible for exemption under s. 11 as the activities of the assessee cannot be said to be for ‘charitable purposes’ defined under s. 2(15), but then this aspect of the matter is relevant for the assessment proceedings and not in the context of exercise of CIT’s powers under s. 12AA(3). The impugned order passed by the learned CIT is thus vitiated in law on this count as well.
  4. For the detailed reasons set out above, we quash the order of the learned CIT and hold that the learned CIT did not have any good reasons, sustainable in law, to withdraw the registration. The impugned order is accordingly set aside.
  5. In the result, the appeal is allowed.

These two appeals by two respective assessees are directed against the separate orders passed by the learned CIT(A) dt. 19th Nov., 2007 for the asst. yr. 2004-05. Since facts are identical and grounds are common both these appeals are disposed of by this common order for the sake of convenience.

  1. Briefly stated facts of the case in ITA No. 953/Mum/2008 in respect of appeal of Shri Suresh C. Sadarangani are that the assessee is a managing director in two companies and his income consist of salary, director’s fees, commission from the company, income from house property and income from other sources. The return was filed showing an income of Rs. 2,93,99,590. However, the assessment was completed at an income of Rs. 3,11,75,020 including the income from two house properties Rs. 5,15,274 + Rs. 5,15,274 = Rs. 10,30,548 and capital gain Rs. 6,19,682, vide order dt.27th Dec., 2006 passed under s. 143(3) of the IT Act, 1961 (‘the Act”). On appeal the learned CIT(A) confirmed the additions made by the AO and dismissed the appeal.
  2. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.
  3. Ground No. 1(c) is against the sustenance of addition of income from house property Rs. 5,15,274.
  4. The brief facts of the above ground are that it was observed by the AO that the assessee is having a 50 per cent share on two flats viz., flat Nos. 18B and 19B in Belvedere Court. Both the flats are jointly owned by the assessee and his wife Smt. Kusum Suresh Sadarangani. The assessee has claimed both the flats as one flat and has shown annual value at Rs. nil. Since the assessee has not declared any income from second flat as per provisions of s. 23(4)(b) of the Act, the assessee was asked to show cause as to why the annual value of the property shall not be brought to tax as income from house property and the annual value was proposed to be taken at Rs. 7.50 lakhs being 50 per cent of the rent received by the assessee in financial year 2004-05. In response, it was, inter alia, submitted by the assessee that the flat is a duplex flat purchased jointly by the assessee and his wife having equal ownership. These flats are one above the other and are connected with internal staircase. The assessee has claimed 50 per cent share in the flat as self occupied property (SOP), therefore, no income should be taxed in the hands of the assessee. It was further submitted that the Department has not considered his submission in asst. yr. 2003-04 and made the addition and the same is pending in appeal. It was further claimed that as there are two flats and both are owned by the assessee and his wife, therefore, SOP at Rs. nil may be accepted in both cases. However, the AO did not accept the assessee’s explanation for the following reasons :

(1) That there are two separate agreements, and

(2) The assessee has let out the flat in subsequent financial year.

Hence, the annual value of the flat is to be taxed as income from house property. It was further observed by the AO that during the financial year 2004-05 the assessee has given both the flats on a rent of Rs. 30 lakhs per annum. The AO on the same basis adopted the annual value of one flat at Rs. 15 lakhs and, accordingly, computed the income from house property under s. 23(4)(b) of the Act at Rs. 5,15,274 and on the same basis he also assessed the income from flat No. 21 in Belvedere Court at Rs. 5,15,274.

  1. On appeal the learned CIT(A) while observing that there are two separate agreements of flat Nos. 18B and 19B, therefore, they are two separate units and, accordingly, upheld the order of the AO.
  2. At the time of hearing the learned counsel for the assessee while reiterating the same submissions as submitted before the AO and the learned CIT(A) further submits that the assessee owns a house, which is a duplex flat. These flats 18B and 19B are one above the other and connected with internal staircase. In support, the reference was also made on the floor plan of lower duplex floor and upper duplex floor appearing at pp. 43 and 44 of assessee’s paper book. The nature of ownership of the assessee is joint with his wife Mrs. Kusum Sadarangani. It was used by the assessee and his family as single flat though technically it had two numbers. He further submits that both the flats i.e., 18B and 19B are also assessed as one flat as per society maintenance bill appearing at p. 98 of assessee’s paper book. He further submits that the said duplex flat during the year under consideration, was used for self-occupation by the assessee, therefore, no income from house property was shown in the return of income and, therefore, the value of the property under s. 23(2) should be taken as nil He further submits that since the property was not let out during the year under consideration, therefore, the AO was not justified in taking the rental value of the whole property at Rs. 30 lakhs per annum which, in fact, was let out in financial year 2004-05 relevant to asst. yr. 2005-06. The reliance was also placed on the following decisions :

(1) K .G. Vyas vs. ITO (1986) 26 TTJ (Mumbai) 491 : (1986) 16 ITD 195 (Mumbai);

(2) CIT vs. Bijoy Kumar Almal (1995) 125 CTR (SC) 418 : (1995) 215 ITR 22 (SC);

(3) D.R. Sunder Raj vs. CIT (1980) 14 CTR (AP) 325 : (1980) 123 ITR 471 (AP).

  1. On the other hand the learned Departmental Representative while relying on the order of the AO and the CIT(A) further submits that since there are two separate agreements of flat Nos. 18B and 19B they are to be considered as two separate units and therefore, the AO was justified in computing the income from house property as per cl. (b) of sub-s. (4) of s. 23 of the Act. She further submits that since the property i.e., two flats was let out in the next financial year i.e., financial year 2004-05 on a rent of Rs. 30 lakhs per annum therefore, the AO was justified in taking the rental value of one flat at Rs. 15 lakhs. Reliance was also placed on the following decisions :

(1) Addl. CIT vs. Mrs. Leela Govindan (1978) 113 ITR 136 (Mad);

(2) ITO vs. Farouk D. Vevaina (2009) 121 TTJ (Mumbai) 510 : (2008) 9 DTR (Mumbai) 434 : (2008) 26 SOT 556 (Mumbai);

(3) Dy. CIT vs. Shripal S. Morakhia (2006) 7 SOT 609 (Mumbai);

(4) ITO vs. Hemprabha Trading Co. (P) Ltd. [ITA Nos. 1015 and 1016/Mum/2004, 2927, 4198/Mum/2005, CO Nos. 349 and 394/Mum/2004 for asst. yrs. 1997-98, 1998-99 and 2001-02, dt. 13th Dec., 2007]; and

(5) CIT vs. Parasmal Chordia (1998) 145 CTR (Mad) 468 : (1998) 233 ITR 147 (Mad).

  1. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that duplex flat having Nos. 18B and 19B in Belvedere Court, Mumbai was jointly purchased by the assessee and his wife. The claim of the assessee is that the flats are one above the other and are connected with internal staircase, therefore, 50 per cent share each was claimed as SOP at Rs. nil per contra, the contention of the Revenue is that since the two flats were purchased by two separate agreements in the name of the assessee and his wife, therefore, they are two separate units and hence, half of each flat is assessable under sub-cl. (b) of sub-s. (4) of s. 23 of the Act.
  2. The relevant provisions of s. 23(2), (3) and (4) read as under :

“Annual value how determined.—…….. ………….. …………

(2) Where the property consists of a house or part of a house which—

(a) is in the occupation of the owner for the purpose of his own residence; or

(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil.

(3) The provisions of sub-s. (2) shall not apply if—

(a) the house or part of the house is actually let during the whole or any part of the previous year; or

(b) any other benefit therefrom is derived by the owner.

(4) Where the property referred to in sub-s. (2) consists of more than one house—

(a) The provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf;

(b) The annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under cl. (a), shall be determined under sub-s. (1) as if such house or houses had been let.”

  1. A perusal of the above provisions show that the word ‘property’ has been used by the legislature in a wider sense so as to include more than one house. However, the right to compute the ALV at nil in respect of self occupied property is restricted to one house even though the property owned by the assessee may consist of more than one house. Sec. 23(2)(a) permits the assessee to compute the ALV of self occupied property at nil provided : (i) the property must be in the occupation of the owner, (ii) the occupation of the owner must be for the purpose of his own residence, (iii) it is not let during any part of the accounting year and (iv) no other benefit therefrom is derived by the owner. However, s. 23(4)(a) clearly reveals that where the property owned by the assessee consists of more than one house, then the owner is entitled to the benefit of s. 23(2) in respect of one such residential house, to be chosen by him. Sec. 23(4)(b) provides that annual value of the house or houses other than the house in respect of which the assessee has exercised an option under cl. (a) shall be determined under sub-s. (1) as if such houses or houses had been let.
  2. In ITO vs. Ms. Sushila M. Jhaveri (2007) 109 TTJ (Mumbai)(SB) 299 : (2007) 107 ITD 321 (Mumbai)(SB), the Tribunal while considering the provisions of s. 54 and s. 54F has observed (p.14) as under :

“…However, where more than one unit is purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen etc., then, it would be a case of investment in one residential house and consequently, the assessee would be entitled to exemption.

  1. In CIT vs. D. Ananda Basappa (2009) 223 CTR (Kar) 186 : (2009) 20 DTR (Kar) 266 : (2009) 309 ITR 329 (Kar), the issue was under the provisions of s. 54 and s. 54F. The facts of the case are (p. 330) :

“The respondent-assessee is an HUF. The assessee sold a residential house for Rs. 2,12,50,000 in the year October, 1995. The assessee purchased two residential flats adjacent to each other from M/s Ormonde (P) Developers Ltd. The assessee has, however, taken two separate registered sale deeds in respect of two flats situated side by side purchased on the same day. The vendor has certified that he has effected necessary modifications to the two flats to make it one residential apartment. The assessee sought for exemption under s. 54 of the IT Act.

The assessing authority gave exemption for capital gains to the extent of purchase of one residential flat. It was found in the inspection by the Inspector that the residential flats were in occupation of two different tenants disclosing separate enjoyment. Therefore, it is held that s. 54(1) of the IT Act does not permit exemption for the purchasers for more than one residential premises….”

It has been held (330 head notes) :

“Held, dismissing the appeal, that it was shown by the assessee that the apartments were situated side by side. The builder had also stated that he had effected modification of the flats to make them one unit by opening the door in between the two apartments. The fact that at the time when the Inspector inspected the premises, the flats were occupied by two different tenants was not a ground to hold that the apartment was not one residential unit. The fact that the assessee could have purchased both the flats in one single sale deed or could have narrated the purchase of two premises as one unit in the sale deed was not a ground to hold that the assessee had no intention to purchase two flats as one unit. The assessee was entitled to the exemption under s. 54.”

  1. In Farouk D. Vevaina’s case (supra) relied on by the learned Departmental Representative, the assessee was allotted 2nd and 3rd floor in the building ‘Jackers’ apart from 1/6th share in the flat at 6th floor. The assessee had computed the ALV at nil on the ground that all the flats allotted in the new building was in lieu of his 1/6th share in the old property and, therefore, all the flats allotted to him constitute one property which was used for self residence. However, the AO considering the provisions of s. 23(2)(b) of the Act was of the view that the assessee was entitled to compute the ALV at nil in respect of one residential house only. It has been held by the Tribunal that the right of assessee to compute ALV at nil is restricted to only one house used for residence though the option is with the assessee to choose any one of the houses owned by him and, accordingly, the issue was decided against the assessee.
  2. Whereas in the case before us the duplex flat jointly owned by the assessee and his wife is one flat, therefore, the decision relied on by the learned Departmental Representative is distinguishable and not applicable to the facts of the present case.
  3. The other decisions as mentioned in para 8 of this order, relied on by the learned Departmental Representative, the issue was in respect of determination/computation of annual value of the house property under s. 23(1) of the Act. Whereas the assessee’s case is not on the issue under s. 23(1) of the Act. Hence, the decisions relied on by the learned Departmental Representative are distinguishable and not applicable to the facts of the present case.
  4. Applying the above provisions in the light of the ratio of the above decisions to the facts of the present case we are of the view that as per floor plan of the property a duplex flat Nos. 18B and 19B, one above the other and connected with internal staircase having one kitchen was jointly purchased by the assessee and his wife having equal ownership, and was occupied by assessee and his wife as a single duplex flat for self occupation and also assessed by the society as one owner of the flats and was not let out during the year, hence, the house falls under the provisions of s. 23(2)(a) of the Act. Merely because the assessee has entered jointly with two separate agreements to purchase the above duplex flat having two separate numbers does not mean that they are two residential units. Accordingly, the value of the property is liable to be taken at nil. In this view of the matter the addition of Rs. 5,15,274 made by the AO and sustained by the learned CIT(A) is deleted. The ground taken by the assessee is, therefore, allowed.
  5. Ground No. 1(b) is against sustenance of addition of Rs. 5,15,274 in respect of house property flat No. 21 at Belvedere Court.
  6. After hearing the rival parties and perusing the material available on record we find that before the learned CIT(A) the assessee has taken following ground :

“1. On the basis of facts of the case, the learned AO erred in seeking to tax income from house property of Rs. 10,30,548. He ought to have considered the facts and circumstances made during the course of assessment.”

  1. However, the learned CIT(A) in para 2 of his order has mentioned the aforesaid ground as under :

“The first ground of appeal is against the addition of Rs. 5,15,274 under the head ‘Income from house property’.”

  1. The learned CIT(A) has decided the ground to the extent of addition of Rs. 5,15,274 only and there is no adjudication in respect of the remaining addition of Rs. 5,15,274 which is in respect of property flat No. 21 Belvedere Court. Since the order of the learned CIT(A) is silent on the ground raised by the assessee, therefore, in the interest of justice, the issue is restored back to the file of the learned CIT(A) to decide the aforesaid ground afresh and according to law after providing reasonable opportunity of being heard to the assessee and, accordingly, the ground taken by the assessee is partly allowed for statistical purposes.
  2. Ground No. 2 is in respect of sustenance of addition of Rs. 6,19,682 in respect of capital gain on sale of flat.
  3. After hearing the rival parties and perusing the material available on record we find that the learned CIT(A) has decided the issue vide finding recorded in para 4.3 of his order as under :

“4.3 I have duly considered the submission of the Authorised Representative of the appellant and I find that AO has referred the matter to the District Valuation Officer. On receipt of the valuation report the long-term capital gain should be determined after allowing deductions/exemption as prescribed in the IT Act. This ground of appeal is disposed of accordingly.”

  1. From the above reading we observe that the order passed by the learned CIT(A) is not in accordance with the provisions of s. 250(6), r/w s. 251(1)(a) of the Act which provide that the order passed by the learned CIT(A) should be reasoned order and there is no power to set aside the issue. Hence, we consider it fair and reasonable that the matter should go back to the file of the learned CIT(A) and, accordingly, we restore the matter to his file who shall decide the same afresh and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purposes.

ITA No. 954/Mum/2008 (appeal by Mrs. Kusum Suresh Sadarangani) (asst. yr. 2004-05)

  1. Ground No. 1(a) is similar to ground No. 1(a) taken in the case of Shri Suresh C. Sadarangani.
  2. After hearing the rival parties and perusing the material available on record and keeping in view of our finding recorded in para 17 of this order in the appeal of Shri Suresh C. Sadarangani in ITA No. 953/Mum/2008, the ground taken by the assessee is, therefore, allowed.
  3. Ground No. 1(b) is similar to ground No. 1(b) in the case of Shri Suresh except the amount of addition which in the present case is Rs. 2,57,637.
  4. Having carefully heard the rival parties and perusing the material available on record and keeping in view of our finding recorded in para 21 of this order in the appeal of Shri Suresh C. Sadarangani in ITA No. 953/Mum/2008. the ground taken by the assessee is, therefore, partly allowed for statistical purposes.
  5. In the result, both the appeals are partly allowed for statistical purpose.

 

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