ASHIMSA KESHAV SHRISHTI CHS LTD., MUMBAI V. I.T.O. 24(1)(3), MUMBAI

ITA 3373/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3582 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 3373/MUM/2011 (ASSESSMENT YEAR: 2007-08) M/S. AHIMSHA KESHAV SHRISHTI INCOME TAX OFFICER - 24(1)(3) CHS LTD., OPP. GREEN HOTEL MUMBAI CHINCHOLI LINK ROAD, MALAD (W) VS. MUMBAI 400064 PAN - AAAAA7810B APPELLANT RESPONDENT APPELLANT BY: SHRI MANISH CHULAWALA RESPONDENT BY: MS. NEERAJA PRADHAN DATE OF HEARING: 21.06.2013 DATE OF PRONOUNCEMENT: 21.06.2013 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04.02.2011 PASSED BY THE CIT(A)-34, MUMBAI AND IT P ERTAINS TO A.Y. 2007-08. 2. THE ASSESSEE SOCIETY, IN ITS CAPACITY AS AN AOP, DE CLARED TOTAL INCOME OF ` 3,03,340/- FOR THE YEAR UNDER CONSIDERATION. THE CA SE WAS TAKEN UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AO NOTICED THAT THE ASSESSEE CO-OPERATIVE HOUSING SOCIETY CLAIMED T O HAVE EARNED INCOME FROM LETTING OUT SPACE ON THE TERRACE OF THE BUILDI NG OF THE SOCIETY. A SUM OF ` 3,68,652/- WAS RECEIVED FROM SHLOK MEDIA PVT. LTD. AND ` 1,80,000.- FROM RELIANCE INFOCOM LTD. THUS THE TOTAL AMOUNT EARNED BY THE ASSESSEE WAS ` 5,48,652/-. THE ASSESSEE SOCIETY DECLARED THE INCOM E UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ACCORDINGLY CLAIME D PROPORTIONATE DEDUCTION WITH RESPECT TO MUNICIPAL TAXES AND 30% S TANDARD DEDUCTION. AS PER TDS CERTIFICATE THE NATURE OF PAYMENT WAS SHOWN AS PAYMENT TO CONTRACTORS. UNDER THESE CIRCUMSTANCES THE AO CALL ED UPON THE ASSESSEE TO FURNISH DETAILS OF THE INCOME AND ALSO EXPLAIN AS T O WHY THE SAME SHOULD NOT ITA NO. 3373/MUM/2011 M/S. AHIMSHA KESHAV SHRISHTI CHS LTD. 2 BE TREATED AS INCOME FROM OTHER SOURCES. SINCE TH E ASSESSEE DID NOT RESPOND TO THE NOTICE, THE AO PROCEEDED TO COMPLETE THE ASSESSMENT EXPARTE UNDER SECTION 144 OF THE ACT. HE OBSERVED THAT THE ASSESSEE SOCIETY CLAIMED THAT THE IMPUGNED INCOME IS NOT TAXABLE ON THE CONC EPT OF MUTUALITY AND CORRESPONDING EXPENSES WOULD BE ALLOWABLE ONLY AGAI NST SUCH INCOME BUT THE FACT REMAINS THAT THE SOCIETY DEBITED CERTAIN EXPEN DITURE WHICH IS ALLOWABLE ONLY AGAINST CONTRIBUTIONS FROM THE MEMBERS AND NOT AGAINST INCOME RECEIVED FROM NON-MEMBERS. THE EXPENSES INCURRED ON ELECTRIC ITY AND INCIDENTAL TO THE EQUIPMENTS INSTALLED ARE BORNE BY THE COMPANY INSTA LLING THE EQUIPMENTS. IT WAS NOT ESTABLISHED THAT THE SOCIETY POSSESSED A CO NVEYANCE DEED TO ESTABLISH OWNERSHIP OVER THE LAND OR BUILDING. IN THE ABSENCE OF ANY MATERIAL ON RECORD THE AO ARRIVED AT A CONCLUSION THAT THE IMPUGNED IN COME RECEIVED BY THE ASSESSEE IS TAXABLE UNDER THE HEAD OTHER SOURCES. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE FIRST APPE LLATE AUTHORITY THAT THE ASSESSEE SOCIETY HAS MAINTAINED PROPER RECORDS. SINCE THE INCOME WAS RECEIVED BY THE SOCIETY IN ITS CAPACITY AS OWNER, T HE SAME HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. 4. THE LEARNED CIT(A) OBSERVED THAT AS PER THE AGREEME NT OF THE SOCIETY WITH SHLOK MEDIA PVT. LTD. AND RELIANCE INFOCOM THE ASSESSEE IS RECEIVING THE INCOME AND HENCE IT HAS TO BE TAXED IN ITS HAND S BUT THERE IS NO CONVEYANCE DEED TO CONFER OWNERSHIP OF LAND OR BUIL DING AND IN THE ABSENCE OF PROVING THAT THE ASSESSEE IS THE OWNER OF THE SA ID SPACE THE INCOME RECEIVED BY THE ASSESSEE SOCIETY IS TAXABLE UNDER T HE HEAD INCOME FROM OTHER SOURCES. HE ALSO OBSERVED THAT IN THE LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE SIND CO-OPERA TIVE HOUSING SOCIETY VS. ITO 317 ITR 47 THE FIRST AND FOREMOST TEST AS T O WHETHER THE INCOME EARNED IS COVERED BY THE PRINCIPLE OF MUTUALITY IS TO VERIFY AS TO WHETHER ANY COMMERCIALITY IS INVOLVED IN SUCH TRANSACTIONS. IN THE INSTANT CASE THE AGREEMENT BETWEEN THE ASSESSEE AND THE TWO COMPANIE S MAKES IT CLEAR THAT THERE IS AN ELEMENT OF COMMERCIALITY IN THE ABOVE T RANSACTIONS AND HENCE THE RECEIPTS ARE OUTSIDE THE PRINCIPLE OF MUTUALITY AND TAXABLE UNDER THE INCOME TAX ACT, 1961. HE THUS CONFIRMED THE ORDER O F THE AO. ITA NO. 3373/MUM/2011 M/S. AHIMSHA KESHAV SHRISHTI CHS LTD. 3 5. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. IT MAY BE NOTICED THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT ADVANC ED HIS ARGUMENTS WITH REGARD TO APPLICATION OF PRINCIPLES OF MUTUALITY IN THE INSTANT CASE. IN FACT, THE ASSESSEE DISCLOSED THE INCOME UNDER THE HEAD HOUSE PROPERTY. THUS THE ONLY ISSUE THAT WAS CONTESTED BEFORE US IS WITH REGARD T O THE HEAD UNDER WHICH THE IMPUGNED INCOME IS ASSESSABLE TO TAX. THE LEARNED C OUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE APEX COURT IN THE C ASE OF CIT VS. M/S. PODAR CEMENT PVT. LTD. 226 ITR 625 IN SUPPORT OF HIS CONT ENTION THAT THE EXPRESSION OWNER, UNDER SECTION 22 OF THE ACT, MEANS A PERSO N WHO IS ENTITLED TO RECEIVE INCOME IN HIS OWN RIGHT. IN OTHER WORDS, IF A HOUSE PROPERTY IS HANDED OVER TO A PURCHASER, WHO ENJOYS THE FRUITS OF THAT PROPERTY, HE CAN BE TREATED AS OWNER EVENTHOUGH THERE IS NO REGISTERED DOCUMENT IN HIS N AME. ON THE SAME LINES, THE LEARNED COUNSEL SUBMITTED THAT IN THE INSTANT C ASE THE MEMBERS OF THE SOCIETY HAVE HANDED OVER POSSESSION OF THE LAND AND BUILDING TO THE COMMITTEE AND THUS THE HOUSING SOCIETY (AOP) IS IN POSSESSION OF THE PROPERTY AND WAS ENJOYING THE RIGHTS OVER IT IN THEIR CAPACITY AS O WNER, AS PER THE CONSTRUED BROADER DEFINITION, COUCHED FROM THE LANGUAGE OF TH E APEX COURT IN THE CASE OF PODAR CEMENT PVT. LTD. ONCE THE ASSESSEE SOCIETY IS TREATED AS OWNER, DECISION OF THE ITAT IN THE CASE OF M/S. MAHALAXMI SHEELA PR EMISES CHS LTD. IN ITA NO. 784 TO 796/MUM/2010 DATED 30.08.2011 WOULD SQUARELY APPLY TO THE FACTS OF INSTANT CASE WHEREIN THE TRIBUNAL FOLLOWED THE EARL IER DECISION OF THE ITAT MUMBAI BENCHES AND KEEPING IN VIEW THE RULE OF CONS ISTENCY THE BENCH NOTED THAT INCOME FROM LETTING OUT OF TERRACE HAS TO BE A SSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FRO M OTHER SOURCES AS ASSESSED BY THE AO AND CONSEQUENT DEDUCTIONS PERMIS SIBLE UNDER THE ACT AGAINST INCOME FROM HOUSE PROPERTY ARE ALLOWABLE. H E FURTHER SUBMITTED THAT THE LEARNED CIT(A) WRONGLY ASSUMED THAT THE ASSESSE E IS CLAIMING EXEMPTION OF THE INCOME ON THE GROUND THAT TESTS OF MUTUALITY AR E FULFILLED. IN FACT CITING OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SIND CO-OPERATIVE HOUSING SOCIETY (SUPRA) IS OUT OF CONTEXT AS THE AS SESSEE NEVER OBJECTED TO THE TAXABILITY OF THE AFORESAID INCOME AND THE LIMITED ISSUE IS WITH REGARD TO THE HEAD UNDER WHICH THE INCOME IS ASSESSABLE TO TAX. T HE LEARNED COUNSEL THUS STRONGLY RELIED UPON THE ORDER PASSED BY THE ITAT M UMBAI BENCHES. ITA NO. 3373/MUM/2011 M/S. AHIMSHA KESHAV SHRISHTI CHS LTD. 4 6. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 7. IT MAY BE NOTICED THAT THE CASE OF THE REVENUE IS T HAT THE ASSESSEE HAS NOT FURNISHED ANY PROOF TO SHOW THAT THE ASSESSEE I S IN POSSESSION OF THE BUILDING. TO COUNTER THIS ARGUMENT THE LEARNED COUN SEL PLACED BEFORE AS A COPY OF THE LETTER DATED 12.10.2005 OF K.M. ENTERPR ISES ADDRESSED TO THE SECRETARY/CHAIRMAN OF AHIMSA KESHAV SHRUSTI CO-OPER ATIVE HOUSING SOCIETY LTD. WHEREIN IT WAS STATED THAT POSSESSION OF THE BUILDING/LAND WAS HANDED OVER TO THE ADHOC COMMITTEE FOR HANDLING THE AFFAIRS OF THE SOCIETY REGISTERED UNDER THE NAME AHIMSA KESHAV SHRUSTI CO- OP HSG. SOCIETY LTD. IN THE WRITTEN SUBMISSION FILED BY THE ASSESSEE IT WAS SUBMITTED THAT THE ACTUAL POSSESSION IN A GIVEN PARTICULAR CASE GIVES A RIGHT TO RETAIN SUCH A POSSESSION UNTIL THE CONTRARY IS PROVED AND SO LONG AS THAT IS NOT DONE, A POSSESSOR IS PRESUMED TO BE THE OWNER. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. HAVING REGARD TO THE FACTUAL MATRIX OF THE CASE WE ARE OF THE VIEW THAT THE ASSESSEE, WHO IS POSSESSOR OF THE BUILDING , SHOULD BE TECHNICALLY TREATED AS OWNER OF THE SPACE WHICH WAS LEASED OUT TO THE ABOVE MENTIONED TWO COMPANIES. SINCE THE INCOME RECEIVED FROM LEASI NG OUT OF TERRACE PORTION IS TREATED AS INCOME FROM HOUSE PROPERTY BY THE ITA T IN THE CASE OF MAHALAXMI SHEELA PREMISES CHS LTD. (SUPRA), CONSIST ENT WITH THE VIEW TAKEN THEREIN, WE HOLD THAT THE IMPUGNED INCOME IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO IS DI RECTED TO RECOMPUTE THE ASSESSABLE TAXABLE INCOME ACCORDINGLY. 9. IN THE RESULT, AS PRONOUNCED IN THE OPEN COURT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2013. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 21 ST JUNE, 2013 ITA NO. 3373/MUM/2011 M/S. AHIMSHA KESHAV SHRISHTI CHS LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 34, MUMBAI 4. THE CIT 24, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.