M/s. Arun Vihar Residents Welfare Association, Noida V. JCIT, Noida

ITA 1978/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6973 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 250; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1978/DEL./2014 (ASSESSMENT YEAR : 2010-11) ARUN VIHAR RESIDENTS WELFARE ASSOCIATION, VS. JCIT, RANGE 1, KALYAN KENDRA, AVRWA, NOIDA. SECTOR 37, NOIDA 201 303. (PAN : AAAAA1958J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.P. GARG, CA REVENUE BY : SHRI S.K. JAIN, SENIOR DR DATE OF HEARING : 18.01.2017 DATE OF ORDER : 24.01.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ARUN VIHAR RESIDENTS WELFARE ASSOCI ATION (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 06.01.2014, PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), NOIDA UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (FOR SHO RT THE ACT) QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTE R ALIA THAT :- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF LD. AO IN MAKING AN ADDITION OF RS.19,50,000/- ON ACCOU NT OF TRANSFER CHARGES RECEIVED BY THE SOCIETY FROM OUTGO ING MEMBERS, BY HOLDING THAT THE SAME IS TO BE INCLUDED IN THE T AXABLE INCOME FOR ITA NO.1978/DEL./2014 2 THE RELEVANT ASSESSMENT YEAR OF THE APPELLANT ON AC COUNT OF RECEIPTS FROM THIRD PARTY NOT BEING EXEMPT FROM INCOME TAX B Y VIRTUE OF PRINCIPLE OF MUTUALITY. 2. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN FAILING TO APPRECIATE THAT THE OUTGOING M EMBERS SHALL CONTINUE TO BE THE MEMBERS OF THE SOCIETY TILL THEI R MEMBERSHIP ARE TRANSFERRED TO THE INCOMING MEMBERS AFTER PAYING TH E TRANSFER AND OTHER CHARGES AND COMPLYING ALL THE REQUIRED FORMAL ITIES. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE MEMBERSHIP OF SOCIETY OF A PERSON WOULD BE TRANSFER RED TO THE NEW MEMBER ONLY WHEN ALL HIS DUES ARE CLEARED. UNLESS A ND UNTIL, A MEMBER CLEARS ALL HIS DUES, HIS MEMBERSHIP WOULD NE VER BE TRANSFERRED TO THE NEW MEMBER BY THE SOCIETY. THUS, FIRSTLY TRANSFER CHARGES ARE RECEIVED BY THE SOCIETY FROM T HE OUTGOING MEMBERS AND THEN AFTER COMPLYING CERTAIN FORMALITIE S AND PROCEDURE LAID DOWN, MEMBERSHIP OF AN OUTGOING MEMB ER IS TRANSFERRED TO THE INCOMING MEMBER. 4. THAT THE LD CIT(A) HAS FAILED TO APPRECIATE THAT AN OUTGOING MEMBER IS DIFFERENT FROM AN OUTGONE MEMBER . OUTGOING MEMBER LITERALLY MEANS A PERSON WHOSE MEMBERSHIP IS YET TO BE TRANSFERRED AND HAS NOT BEEN TRANSFERRED YET SO FAR . HE STILL CONTINUES TO BE A MEMBER OF THE SOCIETY. AN OUTGONE MEMBER MEANS A PERSON, WHOSE MEMBERSHIP HAS BEEN TRANSFERR ED. AN OUTGOING MEMBER WOULD FIRST CLEAR HIS DUES AND THEN APPLY TO THE SOCIETY FOR THE TRANSFER OF MEMBERSHIP TO THE SOCIE TY AND THERE AFTER HIS MEMBERSHIP WOULD BE TRANSFERRED. THE LD CIT(A) HAS USED IN ORDER ISSUED U/S 250 IN PARA 5. OBERSAVATIONS GROUN D 0.2 ON PAGE 7, 'IN CASE OF TRANSFER CHARGES SO COLLECTED F ROM THE OUTGOING MEMBERS, WHO LEFT THE SOCIETY BY SELLING HIS HOUSE, ..... '. CORRECTLY, IT SHOULD BE WHO WOULD LEAVE THE SOCIETY . IF AN OUTGOING HAS LEFT THE MEMBERSHIP OF THE SOCIETY, HE WOULD BE COME' AN OUTGONE MEMBER AND NOT AN OUTGOING MEMBER. AN OUTGO ING MEMBER CAN NOT LEAVE THE MEMBERSHIP OF THE SOCIETY IN THE PAST? IF THE MEMBERSHIP OF A PERSON IS YET TO BE TRANSFERRED IN FUTURE, THE WORD 'LEFT' [ PAST TENSE OF 'LEAVE' ] CAN NOT BE US ED AT ALL. 5. THAT NOBODY WOULD PAY ANY SUM TO A RESIDENT WELF ARE SOCIETY AS A DONATION GRATUITOUSLY FOR FREE-SHIPS U NLESS THERE IS SOME OBLIGATION OR COMPULSION TO PAY THE SAME. SOCI ETY HAS NO AUTHORITY TO CHARGE ANY SUM FROM ANY PERSON ON ANY ACCOUNT, UNLESS THE CONCERNED PERSON IS ITS MEMBER. EVEN, TH E SOCIETY CANNOT CHARGE ANY SUM FROM THE TENANTS RESIDING IN THE FLATS IN ITS AREA. IN FACT, BEING A MEMBER, A PERSON GETS CERTAI N FACILITIES AND ENJOYS SEVERAL BENEFITS, RIGHTS AND PRIVILEGES. ARU N VIHAR RESIDENTS WELFARE SOCIETY IS NOT A CHARITABLE SOCIETY. IT IS BASICALLY A MUTUAL BENEFIT ASSOCIATION. IT GETS THE MONEY FROM ITS MEM BERS AND IN TURN INCURS THE SAME FOR PROVIDING THE SERVICES TO THEM. ITA NO.1978/DEL./2014 3 6. THAT THE TRANSFER CHARGED RECEIVED BY THE SOCIET Y FROM ITS MEMBERS IS NOT TAXABLE ON ACCOUNT OF PRINCIPLE OF M UTUALITY. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, M ODIFY OR DELETE ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEFLY STATED FACTS OF THIS CASE ARE : ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2010-11 DECLARING INCOME AT RS.20, 77,506/-, WHICH WAS PUT TO SCRUTINY. ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS DECLARED NET TAXABLE INCOME AT RS.20,7 7,506/- AFTER EXCLUDING MISCELLANEOUS RECEIPT OF RS.1,53,923/- AN D TRANSFER CHARGES RECEIPTS OF RS.19,50,000/-. ASSESSEE IN RE SPONSE TO THE EXPLANATION SOUGHT BY THE AO SUBMITTED THAT INCOME RECEIVED FROM MEMBERS OF THE SOCIETY ON ANY ACCOUNT IS NOT TAXABL E UNDER THE PROVISIONS OF THE ACT BEING MUTUALLY BENEFICIAL FOR THE SOCIETY. FINDING THE EXPLANATION MADE BY THE ASSESSEE NOT TE NABLE, AO MADE AN ADDITION OF RS.19,50,000/- AND ASSESSED THE TOTAL INCOME AT RS.41,15,010/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS DISMISSED THE APPEAL. FE ELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.1978/DEL./2014 4 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CONTENDED THAT TRANSFER FEE RECEIVED BY THE ASSESSEE SOCIETY FROM OUTGOING MEMBERS IS NO T SUBJECT TO TAX AS IT IS MERELY A FEE FOR SUBSTITUTION OF THE O UTGOING MEMBER WITH INCOMING MEMBER BY VIRTUE OF OWNERSHIP. HOWEV ER, ON THE OTHER HAND, LD. DR FOR THE REVENUE REPELLED THE ARG UMENT BY CONTENDING THAT THE PRINCIPLE OF MUTUALITY IS NOT A TTRACTED IN THIS CASE AS THE OUTGOING MEMBER IS NOT TO GET BENEFIT O UT OF THE FUNDS AVAILABLE WITH THE SOCIETY IN ANY MANNER WHATSOEVER AND RELIED UPON THE DECISION RELIED UPON BY ITAT, MUMBAI BENCH C IN CASE OF OVAL SHIV-SHANTI BHUVAN COOPERATIVE HOUSING SOCIETY LTD. VS. ITO (2001) 78 ITR 403 (MUM.). 6. FROM THE ARGUMENT ADDRESSED BY THE LD. REPRESENT ATIVES OF THE PARTIES, ORDER PASSED BY THE REVENUE AUTHORITIE S BELOW AND THE CASE LAW RELIED UPON, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER TRANSFER CHARGES COLLECTED BY THE ASSESSEE SOCIETY FROM OUTGOING MEMBERS WHO HAVE LEF T THE SOCIETY BY SELLING HIS FLAT ARE EXEMPTED FROM T AX BY VIRTUE OF PRINCIPLE OF MUTUALITY AS CONTENDED BY LD . COUNSEL FOR THE ASSESSEE? 7. UNDISPUTEDLY, THE ASSESSEE SOCIETY BEING REGISTE RED UNDER THE SOCIETIES REGISTRATION ACT HAS COLLECTED AMOUNT OF RS.19,50,000/- ITA NO.1978/DEL./2014 5 ON ACCOUNT OF TRANSFER CHARGES FROM THE OUTGOING ME MBERS WHO HAVE LEFT THE SOCIETY BY SELLING HIS PLOT. IT IS A MATTER OF COMMON KNOWLEDGE THAT THE CHARGES COLLECTED BY THE RESIDEN T WELFARE SOCIETY, THE ASSESSEE IN THIS CASE IS TO BE INCURRE D FOR THE WELFARE OF THE MEMBERS OF THE SOCIETY TO CLAIM EXEMPTION BY VI RTUE OF THE PRINCIPLE OF MUTUALITY. WHEN OUTGOING MEMBER DEPOS ITS A PARTICULAR AMOUNT ON ACCOUNT OF TRANSFER FEES BY VI RTUE OF THE SALE TO SOME OTHER PERSON, THE OUTGOING MEMBER IS NOT TO GET ANY BENEFIT FROM THE CORPUS OF THE SOCIETY TO BE USED FOR SOCIE TYS WELFARE. TO OUR MIND, IT IS NOT MERE SUBSTITUTION OF OUTGOING M EMBER WITH INCOMING MEMBER BECAUSE INCOMING MEMBER TO AVAIL OF THE BENEFIT OF WELFARE ACTIVITY OF THE SOCIETY IS TO INCUR HIS OWN FUNDS BY WAY OF MEMBERSHIP FEES, ANNUAL FEE OR WELFARE FUNDS. I N THESE CIRCUMSTANCES, THE STATUS OF OUTGOING MEMBER OF THE ASSESSEE SOCIETY TURNS TO BE A STATUS OF A THIRD PARTY. SO, IN THE GIVEN CIRCUMSTANCES, ASSESSEE SOCIETY IS NOT ENTITLED FOR EXEMPTION FOR TAX ON THE AMOUNT OF RS.19,50,000/- BY VIRTUE OF TH E PRINCIPLES OF MUTUALITY. 8. COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF OVAL SHIV- SHANTI BHUVAN COOPERATIVE HOUSING SOCIETY LTD. (SUPRA) DEALT WITH THE IDENTICAL ISSUE AND BY RELYING UPON THE DE CISIONS RENDERED BY HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. PRESIDENCY ITA NO.1978/DEL./2014 6 COOPERATIVE HOUSING SOCIETY LTD. (1995) 216 ITR 3 21, HELD THAT THE TRANSFER FEE COLLECTED BY ASSESSEE SOCIETY FROM OUTGOING MEMBER ON SALE OF HIS FLAT TO THEIR PARTY IS TAXABL E AND PRINCIPLE OF MUTUALITY DOES NOT APPLY IN THIS CASE. 9. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND BY FOLLOWING THE DECISION RENDERED BY COORDINATE BENCH OF THE TRIBUNAL IN CASE OF OVAL SHIV-SHANTI BHUVAN COOPERATIVE HOUSING SOCIETY LTD. (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT COLLECTED BY THE ASSESSEE SOCIETY WAS NO T ON ACCOUNT OF TRANSFER OF ANY OF ITS CAPITAL ASSET NOR THE SAID A MOUNT HAS BEEN RECEIVED BY THE ASSESSEE FOR CREATION OF ANY NEW RI GHTS IN THE CAPITAL ASSET AND AS SUCH, IS ASSESSABLE TO TAX AS INCOME OF THE SOCIETY, SO FINDING NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETURNED BY LD. CIT (A), PRESENT APPEAL FILED BY TH E ASSESSEE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF JANUARY, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 24 TH DAY OF JANUARY, 2017 TS ITA NO.1978/DEL./2014 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A), NOIDA. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.