SUMERU CHS HSG LTD, MUMBAI V. I.T.O. WARD 20(3)(3), MUMBAI

ITA 2171/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59662 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 16-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Gift

Judgement Text

1 SUMERU CHS HSG LTD IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI E EE E BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R S SYAL, R S SYAL, R S SYAL, R S SYAL, AM AM AM AM & SHRI & SHRI & SHRI & SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 2171/MUM/2011 2171/MUM/2011 2171/MUM/2011 2171/MUM/2011 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2006 2006 2006 2006- -- -07 0707 07) )) ) SUMERU CHS HSG LTD PLOT NORDP-SVER-7 NEAR VERSOVA TELEPHONE EXCHANGE ANDHERI (WEST) MUMBAI VS THE INCOME TAX OFFICER WARD 20(3)(3), MUMBAI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AACAS2614M AACAS2614M AACAS2614M AACAS2614M ASSESSEE BY SH B V JHAVERI REVENUE BY SH O A MAO DT.OF HEARING 4 TH JAN 2012 DT OF PRONOUNCEMENT 11 TH , JAN 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 3.1.2011 OF THE CIT(A) FOR THE AY 2006-07. 2 THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS AP PEAL IS AS UNDER: IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A)A ERRED IN CONFIRMING THE ADDITIONS MADE BY LD ASSESS ING OFFICER ON ACCOUNT OF TRANSFER FEE OF `. 4,67,114/- CREDITED T O COMMON AMENITY FUND OF THE SOCIETY. 3 THE ASSESSEE IS A REGISTERED COOPERATIVE HOUSING SOCIETY. DURING THE YEAR, THE ASSESSEE HAS CREDITED ITS P&L ACCOUNT BY A SUM OF `. 4,67,114/- UNDER THE HEAD COMMON AMENITY FUND RECEIVED FROM THE TRANSF EROR MEMBERS OF THE SOCIETY. THE ASSESSING OFFICER HAS NOTED THAT THIS AMOUNT IS IN ADDITION TO ` 25,000/- OF TRANSFER FEES RECEIVED FROM MEMBER S. THUS, THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS IS NOT A VOLUNTARY CONTRI BUTION MADE BY THE MEMBERS 2 SUMERU CHS HSG LTD BUT CHARGES LEVIED BY THE SOCIETY TO ALLOW TRANSFER OR TO SELL THE FLAT. ACCORDINGLY, THE ASSESSING OFFICER HAS ADDED THE SAID AMOUNT AS INCOME OF THE ASSESSEE. 3.1 ON APPEAL, THE CIT(A) HAS CONFIRMED THE VIEW OF THE ASSESSING OFFICER WHILE PASSING THE IMPUGNED ORDER. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT TRANSFER FEE IS PERMITTED BY THE BYE-LAWS OF THE ASSESSEE SOCIETY A ND THE CIT(A) HAS DULY ACKNOWLEDGE THE EXISTENCE OF THE PROVISIONS IN THE BYE-LAWS OF THE ASSESSEES SOCIETY, WHICH PERMITS TRANSFER FEE FROM THE OUTGOI NG MEMBERS ON TRANSFER OF THE FLATS. HE HAS FURTHER CONTENDED THAT THE BYE-LAWS F URTHER PERMIT THE ASSESSEE SOCIETY TO ACCEPT VOLUNTARY CONTRIBUTION FROM THE M EMBERS. ACCORDINGLY, THE SOCIETY, IN ITS SPECIAL GENERAL BODY MEETING HELD O N 31.5.1998, HAS RESOLVED TO ACCEPT VOLUNTARY DONATION TO THE SOCIETY OF AN AMOU NT CALCULATED @ RS 75/- PER SQ.FT FOR THE ENTIRE BUILT-UP AREA OF THE FLAT BEIN G TRANSFERRED. THUS, HE HAS SUBMITTED THAT WHEN THE SAID RECEIPT IS PERMITTED B Y THE BYE-LAWS OF THE ASSESSEE SOCIETY, THEN THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO- OPERATIVE HOUSING SOCIETY V. INCOME-TAX OFFICER REPORTED IN 317 ITR 47, THE PRIN CIPLE OF MUTUALITY WOULD APPLY ON THIS AMOUNT. HE HAS ALSO RELIED UPON THE DECISIO N OF THE TRIBUNAL IN THE CASE OF M/S DAMODAR BHUVAN CHS LTD IN ITA NO.1610/MUM/20 10 DT 16.9.2011; IN THE CASE OF ABHILASHA CHS LTD IN ITA NO.683/MUM/2010 DT 19.11.2010 AS WELL AS OTHER ORDERS OF THE TRIBUNAL. 4.1 ON THE OTHER HAND, THE LD DR HAS RELOED UPON TH E ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL IN THE CASE REGENT CHAMBERS PREMISES COOPERATIVE SOC LTD VS ITO REPORTED IN 82 ITD 13(MUM). 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. THIS AMOUNT WAS RECEIVED BY THE SOCIET Y FROM ITS MEMBERS WHO 3 SUMERU CHS HSG LTD INTENDED TO TRANSFER THEIR FLATS. IT IS TO BE NOTE D THAT THE BYE-LAWS OF THE ASSESSEES SOCIETY PERMITS THE TRANSFER FEE OF THE FLAT TO THE EXTENT OF `. 25,000/-. THE BYE-LAWS ALSO PERMIT THE ASSESSEE TO TAKE VOLUN TARY DONATION BY CONTRIBUTION BY THE MEMBERS. THE CITI(A), IN PARA 2.3.1 AND 2.3. 2 AS REPRODUCED THE RELEVANT RULES OF THE BYE-LAWS AS WELL AS THE RESOLUTION PAS SED IN THE SPECIAL GENERAL BODY MEETING AS ON 31.8.2000. 2.3.1. AS PER RULE 40(D)(VII) OF THE BYE-LAWS OF TH E SOCIETY, THE APPELLANT SOCIETY IS MANDATE TO CHARGE FEES AT THE TIME OF T RANSFER OF THE PROPERTY; WHICH READS AS UNDER :- TO PAY THE AMOUNT OF PREMIUM AT THE RATE TO BE FIX ED BY THE GENERAL BODY MEETING, NOT EXCEEDING 2.5% OF THE DI FFERENCE BETWEEN THE BOOK VALUE OF THE FLAT AND THE PRICE RE ALIZED BY THE TRANSFEROR ON TRANSFER OF THE FLAT OR `.25,000/- WH ICHEVER IS LESS. NO ADDITIONAL AMOUNT BY WAY OF DONATION ETC WILL BE TA KEN UNLESS IT IS PAID VOLUNTARILY BY THE MEMBER. 2.3.2. HOWEVER, FROM A COPY OF THE MINUTES OF THE S PECIAL GENERAL BODY MEETING HELD ON 31.05.1998 PLACE ON RECORD BY AR, V IDE PARA 3 OF THE MINUTE HELD AS UNDER: TRANSFER OF FLATS: SOME MEMBERS HAVE APPROACHED THE SOCIETY CONTEMPLATING TRANSFER/SALE OF THEIR FLATS. THE PRO CEDURE FOR SUCH TRANSFER WAS CONSIDERED AT LENGTH, WHERE AFTER THE FOLLOWING RESOLUTION, PROPOSED BY SHRI.RAMKRISHNAN AND SECOND ED BY SHRI S.S. TAMHANE WAS PASSED UNANIMOUSLY. I) IF THE TRANSFEREE IS THE SPOUSE SON, DAUGHTER OR DEPENDENT PARENT OF THE MEMBER, NO TRANSFER FEE WOULD BE PAYA BLE BY THE CONCERNED MEMBER TO THE SOCIETY. II) IF THE TRANSFEREE IS A BROTHER, SISTER OR ANY O THER FAMILY MEMBER, A TRANSFER FEE OF `.25,000/- WOULD BE PAYAB LE BY THE CONCERNED MEMBER TO THE SOCIETY. III) IF THE TRANSFEREE IS ANY PERSON OTHER THAN MEN TIONED IN (I) AND (II) ABOVE, THE TRANSFER OF THE FLAT WILL BE CO NSIDERED AS PURELY COMMERCIAL. IN SUCH CASES A TRANSFER FEE OF `.25,000/- WOULD BE PAYABLE BY THE CONCERNED MEMBER TO THE SOC IETY AND IN ADDITION TO THIS, THE CONCERNED MEMBER WOULD MAKE A VOLUNTARY DONATION TO THE SOCIETY OF AN AMOUNT CALC ULATED @`.75/- PER SQ.FT FOR THE ENTIRE AREA OF HIS FLAT. 4 SUMERU CHS HSG LTD 5.1 WHEN THE AMOUNT RECEIVED BY THE ASSESSEES SOCI ETY IS AS PER THE PROVISIONS OF THE BYE-LAWS AND DULY APPROVED BY THE SPECIAL GENERAL MEETING OF THE SOCIETY, THEN IN VIEW OF THE DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT, PRINCIPLE OF MUTUALITY IS APPLICABLE. THE HONBLE H IGH COURT IN THE CASE OF SIND COOPERATIVE HSG LTD (SUPRA) HAS OBSERVED AS UNDER: CONSIDERING THESE PRINCIPLES, THE QUESTION IS WHET HER ON THE FACTS BEFORE US, THE PRINCIPLE OF MUTUALITY WOULD BE ATT RACTED IN RESPECT OF THE TRANSFER FEE RECEIVED BY THE HOUSING CO-OPE RATIVE SOCIETIES GOVERNED BY THE PROVISIONS OF THE MAHARASHTRA CO-OP ERATIVE SOCIETIES ACT AND THE RULES. IN WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. [2004] 267 ITR (AT) 86 ; [2004] 88 IT D 158 (MUM) [SB], THE TRIBUNAL ITSELF HAS HELD THAT THE AMOUNT RECEI VED FROM THE TRANSFEROR MEMBER WOULD NOT BE EXIGIBLE TO TAX. IT IS ONLY THE AMOUNT RECEIVED FROM THE TRANSFEREE, THAT IS EXIGIB LE TO TAX. WE HAVE NOTED THAT IN SO FAR AS SIND CHS AND NATIONAL CHS LTD. THEIR BYE-LAWS PROVIDE THAT THE AMOUNT HAS TO BE PAID BY THE TRANSFEROR MEMBER. THE ISSUE, THEREFORE, OF THE TRANSFEROR OR THE TRANSFEREE FOR THOSE ASSESSEES REALLY DOES NOT ARISE. HOWEVER, WE WILL HAVE TO ANSWER THE ISSUE CONSIDERI NG WHAT WAS CONSIDERED IN THE CASE OF WALKESHWAR [2004] 267 ITR (AT) 86 (BOM) AND CONSIDERING THE MODEL BYE-LAWS WHICH ARE NOW A DOPTED BY MOST HOUSING SOCIETIES. WE HAVE NOTED THE BYE-LAWS AS ALSO THE PROVISIONS UNDER THE ACT AND THE RULES. THE TRANSFE R FEE CAN BE APPROPRIATED ONLY IF THE TRANSFEREE IS ADMITTED TO MEMBERSHIP. THE FACT THAT A PROPOSED TRANSFEREE MAY MAKE PAYMENT IN ADVANCE BY ITSELF IS NOT RELEVANT. THE AMOUNT CAN ONLY BE APPR OPRIATED ON THE TRANSFEREE BEING ADMITTED AS A MEMBER. AS IT IS A TRANSFER FEE, IF THE TRANSFEREE IS NOT ADMITTED AS A MEMBER, THE AMO UNT RECEIVED WILL HAVE TO BE REFUNDED, AS THE AMOUNT IS PAYABLE ONLY ON A TRANSFER OF RIGHTS OF THE TRANSFEROR IN THE TRANSFE REE. IF IT IS HELD THAT PAYMENT OF TRANSFER FEES IS BY A STRANGER, IT WILL CERTAINLY BE IN THE NATURE OF GIFT AND NOT INCOME. IF AN AMOUNT IS RECE IVED MORE THAN WHAT IS CHARGEABLE UNDER THE BYE-LAWS OR GOVERNMENT DIRECTIONS, THE SOCIETY IS BOUND TO REPAY THE SAME AND IF IT RE TAINS THE AMOUNT IT WILL BE IN THE NATURE OF PROFIT MAKING AND THAT SPECIFIC AMOUNT WILL BE EXIGIBLE TO TAX. CONSIDERING THE BYE-LAWS, AS TH E MAIN ACTIVITY OF A CO-OPERATIVE HOUSING SOCIETY IS TO MAINTAIN THE P ROPERTY OWNED BY IT AND TO RENDER SERVICES TO ITS MEMBERS BY WAY OF USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES, THERE IS NO PROFIT MOT IVE INVOLVED IN THESE ACTIVITIES. THE AMOUNT LEGALLY CHARGEABLE AND RECEIVED GOES 5 SUMERU CHS HSG LTD INTO THE FUND OF THE SOCIETY WHICH IS UTILIZED FOR THE REPAIRS OF THE PROPERTY AND COMMON BENEFITS TO ITS MEMBERS. 6 AS REGARDS THE DECISIONS RELIED UPON BY THE LD DR , THE SAME IS PRIOR TO THE DECISION OF THE JURISDICTIONAL HIGH COURT AND AT TH AT POINT OF TIME, THE TRIBUNAL DID NOT HAVE THE BENEFIT OF THE DECISION OF THE JURISDI CTIONAL HIGH COURT. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH , DAY OF JAN 2012 SD/ SD/ SD/ SD/ SD/ SD/ SD/ SD/ ( R S SYAL ) ( R S SYAL ) ( R S SYAL ) ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) ( VIJAY PAL RAO ) ( VIJAY PAL RAO ) ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 11 TH , JAN 2012 RAJ* RAJ* RAJ* RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER