ACIT CIR 21(1), MUMBAI V. THE JUHU VILE PARLE DEVELOPMENT CO-OP HSG. ASSOCIATION LTD, MUMBAI

ITA 3132/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3921 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 06-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 13-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: S S PHADKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI R.K. PAN DA, AM I.T.A.NO.3132/MUM/2009 (ASSESSMENT YEAR: 2004-05) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-21(1), R.NO.601, PRATYAKSHAKAR BHAVAN, BKC., BANDRA(E), MUMBAI-400 051. VS. THE JUHU VILE PARLE DEVELOPMENT CO-OPERATIVE HOUSING ASSOCIATION LTD. 51, JAIHIND CLUB, JAIHIND SOCIETY, N.S.ROAD NO.11, JVPD SCHEME, JUHU, VILE PARLE(W), MUMBAI-400 049 PAN: AABFT5293P (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SUMEET KUMAR, SR. DR RESPONDENT BY : MR. S.S.PHADKAR O R D E R PER R.V.EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND THE ONLY GROUND TAKEN IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING T HE ADDITION MADE BY THE ASSESSING OFFICER OF RS.74,17,895/- ON PROTECTIVE BASIS UNDER THE HEAD CAPITAL GAIN. 2. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2004-0 5. THE ASSESSEE IS A CO-OPERATIVE SOCIETY MANAGING THE COM MON AFFAIRS OF 14 SOCIETIES SITUATED AT JUHU VILE PARLE DEVELOP MENT SCHEME. IT FILED A RETURN OF INCOME FOR THE YEAR ENDED 31.0 3.2004 SHOWING INCOME FROM PROPERTY, BUSINESS AND OTHER SO URCES. THE TOTAL INCOME SHOWN WAS RS.115/- ONLY. THE RETURN WA S ACCOMPANIED BY INTERNAL AUDIT REPORT INDICATING VA RIOUS HEADS OF INCOME AND EXPENDITURE. 3. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, THE ASSESSING OFFICER NOTICED T HAT THE OBJECT OF THE SOCIETY WAS TO TAKE POSSESSION OF THE COMMON PROPERTIES ITA NO.5797/M/09 2 FROM THE MANAGING COMMITTEE OF THE 14 CO-OPERATIVE SOCIETIES UNDER JVPD SCHEME AND TO HOLD THEM AND SETTLE THE T ERMS OF THE DISPOSAL THEREOF BY GRANT, LEASE, SALE ETC. AND TO CONSIDER PROPOSALS FOR THE DISPOSAL OF ANY COMMON PROPERTY F OR THE GENERAL AND BENEFICIAL ADVANTAGE OF THE 14 SOCIETIE S. THE COMMON PROPERTIES WERE FOUND TO BE HELD BY ONE OR T HE OTHER OF THE 14 CO-OPERATIVE HOUSING SOCIETIES UNDER THE LEA SE DEED EXECUTED IN THEIR FAVOUR BY THE BOMBAY HOUSING BOAR D. THE LEASE WAS FOR A PERIOD OF 999 YEARS. THE 14 SOCIETI ES IN TURN HAVE LEASED OUT A PORTION OF THEIR LAND AS INDEPEND ENT PLOTS TO VARIOUS CONSTITUENT SOCIETY MEMBERS. ALL THE 14 SOC IETIES WERE INDEPENDENTLY REGISTERED AS CO-OPERATIVE HOUSING SO CIETIES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEES ROLE WA S ONLY TO MANAGE AND MAINTAIN THE COMMON LANDS BELONGING TO A LL THE SOCIETIES AND FOR THIS PURPOSE THE ASSESSEE WAS COL LECTING FUNDS FROM ALL THE SOCIETIES AND INCURRING COMMON EXPENSE S OUT OF THE SAME. SUCH EXPENSES WERE IN THE FORM OF PROPERTY T AX, WATER CHARGES, SECURITY, ELECTRICITY ETC. ON THESE FACTS , THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE SOCIETY WAS NOT HING BUT AN ENTITY CREATED TO COLLECT FUNDS FROM THE 14 HOUSING SOCIETIES AND APPLY THEM FOR THEIR BENEFIT AND THE BENEFIT OF THE IR MEMBERS AT LARGE. THE ASSESSING OFFICER FURTHER NOTICED THAT D URING THE RELEVANT PREVIOUS YEAR PLOT NO.4/A7 WAS TRANSFERRED TO THE PROMOTERS OF VASUNDHARA CO-OPERATIVE HOUSING SOCIET Y LTD. WHICH BELONGED TO THE MAHARASHTRA CADRE OF INDIAN P OLICE SERVICE UNDER COMPULSORY ACQUISITION SINCE IT WAS A RESERVED PLOT AS PER THE ORIGINAL DEED OF CONVEYANCE EXECUTE D BY THE BOMBAY HOUSING BOARD. THE ORIGINAL DEED OF CONVEYA NCE WAS EXECUTED IN APRIL, 1990 IN FAVOUR OF THE 14 CO-OPER ATIVE HOUSING SOCIETIES WHO JOINTLY OWNED THEM. FOR TRANSFER OF T HE PLOT TO THE VASUNDHARA CO-OPERATIVE HOUSING SOCIETY LTD. DURING THE RELEVANT PREVIOUS YEAR A SUM OF RS.74,17,895/- WAS REALISED BY THE ASSESSEE. THE ASSESSING OFFICER CONSIDERED THAT THE ITA NO.5797/M/09 3 AFORESAID AMOUNT REPRESENTED CAPITAL GAINS IN THE A SSESSEES HANDS. THE ASSESSEE POINTED OUT THAT THE AMOUNT WA S RECEIVED FOR AND ON BEHALF OF THE 14 MEMBERS SOCIETIES WHICH FACT WAS CLEARLY MENTIONED IN THE CONVEYANCE DEED THAT THE A MOUNT WAS RECEIVED FOR THE USE, FOR THE WELFARE OF THE JVPD S CHEME AND THE AMOUNTS STOOD IN THE BALANCE SHEET AND WAS SHOWN AS DEPOSITS RECEIVED FROM THE 14 MEMBERS SOCIETIES. THE ASSESSI NG OFFICER AFTER CONSIDERING THE ASSESSEES PLEA TOOK THE VIEW IN PARA 11 OF THE ASSESSMENT ORDER THAT THE AMOUNT RECEIVED FOR T RANSFER OF THE PLOT HAS BEEN CAMOUFLAGED BY ROUTING THE SAME T HROUGH THE ACCOUNTS OF THE ASSESSEE SOCIETY THOUGH THE INCOME BY WAY OF CAPITAL GAINS SHOULD BE CONSIDERED IN THE HANDS OF THE 14 MEMBERS SOCIETIES ONLY. HAVING STATED THUS, HE OPIN ED IN PARA 12 OF THE ASSESSMENT ORDER THAT AS A PROTECTIVE MEA SURE THE AMOUNT RECEIVED BY THE ASSESSEE NEEDS TO BE BROUGHT TO TAX IN ITS HANDS. HE ACCORDINGLY BROUGHT THE ENTIRE AMOUNT OF RS.74,17,895/- TO TAX IN THE ASSESSEES HANDS AS IN COME BY WAY OF CAPITAL GAINS. 4. ON APPEAL, THE CIT(A) NOTICED THAT CONVEYANCE DE ED WAS EXECUTED BETWEEN THE PROPOSED SOCIETY OF THE POLICE OFFICERS AND THE 14 SOCIETY MEMBERS ON 14.05.2003 FOR A TOTAL CO NSIDERATION OF RS.77,14,920/- AND THAT THE 14 MEMBERS SOCIETIES AGREED TO DEPOSIT THE SALE CONSIDERATION WITH THE ASSESSEE IN PROPORTION TO THEIR OWNERSHIP IN THE PLOT. THE AMOUNT WAS SO DEPO SITED WITH THE ASSESSEE SOCIETY WHICH AFTER DEDUCTING THE EXPE NSES INCURRED ON DEVELOPMENT AND MAINTENANCE OF THE PLOT CREDITED THE BALANCE OF RS.74,17,895/- IN THE RATIO OF THE O WNERSHIP RIGHTS TO THE ACCOUNTS OF THE 14 SOCIETIES MEMBERS IN ITS BOOKS OF ACCOUNT. THE CIT(A) FURTHER FOUND THAT THE MEMO RANDUM OF UNDERSTANDING HAD BEEN ENTERED INTO BETWEEN THE 14 MEMBERS SOCIETIES AND THE PROPOSED VASUNDHARA CO-OPERATIVE HOUSING SOCIETY AND FINALLY CONVEYANCE DEED WAS EXECUTED ON ITA NO.5797/M/09 4 14.05.2003. ON THESE FACTS, HE HELD THAT THE ASSES SING OFFICER WAS RIGHT IN CONSIDERING THE NET SALE PROCEEDS OF R S.74,17,895/- FOR THE PURPOSE OF WORKING OUT THE CAPITAL GAINS, B UT HELD THAT IF THE 1.4.1981 VALUE WAS ADOPTED AS THE COST OF ACQUI SITION IN TERMS OF SECTION 48, AND INDEXATION BENEFIT IS ALSO ALLOWED, THERE WOULD BE NET CAPITAL LOSS OF RS.57,65,385/-. IN THI S VIEW OF THE MATTER, HE DELETED THE ADDITION OF CAPITAL GAINS ON PROTECTIVE BASIS IN THE ASSESSMENT OF THE ASSESSEE. 5. THE REVENUE IS IN APPEAL TO CONTEND THAT THE ASS ESSEE IS PRACTICALLY THE OWNER OF THE PLOT AND SINCE THE MON IES ARE STILL LYING WITH IT, NOT HAVING BEEN HANDED OVER TO THE 1 4 SOCIETIES, THE ASSESSING OFFICER WAS RIGHT IN HOLDING THAT THE ASSESSEE SHOULD BE PROTECTIVELY ASSESSED IN RESPECT OF THE C APITAL GAINS. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE WAS MERELY HOLDING POSS ESSION OF THE PLOT, THAT IT WAS NOT THE OWNER OF THE PLOT AND THERE WAS NO TRANSFER OF THE PLOT BY THE ASSESSEE AND THEREFORE THERE WAS NO QUESTION OF ANY CAPITAL GAINS BEING ASSESSED IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND THE RIVAL CONTENTIONS, WE ARE INCLINED TO UPHOLD THE DECISION OF THE CIT(A). IT IS NOT THE CASE OF THE DEPARTMENT THAT T HE ASSESSEE WAS THE OWNER OF THE PLOT AND THEREFORE IT SHOULD B E ASSESSED TO CAPITAL GAINS. THERE IS NO DISPUTE THAT THE PLOT WA S OWNED BY 14 DIFFERENT CO-OPERATIVE HOUSING SOCIETIES IN SPECIFI C SHARES AND THAT THE ASSESSEE WAS MERELY PUT IN POSSESSION OF T HE PLOT FOR THE PURPOSE OF COMMON MANAGEMENT. THE PLOT WAS ORIG INALLY ALLOTTED TO THE 14 CO-OPERATIVE HOUSING SOCIETIES B Y THE BOMBAY HOUSING BOARD UNDER AN INDENTURE DATED 26.04.1960 (PAGES 47 TO 74 OF THE PAPER BOOK) AND IN THE LIGHT OF THIS I NDENTURE IT CANNOT BE SAID THAT THE ASSESSEE BECAME THE OWNER O F THE PLOT. ITA NO.5797/M/09 5 THE BYELAWS OF THE ASSESSEE SOCIETY, A COPY OF WHIC H IS PLACED AT PAGES 105 TO 112 OF THE PAPER BOOK, SHOWS THAT THE 14 CO- OPERATIVE HOUSING SOCIETIES WERE HOLDING THE RESIDE NTIAL PLOT, WHICH WAS PART OF THE LAND IN JVPD SCHEME. THE PROP ORTIONATE SHARE OF THESE SOCIETIES IN THE PROPERTY AND THEIR LIABILITY TO PAY THE COST OF DEVELOPMENT OF THE PROPERTY IS ALSO MEN TIONED IN THE BYELAWS. THERE IS NO DOCUMENT TO WHICH OUR ATTENTI ON WAS DRAWN ON BEHALF OF THE DEPARTMENT TRANSFERRING THE OWNERSHIP OF THE PLOT TO THE ASSESSEE SOCIETY. THE FINDING OF TH E CIT(A) WHICH IS NOT CHALLENGED BEFORE US IS THAT THE CONVEYANCE DEED WAS EXECUTED BY THE 14 SOCIETIES MEMBERS ON 14.5.2003 I N FAVOUR OF VASUNDHARA CO-OPERATIVE HOUSING SOCIETY LTD. FORMED BY THE MAHARASHTRA CADRE OF IPS. EARLIER TO THIS CONVEYANC E, THERE WAS A MEMORANDUM OF UNDERSTANDING ENTERED INTO BETWEEN THESE PARTIES ON 26.1.2000, A COPY OF WHICH IS AT PAGES 7 5 TO 104 OF THE PAPER BOOK. A PERUSAL OF THE MEMORANDUM OF UNDE RSTANDING SHOWS THAT IT WAS EXECUTED BETWEEN THE 14 CO-OPERAT IVE HOUSING SOCIETIES, THE ASSESSEE AND THE PROMOTERS OF VASUND HARA CO- OPERATIVE HOUSING SOCIETY LTD. CLAUSE (III) OF THE PREAMBLE STATES THAT THE SOCIETY WAS FORMED BY THE 14 SOCIET IES AND REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIE TIES ACT TO TAKE POSSESSION OF THE PROPERTY FROM THE MANAGING C OMMITTEES OF THE 14 CO-OPERATIVE HOUSING SOCIETIES AND TO HOL D AND UTILISE THE PROPERTY FOR PROVIDING SUITABLE UTILITIES AND A MENITIES SUCH AS PLAY GROUND, SCHOOLS, COLLEGES ETC. AND TO DO AL L SUCH ACTS AND THINGS AS ARE OF COMMON INTEREST TO THE 14 SOCI ETIES. THE MEMORANDUM OF UNDERSTANDING DOES NOT SHOW THE ASSES SEE AS A OWNER OF THE PROPERTY. CAPITAL GAINS CAN ARISE TO A PERSON ONLY IF HE OWNS THE PLOT AND TRANSFERS THE SAME FOR CONSIDE RATION. THE ASSESSEE NOT BEING THE OWNER OF THE PLOT BUT MERELY HOLDING POSSESSION THEREOF ON BEHALF OF THE 14 CO-OPERATIVE SOCIETIES AND MANAGING THE SAME FOR THE COMMON BENEFIT OF THE MEM BER SOCIETIES CANNOT BE CONSIDERED AS THE OWNER OF THE PROPERTY IN ITA NO.5797/M/09 6 ORDER TO BRING THE SALE PRICE TO TAX IN ITS HANDS A S CAPITAL GAINS. THIS IS ALSO SUPPORTED BY THE ACCOUNTING ENTRIES WH ICH SHOW THAT THE RESPECTIVE SHARES OF THE 14 HOUSING SOCIET IES IN THE SALE CONSIDERATION, AFTER DEDUCTING THE COMMON EXPENSES, HAS BEEN DIVIDED IN PROPORTION TO THEIR RESPECTIVE SHARES IN THE PROPERTY AND CREDITED TO THEIR ACCOUNTS AND SHOWN AS DEPOSIT S IN THE ASSESSEES BALANCE SHEET. IN THE ABSENCE OF ANY TRA NSFER BY THE ASSESSEE, NO CAPITAL GAINS CAN BE ASSESSED IN ITS H ANDS EVEN ON PROTECTIVE BASIS. 7. WE THUS AFFIRM THE DECISION OF THE CIT(A) BUT FO R DIFFERENT REASONS AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOVEMBER, 2010. SD/- ( R.K. PANDA ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATED 4 TH NOVEMBER, 2010. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CITY-21,MUMBAI. 4. THE CIT(A)-XXI, MUMBAI 5. THE DR J BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI