Tca/611/2018 Of M/S Kalaimagal Sabha v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.12.2018 CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case Appeal Nos.611 to 614 of 2018 andCMP Nos.12414 to 12420 of 2018 M/s.Kalaimagal SabhaNew No.17, Old No.48,North Usman Road,T.Nagar, Chennai - 600 017. ...Appellant in allAppeals/Appellant-vs- The Income Tax Officer,Non Corporate Ward - 1(4)Chennai. .... Respondent in allAppeals/RespondentTax Case Appeals filed under Section 260-A of the Income TaxAct, 1961 against the common order of the Income Tax AppellateTribunal"C"Bench,Chennaidated08.01.2018inI.T.A.No.1403/Mds/2017,I.T.A.No.1997/Mds/2016,I.T.A.No.1998/Mds/ 2016 and I.T.A.No.1404/Mds/2017 for theassessment years 2012-13, 2010-11, 2011- 12 and 2013-14respectively. Against the order passed by the Commisioner of Income Tax(Appeals)-2 Chennai 600 034 datd 31/03/2017 made in ITA No.44 &225/CIT(A)-2/2015-16 for the Assessment Year 2012-13 and againstthe order passed by the Income Tax Officer non Corporate Ward 1(4), Chennai dated 16/3/2015 made in AAAAK1638B for theAssessment Year 2012-13 (Tax Case 611/2018) against the order passed by the Commissioner of Income Tax(Appeals)-2 Chennai 600 034 dated 11/03/2016 made in ITANo.256/CIT(A)-2/2013-14 & 119/CIT (A)-2/2014-15, dated 11/3/2016made in ITA No.256/CIT(A)-2/2013-2014 and 119/CIT(A)-2/2014-15dated 11/03/2016 made in ITA No.44 & 225/CIT(A)02/2015-16 dated31/3/2017 for the Assessment Year 2010-11 , 2011-2012, 2012-13respectively and against the order passed by the Income TaxOfficer Ward 1(4), Chennai made in AAAAK1638B dated 20/03/2013for the Assessment Year 2010-11, AAAAK1638B dated 11/03/2014 for https://hcservices.ecourts.gov.in/hcservices/ the Assessment Year 2011-12, AAAAK1638B dated 29/01/2016 for theAssessment Year 2013-14 respectively (TAX Case Nos.612 to614/2018) (Judgment of the Court was delivered by T.S.SIVAGNANAM,J.) These appeals by an organisation called Kalaimagal Sabha isdirected against the common order passed by the Income TaxAppellate Tribunal, "C" Bench, Chennai, dated 08.01.2018 inI.T.A.Nos.1403/Mds/2017, 1997/Mds/2016, 1998/Mds/ 2016 and1404/Mds/2017 for the assessment years 2012-13, 2010-11, 2011-12 and 2013-14 respectively. 3. The assessee's case is that Fixed Deposits made bycollecting monies by sale of properties and the interest earnedfrom them is not to be treated as income and made taxable. 4. The Assessing Officer, Commissioner of Income Tax(Appeals) as well as the Tribunal rejected the contentionsadvanced by the appellant and held that once the funds of theSociety are given for business purposes of a non-Member and theassessee receives any compensation either in the form of profitsor in the form of interest from such non-Member, the principles https://hcservices.ecourts.gov.in/hcservices/ of mutuality cannot be applied to that receipt from the non-Member. 5. Under normal circumstances, we would have accepted thesaid finding of the Tribunal as well as the submission ofMr.T.Ravikumar, learned Senior Standing Counsel for the Revenue,as he would submit that he is supported by three decisions inthis regard. However, considering the facts and circumstances ofthe case, we are compelled to take a different view. https://hcservices.ecourts.gov.in/hcservices/ of mutuality cannot be applied to that receipt from the non-Member. 5. Under normal circumstances, we would have accepted thesaid finding of the Tribunal as well as the submission ofMr.T.Ravikumar, learned Senior Standing Counsel for the Revenue,as he would submit that he is supported by three decisions inthis regard. However, considering the facts and circumstances ofthe case, we are compelled to take a different view. 6. M/s.Kalaimagal Sabha, which was registered as a Societyunder the provisions of the Tamil Nadu Societies RegistrationAct, defrauded its members numbering more than 5 1/2 lakhs. Writpetitions were filed by the members, who were defrauded by theSociety in W.P.No.514 of 1999. In the said writ petition, theCourt appointed Joint Receivers to take charge of the affairs ofthe Sabha and detailed directions were issued. Pursuant to suchdirections, the writ petition was heard by other learned Judges,including one of us (T.S.SIVAGNANAM,J.) wherein, the JointReceivers had to act in accordance with the directions issued bythe Court. Hence, this aspect has to be borne in mind beforeconsidering as to whether the interest income earned from theFixed Deposits of the Bank required to be taxed. It appearsthat the directions issued in the writ petition from time totime were not placed before the Assessing Officer and thedirections are required to be examined in depth to ascertain themanner in which the sale proceeds are kept in Fixed Deposit andthe purpose for which it is done. 7. Mr.S.Navaneethakrishnan, was one of the Joint Receiversappointed by the Court. The Assessing Officer shall afford anopportunity to the Joint Receiver to make submissions. The Courthopes and trust that the Assessing Officer will devotesufficient time to examine the matter considering the criticalnature of the case and bearing in mind that the order passed bythe Writ Court appointing Joint Receiver was to realise themonies invested by innocent persons in the Sabha and this can berealised only by way of sale of immovable properties. Apart fromthat, the Joint Receiver has initiated various litigations torecover properties. Thus, a holistic view is required to betaken. However, if in the event, any application is required tobe made before seeking waiver, then the Joint Receiver is atliberty to do so. 8. For the foregoing reasons, we allow the appeals and setaside the orders passed by the Tribunal, Commissioner of IncomeTax (Appeals) as well as the Assessing Officer and remand thematter to the Assessing Officer to redo the assessment after https://hcservices.ecourts.gov.in/hcservices/ affording an effective opportunity to the Joint Receiverappointed by this Court in W.P.No.514 of 1999. The JointReceiver is directed to file a compilation consisting of all thedirections issued by the Court from time to time to enable theAssessing Officer to take a correct decision in the matter. Nocosts. Consequently, connected miscellaneous petitions areclosed. Sd/- Assistant Registrar(CS VIII) //True Copy// Sub Assistant RegistrarsvkiTo1.The Income Tax Officer, Non Corporate Ward - 1(4) Chennai.2.The Income Tax Appellate Tribunal "C" Bench, Chennai.3.The Commissioner of Income tax (Appeals)-2, Chennai 600 034.+1cc to Mr.T.Ravikumar, Advocate sr.88626+4c to Mr.P.Rajagopal, Advocate Sr.88881 to 88884T.C.A.Nos.611 to 614 of 2018 nri[co]srg 28/01/2019 https://hcservices.ecourts.gov.in/hcservices/