DCIT 9(2), MUMBAI V. KARTIK M. PATEL, MUMBAI

ITA 3991/MUM/2010

• Counselvise Citation: 399119914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA.3991/MUM/2010 (ASSESSMENT YEAR: 2006-07) DEPUTY COMMISSIONER OF INCOME-TAX -9(2), R.NO.218, 2ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ...... APPELLANT VS SHRI KARTIK M PATEL, 12TH ROAD, JVPD SCHEME, VILE PARLE (WEST), MUMBAI -400 049 ..... RESPONDENT PAN: AETPP 6944 D APPELLANT BY: SHRI CHANDRAJIT SINGH RESPONDENT BY: SHRI PRAKASH JHUNJHUNWALA DATE OF HEARING: 29.12.2012 DATE OF PRONOUNCEMENT: 27.02.2012 O R D E R PER R.S. PADVEKAR, JM : IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUG NED ORDER OF THE LD. CIT (A)-20, MUMBAI DATED 02.03.2010 FOR THE A.Y. 2006-07. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN D: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN TREATING THE MONETARY AND KIND BENEFITS RECEIVED BY THE ASSESSEE FROM THE SOCIETY TO BE ELIGIBLE FOR BEING COVERED UNDER THE CONCEPT OF MUT UALITY BY MAKING WRONG INTERPRETATION OF CBDT CIRCULAR AND DE SPITE THE FACT THAT THE SO CALLED BENEFITS HAVE NOT BEEN DISTRIBUTED TO ALL THE MEMBERS BUT CERTAIN MEMBERS ONLY AND ALSO DUE TO THE FACT THAT THE ASSESSEE HAS NOT IN ANY FORM MADE ANY PAYMENT TO THE SOCIETY SO THAT IT COU LD HAVE ITA 3991/M/2010 SHRI KARTIK M PATEL 2 BEEN TREATED AS MUTUAL TRANSACTION AND HENCE IN TUR N TO BE COVERED UNDER CONCEPT OF MUTUALITY. 2. THE SHORT CONTROVERSY BEFORE US IS WHETHER THE A MOUNT RECEIVED FROM CO-OPERATIVE SOCIETY IN WHICH THE ASSESSEE IS HAVING A LEASEHOLD PLOT CAN BE TREATED AS A TAXABLE UNDER THE INCOME-T AX ACT. THE RETURN FILED BY THE ASSESSEE FOR THE A.Y. 2006-07 WAS SELE CTED FOR THE SCRUTINY. ON THE PERUSAL OF THE STATEMENT FILED AL ONG WITH THE RETURN, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS SH OWN THE FOLLOWING AMOUNTS RECEIVED FROM NEW INDIA CO-OPERATIVE HOUSI NG SOCIETY LTD. (IN SHORT NEW INDIA SOCIETY): I) COMPENSATION OF LOSS OF PROPERTY AND DAMAGES - ` 10 LAKHS; II) REIMBURSEMENT OF ELECTRICAL EXPENSES - ` 6,000/- III) RENOVATION AND ENHANCEMENT OF BEAUTY & CLEANLINESS OF THE SOCIETY - ` 5 LAKHS 3. IN THE OPINION OF THE A.O. THOSE WERE BENEFITS R ECEIVED BY THE ASSESSEE IN MONETARY FORMS OR IN KIND FROM NEW INDI A SOCIETY, WHICH IS A SOCIETY OF LAND OWNERS WHEREIN THE ASSESSEE IS ALSO ONE OF THE MEMBERS. THE A.O. HAS NOTED THAT THE SOCIETY GIVES PERIODICAL GIFTS TO SELECTED MEMBERS IN THE FORM OF ICICI BONDS, GOLD / SILVER COINS, GOLD BISCUITS, AD HOC AMOUNTS ON ACCOUNT OF COMPENSATION TOWARDS SUFFERINGS, RENOVATION, REPAIRS & BEAUTIFICATION OF BUILDINGS ETC. THE A.O. HAS ALSO NOTED THAT THE BUNGALOWS IN THE SOCIE TY ARE THE PERSONAL PROPERTIES OF THE MEMBERS AND ANY EXPENSES RELATING TO THE BUILDING ARE PERSONAL EXPENSES OF THE MEMBERS AND NOT OF THE SOCIETY. IN THE OPINION OF THE A.O. THE CONCEPT OF MUTUALITY ALSO D OES NOT ARISE AND SOCIETY HAS ALSO NOT PAID ANY TAX ON TRANSFER FEES ETC. THE A.O. BROUGHT TO TAX THE SUM OF ` 15,06,000/- AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE HANDS OF THE ASS ESSEE. 4. THE ASSESSEE CHALLENGED SAID ADDITION BEFORE THE LD. CIT (A) WHO DELETED THE ADDITION. THE LD. CIT (A) HAS OBSERVED THAT NEW INDIA SOCIETY IS COVERED BY THE CONCEPT OF MUTUALITY. MOREOVER, NOTHING IS THERE ON RECORD TO SHOW THAT NEW INDIA SOCIETY IS E NGAGED IN ANY ITA 3991/M/2010 SHRI KARTIK M PATEL 3 DEALING WITH OUTSIDE AGENCIES OR HAD PROCURED OUTSI DE FUNDS WHICH WERE NOT DISTRIBUTED AMONG THE MEMBERS. IN THE OPI NION OF THE LD. CIT (A) THE SUM RECEIVED BY THE ASSESSEE FROM NEW I NDIA SOCIETY CANNOT BE AND IS NOT A TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE IS HAVING A RESIDENTIAL PLOT IN NEW INDIA SOCIETY, VILE PARLE, PAREL (WEST), MUMBAI . WE FURTHER FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THE AS SESSEE RECEIVED THE ABOVE AMOUNTS FROM THE SAID SOCIETY FOR THE REASONS MENTIONED. THE LD. COUNSEL SUBMITS THAT NEW INDIA SOCIETY IS A PLO T HOLDERS SOCIETY FOR THE REASONS MENTIONED. THE LD. COUNSEL SUBMITS THAT NEW INDIA SOCIETY IS A PLOT HOLDERS SOCIETY AND ASSESSEE IS A MEMBER OF THE SAID SOCIETY AND HENCE, THE ASSESSEE-MEMBER CANNOT BE CO NSIDERED AS A ABSOLUTE OWNER OF THE PLOT AS ADMITTEDLY THE OWNERS HIP OF ALL THE PLOTS IS VESTED WITH THE SOCIETY. HE FURTHER SUBMITS THA T IT IS NOT CORRECT TO SAY THAT THE SOCIETY HAS GIVEN GOLD COINS, GOLD BIS CUITS, ICICI BONDS ETC. TO THE MEMBERS BUT THE AMOUNTS ARE GIVEN FOR T HE CAUSE OF THE MEMBERS. THE ASSESSEE IS HAVING A RESIDENTIAL BUNG ALOW IN THE SAID PLOT. THERE IS NO ARBITRARY DISTRIBUTION OF THE FU NDS BY THE SOCIETY. HE SUBMITS THAT THE FIRST PAYMENT OF ` 5 LAKHS WAS MADE BY THE SOCIETY TO THE MEMBERS ON 26.04.2005 FOR THE PURPOSE OF RENOVA TION/ BEAUTIFICATION OF THE EXTERIOR OF THEIR PREMISES/RE SIDENTIAL HOUSE / BUNGALOWS WHICH IS AS PER THE RESOLUTION PASSED BY THE MANAGING COMMITTEE AND THERE IS NO DISCRIMINATION AS IT IS G IVEN TO ALL THE MEMBERS. THE SECOND PAYMENT OF ` 10 LAKHS IS MADE BY THE SOCIETY ON 01.10.2005 AS DUE TO HEAVY RAIN FALL ON 26TH JUL Y 2005, THERE WAS DAMAGE TO THE BUNGALOWS IN THE SOCIETY. THE LD. CO UNSEL ALSO REFERRED TO THE RESPECTIVE RESOLUTIONS AS PER WHICH IT WAS DECIDED TO PAY ` 10 LAKHS TO THE MEMBERS TO MEET THE LOSS OF THE PR OPERTY AND DAMAGES DUE TO HEAVY RAINS. IN RESPECT OF THE THIR D AMOUNT I.E. REIMBURSEMENT OF ELECTRICITY EXPENDITURE OF ` 6,000/-, THE LD. COUNSEL SUBMITS THAT HOW THE REIMBURSEMENT CAN BE TREATED A S INCOME OF THE ASSESSEE ? WE HAVE ALSO HEARD THE LD. D.R. ITA 3991/M/2010 SHRI KARTIK M PATEL 4 6. THE FACTS ARE ALREADY DISCUSSED HEREINABOVE. SO FAR AS THE TAXABILITY OF ` 10 LAKHS AND 5 LAKHS IS CONCERNED, THE AMOUNTS WHI CH WERE RECEIVED BY THE ASSESSEE FROM THE NEW INDIA SO CIETY IN WHICH HE IS A MEMBER OF A PLOT, WHETHER THE SAME CAN BE TRE ATED AS INCOME OF THE ASSESSEE ? WE FIND THAT THE NATURE, SOURCE AND PURPOSE OF THE AMOUNT ARE NOT DISPUTED BY THE A.O., THE ONLY RESER VATION, WE FIND THAT, IN HIS OPINION BUNGALOW AND BUILDING ARE PERS ONAL PROPERTIES OF THE MEMBERS AND WHY THE SOCIETY SHOULD PAY OR BEAR THE EXPENDITURE? 7. WE HAVE HEARD PERUSED THE COMPILATION FILED BY T HE ASSESSEE. THE ASSESSEE HAS FILED THE COPIES OF THE RESOLUTION PASSED BY THE SOCIETY. SO FAR AS AMOUNT OF ` 10 LAKHS PAID TO THE ASSESSEE TO MEET THE DAMAGES IS CONCERNED, WE FIND THAT THE SAME IS DULY SUPPORTED BY THE RESOLUTION OF THE SOCIETY DATED 14.09.2005 (PAG E NO.17 TO 20). SO FAR AS ` 6 LAKHS IS CONCERNED, WE FIND THAT EVEN THE BYE-LA WS OF THE SOCIETY, (COPY PLACED ON PAGE NO.27 TO 56) PERMITS THE SAID PAYMENT VIDE CLAUSE NO.66. SO FAR AS NEW INDIA SOCIETY IS CONCERNED, WHILE COMPLETING ASSESSMENT, ADDITIONS WERE MADE IN THE H ANDS OF SAID SOCIETY FOR DISTRIBUTING ` 10 LAKHS TO CERTAIN MEMBERS TOWARDS THE COMPENSATION OF LOSS INCURRED DUE TO DEVASTATING FL OODS WHICH OCCURRED ON 26.07.2005 AND HENCE, THE ASSESSEE SOCI ETY INCOME WAS HELD TAXABLE AND NOT COVERED UNDER THE MUTUAL BENEF ITS. WHEN THE SOCIETYS CASE REACHED BEFORE THE TRIBUNAL IT WAS H ELD THAT THE INCOME OF THE NEW INDIA SOCIETY WAS COVERED UNDER THE PRIN CIPLES OF MUTUALITY AND MERELY SOME OF THE MEMBERS WERE PAID OR DISTRIB UTED ` 10 LAKHS TO COMPENSATE THE LOSS INCURRED DUE TO DEVASTATING RAIN OCCURRED ON 26.6.2005, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE SAID SOCIETY WERE OUT OF THE PRINCIPLES OF THE MUTUALITY (COPY OF THE TRIBUNAL ORDER AT PAGES 6 TO 40) IN ITA NOS.5846, 5847, 5448/M/200.. DATED 31.01.2011. IN OUR OPINION, THE AMOUNTS RECEIVED B Y THE ASSESSEE CANNOT BE TREATED AS AN INCOME WITHIN THE MEANING O F SEC.4 OF THE INCOME-TAX ACT WHICH IS CHARGING PROVISION. ADMITT EDLY, THE ENTIRE INCOME OF THE NEW INDIA SOCIETY IS COVERED UNDER TH E PRINCIPLES OF MUTUALITY WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL ALSO IN CASE OF ITA 3991/M/2010 SHRI KARTIK M PATEL 5 NEW INDIA SOCIETY FOR THE A.YS. 2001-02, 2002-03 AN D 2005-06. THE ASSESSEE HAS PAID OUT OF THE COMMON FUNDS AND ON TH E PRINCIPLES OF MUTUALITY THE AMOUNT RECEIVED BY THE ASSESSEE CANNO T BE TREATED AS A BENEFIT IN NATURE OF PROFIT OR INCOME AS ASSESSE IS ALSO PAYING MAINTENANCE CHARGES AND OTHER LEVIES TO THE SOCIETY . WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. C IT (A). WE, ACCORDINGLY, CONFIRM THE SAME. 8. THE LD. COUNSEL SUBMITS THE DECISIONS OF THE TRI BUNAL IN THE CASE OF NEW INDIA SOCIETY WERE CHALLENGED BY THE RE VENUE BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE APPEALS F ILED BY THE REVENUE HAVE BEEN DISMISSED. THE LD. COUNSEL FILED THE CO PIES OF THE TRIBUNAL ORDER OF THE HONBLE HIGH COURT IN THE CASE OF NEW INDIA SOCIETY LTD. DATED 09.09.2011 AND 09.11.2011 RESPECTIVELY WHICH ARE PLACED ON RECORD. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7TH FEBRUARY, 2012. SD/- ( RAJENDRA SINGH ) ACCOUTANT MEMBER SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 27TH FEBRUARY, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-20, MUMBAI. 4) THE CIT-9, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN