ITO 19(2)(1), MUMBAI V. LANDS END CO OPERATIVE HOUSING SOCIETY LTD, MUMBAI

ITA 1174/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9720 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 1174/MUM/2016 : A.Y : 2012 - 13 ITO - 19(2)(1), MUMBAI (APPELLANT) VS. LANDS END CO - OPERATIVE SOCIETY LTD., 29D, DONGERSY ROAD, MALABAR HILL, MUMBAI 400 006 (RESPONDENT) PAN : AAAAL0060L APPELLANT BY : SHRI V. JUSTIN RESPONDENT BY : SHRI SATISH MODY DATE OF HEARING : 03/07/2017 DATE OF PRONOUNCEMENT : 31 /07/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 30 , MUMBAI DATED 17.12.2015 , PERTAINING TO THE ASSESSMENT YEAR 2012 - 13 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30.1.2015 UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 2 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDI TION RS.98,25,000/ - ON ACCOUNT OF TRANSFER FEE AND OF RS.5,99,040/ - ON ACCOUNT OF NON - OCCUPANCY CHARGE; RECEIVED FROM THE MEMBERS OF THE SOCIETY, MADE BY THE ASSESSING OFFICER ? 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUN D WHICH MAY BE NECESSARY. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE RESPONDENT - ASSESSEE IS A CO - OPERATIVE SOCIETY WHO HAD FILED ITS RETURN OF INCOM E FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING AN INCOME OF RS.90,010/ - . IN THE ASSESSMENT FINALISED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, AMOUNTS ON ACCOUNT OF (I) TRANSFER FEE RS.98,25,000/ - ; AND, (II) NON - OCCUPANCY CHARGES RS.5,9 9,040/ - WERE BROUGHT TO TAX ON THE GROUND THAT SUCH RECEIPTS WERE NOT COVERED BY THE PRINCIPLE OF MUTUALITY. THE CIT(A) HAS SINCE DELETED THE ADDITIONS NOTICING THE ORDERS OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. IN TH IS BACKGROUND, THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT BOTH THE ISSUES RAISED IN THE INSTANT APPEAL BY THE REVENUE ARE COVERED BY THE FOLLOWING DECISION S OF THE TRIBUNAL IN ASSESSEES O WN CASE : - I) ITA NO. 6066/MUM/2006 DATED 10.1.2011 (A.Y 2003 - 04); II) ITA NO. 6866/MUM/2007 DATED 27.9.2013 (A.Y 2004 - 05); III) ITA NO. 3566/MUM/2014 DATED 15.1.2016 (A.Y 2009 - 10); 3 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 IV) ITA NO. 5976/MUM/2013 DATED 14.3.2016 (A.Y 2010 - 11); AND V) ITA NO. 2 483/MUM/2017 DATED 8.6.2017 (A.Y 2013 - 14) SO HOWEVER, IN ORDER TO IMPART COMPLETENESS, THE FOLLOWING DISCUSSION IS RELEVANT . AS FAR AS THE ISSUE RELATING TO TRANSFER FEE AMOUNTING TO RS.98,25,000/ - IS CONCERNED, THE SAME IS RECEIVED BY THE ASSESSEE - SOCIETY FROM THE MEMBERS ON THE TRANSFER OF THEIR FLATS. ACCORDING TO THE ASSESSING OFFICER, SUCH FEE IS NOT A VOLUNTARY CONTRIBUTION , BUT SAME HAS BEEN COLLECTED WITH A PROFIT MOTIVE AND IS THUS NOT EXEMPT UNDER THE PRINCIPLES OF MUTUALITY. WE FIND THAT THE SAID ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE PAST YEARS ALSO, AND IT HAS BEEN CONSISTENTLY HELD THAT SUCH AMOUNTS ARE EXEMPT . WE MAY REPRODUCE HEREINAFTER THE DECISION OF THE TRIBUNAL DATED 14.3.2016 (SUPRA) FOR ASSESSMENT YEAR 2010 - 11 WHICH READS AS UNDER : - 3. SO FAR AS THE FIRST ISSUE RELATING TO 'TRANSFER FEE' AMOUNTING TO RS.32,75,000/ - RECEIVED FROM THE MEMBERS ON THE TRANSFER OF THEIR FLATS, THE AO HELD THAT SUCH A FEE IS NOT A VOLUNTARY CONTRIBUTION ALBEIT HAS BEEN COLLECTED WITH A PROFIT MOTIVE AND, THEREFORE, SAME DOES NOT COVER UNDER THE 'PRINCIPLE OF MUTUALITY'. WE FIND THAT THIS ISSUE HAS BEEN CONSISTENTLY DECID ED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEE'S OWN CASE IN THE EARLIER YEARS. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E., AY 2009 - 10, THIS MATTER HAS BEEN DECIDED BY THE TRIBUNAL AFTER REFERRING TO THE EARLIER YEAR DECISION AND LATEST D ECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS DARBHANGA MANSIONS CHS LTD. (SUPRA); IN THE FOLLOWING MANNER: - 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTE THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FA VOUR OF ASSESSEE IN IT ITS OWN CASE IN ITA NO. 6866/ MUM/2007 ASSESSMENT YEAR 2004 - 05 VIDE ORDER DATED 4 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 27/09/2013. THE RELEVANT PARAGRAPHS 3 & 4 OF THE SAID ORDER ARE REPRODUCED AS UNDER: - 'WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE R ELEVANT MATERIAL ON RECORD. THE LD. AR HAS POINTED OUT THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04 VIDE ORDER DATED 10.01.2011 IN ITA NO.6066/M/2006. THUS, THE LD. AR HAS S UBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THE AO MADE THE ADDITION WITH RESPECT TO THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS TRANSFER FEE OF RS.500/ - FROM OUTGOING MEMBE RS, ENTRANCE FEE FOR RS.100/ - FROM INCOMING MEMBERS, SHARE PREMIUM AND CONTRIBUTION TO COMMON AMENITIES FUND. THE CIT(A) DELETED THE TRANSFER FEE OF RS.500/ - EACH ON THE PRINCIPLES OF MUTUALITY BUT CONFIRM THE ADDITION TOWARDS THE RECEIPT OF ENTRANCE FEE OF RS.100/ - EACH AND THE RECEIPTS OF CONTRIBUTION TO COMMON AMENITIES FUND TOTAL AMOUNTING TO RS.17,01,200/ - . THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2003 - 04 HAS CONSIDERED AND ADJUDICATED THE ISSUE OF CONTRIBUTION TO COMMON AMENITIES IN PARA 4 AS UNDER: 'WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CASE OF THE ASSESSEE IS THAT THOUGH THE AMOUNT WAS RECEIVED IN THE FORM OF CONTRIBUTION TO COMMON AMENITIES FUND IT IS ESSENTIALLY UTILIZED FOR THE BENEFIT OF C OMMON MEMBERS AND THUS PRINCIPLES OF MUTUALITY ARE ATTRACTED. FACTS NOT BEING IN DISPUTE, IN THE LIGHT OF THE DECISION OF THE ITAT (SUPRA), WE ACCEPT THE PLEA OF THE ASSESSEE AND HOLD THAT THE IMPUGNED AMOUNT RECEIVED IN THE FORM OF CONTRIBUTION TO COMMON AMENITIES FUND IS EXEMPT FROM TAX SINCE PRINCIPLES OF MUTUALITY APPLIED TO THE INSTANT RECEIPTS. UNDER THE CIRCUMSTANCES, APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON THE DATE OF HEARING I.E. ON 10.1.2011.' IN VIEW OF THE EARLIER ORDER OF THIS TRIBUNAL THE AMOUNT OF RS. 16,50,000/ - TOWARDS 5 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 COMMON AMENITIES FUND IS NOT TAXABLE ON THE PRINCIPLE OF MUTUALITY AS DECIDED BY THIS TRIBUNAL IS THE ASSESSEE'S OWN CASE. AS REGARDS THE RECEIPT TOWARDS SHARE PREMIUM AND ENTRANCE FEE FROM INCOMING MEMBERS IF THE SAID AMOUNT IS RECEIVED FOR THE PURPOSE OF UTILIZING FOR THE COMMON AMENITIES OF THE SOCIETY THEN THE SAME FALLS UNDER THE CATEGORY OF THE CONTRIBUTION OF COMMON AMENITIES FUND AND THE CONCEPT OF MUTUALITY WILL BE APPLICAB LE. ACCORDINGLY, THE AO TO VERIFY THE SAME AND THEN DECIDE AS PER OUR OBSERVATION. WE ALSO FIND THAT JURISDICTIONAL HIGH COURT IN THE CASE OF CLT V/S DARBHANGA MANSION CHS LTD IN ITA NO. 1474/MUM/2012 VIDE ORDER DATED 18 - 12 - 2014 HAS DECIDED A SIMILAR ISS UE ON IDENTICAL FACTS IN FAVOUR OF THE SOCIETY. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, DELETE THE ADDITION OF RS.11,00,000/ - BY ALLOWING THE APPEAL OF THE ASSESSEE ON THIS POINT. THE AO IS DIRECTED ACCORDINGLY'. THUS, CONSISTENT WITH T HE JUDICIAL PRECEDENCE FOR THE EARLIER YEARS AND ALSO FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT, WE DECIDE THIS I SSUE IN FAVOUR OF THE ASSESSEE. FOLLOWING THE AFORESAID PRECEDENT, AND FINDING THAT THE FACTS AND CIRCUMSTANCES IN THIS YEAR STANDS ON A SIMILAR FOOTING, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AS WE FIND NO ERROR IN THE ORDER OF CIT(A) ON THIS ASPECT. 5 . INSOFAR AS THE SECOND ISSUE RELATING TO NON - OCCUPANCY CHARGES OF RS. 5,99,040/ - RECEIVED FROM MEMBERS IS CONCERNED, THE ASS ESSING OFFICER NOTED THAT THE SAID RECEIPT IS ALSO BEYOND THE SCOPE OF PRINCIPLES OF MUTUALITY. ON THIS ISSUE ALSO, THE DECISION OF THE TRIBUNAL DATED 14.3.2016 (SUPRA) IS QUITE ELOQUENT, WHICH READS AS UNDER : - 6 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 5. WE FIND THAT, THIS ISSUE IS NOT ONLY CO VERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT BUT THE SAME HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER: - '4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND FIND THAT THE ASSESSEE RECEIVED NON-OCCUPANCY CHARGES FROM THOSE MEMBERS WHO LET OUT THEIR FLATS. THE CHARGES ARE RECEIVED AT THE PRESCRIBED RATES AS PER THE BYELAWS OF THE SOCIETY AND ARE SPENT FOR THE COMMON PURPOSES OF THE SOCIETY FOR THE BENEFIT OF THE MEMBERS. IN THE CASE OF MITTAL COURT PREMISES CO - OPERATIVE SOCIETY LTD. VS INCOME TAX OFFICER 320 ITR 414 THE HON'BLE HIGH COURT HELD THAT THE BYE - LAWS THEMSELVES PROVIDED FOR NON - OCCUPATION CHARGES. THE CONTRIBUTION, THEREFORE, WAS BY THE MEMBERS FOR THE PURPOSE OF MUTUAL BENEFIT. THE OBJECT OF THE CONTRIBUTION WAS THE PURPOSE OF INCREASING THE SOCIETY'S FUNDS, WHICH COULD BE USED FOR FULFILLING THE OBJECTS OF THE SOCIETY. THE OBJE CT OF THE SOCIETY WAS TO PROVIDE SERVICE, AMENITIES AND FACILITIES TO ITS MEMBERS. IN THESE CIRCUMSTANCES, THE PRINCIPLE OF MUTUALITY WOULD APPLY AND THEREFORE NON - OCCUPANCY CHARGES WERE NOT TAXABLE. IN OUR OPINION THE CASE OF THE ASSESSEE CASE IS SQUARELY COVERED BY THE AFORESAID DECISION. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT DELETE THE ADDITION OF RS. 6,04,500/ - ON ACCOUNT OF NON - OCCUPANCY CHARGES. THE AO IS DIRECTED ACCORDINGLY'. 6. THUS, RESPECTFULLY FOLL OWING THE EARLIER YEAR PRECEDENCE AND THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT ON THE ISSUES INVOLVED, BOTH THE ISSUES ARE DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, BOTH THE GROUNDS OF THE REVENUE STANDS DISMISSED . 7 LANDS END CO - OP. SOCIETY LTD. ITA NO. 1174/MUM/2016 FOLLOWING THE AFORESAID PRECEDENT, WE FIND THAT THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER, WHICH WE HEREBY AFFIRM. 6 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN C OURT ON 3 1 S T JULY, 2017. SD/ - SD/ - (RAVISH SOOD) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 3 1 S T JULY, 2017 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI