ITO 19(3)(4), MUMBAI V. STERLING CO OP HSG SOC LTD, MUMBAI

ITA 1196/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9724 (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

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. 1196/MUM/2016 : A.Y : 2012 - 13 ITO - 19(3)(4), MUMBAI (APPELLANT) VS. M/S. STERLING CO - OP. HSG. SOCY. LTD., 38, PEDDAR ROAD, MUMBAI PAN : AAAJS1912M (RESPONDENT) APPELLANT BY : SHRI V. JUSTIN RESPONDENT BY : SHRI VISHWAS MEHENDALE 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 2.12.2015 , PERTAINING TO THE ASSESSMENT YEAR 2012 - 13 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 24.2.2015 UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN ITS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCO UNT OF NON - OCCUPANCY CHARGES OF RS.3,34,057/ - . 2 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF TRANSFER FEES OF RS.63,08,400/ - . 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF RENOVATION CHARGES OF RS.82,500/ - . 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. AT THE OUTSET, THE LEARNED REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE POINTED OUT THAT INSOFAR AS THE GROUNDS OF APPEAL NO. 1 & 2 RELATING TO TAXA BILITY OF NON - OCCUPANCY CHARGES OF RS.3,34,057/ - AND TRANSFER FEE OF RS.63,08,400/ - RESPECTIVELY ARE CONCERNED, THE SAME ARE FULLY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO. 8197/MUM/2011 DATED 23.11.2012 , WHICH HAS SUBSEQUENTLY BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 VIDE ORDER DATED 15.7.2014 IN ITA NO. 6527/MUM/2012 , COPIES OF WHICH ARE PLACED ON RECORD. 4. ON THE OTHER HAND, THOUGH THE LD. DR DID NOT DISPUTE THE AFORESAID FA CTUAL MATRIX, BUT HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 5. HAVING CONSIDERED THE RIVAL STANDS, WE FIND THAT INSOFAR AS THE GROUNDS OF APPEAL NO. 1 & 2 ARE CONCERNED, SAME ARE SQUARELY COVERED 3 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN VIEW OF THE PAST PRECEDENTS. THE LEAD ORDER OF THE TRIBUNAL IS DATED 23.11.2012 (SUPRA) FOR ASSESSMENT YEAR 2008 - 09, WHICH READS AS UNDER : - 3. AT THE OUTSET, SHRI VISHWAS V. MEHENDALE, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE JUDGMENTS OF JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. SHYAM CHS VIDE ITA NO.92, 93, 206 OF 2009, DATED 17.7.2009 AND SUPRABHAT CHS VIDE ITA NO. 1972 OF 2009, DATED 1.10.2009 AND MENTIONED THAT THE HONBLE HIGH COURT HAS HELD THAT THE TRANSFER FEE RECEIPTS ARE EXEMPT FROM THE TAX ON THE PRINCIPLES OF MUTUALITY. THUS, THE ISSUE OF TAXABILITY OF TRANSFER FEE STANDS COVERED IN FAVOUR OF THE ASSESSEES BY THE SAID DECISIONS. REGARDING APPLICABILITY OF PRINCIPLE OF MUTUALITY TO NON - OCCUPANCY CHARGES, ASSESSEE BROUGHT OUR ATTENTION TO PARA 4.1 OF THE IMPUGNED ORDER AND MENTIONED THAT THIS ISSUE IS ALSO ENJOYS THE EXEMPTION IN VIEW OF THE PRINCIPLE OF MUTUALITY AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF MITTAL COURT CO - OPERATIVE HSG. SOCIETY (2009) 184 TAXMA N 292 AND ALSO IN THE CASE OF SUPRABHAT CHS (SUPRA). 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDERS OF THE REVENUE PARA 3, 4 AND 4.1 OF THE IMPUGNED ORDER. CONSIDERING THE REQUIREMENT O F THE SAID PARAGRAPHS THEY ARE REPRODUCED AS UNDER: 3. DURING THE PROCEEDINGS BEFORE ME, THE AR SUBMITTED THAT IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASES OF SIND HOUSING SOCIETY AND MITTAL COURT COOPERATIVE HSG. SOCIETY WHERE THEIR LORDSHIPS HAD GIVEN A JUDGMENT THAT THE TRANSFER FEE AND NON OCCUPANCY CHARGES RECEIVED BY THE HOUSING SOCIETY ARE EXEMPT TO TAX UNDER PRINCIPLE OF MUTUALITY, THE ADDITION MADE BY THE AO SHOULD BE DELETED. THE AR ALSO ARGUED THAT MISCELLANEOUS RECEIP TS INCLUDE RENT OF RS. 6,000 COLLECTED FROM THE MEMBERS OF THE SOCIETY FOR USING THE GARDEN AND IT IS NOT FROM GIVING THE PROPERTY ON RENT TO ANY OUTSIDERS. AS REGARDS 4 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 THE BALANCE AMOUNT OF RS. 5000 REALIZED ON SALE OF SCRAP THE AR HAS NOT PRESSED THE GROU NDS. 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. AS REGARDS THE TRANSFER FEE RECEIVED, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND COOPERATIVE HSG. SOCIETY STATED IN ONE OF THE PARAGRAPHS OF THE ORDER THAT TRANSFER FEE REC EIVED BY THE HOUSING SOCIETY IS EXEMPT UNDER THE PRINCIPLE OF MUTUALITY, BUT, THEY HAD ALSO STATED IN THEIR ORDER THAT ANY AMOUNT TAKEN BY THE SOCIETY WHICH IS IN EXCESS OF GOVERNMENT RULES, AS LAID DOWN BY THE MAHARASHTRA COOPERATIVE SOCIETIES ACT WOULD E ITHER HAVE TO BE REFUNDED TO THE MEMBER OF THE SOCIETY OR THE AMOUNT WOULD BE HELD TO BE TAXABLE AS THERE WAS AN ELEMENT OF PROFITEERING IN IT. SUBSEQUENTLY, HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. SHYAM CHS IN ITA NO. 92, 93, 206 OF 2009 VIDE THEIR ORDERS DATED 17TH JULY, 2009 AND SUPRABHAT CHS IN ITA NO. 1972 OF 2009 VIDE THEIR ORDERS DATED 1.10.2009, HAS CLEARLY STATED THAT ALL THE AMOUNTS RECEIVED BY THE CHS ON ACCOUNT OF TRANSFER FEE ARE EXEMPT TO TAX UNDER THE PRINCIPLE OF MUTUALITY. SINCE THE I SSUE IS NOW FULLY CLARIFIED BY THE SUBSEQUENT JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT, THE AMOUNT OF TRANSFER FEES CONSIDERED BY THE AO AS APPELLANTS INCOME AMOUNTING TO RS. 14,65,000/ - STANDS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 4.1. SECOND LY, THE HONBLE BOMBAY HIGH COURT IN THE CASES OF MUTTAL COURT COOPERATIVE HSG. SOCIETY (2009) 184 TAXMAN 292 AND SUPRABHAT CHS IN ITA NO. 12972 OF 2009 VIDE THEIR ORDERS DATED 1.10.2009, HAS CLEARLY STATED THAT ALL THE AMOUNTS RECEIVED BY THE CHS ON ACCOU NT OF NON OCCUPANCY CHARGES ARE EXEMPT TO TAX UNDER THE PRINCIPLE OF MUTUALITY. SINCE THE ISSUE IS NOW FULLY SETTLED BY THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT, THE NON OCCUPANCY CHARGES CONSIDERED BY THE AO AS APPELLANTS INCOME AMOUNTING TO RS. 3, 27,640/ - ALSO STANDS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 5 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 6. FROM THE ABOVE IT IS EVIDENT THAT THE ISSUES RELATING TO TAXABILITY OF TRANSFER FEE RECEIPTS AND NON - OCCUPANCY CHARGES UNDER THE PRINCIPLE OF MUTUALITY ARE COVERED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASES OF M/S. SHYAM CHS (SUPRA), SUPRABHAT CHS (SUPRA) AND MITTAL COURT CO - OPERATIVE HSG. SOCIETY (SUPRA) IN FAVOUR OF THE ASSESSEE. THEREFORE, CONSIDERING THE SPEAKING ORDER OF THE CIT (A) WHO DECIDED THE ISSUES AGAIN RELY ING ON THE BINDING JURISDICTIONAL HIGH COURT JUDGMENTS, WE ARE OF THE OPINION THAT ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. FOLLOWING THE AFORESAID PRECEDENT, AND IN THE ABSENCE OF ANY CHANGE IN THE FACTS AS COMPARED TO ASSESSMENT YEAR 2008 - 09, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL NO. 1 & 2 RAISED BY THE REVENUE WHICH ARE HEREBY DISMISSED. 7. NOW, WE MAY TAKE UP GROUND OF APPEAL NO. 3 RAISED BY THE REVENUE, WHICH IS WITH RESPECT TO RENOVATION CHARGES OF RS.82,500/ - . THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT THE AMOUNTS WERE RECEIVED FROM THE MEMBERS OF THE SOCIETY WHICH ARE NON - REFUNDABLE IN NATURE. THE ASSESSING OFFICER HELD THAT THE AMOUNTS RE CEIVED IN THE GARB OF RENOVATION CHARGES WERE NOTHING BUT TRANSFER FEE COLLECTED FROM THE INCOMING MEMBERS TO WHICH THE PRINCIPLE OF MUTUALITY IS NOT APPLICABLE. THE ASSESSING OFFICER ALSO OBSERVED THAT ASSESSEE HAD COLLECTED SUCH AMOUNTS OVER AND ABOVE THE PERMISSIBLE LIMIT OF RS.25,000/ - PER FLAT AS PER THE GOVERNMENT NOTIFICATION. THEREFORE, HE TREATED THE AMOUNT OF RS.82,500/ - AS AN ASSESSABLE INCOME. 6 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 8. BEFORE THE CIT(A), ASSESSEE EXPLAINED THAT THE RENOVATION CHARGES ARE COLLECTED FROM THE EXISTI NG MEMBERS OF THE ASSESSEE - SOCIETY WHO CARRY OUT RENOVATION IN THEIR FLATS. IT WAS EXPLAINED THAT THE SAID AMOUNT IS COMPENSATORY IN NATURE, THAT IS TO SAY, THE SOCIETY COLLECTS THE SAME FOR EXCESSIVE USE OF LIFT, COLLECTION OF DEBRIS AND ANY POSSIBLE DAM AGE TO THE BUILDING, ETC. DURING THE PERIOD OF RENOVATION. THE ASSESSEE POINTED OUT THAT IT WAS NOT IN THE NATURE OF TRANSFER FEE, WHICH IS COLLECTED FROM THE INCOMING MEMBERS. THE ASSESSEE ALSO REFERRED TO THE RESOLUTION PASSED BY ITS ANNUAL GENERAL MEE TING AUTHORISING LEVY OF ONE - TIME RENOVATION CHARGES FROM THE MEMBERS WHO UNDERTAKE REPAIRS AND RENOVATION WORK IN THEIR INDIVIDUAL FLATS. ON THIS BASIS, THE ASSESSEE CONTENDED THAT THE CONTRIBUTION UNDER THE HEAD RENOVATION CHARGES COME FROM THE MEMBER S OF THE SOCIETY WITHOUT ANY MOTIVE OF PROFIT AND THUS, THE SAME WAS EXEMPT ON THE PRINCIPLES OF MUTUALITY. THE CIT(A) CONSIDERED THE SUBMISSIONS PUT FORTH BY THE ASSESSEE AND SET - ASIDE THE ACTION OF THE ASSESSING OFFICER BY MAKING THE FOLLOWING DISCUSSIO N : - 6.2 PERUSED THE REASONS ON WHICH THE AO ADDED THE 'RENOVATION CHARGES COLLECTED FROM MEMBERS AND THE COUNTER ARGUMENTS OF THE APPELLANT FOR DELETING THE ADDITION MADE OF ` 82,500/ - . AS PER THE AO, THE AMOUNTS ARE COLLECTED IN THE GUISE OF 'RENOVATION CHARGES' AND ARE NOTHING BUT TRANSFER FEE COLLECTED FROM INCOMING MEMBERS TO WHICH PRINCIPLE OF MUTUALITY IS NOT APPLICABLE. WHEREAS THE APPELLANT IS STATING THAT THE AMOUNT AR E COLLECTED FROM THE MEMBERS AT THE TIME OF ANY RENOVATION WORK IN THEIR FLATS AND NO WAY CONNECTED TO TRANSFER OF FLATS. AS STATED BY THE AO IF THE AMOUNTS ARE 'TRANSFER FEE' COLLECTED IN THE GUISE OF 'RENOVATION CHARGES' THEN THE DECISION OF THE HON'BLE ITAT ALLOWING SUCH TRANSFER FEE AMOUNTS COLLECTED UNDER THAT HEAD, DISCUSSED IN PARA 5.4 OF THE ORDER WILL STRAIGHT AWAY APPLY. IF THE SAME LOGIC IS APPLIED, THIS AMOUNT ALSO COVERS UNDER THE PRINCIPLES OF MUTUALITY. VERIFIED THE AMOUNTS WHICH ARE MENTION ED IN PARA - 8 OF 7 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 THE ASSESSMENT ORDER WHICH ARE BELOW ` 10,000/ - IN EACH CASE AND ARE WELL WITHIN THE PRESCRIBED LIMIT. IN VIEW OF THE SAME, THE CASE RELIED UPON BY THE AO IS NOT APPLICABLE FOR THESE RECEIPTS. ON VERIFICATION OF THE NATURE OF RECEIPTS, I AM CONVINCED THAT THESE ARE COLLECTED FROM THE MEMBERS TOWARDS THE 'RENOVATION CHARGES AND PRINCIPLES OF MUTUALITY ARE VERY MUCH APPLICABLE AND NO PROFIT MOTIVE CAN BE ATTRIBUTED TO THESE COLLECTIONS. ACCORDINGLY GROUND OF APPEAL NO. 3 IS ALLOWED. THE AO I S DIRECTED TO DELETE THE ADDITION. 9. AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEFORE US. APART FROM REITERATING THE RELIANCE ON THE ORDER OF THE ASSESSING OFFICER, THE LD. DR HAS NOT CONTROVERTED ANY OF THE ABOVE FINDINGS RECORDED BY THE CIT(A). N OTABLY, AS PER THE CIT(A), THE AMOUNTS UNDER THE HEAD RENOVATION CHARGES ARE COLLECTED FROM THE EXISTING MEMBERS AND, THEREFORE, HE HAS PROCEEDED TO HOLD THAT THE PRINCIPLES OF MUTUALITY ARE APPLICABLE AND NO PROFIT MOTIVE CAN BE ATTRIBUTED TO SUCH COLLE CTION S . IN OUR CONSIDERED OPINION, THE FINDINGS OF CIT(A) ARE QUITE CLEAR AND SO FAR AS THE OBSERVATIONS OF THE ASSESSING OFFICER ARE CONCERNED, SAME ARE NOT BASED ON ANY MATERIAL. THEREFORE, WE HEREBY AFFIRM THE ORDER OF CIT(A) AND ACCORDINGLY, REVENUE FAILS ON THIS ASPECT ALSO. 10. RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 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 * 8 M/S. STERLING CO - OP. HSG. SOCY. LTD. ITA NO. 1196/MUM/2016 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. 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