MALABAR CHS LTD, MUMBAI V. ITO WD 16(2)(1), MUMBAI

CO 158/MUM/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5423 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 18-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK PER R K
• Assessee Lawyers: I D RATHI
• Keywords: Opportunity of being heard; Corroborative evidences

Judgement Text

1 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH MUMBAI G BENCH MUMBAI G BENCH MUMBAI G BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R S PADVEKAR, JM & R S PADVEKAR, JM & R S PADVEKAR, JM & R S PADVEKAR, JM & SHRI R SHRI R SHRI R SHRI R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM ITA N ITA N ITA N ITA NO OO O. 688/MUM/2010 . 688/MUM/2010 . 688/MUM/2010 . 688/MUM/2010 (ASST YEAR 2006 (ASST YEAR 2006 (ASST YEAR 2006 (ASST YEAR 2006- -- -07) 07) 07) 07) THE INCOME TAX OFFICER WARD 16(2)(2), MUMBAI VS MALABAR CHS LTD SILVER ARCH. PETIT HALL COMPOUND 66A L GAJMOHANDAS ROAD MUMBAI 400006 ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO.AAALM0033F PAN NO.AAALM0033F PAN NO.AAALM0033F PAN NO.AAALM0033F & && & CO NO 158 CO NO 158 CO NO 158 CO NO 158/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 MALABAR CHS LTD SILVER ARCH. PETIT HALL COMPOUND 66A L GAJMOHANDAS ROAD MUMBAI 400006 VS THE INCOME TAX OFFICER WARD 16(2)(2), MUMBAI ( (( (CROSS OBJECTOR CROSS OBJECTOR CROSS OBJECTOR CROSS OBJECTOR) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY SHRI I D RATHI REVENUE BY SHRI A K NAYAK PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 24.11 .2009 OF THE CIT(A) 27, MUMBAI RELATING TO ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIENCE, THE APPEAL AND THE CO WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) ITA NO. 688/MUM/2010 ( BY THE REVENUE ) ITA NO. 688/MUM/2010 ( BY THE REVENUE ) ITA NO. 688/MUM/2010 ( BY THE REVENUE ) ITA NO. 688/MUM/2010 ( BY THE REVENUE ) 2 GROUNDS OF APPEAL NO.1 RAISED BY THE REVENUE READ S AS UNDER: THE LD CIT(A) ERRED IN DELETING THE ADDITION ON AC COUNT OF CONTRIBUTION TOWARDS COMMON AMENITIES FUND OF RS. 33 LACS, FOLLO WING THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF M/S SH YAM CHS AND SUPRABHAT CHS WHEREIN IT HAS BEEN HELD THAT ALL ABO UNDS RECEIVED BY THE CHS ON THE GROUNDS OF TRANSFER CHARGES ARE EXEMPT U NDER THE PRINCIPLE OF MUTUALITY. THE DECISION HAS NOT BEEN ACCEPTED BY TH E DEPARTMENT AND THE MATTER IS SUBJUDICED. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE COMPANY HAS CREDITED AN AMOUNT OF RS. 33 LACS AS CONTRIBUTION UNDER THE H EAD COMMON AMENITIES FUND ON ACCOUNT OF TRANSFER OF FLAT AND CLAIMED THE SAME AS EXEMPT ON THE PRINCIPLE OF MUTUALITY. THE ASSESSING OFFICER, AFTER EXTENSIVEL Y DISCUSSING THE APPLICABILITY OF PRINCIPLE OF MUTUALITY AND RELYING ON A HOST OF DEC ISIONS HELD THAT THE AMOUNT OF RS. 33 LACS COLLECTED BY THE ASSESSEE ON TRANSFER O F FLATS IS NOT EXEMPT FROM TAX. 2.2 IN APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED T HAT IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND C O-OPERATIVE HSG SOCIETY, WHEREIN IT HAS BEEN HELD THAT TRANSFER FEE RECEIVED BY THE CO-OPERATIVE SOCIETY IS EXEMPT UNDER THE PRINCIPLE OF MUTUALITY, THE ADDITI ON MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 2.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE , THE CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: IN MY EARLIER DECISIONS IN APPEAL ORDERS, THIS DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND COOPERATIVE H SG SOCIETY WAS NOT FOLLOWED BECAUSE THEIR LORDSHIPS HAD STATED IN ONE OF THE PARAGRAPHS OF THE ORDER THAT DONATION/MONEY RECEIVED BY THE HOUSI NG SOCIETY IS EXEMPT UNDER THE PRINCIPLE OF MUTUALITY, BUT, THEY HAD ALS O STATED IN THEIR ORDER THAT ANY AMOUNT TAKEN BY THE SOCIETY WHICH IS IN E XCESS OF GOVERNMENT RULES, AS LAID DOWN BY THE MAHARASHTRA COOPERATIVE SOCIETIES ACT THAT ANY AMOUNT WHICH WAS IN EXCESS OF THE LIMIT LAID DOWN B Y THE COOPERATIVE 3 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) SOCIETIES WOULD EITHER HAVE TO BE REFUNDED TO THE M EMBER OF THE SOCIETY OR THE AMOUNT WOULD BE HELD TO BE TAXABLE AS THERE WAS AN ELEMENT OF PROFITEERING IN IT. IN VIEW OF THE ABOVE OBSERVATIO NS OF THEIR LORDSHIPS, A VIEW WAS FORMED THAT ANY AMOUNTS RECEIVED IN EXCESS OF RS. 25,000/- WOULD BE HELD TO BE TAXABLE. BUT, SUBSEQUENTLY, DEC ISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S SHYAM CHS AND SUPERABHAT CHS, DECISION GIVEN ON 1.10.2009, THE HONBLE COURTS HA VE CLEARLY STATED THAT ALL AMOUNTS RECEIVED BY THE CHS ON THE GROUNDS OF T RANSFER CHARGES ARE EXEMPT UNDER THE PRINCIPLE OF MUTUALITY. SINCE THE ISSUE IS NOW FULLY CLARIFIED BY THE SUBSEQUENT JUDGMENTS OF THE HONBL E BOMBAY HIGH COURT, THE AMOUNT OF TRANSFER FEES ADDED BY THE AO AMOUNTI NG TO RS. 33 LACS STANDS DELETED. 3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL HERE BEFORE US. 4 AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), WHO HAS FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT AND ALLOWED THE CLAI M OF THE ASSESSEE SOCIETY. MERELY BECAUSE THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IT CANNOT BE THE GROUND FOR TAKI NG A DIFFERENT VIEW OTHER THAN THE VIEW TAKEN BY THE JURISDICTIONAL HIGH COUR T. 4.1 WE FURTHER FIND THE COORDINATE BENCHES OF THE T RIBUNAL ARE TAKING THE CONSISTENT VIEW THAT THE CHARGING OF TRANSFER FEES BY A COOPERATIVE HOUSING SOCIETY HAS NO ELEMENT OF TRADING AND COMMERCIALI TY AS IT APPLIES THE MONEYS TOWARDS MAINTENANCE OF THE PROPERTY OWNED BY IT AN D TO RENDER SERVICES TO ITS MEMBERS BY WAY OF USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES WITHOUT ANY PROFIT MOTIVE AND THE PARTICIPANTS AND CONTRIBUTORS TO THE FUND BELONG TO THE SAME IDENTIFIABLE CLASS I.E. MEMBERS AND, THEREFORE , PRINCIPLE OF MUTUALITY IS APPLICABLE TO THE TRANSFER FEES RECEIVED BY A COOPE RATIVE HOUSING SOCIETY, WHETHER FROM OUTGOING OR INCOMINGMEMBERS. WE DO N OT FIND ANY MERIT IN THE ARGUMENTS ADVANCED BY THE LD DR THAT THE JURISDICT IONAL HIGH COURT IN THE CASE 4 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) OF SHYAM CHS LTD AND SUPRABHAT CHS LTD HAS MERELY P ASSED ONE LINE ORDER AND THEREFORE, IS NOT APPLICABLE. SINCE THE CIT(A) IN THE CASE OF THE ASSESSEE HAS FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH C OURT AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, AGAINST T HE DECISION OF THE JURISDICTIONAL HIGH COURT, THE ORDER OF THE CIT(A) IS UPHELD. THE GROUND RAISED BY THE REVENUE, BEING DEVOID OF ANY MERIT, IS DISMISSED. 5 GROUNDS OF APPEAL NO.2 BY THE REVENUE READS AS UN DER: THE LD CIT(A) ERRED IN DELETING THE ADDITION ON A CCOUNT OF NON- OCCUPANCY CHARGES OF RS. 31,864/- FOLLOWING THE DECISION OF V ARIOUS DECISIONS OF HONBLE MUMBAI ITAT WHEREIN IT HAS BEEN HELD THAT N ON-OCCUPANCY CHARGES TAKEN FROM MEMBERS WHO HAVE LET OUT THEIR F ATS IS EXEMPT UNDER PRINCIPLE OF MUTUALITY. 6 AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES, WE FIND THE CO-OPERATIVE HSG RECEIVED AN AMOUNT OF RS. 31,8 64/- AS NON-OCCUPANCY CHARGES AND CLAIMED THE SAME AS EXEMPT ON THE PRINC IPLE OF MUTUALITY. THE AO, AFTER REJECTING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE HELD THAT THE AMOUNT OF RS.31,864/- COLLECTED BY THE SOCIETY AS NON-OCCUPANCY CHARGES IS NOT EXEMPT ON THE PRINCIPLE OF MUTUALITY AND ACCORDINGL Y BROUGHT THE SAME TO TAX. WE FIND IN APPEAL, THE CIT(A) FOLLOWING THE DECISIO NS OF THE TRIBUNAL HELD THAT PRINCIPLE OF MUTUALITY APPLIES TO THE AMOUNT RECEIV ED BY THE SOCIETY ON ACCOUNT OF NON-OCCUPANCY CHARGES. HE, ACCORDINGLY DELETED T HE ADDITION MADE BY THE ASSESSING OFFICER, FOR WHICH THE REVENUE IS IN APPE AL HERE BEFORE US. 6.1 WE FIND THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF MIT TAL & COURT PREMISES CO- OPERATIVE SOCIETY LTD VS ITO REPORTED IN 320 ITR 4 14 WHEREIN IT HAS BEEN HELD THAT PRINCIPLE OF MUTUALITY APPLIES FOR NON-OCCUPAN CY CHARGES PAID UNDER THE BYE-LAWS OF THE SOCIETY AND THEREFORE SUCH AMOUNT I S NOT TAXABLE. 5 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) 7 IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIG H COURT CITED SUPRA, AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. CROSS OBJECTION NO. 158/MUM/2010 CROSS OBJECTION NO. 158/MUM/2010 CROSS OBJECTION NO. 158/MUM/2010 CROSS OBJECTION NO. 158/MUM/2010 8 THE GROUNDS OF CROSS OBJECTIONS NO.1 & 2 READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES F THE CASE, T HE LD CIT(A) HAS ERRED IN CONFIRMING ADDITIONS TO THE TAXABLE INCOME AT ` 91,850/- AS INCOME FROM OTHER SOURCES BEING AMOUNTS RECEIVED AS REIMBURSEME NT OF EXPENSES FROM MEMBERS FOR THE USE OF SERVICES AND CLAIMED AS EXEMPT ON THE PRINCIPLE OF MUTUALITY. WITHOUT PREJUDICE TO THE AFORESAID GROUND OF CROSS OBJECTION, THE EXPENSES INCURRED AGAINST SUCH RECEIPT SHOULD BE ALLOWED BEF ORE TAXING AY RECEIPT AS INCOME. 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE HAS CREDITED AN AMOUNT OF ` 91,850/- AS MISCELLANEOUS RECEIPTS/INCOME. ON BEIN G QUESTIONED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE SOCIETY HAS TAKEN RECEIPTS AS A REIMBURSEMENT OF EXPENSES INCURRED BY THE SOCIETY FOR USE OF GARDEN AND OTHER AREAS. SALE OF SCRAP, REIMBURSEMENT OF EXPENSES FOR GRASS CUTTING IN BACKYARD LAND OUTSIDE THE SOCIETY, COMMON DRAINAGE LINE CLEA NING, USE OF CHAIRS AND OTHER SOCIETY FURNITURE, REMOVAL OF DEBRIS ETC., INCLUDED IN TOTAL RECEIPTS DURING THE YEAR AMOUNTING TO ` 91,850/. HOWEVER, SINCE THE ASSESSEE DID NOT FURN ISH ANY DETAILS OF EXPENDITURE ACTUALLY INCURRED BY THE SOC IETY WITHOUT ANY SUPPORTING EVIDENCE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNTS ARE NOT PAID VOLUNTARILY BY THE MEMBERS AND ARE CHARGED BY THE A SSESSEE WITH A PROFIT MOTIVE. HE ACCORDINGLY HELD THAT THE RECEIPT IS NOT COVERED BY THE CONCEPT OF MUTUALITY. HE, THEREFORE, BROUGHT THE AMOUNT OF ` 91,850/- TO TAX. 6 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) 8.2 IN APPEAL, THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN ABSENCE OF ANY EVIDENCES FILED BEFORE HIM OR ANY REASON TO SHOW THAT THIS AMOUNT IS EXEMPT UNDER THE PRINCIPLE OF MUTUALITY. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL HERE BEFORE US. 9 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE INTEREST OF JUSTICE, THE MATTER MAY BE SENT BACK TO THE FILE OF THE ASSE SSING OFFICER WITH A DIRCTION TO GIVE ONE MORE OPPORTUNITY TO ENABLE THE ASSESSEE TO SUBMIT ALL THE DETAILS BEFORE THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10 AFTER HEARING BOTH SIDES, WE ARE OF THE CONSIDER ED OPINION THAT THE ASSESSEE SOCIETY SHOULD BE GIVEN ONE MORE OPPORTUNI TY TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFIC ER REGARDING THE DETAILS OF EXPENSES ACTUALLY INCURRED BY THE SOCIETY AND TO P ROVE THAT THE AMOUNTS ARE PAID VOLUNTARILY BY THE MEMBERS AND ARE NOT CHARGED ON PROFIT MOTIVE. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. GROUNDS OF CROSS OBJECTIONS NO. 1 & 2 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 11 GROUNDS OF CROSS OBJECTION NO.3 BY THE ASSESSEE READS AS UNDER: FURTHER, WITHOUT PREJUDICE TO THE ALLOWABILITY OF RECEIPT OF ` . 33,00,00 & ` 31,864/- AS EXEMPT ON ACCOUNT OF MUTUALITY, THE E XPENSES INCURRED AGAINST SUCH RECEIPT SHOULD BE ALLOWED BEFORE TAXI NG ANY RECEIPT INCOME. 7 ITA NO. 688/MUM/2010 (ASST YEAR 2006-07) 12 AFTER HEARING BOTH THE PARTIES, WE FIND THIS GRO UND IS AN ALTERNATE GROUND IN THE CROSS OBJECTION TO THE GROUND RAISED BY THE REVENUE IN ITS APPEAL. SINCE WE HAVE ALREADY DISMISSED THE GROUND RAISED BY THE REVENUE, THEREFORE, THIS GROUND OF THE ASSESSEE IN THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED. 13 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSE. ORDER PRONOUNCED ON THE 26 TH , DAY OF NOV 2010. SD/- SD/- ( (( (R S PADVEKAR R S PADVEKAR R S PADVEKAR R S PADVEKAR ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED:26 TH , NOV 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI