ITO 5(1)(4), MUMBAI V. HILL PROPERTIES LTD, MUMBAI

ITA 2999/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5084 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 09-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: F V IRANI
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO.2999/M/2012 (AY: 2009 - 2010) ITO - 5(1)(4), AAYAKAR BHAVAN, R.NO.569, 5 TH FLOOR, M.K. ROAD, MUMBAI 400 020. / VS. M/S. HILL PROPERTIES LTD., HILL PARK ESTATE, A.G. BELL ROAD, MALBAR HILL, MUMBAI 400 006. ./ PAN : AABCH 7578 L ( / APPELLANT) .. ( / RESPONDENT ) C.O. NO. 100/M/2013 (AY: 2009 - 2010) (ARISING FROM I.T.A. NO.2999/M/2012) M/S. HILL PROPERTIES LTD., HILL PARK ESTATE, A.G. BELL ROAD, MALBAR HILL, MUMBAI 400 006. / VS. ITO - 5(1)(4), AAYAKAR BHAVAN, R.NO.569, 5 TH FLOOR, M.K. ROAD, MUMBAI 400 020. / ASSESSEE BY : SHRI F.V. IRANI / REVENUE BY : SHRI M. RAJAN , DR / DATE OF HEARING : 09.12.2013 / DATE OF PRONOUNCEMENT : 20 .12.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THERE IS ONE A PPEAL AND ONE CROSS OBJECTION UNDER CONSIDERATION. APPEAL ITA NO.2999/M/2012 IS FILED BY THE REVENUE AND CO NO.100/M/2013 IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) - 9, MUMBAI DATED 6.2.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. SINCE, THE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAP HS. 2. FIRSTLY, WE SHALL TAKE UP THE REVENUES APPEAL ITA NO.2999/M/2012 AND THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: 2 A) WHETHER ON THE FACTS, CIRCUMSTANCES AND IN LAWS, THE LD CIT (A) HAS ERRED IN HOLDING THAT T HE SHARE TRANSFER FEES OF RS. 30,00,000/ - RECEIVED BY THE ASSESSEE COMPANY, ON TRANSFER OF FLATS, AS EXEMPT FROM INCOME TAX, ON PRINCIPLE OF MUTUALITY? B) WHETHER ON THE FACTS, CIRCUMSTANCES AND IN THE LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE NOMINEE OCCUPANCY CHARGES OF RS. 24,25,000/ - RECEIVED BY THE ASSESSEE FROM ITS NON - MEMBERS (TENANTS) ARE COVERED BY THE CONCEPT OF MUTUALITY. C) WHETHER ON THE FACTS, CIRCUMSTANCES AND IN THE LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE NON - REFUNDABLE SECURITY DEPOSITS OF RS. 10,45,000/ - RECEIVED BY THE ASSESSE E COMPANY FOR ALLOWING REPAIRS TO FLATS IS EXEMPT FROM INCOME TAX ON PRINCIPLE OF MUTUALITY. 3. AT THE OUTSET, SHRI F.V. IRANI, LD COUNSEL FOR THE ASSESSEE, REFERRING TO THE ABOVE MENTIONED GROUNDS RAISED BY THE REVENUE, MENTIONED THAT THE SAID GROUNDS ARE IDENTICAL TO THAT OF THE GROUNDS ADJUDICATED BY THE ITAT, MUMBAI IN ASSESSEES OWN CASE VIDE ITA NO.4927/M/2011 (AY 2008 - 2009) ORDER DATED 3.4.2013. IN THIS REGARD, LD COUNSEL FILED A CHART SHOWING THE GROUND WISE REMA RKS AND ITS COVERED NATURE BY THE SAID ORDER OF THE TRIBUNAL AND READ OUT THE RELEVANT PARA 4 FROM THE SAID TRIBUNALS ORDER (SUPRA). 4. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES A ND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) DATED 3.4.2013. ON PERUSAL OF THE SAID TRIBUNALS ORDER, WE FIND THAT PA RA 4 IS RELEVANT IS RELEVANT IN THIS REGARD AND THE SAME REA DS AS UNDER: 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT ALL THE THREE ISSUES RAISED IN THIS APPEAL OF THE REVENUE ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIB UNAL FOR THE EARLIER YEARS, WHEREIN SIMILAR ISSUES HAVE BEEN CONSISTENTLY DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE . IN ONE OF SUCH ORDERS PASSED FOR THE IMMEDIATELY PRECEDING AY I.E., 2007 - 2008, THE COORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDE R DATED 21.10.2011 PASSED IN ITA NO. 6381/M/2010 HAS HELD THAT TRANSFER FEES RECEIVED BY THE COMPANY BEING A MUTUAL CONCERN, WHETHER FROM OUT COMING OR INCOMING MEMBERS IS NOT LIABLE TO TAX BECAUSE OF PRINCIPLE OF MUTUALITY . THE TRIBUNAL ALSO HELD THAT TH E REFUNDABLE SD HAVING BEEN COLLECTED BY THE ASSESSEE COMPANY FROM ITS MEMBERS ARE ALSO EXEMPT FROM TAX AS THE PRINCIPLES OF MUTUALITY ARE CLEARLY APPLICABLE TO THE SAID CHARGES . AS REGARD THE NOMINEE OCCUPANCY CHARGES, THE TRIBUNAL RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MITTAL COURT PREMISES COOPERATIVE SOCIETY LTD. VS. ITO [2009] 184 TAXMAN 292 (BOM.) TO HOLD THAT PRINCIPLES OF MUTUALITY ARE APPLICABLE EVEN TO THE NOMINEE OCCUPANCY CHARGES ALTHOUGH THE SAME WERE RECEIVED F ROM THE TENANTS WHO ARE NOT THE MEMBERS OF THE ASSESSEE COMPANY . AS THE ISSUES INVOLVED IN THE YEAR UNDER CONSIDERATION AS RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF AY 2007 - 2008, WE RESPECTFULLY ALLOW THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL PASSED IN ASSESSEES OWN CASE FOR THE AY 2007 - 2008 AND UPHOLD THE IMPUGNED ORDER OF THE LD CIT (A) GIVING RELIEF TO THE ASSESSEE ON THESE ISSUES. THE APPEAL FILED BY THE REVENU E IS ACCORDINGLY DISMISSED. 3 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT ALL THE THREE ISSUES RAISED BY REVENUE I.E., (I) SHARE TRANSFER FEES RECEIVED BY THE ASSESSEE COMPANY, ON TRANSFER OF FLATS; (II) NOMINEE OCCUPANCY CHARGES AND (III) NON - REF UNDABILITY OF SECURITY DEPOSITS ARE SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE, BY THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 3.4.2013. IT IS ALSO EVIDENT THAT SIMILAR ISSUES HAVE BEEN CONSISTENTLY DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. CONSIDERING THE SETTLED NATURE OF THE ISSUES INVOLVED IN THE GROUNDS RAISED BY REVENUE, WE ARE OF THE OPINION THAT THEY SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. C.O. NO. 100/M/2013 (AY: 2009 - 201 0) (ARISING FROM I.T.A. NO.2999/M/2012) 7. THIS CROSS OBJECTION RAISED BY THE ASSESSEE ON 20.5.2013 , IS AGAINST THE ORDER OF THE CIT (A) - 9, MUMBAI DATED 6.2.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS CROSS OBJECTION, ASSESSEE RAISED THE FOLLOWING GR OUNDS WHICH READ AS UNDER: 1. THE ITO - 5(1)(4), MUMBAI ERRED IN STATING THAT THE NOMINEE OCCUPANCY CHARGES ARE RECEIVED FROM NON - MEMBERS. 2. YOUR RESPONDENTS SUBMITS THAT THE CIT (A) - 9 ERRED IN INCLUDING IN THE TOTAL INCOME, THE INTEREST INCOME OF RS. 29,40,721/ - . 8. GROUND NO.1 RELATES TO THE NOMINEE OCCUPANCY CHARGES RECEIVED FROM NON - MEMBERS. THIS GROUND IS EXACTLY SIMILAR TO THAT OF GROUND NO.2 RAISED BY THE REVENUE AND THE SAME IS ADJUDI CATED BY US IN THE ABOVE PARA 5 OF THIS ORDER, WHE REIN THE SAID ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE ALLOW ED THE GROUND NO.1 RAISED BY THE ASSESSEE. 9. GROUND NO.2 RELATES TO THE INCLUSION OF THE INTEREST INCOME OF RS. 29,40,721/ - IN THE TOTAL INCOME OF THE ASSESSEE. BRIEFLY STATED, DURING THE ASSESSMENT, ASSESSEE RECEIVED THE SAID AMOUNT OF RS. 29,40,721/ - AS INTEREST AND CLAIMED EXEMPT ON THE GROUND OF PRINCIPLE OF MUTUALITY. AO BROUGHT THE SAME TO THE TAX BY HOLDING THAT THE SAID INTEREST INCOME IS NOT COVERED BY THE CONCEPT OF MUTUALITY AND RELIED ON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF MADRAS GYMKHANA CLUB 183 TAXMAN 333. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE FILES OF THE CIT (A). DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE 4 AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DISMI SSED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE EARLIER AYS ORDER OF THE CIT (A) AND THE ORDER OF THE ITAT FOR THE AY 2 007 - 2008. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), ASSESSEE RAISED THE GROUND NO.2. 10. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IN THIS REGARD, HE RELIED ON THE JUDGMENT OF THE H ONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB V. COMMISSIONER OF INCOME - TAX , 350 ITR 509 AND PRAYED FOR REMANDING THE MATTER TO THE FILES OF THE AO TO ADJUDICATE THE ISSUE AFRESH. 11. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHOR ITIES. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BANGALORE CLUB (SUPRA). ON PERUSAL OF THE SAID JUDGMENT OF THE APEX COURT, WE FIND THAT TH E SAID JUDGMENT IS RELEVANT IN THIS REGARD, WHEREIN IT WAS HELD THAT T HE PRINCIPLE OF MUTUALITY RELATES TO THE NOTION THAT A PERSON CANNOT MAKE A PROFIT FROM HIMSELF. THE CONCEPT OF MUTUALITY HAS BEEN EXTENDED TO DEFINED GROUPS OF PEOPLE WHO CONTRIBUTE TO A COMMON FUND, CONTROLLED BY THE GROUP, FOR A COMMON BENEFIT. ANY AMOUNT SURPLUS TO THAT NEEDED TO PURSUE THE COMMON PURPOSE IS SAID TO BE SIMPLY AN INCREASE OF THE COMMON FUND AND AS SUCH NEITHER CONSIDERED INCOME NOR TAXABL E. CONSIDERING THE SAME, WE REMIT THE ISSUE TO THE FILES OF THE AO TO ADJUDICATE THE SAME AFRESH IN THE LIGHT OF THE ABOVE CITED JUDGMENT AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSES . 13. IN THE RESULT, CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. SD/ - SD/ - (SANJAY GARG) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 20 .12 .2013 5 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI