PATHARE PRABHU CO -OP HSG. SOC .LTD, MUMBAI V. ITO 15(2)(2), MUMBAI

ITA 128/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101301 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 02-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 06-01-2012
• Court: TRIBUNAL
• Keywords: Gift

Judgement Text

` , , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA N O S . 5 5 24 - 5 5 26 &128 / MUM/20 1 2 ITA NO.256/MUM /201 3 ( / ASSESSMENT YEAR S : 20 0 3 - 04 TO 200 6 - 20 07 & 2008 - 09 ) PATHARE PRABHU CO - OP. HSG. SOC. LTD., PLOT NO.340, PRABHU NAGAR, 12 TH ROAD, KHAR (W), MUMBAI - 400052 VS. ITO - 15(2)(2), MUMBAI ./ ./ PAN/GIR NO. : A AAAP 4549 G ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VIPUL JOSHI /REVENUE BY : SHRI NIMESH YADAV / DATE OF HEARING : 2 7 /0 8 / 2015 / DATE OF PRONOUNCEMENT 09/10 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE A GAINST THE ORDER OF CIT (A) , MUMBAI , FOR THE ASSESSMENT YEAR S 2003 - 04 TO 2006 - 07 & 2008 - 09 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT . 2. COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION, THEREFORE, ALL THE APPEALS WERE HEARD AND ARE NOW DISPOSED OFF BY THIS CONSOLIDATED ORDER. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RE CORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A REGISTERED COOPERATIVE HOUSING SOCIETY ASSESSED TO TAX BEFORE THE ITO WARD - 15(2)(2), MUMBAI. IN THE A.Y.2003 - 04 THE AO ISSUED A NOTICE U/S.143(2) OF THE ACT PURSUANT TO THE ORDER OF ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 2 TRIBUNAL, RESTORIN G THE ISSUES UNDER APPEAL TO THE FILE OF AO AND GIVING DIRECTIONS TO THE AO TO EXAMINE THEM DE NOVO . THE AO MADE THE ASSESSMENT U/S.143(3) AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE SOCIETY AT RS.21,71,920/ - . THE AO ADDED THE AMOUNTS RECEIVED FROM M EMBERS OF THE SOCIETY ON ISSUING NOC TO MEMBERS FOR DEVELOPMENT OF PLOT, USE OF TDR ETC., AND TREATED THE SAME AS INCOME FROM OTHER SOURCES. THE FACT OF THE CASE THAT THIS AMOUNT IS RECEIVED FROM MEMBERS, IS ACCEPTED BY THE AO IN HIS ASSESSMENT ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS BEING THE ORDERS PRESENTLY APPEALED AGAINST. HOWEVER, THE AO TREATED CONTRIBUTION TOWARDS SPECIAL DEVELOPMENT FUNDS FOR GIVING NOC AS INCOME FROM OTHER SOURCES LIABLE TO TAX. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE AC TION OF AO TREATING SUCH RECEIPT AS INCOME FROM OTHER SOURCES. 4. LD. AR PLACED ON RECORD VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN CONTRIBUTION TOWARDS SPECIAL DEVELOPMENT FUNDS WAS HELD TO BE RECEIVED FROM PARTICIPATORS, WHO HAS CONTRIBUTED TO THE COMMO N FUND WHEN THERE IS COMPLETE IDENTITY BETWEEN THE BODY OF CONTRIBUTORS AND BODY OF PARTICIPATORS. IF ALL THE PARTICIPATORS OF THE COMMON FUNDS ARE ALSO CONTRIBUT OR AND THEIR IDENTITIES ARE ESTABLISHED, THE TEST OF MUTUALITY IS SATISFIED, THEREFORE, NOT LI ABLE TO TAX. 5 . FROM THE RECORD, WE FOUND THAT THE ITAT VIDE ITS ORDER DATED 28 - 9 - 2008FOR THE ASSESSMENT YEAR 2003 - 04, 2004 - 05, 2005 - 06 HAS DIRECTED THE AO TO EXAMINE THE RESOLUTION PASSED BY THE SPECIAL GENERAL MEETING OF THE SOCIETY ON 17 - 12 - 2006, WHERE THE PURPOSE OF UTILIZATION OF SPECIAL ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 3 DEVELOPMENT FUNDS FOR THE BENEFIT OF SOCIETYS MEMBERS WAS DECIDED. FROM THE RECORD WE FOUND THAT FOLLOWING WERE THE PURPOSE OF UTILIZATION OF THE SPECIAL DEVELOPMENT FUND AS PER RESOLUTION OF THE SPECIAL GENERAL MEET ING OF THE SOCIETY HELD ON 17 - 12 - 2006. 1) CONSTRUCTION OF SOCIETY'S CULTURAL CENTRE. 2) BEAUTIFICATION OF THE CULTURAL CENTRE FROM TIME TO TIME. 3) HEALTH CARE AND CLINICAL CARE FOR THE MEMBER AND THEIR FAMILIES. 4) GYMNASIUM, LIBRARY AND INDOOR GAME FACILITIES TO THE MEMBERS & THEIR FAMILIES. 5) EDUCATION LOANS FOR THE MEMBERS AND / OR THEIR CHILDREN. 6) PURCHASING LAND AND LEASING IT TO NEW MEMBERS IN ORDER TO EXPAND THE SOCIETY. 7) ORGANIZE OR PROMOTE SPORTS & CULTURAL ACTIVITIES. 8) SECURITY & SAFETY OF THE MEMBERS' PROPERTY. AFTER GOING THROUGH THE MATERIAL PLACED ON RECORD WE FOUND THAT AMOUNT RECEIVED TOWARDS THE SAID DEVELOPMENT FUND WAS UTILIZED BY THE SOCIETY FOR THE BENEFIT OF MEMBERS OF SOCIETY ITSELF. THUS, THE PRINCIPLE OF MUTUALITY W AS FULLY SATISFIED. 6 . FROM THE RECORD WE ALSO FOUND THAT AMOUNT SO RECEIVED BY THE ASSESSEE WAS WITHIN THE FRAMEWORK OF LAW OF THE SOCIETY, THUS , THERE WAS NO PROFIT MOTIVE ATTRIBUTED TO THE SOCIETY. IN ORDER TO BRING THE CONTRIBUTION WITHIN THE NET OF T AX, THERE SHOULD EXIST A PERVADING PROFIT MOTIVE. FOR THIS PURPOSE R ELIANCE CAN BE PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SURAT DISTRICT COTTON DEALERS ASSOCIATION, 35 ITR 121, WHEREIN IT WAS HELD THAT TO ESTABLISH THE MUTUALITY , THERE MUST BE IDENTITY BETWEEN PARTICIPATORS AND CONTRIBUTORS BUT IT IS NOT NECESSARY THAT THERE MUST BE ACTUAL CONTRIBUTION BY ALL THE MEMBERS OF THE ASSOCIATION. IT WAS FURTHER HELD BY THE COURT THAT IF ALL THE MEMBERS HAVE A RIGHT TO MAKE ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 4 CONTRIBUTION AND TO BE PARTICIPATOR, THE REQUIREMENT OF MUTUALITY IS SATISFIED. 7 . AFTER CONSIDERING THE RIVAL CONTENTIONS WE FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF JAI HIND CHS LTD., 349 ITR 541, WHEREIN THE HONBLE HIGH COURT HELD AS UNDER : - THE ASSESSEE WAS A CO - OPERATIVE HOUSING SOCIETY FORMED OF PLOT OWNERS, WHO HAD OBTAINED A LEASE OF LAND FROM THE MAHARASHTRA HOUSING BOARD. THE ASSESSEE HAD ENTERED INTO SUB - LEASE AGREEMENTS WITH ITS MEMBERS. THE AS SESSEE PASSED A RESOLUTION BY WHICH IT RESOLVED THAT IF ANY MEMBER DESIRED TO AVAIL OF THE BENEFIT OF TRANSFERABLE DEVELOPMENT RIGHTS FOR CARRYING OUT CONSTRUCTION OR ADDITIONAL CONSTRUCTION ON HIS/HER PLOT, THE MEMBER SHOULD APPLY FOR A NO OBJECTION CERTI FICATE WHICH COULD BE GRANTED ON THE PAYMENT OF A PREMIUM CALCULATED AT THE RATE OF RS.250 PER SQ.FT. . THE ASSESSEE RECEIVED A PREMIUM OF RS. 18.75 LAKHS FROM FOUR MEMBERS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2005 - 06. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TRANSFERABLE DEVELOPMENT RIGHTS PREMIUM WAS CHARGED BY THE SOCIETY FROM ITS MEMBERS TO PERMIT THEM TO COMMERCIALLY EXPLOIT THE POTENTIAL FOR THE DEVELOPMENT OF THE PLOT. HE ADDED THE AMOUNT TO THE INCOME OF THE ASSESSEE. ON APPEAL TO THE HIGH COURT : - HELD, DISMISSING THE APPEAL, THAT THE TRANSFERRABLE DEVELOPMENT RIGHTS PREMIUM WAS A PAYMENT MADE BY A MEMBER OF THE ASSESSEE, AS A CONSIDERATION FOR BEING PERMITTED TO MAKE AN ADDITIONAL UTILIZATION OF THE FSI ON THE PLOT ALLOTTED BY THE ASSESSEE. THE ASSESSEE WHICH LOOKED AFTER THE INFRASTRUCTURE, REQUIRED THE PAYMENT OF THE PREMIUM IN ORDER TO DEFRAY THE ADDITIONAL BURDEN THAT MUST BE CAS T AS A RESULT OF THE UTILIZATION OF THE FSI. THE POINT, HOWEVER, WAS THAT THERE WAS A COMPLETE M UTUALITY BETWEEN THE ASSESSEE AND ITS MEMBERS. THE AMOUNT WAS NOT TAXABLE. 8 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR S UNDER CONSIDERATION ARE SAME WITH RESPECT TO NATURE OF RECEIPTS AND COMPLETE MUTUALITY BETWEEN THE ASSESSEE AND ITS MEMBERS , R ESPECTFULLY FOLLOWING THE DECISION OF HO NBLE BOMBAY HIGH COURT REPRODUCED ABOVE, WE DO NOT FIND ANY MERIT IN THE ORDER OF LOWER AUTHORITIES TAXING THE CONTRIBUTION ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 5 TOWARDS SPECIAL DEVELOPMENT FUNDS (FOR GIVING NOC ) AS LIABLE TO TAX. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE IN ALL THE YEARS UNDER CONSIDERATION. 9 . THE NEXT GROUND TAKEN BY THE ASSESSEE IN THE ASSESSMENT YEAR 2003 - 04 AND 2005 - 06 PERTAINS TO TAXING LAND PREMIUM ON TRANSFER IN EXCESS OF RS.25,000/ - TAXED BY THE AO. 10 . LD . AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN CASE OF THE FRIENDS CO - OP HOUSING SOCIETY LTD., ITA NO.962/MUM/2010, ORDER DATED 22 - 10 - 2010, WHEREIN EXACTLY SIMILAR ISSUE WAS DEALT WITH AND ALLOWED IN FAVOUR OF THE ASSESSEE. THE PRECISE OBSERVATION OF THE B ENCH WAS AS UNDER : - 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE LD. CIT(A) WHILE DELETING BOTH THE ADDITIONS HAS FOLLOWED T HE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN SIND COOPERATIVE HOUSING SOCIETY (SUPRA). 8. IN THE SIND CO - OPERATIVE HOUSING SOC. (SUPRA) IT HAS BEEN HELD AS UNDER (PLACITUM 44 - 46, PAGE 62 - 63 OF 317 ITR) : LET US NOW APPLY THE VARIOUS TESTS WHICH ARE TO BE CONSIDERED FOR APPLYING THE PRINCIPLE OF MUTUALITY TO A CASE OF A COOPERATIVE 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 - OPERATIVE HOUSING SOCIET Y. IN THE CASE OF THE CO - OPERATIVE HOUSING SOCIETY, ADMITTEDLY, THERE IS NO COMMERCIALITY INVOLVED. ONCE THERE IS NO COMMERCIALITY INVOLVED THE FIRST TEST OF PROFITABILITY DOES NOT EXIST. THE FIRST REQUIREMENT OF MUTUALITY IS, THEREFORE, MET. (2) FROM TH E MONEYS RECEIVED ARE THE SERVICES OFFERED IN THE NATURE OF PROFIT SHARING OR PRIVILEGES, ADVANTAGES AND CONVENIENCES. IN THE CASE OF A CO - OPERATIVE HOUSING SOCIETY, THE ONLY ACTIVITIES WHICH IT CAN CARRY OUT IN TERMS OF ITS BYE - LAWS ARE BASICALLY MAINTE NANCE OF ITS PROPERTY WHICH INCLUDES BUILDING OR BUILDINGS. ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 6 THE SUBSCRIPTION AND/OR CONTRIBUTIONS RECEIVED BY THE MEMBERS CAN ONLY BE EXPENDED FOR THE PURPOSES OF MAINTENANCE AND PROVIDING OTHER PRIVILEGES, ADVANTAGES AND CONVENIENCES TO ITS MEMBERS IN TER MS OF ITS BYE - LAWS. ANOTHER TEST OF MUTUALITY IS THUS SATISFIED. (3) ARE THE PARTICIPANTS AND CONTRIBUTORS IDENTIFIABLE AND BELONG TO THE SAME CLASS IN THE CASE OF CO - OPERATIVE HOUSING SOCIETY. THE CLASS OF MEMBERS ARE CLEARLY IDENTIFIABLE. MEMBERS ARE ORDINARY MEMBERS OR ASSOCIATE MEMBERS. THE PARTICIPANTS AND CONTRIBUTORS ARE THE MEMBERS. THE MEMBERS MAY COME IN OR GO OUT. THE FACT THAT ONLY SOME MEMBERS FROM THOSE WHO CONTRIBUTED MAY PARTICIPATE IN THE SURPLUS, AS HELD BY THE SUPREME COURT, IS IRRELE VANT AS LONG AS THE CLASS IS IDENTIFIABLE. THIS TEST IS ALSO SATISFIED IN THE CASE OF A HOUSING CO - OPERATIVE SOCIETY. (4) DO THE MEMBERS HAVE THE RIGHT TO SHARE IN THE SURPLUS AND DO THEY HAVE A RIGHT TO DEAL WITH ITS SURPLUSES. IN TERMS OF THE BYE LAW S IT IS ONLY THE MEMBERS WHO HAVE A RIGHT TO SHARE IN THE SURPLUS. UNDER THE MAHARASHTRA COOPERATIVE SOCIETIES ACT, NO PART OF THE FUNDS, AS PROVIDED IN SECTION 64 CAN BE PAID BY WAY OF BONUS OR DIVIDEND OR OTHERWISE DISTRIBUTED AMONG ITS MEMBERS EXCEPT AS PROVIDED THEREIN. UNDER SECTION 67, THERE IS A LIMIT ON THE DIVIDEND TO BE PAID ON LIQUIDATION. UNDER SECTION 110 OF THE MAHARASHTRA COOPERATIVE SOCIETIES ACT, THE SURPLUS CAN ONLY BE DEALT WITH IN THE MANNER PROVIDED THEREIN WHICH INCLUDES ANY MEMBER OR DEVOTED TO OBJECTS PROVIDED BY THE BYE - LAWS OR BE TRANSFERRED TO ANOTHER SOCIETY WITH SIMILAR OBJECT. RULE 90 OF THE RULES PROVIDE HOW THE SURPLUS IS TO BE DIVIDED. THE SURPLUS THUS CAN BE DISTRIBUTED IN TERMS OF THE BYE - LAWS TO MEMBERS AND/OR BY OPERATION OF LAW TO ANOTHER SOCIETY HAVING THE SAME OBJECTIVE. IN OTHER WORDS, YET ANOTHER TEST OF MUTUALITY IS SATISFIED. ONCE THESE TESTS ARE SATISFIED, IN OUR OPINION, THERE CAN BE NO DOUBT THAT THE PRINCIPLE OF MUTUALITY WILL APPLY TO A CO - OPERATIVE HOUSING S OCIETY WHICH HAS AS ITS PREDOMINANT ACTIVITY, THE MAINTENANCE OF THE PROPERTY OF THE SOCIETY WHICH INCLUDES ITS BUILDING OR BUILDINGS AND AS LONG AS THERE IS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS. FOR ALL THE AFORESAID REASONS, THE QUESTIONS AS FRAM ED WILL HAVE TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LD. DR WE RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT (SUPRA), HOLD THAT TH E AMOUNT OF TRANSFER FEE OF RS.5,81,000/ - AND TDR PREMIUM AMOUNT OF RS.5,97,725/ - ARE NOT TAXABLE ON THE PRINCIPLE OF MUTUALITY AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING BOTH THE ADDITIONS MADE BY THE ASSESSING OFF ICER. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 9. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 7 1 1 . RELIANCE WAS ALSO PLACED BY LD. AR ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MITTAL COURT PREMISES CO - OPERATIV E SOCIETY LTD., 184 TAXMAN 292, HELD AS UNDER : - THE ASSESSEE WAS A CO - OPERATIVE COMMERCIAL HOUSING SOCIETY. ITS OBJECTS WERE TO MANAGE, MAINTAIN AND ADMINISTER THE PROPERTY OF THE SOCIETY; TO UNDERTAKE AND PROVIDE AMENITIES AND FACILITIES FOR THE BENEFIT OF ITS MEMBERS OR FOR PUBLIC BENEFIT ON ITS OWN ACCOUNT OR JOINTLY WITH THE OTHER CO - OPERATIVE INSTITUTIONS; AND TO ORGANISE SOCIAL, CULTURAL OR RECREATIONAL ACTIVITIES. IT RECEIVED TRANSFER FEE AND NON - OCCUPANCY CHARGES FROM EXISTING/NEW MEMBERS AND CONTE NDED THAT SAME WAS NOT TAXABLE ON PRINCIPLE OF MUTUALITY. THE TRIBUNAL NOTED THAT THE TRANSFEREES WERE, ADMITTEDLY, NOT THE MEMBERS OF THE ASSESSEE - SOCIETY ON THE DATE ON WHICH THE PAYMENTS WERE MADE TO THE ASSESSEE - SOCIETY AND THEY WERE ADMITTED AS MEMBER S OF THE SOCIETY AND FLATS WERE ENTERED IN THEIR NAMES ONLY AFTER THE IMPUGNED PAYMENTS WERE MADE TO THE ASSESSEE - SOCIETY. IT WAS ALSO FOUND THAT THE AMOUNTS WERE PAID IN EXCESS OF THE GOVERNMENT NOTIFICATION. THE TRIBUNAL, THEREFORE, HELD THAT AMOUNTS REC EIVED BY THE ASSESSEE AS TRANSFER FEES WERE EXIGIBLE TO TAX. AS REGARDS NON - OCCUPANCY CHARGES, THE TRIBUNAL REFERRED TO THE GOVERNMENT NOTIFICATION, DATED 1 - 8 - 2001, WHICH SET OUT THAT THE SOCIETY SHOULD NOT COLLECT NON - OCCUPANCY CHARGES AT THE RATE EXCEEDI NG 10 PER CENT OF THE SERVICE CHARGES (EXCLUDING MUNICIPAL CORPORATION/NAGAR PALIKA TAXES). THE TRIBUNAL FOUND THAT THE NON - OCCUPANCY CHARGES COLLECTED BY THE ASSESSEE - SOCIETY WERE IN EXCESS OF THE LIMITS LAID DOWN BY THE AFORESAID NOTIFICATION. IT REMANDE D THE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO TREAT NON - OCCUPANCY CHARGES RECEIVED BY THE ASSESSEE - SOCIETY OVER AND ABOVE THE 10 PER CENT OF THE MAINTENANCE CHARGES AS NON - TAXABLE IN ITS HANDS, AS THE SAME WAS GOVERNED BY THE PRINCIPLES OF MUTUA LITY. HELD THE RESTRICTIONS IMPOSED BY THE NOTIFICATIONS ISSUED BY THE STATE OF MAHARASHTRA ON THE AMOUNT OF TRANSFER FEE WHEN THE MEMBER DESIRES TO TRANSFER HIS SHARES OR OCCUPANCY RIGHTS ARE ONLY IN RESPECT OF HOUSING RESIDENTIAL SOCIETIES. IN THE INSTAN T CASE, THE ASSESSEE WAS NOT A HOUSING RESIDENTIAL SOCIETY AND, CONSEQUENTLY, THOSE NOTIFICATIONS WOULD NOT BE APPLICABLE. THE BYE - LAWS OF THE SOCIETY WERE NOTHING BUT THE CONTRACT BETWEEN THE SOCIETY AND THE MEMBERS. UNDER THOSE BYE - LAWS, IT WAS THE MEMBE R WHO HAD TO MAKE THE PAYMENT. ANY INTER SE ARRANGEMENT BETWEEN THE INCOMING MEMBERS AND THE TRANSFEREE WAS IRRELEVANT INSOFAR AS THE SOCIETY WAS CONCERNED. THERE WAS AN AGREEMENT BY WHICH THE AMOUNT WAS PAID BY THE TRANSFEREE. INSOFAR AS THE ASSESSEE - SOCI ETY WAS CONCERNED, EVEN IF RECEIPT WAS ISSUED IN THE NAME OF TRANSFEREE, IT WAS IN THE NATURE OF ADMISSION FEE WHICH COULD BE APPROPRIATED ONLY ON THE TRANSFEREE BEING ADMITTED. MERELY BECAUSE THE AMOUNT MIGHT BE APPROPRIATED EARLIER, IT WOULD NOT LOOSE TH E CHARACTER OF THE ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 8 AMOUNT BEING PAID BY A MEMBER. IN THOSE CIRCUMSTANCES, THE IDENTITY OF THE CONTRIBUTOR AND BENEFICIARY BEING SATISFIED AND CONSIDERING THE PROVISIONS OF THE MAHARASHTRA CO - OPERATIVE SOCIETIES ACT AND THE RULES FRAMED THEREUNDER, SURPLUS COULD BE DISPOSED OF IN FAVOUR OF THE MEMBERS ONLY OR FOR THE OBJECTS FOR WHICH THEY WOULD SPECIFY. IN THOSE CIRCUMSTANCES, THE TRIBUNAL ERRED IN HOLDING THAT THE CONTRIBUTION TO COMMON AMENITY FUND REPAIRS AND WELFARE FUND BEING THE FIRST CONTRIBUTION MAD E BY THE EXISTING/NEW MEMBER WAS TRANSFER FEE. [PARA 7] SO FAR AS NON - OCCUPATION CHARGES WERE CONCERNED, BYE - LAWS OF THE SOCIETY THEMSELVES PROVIDED FOR NON - OCCUPATION CHARGES. THE CONTRIBUTION, THEREFORE, WAS BY THE MEMBER. OBJECT OF THE CONTRIBUTION WAS FOR THE PURPOSE OF INCREASING THE SOCIETY'S FUNDS, WHICH COULD BE USED FOR THE OBJECTS OF THE SOCIETY. OBJECT OF THE SOCIETY WAS TO PROVIDE SERVICES, AMENITIES AND FACILITIES TO ITS MEMBERS. IN THOSE CIRCUMSTANCES, THE PRINCIPLE OF MUTUALITY MUST ALSO APPL Y. THERE WAS NO ELEMENT OF PROFITEERING. THE MATTER HAD BEEN REMANDED BY THE TRIBUNAL. THE TRIBUNAL HAD DIRECTED THE ASSESSING OFFICER TO TREAT NON - OCCUPANCY CHARGES RECEIVED BY THE ASSESSEE - SOCIETY, WHICH WAS A PREMISES SOCIETY, OVER AND ABOVE THE 10 PER CENT OF THE MAINTENANCE CHARGES AS NON - TAXABLE IN ITS HANDS AS THE SAME WAS GOVERNED BY THE PRINCIPLES OF MUTUALITY. [PARA 8] APART FROM THAT, EVEN ASSUMING THAT THE GOVERNMENT NOTIFICATIONS WERE APPLICABLE, IF THE SOCIETY COULD NOT HAVE CHARGED EXCESS AMO UNT, IT WOULD HAVE TO BE REFUNDED TO THE MEMBERS. A MEMBER IS NOT PROHIBITED FROM GIFTING ANY AMOUNT TO THE SOCIETY FOR THE OBJECTS OF THE SOCIETY. THE PRINCIPLE OF MUTUALITY WOULD NOT CEASE ON ACCOUNT OF THOSE ASPECTS. AT THE HIGHEST, AUTHORITIES UNDER TH E CO - OPERATIVE SOCIETIES ACT AND RULES, IF ANY ACTION IS TAKEN, MAY DIRECT AN ADDITIONAL AMOUNT TO BE REFUNDED. THEREFORE, IN RESPECT OF CONTRIBUTION BY WAY OF NON - OCCUPANCY CHARGES, PRINCIPLE OF MUTUALITY WOULD APPLY. [PARA 9] 12. AFTER CONSIDERING RIVAL CONTENTIONS AND FACTS AND CIRCUMSTANCES OF THE CASE, WE FOUND THAT THIS ISSUE IS ALSO COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND COOPERATIVE HOUSING SOCIETY, 317 ITR 47, WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER : - IF THE OBJECT OF THE ASSESSEE COMPANY CLAIMING TO BE A 'MUTUAL CONCERN' OR 'CLUB' IS TO CARRY ON A PARTICULAR BUSINESS AND MONEY IS REALIZED BOTH FROM THE MEMBERS AND FROM NON - MEMBERS, FOR THE SAME CONSIDERATION, BY GIVING THE SAME OR SIMILAR FACILITIES TO A LL ALIKE IN RESPECT OF THE ONE AND THE SAME BUSINESS CARRIED ON BY IT, THE DEALINGS AS A WHOLE DISCLOSE THE SAME PROFIT EARNING MOTIVE AND ARE ALIKE TAINTED WITH COMMERCIALITY. ON THE OTHER HAND, IF IT IS ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 9 MERELY A MUTUAL ARRANGEMENT WHETHER FEES OR SUBSCRI PTIONS ARE COLLECTED FOR EXTENDING FACILITIES TO MEMBERS LIKE USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES EVEN IF SOME SURPLUS IS GENERATED, THEN THAT SURPLUS CANNOT BE REGARDED AS PROFIT AS LONG AS THE CONTRIBUTORS AND PARTICIPANTS AS A CLASS ARE THE SA ME AND THEY HAVE A SAY OVER THE DISTRIBUTION OF THE SURPLUS. IN A CO - OPERATIVE HOUSING SOCIETY THERE CAN BE MEMBERS AND ASSOCIATE MEMBERS. WE HAVE ALREADY QUOTED FROM THE JUDGMENTS WHERE REFERENCE IS TO MEMBERS AS A CLASS AND THAT CLASS MAY BE DIMINISHED BY MEMBERS GOING OUT OR INCREASED BY THE MEMBERS COMING IN. BUT THE CLASS REMAINS THE SAME. THE ASSESSEE, A CO - OPERATIVE HOUSING SOCIETY, WAS REGISTERED WITH THE OBJECT PRINCIPALLY OF LOOKING AFTER THE PROPERTY INCLUDING BUILDING THEREON. THE BYE - LAWS OF THE ASSESSEE PERMITTED IT TO CHANGE A TRANSFER FEE IN TERMS OF THE NOTIFICATION ISSUED BY THE GOVERNMENT OF MAHARASHTRA . BYE - LAW 38(3)(IX) PROVIDED THAT THE ASSESSEE CAN CHARGE TRANSFER FEE AND THE MEMBERS B Y ADOPTING THE BYE - LAWS AGREED, AMONGST THEMSELVE S, THAT A FEE FOR TRANSFER OF FLAT/TENEMENT WHEN IT WAS SOLD WOULD BE PAID TO THE ASSESSEE. BOTH THE INCOMING OR THE OUTGOING MEMBER HAD TO CONTRIBUTE TO THE COMMON FUND OF THE ASSES SEE. THE AMOUNT PAID WAS TO BE EXCLUSIVELY USED FOR THE BENEFIT OF THE ME MBERS AS A CLASS. THE AMOUNT COULD ONLY BE APPROPRIATED ON THE TRANSFEREE BEING ADMITTED AS A MEMBER. IF THE TRANSFEREE WAS NOT ADMITTED AS A MEMBER, THE AMOUNT RECEIVED WOULD HAVE TO BE REFUNDED, AS THE AMOUNT WAS PAYABLE ONLY ON A TRANSFER OF RIGHTS OF T HE TRANSFEROR IN THE TRANSFEREE. THE AMOUNT LEGALLY CHARGEABLE AND RECEIVED WENT INTO THE FUND OF THE ASSESSEE WHICH WAS UTILIZED FOR THE REPAIRS OF THE PROPERTY AND COMMON BENEFITS TO ITS MEMBERS. ON APPEAL CONTENDING THAT THE TRIBUNAL OVERL OOKED THE PRIN CIPLE WHILE HOLD ING THAT CONTRIBUTION BY THE TRANSFEREE WOULD NOT ATTRACT THE PRINCIPLE OF MUTUALITY: HELD, ALLOWING THE APPEAL, (I) THAT WHETHER THE FEE WAS VOLUNTARY OR NOT WOULD MAKE NO DIFFERENCE TO THE PRINCIPLE OF MUTUALITY. PAYMENTS WERE MADE UNDE R THE BYE - LAWS OF THE ASSESSEE WHICH CONSTITUTED A CONTRACT BETWEEN THE ASSESSEE AND ITS MEMBERS WHIC H WAS V OLUNTAR ILY ENTERED INTO AND VOLUNTARILY CONDUCTED AS A MATTER OF CO NVENIENCE AND DISCIPLINE FOR RUNNING OF THE ASSES SEE - SOCI E TY. IF ANY AMOUNT WAS R ECEIVED MORE THAN WAS CHARGEABLE UNDER THE BYE - LAWS OR THE GOVERNMENT NOTIFICATION, THE ASSESSEE WAS BOUND TO REPAY THE AMOUNT AND IF IT RETAINED THE AMOUNT IT WOULD BE IN THE NATURE OF PROFIT MAKING THAT SPECIFIC AMOUNT EXIGIBLE TO TAX. UNDER THE BYE - LAWS , CHARGING OF TRANSFER FEES HAD NO ELEMENT OF TRADING OR COMMERCIALITY. SINCE THERE WAS NO TAINT OF COMMERCIALITY THE QUESTION OF EARNING PROFITS WOULD NOT ARISE WHEN THE ASSESSEE FROM THE FUNDS RECEIVED APPLIED THE MONEYS RECEIVED TOWARDS MAINTENANCE OF T HE SOCIETY AND PROVIDING THE MEMBERS WITH USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES. THUS, THE PRINCIPLE OF MUTUALITY WAS APPLICABLE TO THE ASSESSEE WHICH HAD AS ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 10 ITS PR EDOMINANT ACTIVITY, THE MAINTENANCE OF THE PROPERTY OF THE SOCIETY WHICH INCLUDED IT S BUILDINGS ) AND AS LONG AS THERE WAS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS, THE RECEIPT OF TR A NSFER FEES WAS NOT LIABLE TO TAX . 1 3 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR TAXING THE LAND PREMIUM ON TRANSFER RECEIVED FROM THE MEMBERS OF THE SOCIETY. 14. THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF SIND COOPERAT IVE HOUSING SOCIETY LTD. WAS NOT ACCEPTED BY THE AO ONLY ON THE PLEA THAT THE REVENUE IS IN FURTHER APPEAL BEFORE THE HON BLE SUPREME COURT AGAINST THE ORDER OF HON BLE HIGH COURT. THIS OBSERVATION OF THE AO IS DEVOID OF ANY MERIT. THE NON ACCEPTANCE OF HO N BLE BOMBAY HIGH COURTS JUDGMENT BY THE REVENUE IS NOT SUSTAINABLE IN VIEW OF THE SAME COURTS DECISION IN BANK OF BARODA VS. HC SRIVASTAVA AND OTHERS, 256 ITR 385 AS LAID DOWN BY THE MUMBAI TRIBUNAL IN ITO VS. GRAND PARADI CH SOCIETY LTD., ITAT G BENC H, MUMBAI IN ITA NO.521/MUM/2010, ORDER DATED 27 - 8 - 2010. 15 . IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09/10 / 201 5 . SD/ - SD/ - ( ) ( PAWAN SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09/10 /201 5 . . /PKM , . / PS ITA NO S . 5524 - 5526& 128 /20 1 2 & ITA NO.256/13 11 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//