HARBOUR HEIGHTS COOP HSG SOC LTD, MUMBAI V. ITO 12(2)(2), MUMBAI

ITA 106/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0586 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: HOMIYAR MADAN
• Section: 143(3)

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./ I.T.A. NO. 106 /MUM/2013 ( / ASSESSMENT YEAR 2004-05 HARBOUR HEIGHTS COOP HOUSING SOCIETY LIMITED, N.A. SAWANT MARG, COLABA, MUMBAI 400 005. / VS. INCOME TAX OFFICER 12(2)(2), 134 AAYAKAR BHAVAN, MUMBAI 400020. ./ PAN : AAAJHO164N ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI HOMIYAR MADAN R E SPONDENT BY : SHRI LOVE KUMAR / DATE OF HEARING : 08-01-2015 / DATE OF PRONOUNCEMENT : 22 -04-2015 -04-2015[ !' / O R D E R PER R.C. SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) - 10, MUMBAI DATED 25-10-2 012 FOR THE A.Y. 2004-05 IN THE MATTER OF ORDER PASSED U/S 143(3) R.W.S. 148 OF THE INCOME TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TH E TAXABILITY OF TRANSFER FEE RECEIVED FROM MEMBERS OF HOUSING SOCIETY IN EXC ESS OF RS. 25,000/- FROM EACH MEMBER. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A CO-OPERATI VE HOUSING SOCIETY AND THE ITA 106/M/13 2 ONLY ISSUE INVOLVED IN THIS CASE IS THE TAXABILITY OF A SUM OF RS. 7,48,100/- RECEIVED BY THE ASSESSEE ON ACCOUNT OF TRANSFER FEE S IN RESPECT OF FOUR FLATS IN THE SOCIETY. THE A.O. HAS BROUGHT THE SAID AMOUNT TO TAX BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF PANCHRATNA CO-OP. HSG. SOCIETY. THE TRANSFER FEES SO RECEIVED FROM THE MEMBERS OF THE S OCIETY WERE TREATED BY THE A.O. AS INCOME FROM OTHER SOURCES AND DID NOT ALL OW THE BENEFIT OF PRINCIPLE OF MUTUALITY. BY THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT ONLY TRANSFER FEES OF RS. 25000/- PER MEMBER IS ELIGIBLE FOR BENE FIT OF MUTUALITY AND ACCORDINGLY HE AFTER GIVING RELIEF OF RS. 1 LAC BEI NG DEDUCTION ON ACCOUNT OF TRANSFER FEES ADMISSIBLE IN ACCORDANCE WITH THE BYE -LAWS @ RS. 25,000/- PER FLAT AND BALANCE WAS BROUGHT TO TAX NET. 4. THE LD. A.R. PLACED ON RECORD COPY OF TRIBUNALS ORDER DATED 24-12-2009 IN ITA NO. 784/MUM/2008 FOR A.Y. 2003-04 IN ASSESSE ES OWN CASE WHEREIN SIMILAR ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE. 5. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A SSESSEES FAVOUR HOLDING AS UNDER:- 'LET US NOW APPLY THE VARIOUS TESTS WHICH ARE TO BE CONSIDERED FOR APPLYING THE PRINCIPLE OF MUTUALITY TO A CASE OF A CO-OPERATIVE HOUSING SOCIETY BASED ON OUR EARLIER DISCUSSION (1) IS THERE ANY COMMERCIALITY INVOLVED? THIS HAS TO BE FOUND FROM THE BYE-LAWS OF THE CO-OP ERATIVE HOUSING SOCIETY. IN CASE OF THE CO-OPERATIVE HOUSING SOCIET Y, ADMITTEDLY THERE IS NO COMMERCIALITY INVOLVED. ONCE THERE IS NO COMMERC IALITY INVOLVED THE FIRST TEST OF PROFITABILITY DOES NOT EXIST. THE FIR ST REQUIREMENT OF MUTUALITY IS THEREFORE MET. (2) FROM THE MONEYS RECEIVED ARE THE SERVICES OFFER ED IN THE NATURE OF PROFIT SHARING OR PRIVILEGES, ADVANTAGES AND CONVEN IENCES. IN CASE OF A ITA 106/M/13 3 CO-OPERATIVE HOUSING SOCIETY, THE ONLY ACTIVITIES W HICH IT CAN CARRY OUT IN TERMS OF ITS BYE-LAWS ARE BASICALLY MAINTENANCE OF ITS PROPERTY WHICH INCLUDES BUILDING OR BUILDINGS. THE SUBSCRIPTION AND OR CONTRIBUTIONS RECEIVED BY T HE MEMBERS CAN ONLY BE EXPENDED FOR THE PURPOSES OF MAINTENANCE AN D PROVIDING OTHER PRIVILEGES, ADVANTAGES AND CONVENIENCES TO ITS MEMB ER IN TERMS OF ITS BYE-LAWS. ANOTHER TEST OF MUTUALITY IS THUS SATISFI ED. (3) ARE THE PARTICIPANTS AND CONTRIBUTORS IDENTIFIA BLE AND BELONG TO THE SAME CLASS IN THE CASE OF CO-OPERATIVE HOUSING SOCI ETY. THE CLASS OF MEMBERS IS CLEARLY IDENTIFIABLE. MEMBERS ARE ORDINA RY MEMBERS OF ASSOCIATE MEMBERS. THE PARTICIPANTS AND CONTRIBUTOR S ARE THE MEMBERS. THE MEMBERS MAY COME IN OR GO OUT. THE FAC T THAT ONLY SOME MEMBERS FROM THOSE WHO CONTRIBUTED MAY PARTICIPATE IN THE SURPLUS, AS HELD BY THE SUPREME COURT IS IRRELEVANT AS LONG AS THE CLASS IS IDENTIFIABLE. THIS TEST IS ALSO SATISFIED IN THE CA SE OF A HOUSING CO-OPERATIVE SOCIETY. (4) DO THE MEMBERS HAVE THE RIGHT TO SHARE IN THE S URPLUS AND DO THEY HAVE A RIGHT TO DEAL WITH ITS SURPLUSES. IN TERMS O F THE BYE-LAWS, IT IS ONLY THE MEMBERS WHO HAVE A RIGHT TO SHARE IN THE S URPLUS. UNDER THE M.C.S. ACT, NO PART OF THE FUNDS, AS PROVIDED IN S. 64 CAN BE PAID BY WAY OF BONUS OR DIVIDEND OR OTHERWISE DISTRIBUTED A MONG ITS MEMBERS EXCEPT AS PROVIDED THEREIN. UNDER S 67 THERE IS A L IMIT ON THE DIVIDEND TO BE PAID ON LIQUIDATION. UNDER SECTION 110 OF THE M/C.S. ACT, THE SURPLUS CAN ONLY BE DEALT WITH IN THE MANNER PROVID ED THEREIN WHICH INCLUDES ANY MEMBER OR DEVOTED TO OBJECTS PROVIDED BY THE BYE-LAWS OR BE TRANSFERRED TO ANOTHER SOCIETY WITH SIMILAR OBJE CT. RULE 90 OF THE RULES PROVIDE HOW THE SURPLUS IS TO BE DIVIDED. THE SURPLUS THEN CAN BE DISTRIBUTED IN TERMS OF THE BYE-LAWS TO MEMBERS AND OR BY OPERATION OF LAW TO ANOTHER SOCIETY HAVING THE SAME OBJECTIVE. I N OTHER WORDS YET ANOTHER TEST OF MUTUALITY IS SATISFIED. ONCE THESE TESTS ARE SATISFIED, IN OUR OPINION THER E CAN BE NO DOUBT THAT THE PRINCIPLE OF MUTUALITY WILL APPLY TO A CO- OPERATIVE HOUSING SOCIETY WHICH HAS ITS PREDOMINANT ACTIVITY, THE MAI NTENANCE OF THE PROPERTY OF THE SOCIETY WHICH INCLUDES ITS BUILDING OR BUILDINGS AND AS LONG AS THERE IS NO TAINT OF COMMERCIALITY, TRADE O R BUSINESS.' 7. WE FURTHER FIND THAT RECENTLY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DARBHANGA MANSION CHS LTD. IN INCOM E TAX APPEAL NO. 1474 OF 2012 ORDER DATED 18-12-2014 HAS DECIDED EXACTLY SIMILAR ISSUE IN FAVOUR OF ASSESSEE. IT WAS CLEARLY HELD BY THE HONBLE JURIS DICTIONAL HIGH COURT THAT TRANSFER FEES IN EXCESS OF RS. 25,000/- RECEIVED BY THE CO-OPERATIVE HOUSING ITA 106/M/13 4 SOCIETY IS COVERED BY THE PRINCIPLE OF MUTUALITY. R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AS WE LL AS THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MERIT IN TH E ORDER OF LD. CIT(A) FOR BRINGING TO TAX THE TRANSFER FEES RECEIVED BY THE H OUSING SOCIETY IN EXCESS OF RS. 25,000/- PER FLAT/MEMBER. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND APRIL, 2015. !' # $% &! ' 22-04-2015 ( ) SD/- SD/- (VIVEK VARMA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 22-04-2015 .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) CONCERNED,, MUMBAI 4. 7 / CIT -CONCERNED, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI E BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI