ITO 3(1)(4), MUMBAI V. FREE PRESS HOUSE LTD, MUMBAI

ITA 3044/MUM/2012

• Counselvise Citation: 304419914 RSA 2012
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA KUMAR
• Assessee Lawyers: DEEPAK TRALSHAWALA
• Keywords: Gift; Share purchase agreement

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.3044/MUM/2012 / ASSESSMENT YEAR 2008-09. THE INCOME TAX OFFICER, RANGE 3(1)(4), ROOM NO.666, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 / VS. M/S. FREE PRESS HOUSE LTD., 215, FREE PRESS HOUSE, GROUND FLOOR, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI 21. ! ./ '# ./ PAN/GIR NO. : AAACF 0616Q ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) !$ ' / APPELLANT BY: SHRI RAJENDRA KUMAR %&!$ ( ' / RESPONDENT BY : SHRI DEEPAK TRALSHAWALA ( ) / DATE OF HEARING : 19/05/2014 *+ ( ) / DATE OF PRONOUNCEMENT : 19/05/2014 , / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-II, MUMBAI DATED 27/02/2012 FO R ASSESSMENT YEAR 2008- 08. GROUNDS OF APPEAL READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11,40,000/-, B EING THE AMOUNT RECEIVED BY THE ASSESSEE FROM TRANSFEREE MADE EXIGIBLE TO TAX, HOLD ING THAT TRANSFER FEE COMES WITHIN THE PRINCIPLE OF MUTUALITY AND IS NOT TAXABL E IN VIEW OF HONBLE BOMBAY HIGH COURTS DECISION IN THE CASE OF SINDH CO-OP HO USING SOC.LTD.(317 ITR 47), AND MITTAL COURT PREMISES CO-OP. SOC. LTD (320 ITR 414), WITHOUT APPRECIATING THE . / ITA NO.3044/MUM/2012 / ASSESSMENT YEAR 2006-07 2 FACT THAT AT THE TIME OF EFFECTING TRANSFER, THE TR ANSFEREE BEING NOT A MEMBER, THE AMOUNT RECEIVED FROM THE TRANSFEREE WOULD NOT BE SA TISFYING THE TEST OF MUTUALITY AND CONSEQUENTLY IS EXIGIBLE TO TAX AS HELD BY HON BLE BOMBAY HIGH COURT IN THE CASE OF SINDH CO-OP HOUSING SOC.LTD, WHICH IS RELIE D UPON BY THE LD.CIT(A). 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. IT WAS CLAIMED BY THE ASSESSEE THAT ITS INCOME W HICH INTER-ALIA INCLUDE TRANSFER FEE OF RS.11,40,000/-, RECEIVED FROM INCOM ING MEMBERS IS EXEMPT ON THE PRINCIPLE OF MUTUALITY ALONGWITH OTHER RECEI PTS INCLUDING INTERESTS ETC. HOWEVER, AO DID NOT ACCEPT SUCH SUBMISSION OF THE A SSESSEE ON THE GROUND THAT AT THE TIME OF EFFECTING THE TRANSFER, THE T RANSFEREE BEING NOT THE MEMBER, THE AMOUNT RECEIVED FROM TRANSFEREE WILL NOT SATISF Y TEST OF MUTUALITY AND CONSEQUENTLY EXIGIBLE TO TAX. AN APPEAL WAS FILED AGAINST THE AFOREMENTIONED ORDER PASSED BY THE AO. IT WAS SUBMITTED THAT AO H AS FAILED TO TAKE NOTE OF THE SUBMISSIONS MADE BEFORE HER THAT TRANSFER FEE WAS PAID BY THE INCOMING MEMBERS. THUS, IT WAS PLEADED THAT TRANSFEREE WAS A MEMBER OF SOCIETY BEFORE HE MADE THE CONTRIBUTION TOWARDS COMMON AME NITY FUND AND THE ISSUE IS NOW COVERED BY THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY VS. ITO, 317 ITR 47 (BOM). IT WAS ALSO SUBMITTED THAT THE DECISION OF SPECIAL BENCH I N THE CASE OF WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY, 267 ITR (AT) 86 (M UM) (SB) WAS ALSO TAKEN INTO CONSIDERATION BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO- OPERATIVE HOUSING SOCIETY VS. ITO(SUPRA). THUS, IT WAS SUBMITTED BEFORE LD. CIT(A) THAT ADDITION HAS WRONGLY BEEN MADE. LD. CI T(A) REQUIRED THE ASSESSEE TO FILE COPY OF MEMORANDUM AND ARTICLES OF ASSOCI ATION, WHICH WAS ALSO SUBMITTED TO HIM AND WAS ALSO EXAMINED BY HIM.. HE OBSERVED THAT ACCORDING TO CLAUSE -37, PARA-2 THE TRANSFER FEE SHALL BE TOW ARDS CONTRIBUTION OF REPAIRS / DEVELOPMENT AND COMMON AMENITY OF THE COMPANY. TH E BOARD OF DIRECTORS OF THE COMPANY IN THEIR MEETING ON 12/12/2006 HAS RES OLVED THAT THE AMOUNT OF CONTRIBUTION TOWARDS COMMON AMENITY FUND IS TO BE INCREASED TO RS.500 PER SQ.FT. FROM RS.300 PER SQ.FT. THE ASSESSEE COMPANY HAS TRANSFERRED THE . / ITA NO.3044/MUM/2012 / ASSESSMENT YEAR 2006-07 3 TRANSFER FEE RECEIVED FROM INCOMING MEMBERS TO THE COMMON AMENITY FUND. ON THESE FACTS LD. CIT(A) HAS OBSERVED THAT THAT IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY VS. ITO(SUPRA) AND MIT TAL COURT PREMISES CO- OPERATIVE SOCIETY VS. ITO, 320 ITR 414 (BOM). ACCO RDINGLY, HE HELD THAT THE TRANSFER FEE RECEIVED BY THE ASESSEE WILL FALL WITH IN THE PRINCIPLE OF MUTUALITY AND IS NOT TAXABLE. THE DEPARTMENT IS AGGRIEVED, H ENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. AFTER NARRATING THE FACTS, RELYING UPON THE GROU NDS OF APPEAL, IT WAS SUBMITTED BY LD. DR THAT ADDITION HAS WRONGLY BEEN DELETED BY LD. CIT(A) WITHOUT APPRECIATING THE FACT THAT AT THE TIME OF EFFECTING TRANSFER, THE TRANSFEREE WAS NOT MEMBER OF THE SOCIETY, THEREFO RE, THE AMOUNT RECEIVED FROM TRANSFEREE WOULD NOT SATISFY THE TEST OF MU TUALITY AND AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO-OP ERATIVE HOUSING SOCIETY VS. ITO (SUPRA), IF THE AMOUNT RECEIVED DOES NOT S ATISFY THE TEST OF MUTUALITY, THEN IT WILL BE EXIGIBLE TO TAX. 4. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT THE CONTENTION OF LD. DR IS CONTRARY TO THE FACTS PLACED ON RECORD. HE I NVITED OUR ATTENTION TOWARDS PAGE 34 OF THE PAPER BOOK, WHERE THE SHARE WAS TR ANSFERRED IN THE NAME OF PAYEE WHO IS I.A. COMMERCIAL PVT. LTD. AND IN WHOS E NAME SHARE CERTIFICATE WAS REGISTERED ON 30/11/2007. HE ALSO REFERRED TO PAGE 37 OF THE PAPER BOOK WHICH SHOWS THAT AMOUNT OF RS.11,40,000/- WAS PAID ON 14/12/2007 I.E. AFTER BECOMING THE MEMBER. IT WAS FURTHER SUBMITTED BY L D. AR THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO-OP ERATIVE HOUSING SOCIETY (SUPRA), RATHER SUPPORT THE CASE OF THE ASSESSEE IN WHICH THEIR LORDSHIPS EVEN HAD CONSIDERED THE SITUATION WHICH HAS BEEN ENVISAG ED BY LD. DR AND STATED IN THE GROUNDS OF APPEAL FILED BY THE DEPARTMENT AN D EVEN CONSIDERING THAT SITUATION THEIR LORDSHIPS HAVE HELD THAT SUCH AM OUNT RECEIVED WILL NOT FALL OUT OF THE PRINCIPLE OF MUTUALITY. HE SUBMITTED TH AT SUCH SITUATION HAS BEEN . / ITA NO.3044/MUM/2012 / ASSESSMENT YEAR 2006-07 4 CONSIDERED BY THEIR LORDSHIPS ON PAGE -60 OF THE RE PORT IN PARA-36, WHERE THEIR LORDSHIPS AFTER NOTING MODEL BYE LAWS HAVE OBSER VED THAT TRANSFER 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 APPROPRIATED ON THE TRANSFER EE BEING ADMITTED AS MEMBER. AS IT IS A TRANSFER FEE, IF THE TRANSFEREE IS NOT ADMITTED AS A MEMBER, THE AMOUNT RECEIVED WILL HAVE TO BE REFUNDED, AS TH E AMOUNT PAYABLE IS ONLY ON A TRANSFER OF RIGHTS OF THE TRANSFEROR IN THE TR ANSFEREE. IF IT IS HELD THAT PAYMENT ON TRANSFER FEE IS BY A STRANGER , IT WILL CERTAINLY BE IN THE NATURE OF GIFT AND NOT INCOME. THUS, IT WAS SUBMITTED BY LD . AR THAT LD. CIT(A) HAS RIGHTLY GRANTED THE RELIEF TO THE ASSESSEE AND HIS ORDER SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE SITUATION MENTIONED IN THE GROUNDS OF APPEAL AND ARGUED BY LD. DR HAS BEEN TAKEN CARE IN THE DECISION OF TO HONBLE BOMBAY HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY LTD.(SUPRA). THE RELEVANT OBSERVATIONS HAVE ALREADY BEEN POINTED OUT BY LD. A R. KEEPING IN VIEW THE ENTIRETY OF FACTS AND CASE LAW RELIED UPON BY THELD . AR, WE ARE OF THE OPINION THAT LD. CIT(A) DID NOT COMMIT ANY ERROR IN DELETIN G THE DISALLOWANCE OF RS.11,40,000/-. ACCORDING TO THE FACTS OF THE CASE WHICH HAVE BEEN DISCUSSED IN THE ABOVE PART OF THIS ORDER AND ABOVE DECISION OF HONBLE BOMBAY HIGH COURT, THE IMPUGNED AMOUNT WILL BE GOVERNED BY THE PRINCIPLE OF MUTUALITY AND CANNOT BE BROUGHT TO TAX. WE DECLINE TO INTERF ERE AND UPHOLD THE ORDER OF LD. CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/05/201 4 , ( *+ - ./ 19/05/2014 + ( 0 1 SD/- SD/- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 19/05/2014 . / ITA NO.3044/MUM/2012 / ASSESSMENT YEAR 2006-07 5 , , , , ( (( ( %)2 %)2 %)2 %)2 32 ) 32 ) 32 ) 32 ) / COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 250 %) , , / DR, ITAT, MUMBAI 6. 0 6 / GUARD FILE. , , , , / BY ORDER, &2) %) //TRUE COPY// 7 77 7 / 8 8 8 8 ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS