Decided on February 19,2008



O.K. Narayanan, Accountant Member - (1.) THESE three appeals are filed by the Assessee. The relevant assessment years are 1997-98, 1998-99 and 2001-2002. The appeals are directed against the common order passed by the CIT(A)-XXI at Mumbai dated 17.2.2004. The assessments in these cases have been completed Under Section 143(3) of the Income-tax Act, 1961.
(2.) The assessee is a company incorporated Under Section 25 of the Companies Act, 1956. As per the Memorandum of Association and the object clauses therein, the assessee-company is incorporated to promote interest of Travel Agents in India. The company does not have any profit motive and distribution of income or property to the members is strictly prohibited by the Memorandum of Association and Articles of Association of the Company. It is the case of the assessee-company in the above circumstances that it conforms the requirement of mutual association and as such the income is exempt from the purview of taxation on the ground of mutuality. The Assessing Authority in the course of assessment proceedings for the impugned assessment years held that even if the assessee-company is a company registered Under Section 25, the company is liable for assessment Under Section 115JA. The Assessing Officer held that the law stated Under Section 115JA does not exempt companies like the assessee-company from the application of Section 115JA and according to the statute, the assessee has to be brought Under Section 115JA. Accordingly the assessee has been brought to tax for the book profit for all the three assessment years under appeal. The assessments have been taken in appeal before the CIT(A). The CIT(A) found that the computation of total income as per the normal provisions of the Income-tax Act is positive figure for the years and that itself shows that the whole income of the assessee is not exempt. He observed that the Profit & Loss account of the assessee is prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956, and therefore, the book profit for the purpose of Section 115JA has to be taken cognizance for the purpose of taxation. He has also referred to the Supreme Court decision in the case of Apollo Tyres Ltd. v. CIT 255 ITR 273. He has also relied on the decision of the Bombay High Court in the case of CIT v. Veekaylal Investment Co. Pvt. Ltd. 249 ITR 597 wherein it is held that income from capital gains is to be included in "book profit" for the purpose of Section 115J of the Act. The assessee is aggrieved, and therefore, these appeals before us.
(3.) SHRI Shailesh Shah, the Chartered Accountant appearing for the Assessee argued the case in detail. He explained that the assessee is computing the income and expenditure on an year to year basis and arrives at the excess of income over expenditure or vice versa and transfer the net amount to income and expenditure account to the Balance Sheet. It is a mutual association, and therefore, Section 115JA does not apply. Alternatively, the learned Chartered Accountant argued that annual convention receipts, membership and interest thereon have been held as exempted receipt from taxation being in the nature of mutual receipt, by ITAT Mumbai Benches in the earlier assessment years. As such, receipts being in the nature of mutual receipts do not represent income or profit, and therefore, not assessable as income.;

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