THE BHARTIYA FRIENDS C-OP.HSG.SOC. LTD, MUMBAI V. ITO WARD 12(2)(3), MUMBAI

ITA 3799/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55454 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SATISH V SHAMBHAG
• Keywords: Gift

Judgement Text

1 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL, AM & SHRI VIJAY PAL RAO, JM ITA NO.3799/MUM/2010 (ASST YEAR 2005-06) THE BHARTIYA FRIENDS COOP HSG SOC LTD SADHANA - B ROAD CHURCHGATE MUMBAI 20 VS THE INCOME TAX OFFICER WARD 12(2)(3), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAAJT 1532E ASSESSEE BY SHRI SATISH V SHAMBHAG REVENUE BY SMT PARMINDER DT.OF HEARING 5 TH SEPT 2011 DT OF PRONOUNCEMENT 23 SEPT 2011 PER VIJAY PAL RAO, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1.2.2010 OF THE CIT(A) FOR THE AY 2005-06. 2 THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS AS UNDER: THE LD ASSESSING OFFICER HAS ERRED IN MAKING ADDITIO N OF RS. 7,44,250/- BEING THE VOLUNTARY CONTRIBUTION RECEIVED FROM THE MEMBER OF THE SOCIETY TOWARDS REPAIRS AND RENOVATION FUND, WITHOUT CONSIDERING THE CONCEPT OF MUTUALITY, WHICH IS AGAINST THE PROVISIONS OF LAW. 3 DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED VOLUNTARY CONTRIBUTION OF RS. 7,44,250/- FROM ONE OF THE MEMB ERS TOWARDS REPAIR FUND. THE ASSESSEE CONTENDED BEFORE THE LOWER AUTHORITIES THA T THE SAID VOLUNTARY CONTRIBUTION WAS ACCEPTED IN TERMS OF CLAUSE 40(D)(VII) OF THE B YELAWS OF THE SOCIETY; THEREFORE, THE SAID AMOUNT CANNOT BE TREATED AS THE INCOME OF THE SOCIETY IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF SIND COOPERATIVE 2 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) HOUSING SOCIETY VS ITO REPORTED IN 317 ITR 47. HOWE VER, THE CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE LOWER AUTHORI TIES. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT WHEN THE AMOUNT IS EXPLAINED AS ONLY VOLUNTARY CONTRIBUTION RECEIVED A S PR THE BYE-LAWS OF THE SOCIETY, THEN THE PRINCIPLE OF MUTUALITY WILL APPLY TO THE S AID CONTRIBUTION. HE HAS RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF SIND COOPERATIVE HSG (SUPRA). 4.1 PER CONTRA, THE LD DR, HAS RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW. 5 AT THE OUTSET, WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND COOPE RATIVE HSG LTD (SUPRA) WHEREIN THEIR LORDSHIPS HAVE OBSERVED IN PARAA 35 & 36 AS UNDER: CONSIDERING THESE PRINCIPLES, THE QUESTION IS WHET HER ON THE FACTS BEFORE US, THE PRINCIPLE OF MUTUALITY WOULD BE ATTRACTED IN RES PECT OF THE TRANSFER FEE RECEIVED BY THE HOUSING CO-OPERATIVE SOCIETIES GOVERNE D BY THE PROVISIONS OF THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT AND THE RUL ES. IN WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. [2004] 267 ITR ( AT) 86 ; [2004] 88 ITD 158 (MUM) [SB], THE TRIBUNAL ITSELF HAS HELD THAT THE A MOUNT RECEIVED FROM THE TRANSFEROR MEMBER WOULD NOT BE EXIGIBLE TO TAX. IT IS ONLY THE AMOUNT RECEIVED FROM THE TRANSFEREE, THAT IS EXIGIBLE 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 (BO M) AND CONSIDERING THE MODEL BYE-LAWS WHICH ARE NOW ADOPTED BY MOST HOUSING SOCIETIES. WE HAVE NOTED THE BYE-LAWS AS ALSO THE PROVISIONS UNDER THE ACT AND THE RULES. THE TRANSFER FEE CAN BE APPROPRIATED ONLY IF THE TRANSFERE E IS ADMITTED TO MEMBERSHIP. THE FACT THAT A PROPOSED TRANSFEREE MAY MAKE PAYMENT IN ADVANCE BY ITSELF IS NOT RELEVANT. THE AMOUNT CAN ON LY BE APPROPRIATED ON THE TRANSFEREE BEING ADMITTED AS A 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 THE AMOUNT IS PAYABLE ONLY ON A TRANSFE R OF RIGHTS OF THE TRANSFEROR IN THE TRANSFEREE. IF IT IS HELD THAT PAYME NT OF TRANSFER FEES IS BY A 3 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 ITA NO.3799/MUM/2010 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005 (ASST YEAR 2005- -- -06) 06) 06) 06) STRANGER, IT WILL CERTAINLY BE IN THE NATURE OF GIFT AND NOT INCOME. IF AN AMOUNT IS RECEIVED MORE THAN WHAT IS CHARGEABLE UNDER THE B YE-LAWS OR GOVERNMENT DIRECTIONS, THE SOCIETY IS BOUND TO REPAY THE SAME AND IF IT RETAINS THE AMOUNT IT WILL BE IN THE NATURE OF PROFIT MAKING AND THAT S PECIFIC AMOUNT WILL BE EXIGIBLE TO TAX. CONSIDERING THE BYE-LAWS, AS THE MAIN ACTIVITY OF A CO- OPERATIVE HOUSING SOCIETY IS TO MAINTAIN THE PROPER TY OWNED BY IT AND TO RENDER SERVICES TO ITS MEMBERS BY WAY OF USUAL PRIVIL EGES, ADVANTAGES AND CONVENIENCES, THERE IS NO PROFIT MOTIVE INVOLVED I N THESE ACTIVITIES. THE AMOUNT LEGALLY CHARGEABLE AND RECEIVED GOES INTO TH E FUND OF THE SOCIETY WHICH IS UTILIZED FOR THE REPAIRS OF THE PROPERTY AN D COMMON BENEFITS TO ITS MEMBERS. 6 SINCE IN THE CASE IN HAND, THE AMOUNT HAS NOT REC EIVED UNDER PRESSURE OR COERCION OR CONTRARY TO THE BYE-LAWS OF THE SOCIETY ; THEREFORE, PRINCIPLES OF MUTUALITY WILL APPLY. ACCORDINGLY, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND COOPERATIVE HSG LTD (SUPR A), WE ALLOW THE CLAIM OF THE ASSESSEE. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 23 RD DAY OF SEPT 2011. SD/- SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 23 RD , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI