M/s. SIND WORK CO-OP. HOUSING SOC. LTD., MUMBAI V. ITO - 16(2)(1), MUMBAI

ITA 1748/MUM/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49196 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 11-04-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 14-03-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E : MUMBAI BEFORE SHRI R.S. PADVEKAR,(JM) AND SHRI RAJENDRA S INGH ,(AM) ITA NO.1748/MUM/2006 ASSESSMENT YEAR :1999-2000 SIND WORK CO-OPERATIVE HSG. SOCIETY LTD. SKY SCRAPER BUILDING 4/897, BHULABHAI DESAI ROAD MUMBAI-400 026. ..( APPELLANT ) P.A. NO. (AAAAS 7077 A) VS. INCOME TAX OFFICER WARD 16(2)(1) MUMBAI-. ..( RESPONDENT ) APPELLANT BY : SHRI M. SUBRAMANIAN RESPONDENT BY : SHRI P .C. MAURYA O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.11.2005 OF CIT(A) FOR THE ASSESSMENT YEAR 1999-0 0. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON FOUR GROUNDS. 2. THE FIRST DISPUTE IS REGARDING ADDITION OF RS .8.00 LACS ON ACCOUNT OF VOLUNTARY CONTRIBUTION MADE BY THE MEMBERS TO THE R EPAIR FUNDS. THE ASSESSEE SOCIETY HAD RECEIVED A SUM OF RS .4.00 LACS FROM M/S. DARYANI CONSTRUCTION PVT. LTD. AN OUTGOING MEMBER ON 25.6. 1996 AND THE FLAT OCCUPIED BY IT WERE TRANSFERRED ON 8.9.1999. SIMIL ARLY SOCIETY HAD RECEIVED RS.4.00 LACS FROM MS. REKHA J. HEMRAJANI AN INCOMING MEMBER ON 25.5.1998 AND THEN THE FLAT WAS TRANSFERRED IN HER NAME ON 9. 8.1998. THE ASSESSEE HAD CLAIMED THE ABOVE AMOUNTS AS EXEMPT ON THE PRIN CIPLE OF MUTUALITY PLACING RELIANCE ON THE DECISION OF THE SPECIAL BEN CH IN THE CASE OF WALKESHWAR TRIVENI CO-OPERATIVE HSG. SOC. LTD. VS. I TO IN 267 ITR 86(AT) ITA NO.1748/M/06 A.Y:99-00 2 AND SEVERAL OTHER DECISIONS OF THE TRIBUNAL. THE ASSESSING OFFICER OBSERVED THAT AS PER CLAUSE 40(D)(7) OF THE BYE-LAWS OF THE SOCIETY, THE ASSESSEE COULD NOT HAVE CHARGED MORE THAN RS.25,000/- TOWARDS PREM IUM ON TRANSFER OF FLATS. THERE WAS THEREFORE A PROFIT MOTIVE IN CHARG ING THE PREMIUM. THE ASSESSING OFFICER ALSO OBSERVED THAT PAYMENT WAS NO T VOLUNTARY AND WAS COERCIVE IN NATURE AND WAS INEXTRICABLY LINKED TO T HE TRANSFER OF THE FLATS. HE THEREFORE, ADDED THE SUM OF RS.8.00 LACS TO THE TOT AL INCOME. IN APPEAL THE ASSESSEE SUBMITTED THAT ALTERNATIVELY AT LEAST A SU M OF RS.25,000/- BEING MINIMUM AMOUNT OF TRANSFER FEES AS PER REQUIREMENT OF STATE GOVT. LAWS SHOULD BE ALLOWED. THE ASSESSING OFFICER HOWEVER O BSERVED THAT THE ASSESSEE COULD NOT CLARIFY AS TO WHETHER ANY TRANSF ER FEE WAS COLLECTED FROM THE MEMBERS AS PER BYE-LAWS. CIT(A) THEREFORE CONF IRMED THE ADDITION. AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. T HE DISPUTE IS REGARDING ADDITION TO TOTAL INCOME ON ACCOUNT OF CO NTRIBUTION MADE BY BOTH OUTGOING AND INCOMING MEMBERS AS TRANSFER FEES. TH IS ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF MITTAL COURT PREMISES CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO ( 320 ITR 414). IN THE SAID CASE THE HONBLE HIGH COURT OBSERVED THAT BYE-LA WS OF SOCIETY WAS NOTHING BUT CONTRACT BETWEEN SOCIETY AND MEMBERS. UNDER THE BYE-LAWS IT WAS THE MEMBER WHO WAS TO MAKE THE PAYMENT AND ANY INTER SE ARRANGEMENT BETWEEN ANY INCOMING MEMBER AND TRANSFE REE IS IRRELEVANT IN SO FAR AS SOCIETY WAS CONCERNED. EVEN IF THE RECEI PT WAS ISSUED IN THE NAME OF THE TRANSFEREE, IT WAS IN THE NATURE OF ADMISSIO N FEE WHICH COULD BE APPROPRIATED ONLY ON THE TRANSFEREE BEING ADMITTED. MERELY BECAUSE THE AMOUNT COULD BE APPROPRIATED EARLIER IT WILL NOT LO OSE CHARACTER OF THE AMOUNT BEING PAID BY THE MEMBER. THE HONBLE HIGH COURT THE REFORE, HELD THAT THE IDENTITY OF THE CONTRIBUTOR AND BENEFICIARY WERE SA TISFIED BOTH IN CASE OF INCOMING MEMBER AND OUT GOING MEMBER. FURTHER THE SURPLUS COULD BE USED ONLY FOR THE MEMBERS FOR THE SPECIFIC OBJECTIVES. IT WAS ACCORDINGLY HELD THAT ITA NO.1748/M/06 A.Y:99-00 3 NO ADDITION CAN BE MADE. THE HONBLE HIGH COURT FOLL OWING THE EARLIER JUDGMENT, IN THE CASE OF SIND CO-OPERATIVE HOUSING S OCIETY LTD.( 317 ITR 47) IN WHICH IT WAS HELD THAT TRANSFER FEES RECEIVE D BOTH FROM THE INCOMING AD OUTGOING MEMBERS AS PER THE BYE-LAWS OF THE SOCI ETY IS COVERED BY THE PRINCIPLE OF MUTUALITY AS THE MEMBERS ALONG HAVE RI GHT TO SHARE SURPLUS. RESPECTFULLY FOLLOWING THE SAID JUDGMENTS THE ADDIT ION MADE IS DELETED. 4. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.3 ,16,500/- ON ACCOUNT OF LEAVE AND LICENCE FEE. THE ASSESSEE HAD DISCLOS ED RECEIPT OF RS.1,65,000/- FROM A BUILDING AND RS.1,51,000/- FROM B BUILDING A S LEAVE AND LICENCE FEES. THE ASSESSING OFFICER OBSERVED THAT THE AMOUNTS REC EIVED WERE NOT VOLUNTARY AND HAD BEEN COLLECTED WITH PROFIT MOTIVE. IT WAS ALSO OBSERVED BY HIM THAT IT WAS NOT A CASE OF CONTRIBUTION TO COMMON FUND AN D THEREFORE, PRINCIPLE OF MUTUALITY WOULD NOT APPLY. THE ASSESSING OFFICER A CCORDINGLY ADDED THE SAID AMOUNT TO TOTAL INCOME. IN APPEAL THE ASSESSEE SUB MITTED THAT THE AMOUNTS COLLECTED REPRESENTED NON-OCCUPANCY CHARGES LEVIED ON THE MEMBER OCCUPYING THE FLAT BUT PAID BY OTHERS IN LIEU OF TH E SCHEME OF BYE-LAWS APPROVED BY THE GOVERNMENT OF MAHARASHTRA. THE CIT (A) HOWEVER OBSERVED THAT THE ASSESSEE COULD NOT EXPLAIN AS TO HOW RECEI PTS WERE CONSIDERED AS COVERED BY PRINCIPLE OF MUTUALITY. THE SPECIFIC PR OVISION OF BYE-LAWS OR THE SCHEME OF THE STATE GOVERNMENT WERE NOT BROUGHT TO THE NOTICE OF THE CIT(A). HE ALSO OBSERVED THAT NEXUS OF LEAVE AND LI CENCE FEE WITH NON OCCUPANCY CHARGES WAS ALSO NOT ELABORATED. THE CIT( A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER, AGGRIEVED B Y WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING ASSES SABILITY OF INCOME ON ACCOUNT OF NON-OCCUPANCY CHARGES PAYABLE BY THE MEM BER ON THE GROUND THAT THE MEMBER IS NOT OCCUPYING THE PREMISES. THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF MITTAL COURT PREMISES CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO ( 320 ITR 414). THE HIGH ITA NO.1748/M/06 A.Y:99-00 4 COURT IN THE SAID CASE HELD THAT THE OBJECT OF THE CONTRIBUTION WAS FOR THE PURPOSE OF INCREASING THE SOCIETY FUNDS WHICH COULD BE USED FOR THE OBJECT OF THE SOCIETY WHICH WAS TO PROVIDE SERVICE, AMENITIES AND FACILITIES TO THE MEMBERS. THERE WAS THEREFORE, NO ELEMENT OF PROFIT AND PRINCIPLE WAS SATISFIED. RESPECTFULLY FOLLOWING THE SAID JUDGMEN T, NO ADDITION COULD BE MADE ON ACCOUNT OF INCOME FROM NON-OCCUPANCY CHARGE S. WE THEREFORE SET ASIDE THE SAID ORDER OF THE CIT AND DELETE THE ADDI TION MADE BY THE ASSESSING OFFICER. 6. THE THIRD DISPUTE IS REGARDING THE ADDITION OF R S.4,20,220/- BEING INTEREST RECEIVED FROM FRENCH BANK. FACTS RELATED TO THE DISPUTE ARE THAT THE ASSESSEE SOCIETY HAD SOLD BASEMENT FOR A SUM OF RS. 76.00 LACS ON 27.5.1993 TO M/S. CREDENCE SOUND & VISION. THERE WAS HOWEVER DISPUTE BETWEEN THE PARTIES AND 10% OF THIS AMOUNT I.E. RS.7.06 LACS H AD TO BE DEPOSITED WITH THE SOLICITOR GAGRAT & CO. AS PER DIRECTION OF THE COURT AND BALANCE AMOUNT OF RS.68.40 LACS WAS RECEIVED BY THE ASSESSEE. AFTER P ROLONGED LITIGATION OF FOUR YEARS, M/S. CREDENCE SOUND & VISION WERE ADMITTED A S MEMBER ON PAYMENT OF BALANCE SUM OF RS.30.00 LACS. IT APPEARS FROM T HE RECORDS THAT GAGRAT & CO. HAD DEPOSITED THE AMOUNT RECEIVED WITH BANQUE N ATIONALE DE PARIS WHICH HAD ISSUED A TDS CERTIFICATE IN THE NAME OF THE SOL ICITOR M/S. GAGRAT & CO. SHOWING INTEREST OF RS.4,20,000/- AND CLAIMED CREDI T FOR TAX AT SOURCE OF RS.24,578/-. M/S. GAGRAT & CO. ALSO GAVE CERTIFICA TE THAT THEY HAD NOT CLAIMED CREDIT FOR THE TAX DEDUCTED AND THAT THE SI ND WORK CO.-OP HSG. SOC. I.E. THE ASSESSEE WAS THE OWNER OF THE DEPOSIT WHIC H HAD BEEN PLACED IN THEIR NAME FOR THE SAKE OF CONVENIENCE. THE INTEREST WAS THEREFORE INCOME OF THE SOCIETY. THE ASSESSING OFFICER ASSESSED THE INCOME OF RS .4,20,200/- IN THE NAME OF THE ASSESSEE. THE ASSESSEE DISPUTED THE DE CISION OF THE ASSESSING OFFICER AND SUBMITTED BEFORE THE CIT(A) THAT THE AM OUNT DEPOSITED WITH M/S. GAGRAT & CO. HAD BEEN RETURNED BACK IN THE PREVIOUS YEAR AND THEREFORE, THE SAME COULD NOT BE TAXED IN THIS YEAR. THE CIT(A) D ID NOT HOWEVER ACCEPT THE CONTENTION RAISED . IT WAS OBSERVED BY HIM THA T THERE WAS NO RE- CONCILLIATION OF INTEREST AS PER ACCOUNT. HE THERE FORE CONFIRMED THE ADDITION ITA NO.1748/M/06 A.Y:99-00 5 MADE BY THE ASSESSING OFFICER, AGGRIEVED BY WHICH T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6.1 BEFORE US THE LD. AR FOR THE ASSESSEE AGREED T HAT INTEREST HAD BEEN RECEIVED FROM A NON-CO-OPERATIVE SOCIETY AND THEREF ORE, PRINCIPLE OF MUTUALITY WAS NOT APPLICABLE. HOWEVER, HE ARGUED THA T AMOUNT DEPOSITED WITH GAGRAT & CO. HAD BEEN RECEIVED IN EARLIER YEAR AND THEREFORE, NO PART OF THE INTEREST IS RELATED TO THE YEAR UNDER CONSIDERA TION. THE INTEREST HAD ACCRUED AND RECEIVED IN EARLIER YEAR AND THEREFORE COULD NOT BE TAXED IN THIS YEAR. THE LD. DR ON THE OTHER HAND SUBMITTED THAT INTEREST HAS TO BE ASSESSED IN THE YEAR IN WHICH DISPUTE WAS SETTLED. 6.2 WE HAVE PERUSED THE RECORDS, CONSIDERED THE MAT TER CAREFULLY. THE DISPUTE IS REGARDING ASSESSMENT OF INTEREST RECEIVE D FROM FRENCH BANK. THE ASSESSEE HAD SOLD BASEMENT AND THERE BEING SOME DIS PUTE, 10% OF CONSIDERATION HAD BEEN DEPOSITED WITH THE SOLICITOR FIRM GAGRAT & CO. AS PER ORDER OF COURT . GAGRAT & CO. HAD DEPOSITED THE AM OUNT WITH FRENCH BANK WHICH HAD ISSUED TDS CERTIFICATE AS PER WHICH THERE WAS INTEREST INCOME OF RS.4,20,200/-. GAGRAT & CO. HAD ISSUED A CERTIFICA TE THAT IT HAD NOT CLAIMED TDS AS INTEREST INCOME BELONGED TO SOCIETY. THERE IS NO DISPUTE ABOUT ASSESSABILITY OF INCOME IN THE NAME OF THE ASSESSEE AS ASSESSEE WAS OWNER OF THE MONEY AND THE AMOUNT WAS ALSO NOT EXEMPT ON THE GROUND OF MUTUALITY AS INTEREST INCOME WAS RECEIVED FROM A NO N-CO-OP. SOCIETY. HOWEVER, ASSESSEE HAS CLAIMED THAT THE AMOUNT HAD BE EN RECEIVED IN THE EARLIER YEAR AND THIS CLAIM HAD NOT BEEN CONTROVERT ED BEFORE US. SINCE THE PRINCIPAL AMOUNT WAS RECEIVED IN THE PRECEDING YEAR , THERE COULD NOT BE ANY INTEREST RECEIVED FROM BANK IN THE CURRENT YEAR. T HE INTEREST PAID BY THE BANK OBVIOUSLY RELATED TO EARLIER YEARS WHICH CANNO T BE TAXED IN THIS YEAR. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AN D DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST. ITA NO.1748/M/06 A.Y:99-00 6 7. THE FOURTH DISPUTE IS REGARDING CARRY FORWARD OF LONG TERM CAPITAL LOSS OF RS.6,90,009/-. THE LD. AR FOR THE ASSESSEE DID NOT PRESS THIS GROUND AT THE TIME OF HEARING OF THE APPEAL AND THE GROUND IS THEREFORE, DISMISSED AS NOT PRESSED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN TERMS OF ORDER ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.6.2011. SD/- SD/- (R.S. PADVEKAR) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17.6.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.