LAXMI FINANCE & LEASING COMPANIES COMMERCIAL PREMISES COOPERATIVE SOCIETY LTD, MUMBAI V. ASST CIT 14(1), MUMBAI

ITA 4521/MUM/2015

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9591 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Maximum Marginal Rate; Liquidation
• Section: 6; 143(3); 142(1); 133(6); 143(1); 250; 143(2); 64; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.4521/Mum/2015 (A.Y:2011-12) M/s. Laxmi Finance & Leasing Companies, Commercial Premiss Co-op Society Ltd., Laxmi Towers, Plot No. C-25, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. Vs. ACIT – 14(1) Earnest House, Nariman Point, Mumbai – 400 021. PAN/GIR No. : AAAJL0006F Appellant .. Respondent ITA No.4522/Mum/2015 (A.Y:2012-13) M/s. Laxmi Finance & Leasing Companies, Commercial Premiss Co-op Socitey Ltd., Laxmi Towers, Plot No. C-25, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. Vs. ACIT – 18(2) Earnest House, Nariman Point, Mumbai – 400 021. PAN/GIR No. : AAAJL0006F Appellant .. Respondent Appellant by : Shri. P.J. Pardiwalla, Sr. Adv Respondent by : Shri. Mehul Jain, DR ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 2 - Date of Hearing 03.11.2021 Date of Pronouncement 31.01.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: These are the appeals filed by the assessee against the common order of the Ld. CIT(A)-29, Mumbai passed u/s 143(3) and 250 of the Act. Since the issues involved in these appeals are identical, and similar, hence they are clubbed, heard and consolidated order is passed. For the sake of convenience, we shall take up the ITA No. 4521/Mum/2015. (A.Y.2011-12) as a lead case and facts narrated therein. The assessee has raised the following grounds of appeal. Ground No. 1: On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) grossly erred in confirming the addition made by the A.O. of Rs.10,00,000/- received by the appellant on account of transfer fee, ignoring the vital favorable judicial pronouncements in the matter wherein it has been held that the transfer fee falls within the ambit of concept of mutuality and therefore not taxable. The appellant prays that the addition of Rs. 10,00,000/- may kindly be deleted. Ground No.2: On the facts and in the circumstances of the case and in law, ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 3 - the Hon'ble CIT(A) erred in directing the A.O. to determine the ALV of the rented properties on the basis of the average rent received from Mls.Enam Securities and MIs.Trans Expo Trade Pvt.Ltd. as against the ALV offered of the rented properties by the appellant on the basis of actual rent received. The appellant prays that the A.O. may be directed to accept the ALV of the rented property on the basis of the actual rent received and offered to tax. Ground No.3: On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in directing the A.O. to determine the ALV of the vacant properties on the basis of average rent being received by the appellant from the MIs.Enam Securities and M/s.Trans Expo Trade Pvt.Ltd. and apply the average rate to determine the ALV of the vacant properties as against the appellant's contention that the ALV of the vacant properties may be taken at municipal ratable value. The appellant prays that the A.O. may be directed to determine the ALV of vacant properties on the basis of Municipal Ratable Value. Ground No.4: Without prejudice to our contentions raised in Ground Nos. 2 & 3 above and in case above contentions are not accepted then on the facts and in the circumstances of the case and in law, the Hon"ble CIT(A) erred in directing the A.O. to exclude the rent received from M/s.Lupin Ltd. while calculating the average rent to be applied in determining the ALV of all the properties i.e. rental as well as vacant Ground No.5: On the facts and in the circumstances of the case and in law, the Hon"ble CIT(A) erred in not allowing the vacancy allowance in respect of the vacant properties which were let out in the last previous year. The appellant prays that the vacancy allowance in respect of such vacant properties may be allowed. Ground No.6: ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 4 - On the facts and in the circumstances of the case and in law, the Hodble CIT(A) en-ed in concluding that the properties are not covered under the Rent Control Act. Ground No.7: On the facts and in the circumstances of the case and in law, the Hodble CIT(A) erred in levying interest u/s.234B, 234C and 234D of the Income Tax Act. 2. The brief facts of the case that the assessee is a society and is a conglomerate of private financial bodies. The assessee is registered under Maharashtra Government Societies Act 1960 on 17-02-1994. The assessee has filed the return of income for the A.Y 2011-12 on 27.09.2011 with a total income of Rs. 3,35,25,308/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the notice u/s 143(2) and 142(1) of the Act along with the detailed questionnaire was issued. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details. Whereas the A.O on perusal of the schedule forming part of balance sheet found that (i)there is a transfer fee of Rs. 10 lakhs was received by the assessee owing to transfer of office premises No.5 along with the parking space by M/s Sugati Leasing and Finance Pvt Ltd. The A.O issued a ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 5 - show cause notice mentioning that why the amount of transfer fee should not be treated as collected and taxed under income from other sources. The assessee has submitted the explanations and but the A.O was not convinenced with the discussions and has made addition of Rs. 10 lakhs collected by the society as transfer fee. Similarly, the assessee has six premises which were available for rental purpose and during the year under consideration the assessee has offered total income of Rs.3,25,00,000/- under income from house property after calculating the rental receipts from the office spaces which was let out u/s 23(1)(a) of the Act. The A.O dealt on the provisions of sec 23(1)(a) of the Act and the judicial decisions and in respect of valuation of the property has worked out the chart at page 4 Para 4.4 to 4.8 of the order and made an addition as under: “4.4 Subsequent to the discussion above, Plain terms of the statute would give a meaning that if it is evident that amount any property is reasonably expected to let from year to years is higher than the amount offered to tax then the same should be taken as annual lettable value. Further, the section also makes it clear that this applies whether or not the property has been actually let out or ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 6 - not so consequently, properties which were vacant during the year would be covered by this deeming fiction of law. 4.5 Using the information supplied by the assessee, from the leave and licence agreement between assessee and enam securities Pvt ltd it is clear that M/s Enam Securities pvt Ltd has agreed to pay rent at a rate of Rs. 230 per Sqft per month to the assessee and consequently, it is noted that the properties listed above can be reasonable expected to let from year to year a sum of Rs. 230 per Sqft per month the same value has been verified from various real estate consultancy agencies and was also provided to the assessee vide order sheet entry dated 17.02.2014 where the average rental rates were in the range of 200-250 per sqft per month. 4.6 Thus value of Rs. 230 per sqft per month as a base for determining the annual lettable value of the office spaces of the assessee the total annual lettable value would work out to be Rs. 6,47,49,600/- as given below and after deducting an amount of Rs. 27,25,000/- on account of unrealized rent leaving a total value of Rs. 6,20,24,600/-. Sl. no Property details Occupant Area rented AVL based on rent received as per assessee AVL as per AO (Rs. 230 per sw ft per month) 1 C-25, G Block, Office No. B/2, 7 th Floor (B- 2-7) Lupin Ltd 5000 1,02,00,000 1,38,00,000 2 C-25, G Block, Office No. A/2, 8 th Floor (A- 2-4) Enam Securitie s 5000 1,26,50,000 1,38,00,000 ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 7 - 3 C-25, G Block, Office No. B/10, 2 nd Floor (B-10-7) Trans Espo Trade Pvt ltd 5000 71,75,000 1,38,00,000 4 C-25, G Block, Office No. 9B, C Wing, 2nd Floor Vacant 5000 0 1,38,00,000 5 C-25, G Block, Office No. A/11, 2 nd Floor Vacant 5000 0 69,00,000 6 C-25, G Block, Office B Wing, 9 th Floor Vacant 5000 0 26,49,600 Total annual lettable value 3,00,25,000 6,47,49,600 4.7 AR also argued that the Property No. 6 with 960 Sqft should not be considered as property for deemed income purposes and he argued that this property was not meant to be let out and thus, ALV should be taken as Nil. Argument was considered and not found acceptable as the society itself admitted that there was a canteen running in the premises before and consequently the argument that premises has not rental value is not correct and act also does not envisage any relief on these lines so the deemed notional rental on the property is also calculated on the same lines as those of the vacant properties. Further, it was also noticed that the ground rent paid to MMRDA has been claimed as a deduction under the head income from house property and MMRDA does not fall with in the meaning of the local authority and consequently any sum paid to it cannot be allowed as an expenses. Further, even it is assumed without prejudice that it is a local authority the payment of ground rent cannot be in anyway be said to fall within ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 8 - the ambit of tax payment and consequently, the same is disallowed from the calculation. Particulars Amount Annual lettable value of the property 6,47,49,600 Less unrealized rent 27,25,000 Add; recovery of BMC property tax 22,02,255 Less: property tax 22,28,994 Less: additional BMC Property Tax 22,02,255 5,97,95,606 Less: 30% standard deduction 1,79,38,682 Income from house property 4,18,56,924 4.8 Income offered by the assessee under the head is Rs. 1,82,91,836/- and consequently, and addition of Rs. 2,35,65,088/- is being made to the income of the assessee under the head of income from house property. 3. The A.O. has assessed the total income of Rs. 5,80,90,390/- and passed the order u/s 143(3) of the Act dated 07.03.2014. 4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) in respect of the first ground of appeal of addition of transfer fee has dealt extensively on the provisions submissions and has confirmed addition and dismissed the ground of appeal. ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 9 - 4.1 The second ground of appeal with respect to computation of let out property and the vacant property the income of the assessee is computed at Rs.4,18,56,924, as against the income declared of Rs. 1,82,91,863/-.The CIT(A) has considered the various facts and decisions of this Honble Tribunal and observed at page 28 Para 4.3.1.7 to Para 4.3.2.1 and partly allowed the ground of appeal and finally partly allowed the assessee appeal as under: 4.3.17. In the present case, similar 3 property have been let out by the assessee ph d the tOtal annual rent received or receivable in respect of these 3 property is Rs.3,00,25,000/-; whereas actual rent received varies from Rs.170/per sq.ft p.m. from M/s.Lupin Ltd, Rs.230/- per sq.ft,per month from MIs. Enam Securities and Rs.205/ . per sq.ft.p.m from Trans Expo Trade Pvt. Ltd. The reasons for such wide variation in the rent received/receivable from the 3 property has not been explained. Security deposit received by the assessee from M/s. Enam Securities is R.69 lakhs, from Trans Export trade Pvt. Ltd. is Rs. 92,25,000/- and from M/s Lupin Ltd is Rs. 51 lakhs. It is also seen that agreement with M/s. Lupin Ltd has been entered into on 27.07.2009 with TransExpo Trade Pvt. Ltd. the agreement has been entered on 25.01.2007 and with M/s. Enam Securities, the agreement is dated 26.04.2010. 4.3.18. From the dates when the agreement have been entered, it is seen that the agreement with M/s. Trans Export trade Pvt. Ltd. is the oldest and entered into from the year 2007 © 205/- per sq.ft.p.m. and having an interest free security deposit of Rs.92,25,000/-. The agreement with M/s.Lupin Ltd. is the second and after about two years of the ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 10 - agreement with M/s. Trans Expo Trade Pvt. Ltd., is at a much lower late © 170/- per sq.ft. whereas agreement with M/s. Enam Securities is the latest and @230/- per sq.ft.p.m. The security deposit WifFi M/S. 'Lupin is also the lowest which is only Rs.51 lakhs. The highest rent in the case of M,'s. Enam Securities when compared with the rent in the case of M/s. trans Export trade Pvt. Ltd. can be explained that the higher security deposit in the case of Trans Expo Trade Pvt.Ltd coupled with lower rent. But the case of M/s. Lupin is inexplicable as this agreement has been done after M/s, Trans Expo Trade Pvt. Ltd. and before M/s. Enam Securities agreement but the rent is the llowest and also security deposit is the lowest. 4,3.19. These facts were not considered by my Hon'ble predecessor CIT(A) while passing the order for the A.Y.2010- 11. Similarly, the various decisions in the case of Shri. Vivek Jain, Indra S. Jain, Hercules ; Hoists Ltd., Tip Top Typography were also not considered by the Hon'ble predecessor CIT(A). 4.3.20. Therefore, considering all these facts and the various decisions of ITAT and the decisions of the Bombay High Court in the various cases as above not considered by ;the predecessor CIT(A), I hereby hold that the property of the assessee is not subject to Rent Control Act, 1999. Fair rent is now required to be determinediland the fair rent received by the assessee for the 'Similar property is readily known. There cannot be any better way to determine the fair rent when rent of Similar property in the same building is readily known. However, the AO has assessed the ALV of the property @230/- per sq.ft p.m. for all the 6 properties inclUding lei: out and not let out property. This in my opinion is not fair. The AO is directed to determine the rent at average rate of rent received from M/s, Enem Securities and M/s. Trans Expo Trade Pvt. Ltd. The rent determined to all the 5 properties except the property let out to M/s. Enam Securities and determine the ALV and assess the same under the head income from house property. In case of Enam Securities, the actual rent received @ Rs. 230/- per sq. ft. per month is directed to be taken as ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 11 - ALV. 4.3.21. It is also noted that out of 3 properties actually let during the year, only 1 property is let for the entire period of 12 months where as the other 2 are let for periods less than 12 months during the year. Applying the provisions of section 23(1)(c), AO is also directed to allow vacancy allowance in case of those properties which are actually let out only for part of the year. In the result, the 2 n ° ground is allowed in part. 5. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Honble Tribunal. 6. At the time of hearing, the Ld.AR of the assessee has raised the additional ground of appeal and is admitted. “ On the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) grossly erred in holding that the annual value of the vacant property should be calculated on the basis of municipal ratable value. ” 7. The Ld. AR on the first disputed issue in respect of addition of transfer fee as the income of the society submitted that the CIT(A) has erred and sustained the addition of transfer fee. In the second and third ground of appeal, the Ld. AR submitted on the similar issues of ALV of the properties, the Honble Tribunal has allowed the assessee’s grounds of appeal in the ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 12 - earlier years and substantiated the arguments with the copy of the ITAT order. The ground of appeal no 4 is alternate ground and is not pressed and treated as withdrawn and dismissed. In respect of ground of appeal No. 5, the Ld. AR has submitted that the issue is on not allowing the vacancy allowance in respect of vacant properties. Ground of appeal No. 6 is a legal issue and is not pressed and is kept open. Last ground of appeal no 7 is consequential and does not require adjudication. The Ld.AR substantiated the submissions with judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A). 8. We heard the rival submissions and perused the material on record. The contentions envisaged by the Ld. AR that the ground of appeal raised on treatment of transfer fee. We find the coordinate Bench of this Tribunal in assessee’s own case in ITA 4708/Mum/2015 and other appeals at page 17 to 23 Para 6 has dealt on the issue and granted the relief. 6. The last issue to be decided in the appeal of the assessee for the A.Y.2004-05 is as to whether the ld. CIT(A) was justified in confirming the disallowance made by the ld. AO of ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 13 - Rs.5 lakhs in respect of amount received on account of transfer fee from incoming member of the society. 6.1. We have heard rival submissions and perused the materials available on record. During the year under consideration, the assessee collected a sum of Rs.5,25,060/- comprising of Rs.25,060/- for transfer fee and Rs.5 lakhs for other amenities from one of the members of the society i.e. Apple Finance Ltd., in respect of property admeasuring 5000 sq.ft. at office No.6, Tower-C, 4th Floor transferred by the member to Federal Bank. The ld. AO was of the view that the receipt of Rs.5 lakhs is taxable under the Act. The assessee submitted before the ld. AO that the transfer / entrance fee is collected equally from transferor and transferee and same is not taxable at all in the hands of the assessee society in view of the various decisions of the Tribunal and Hon‟ble High Courts listed in the assessment order as well as in the order of the ld. CIT(A). The Ld. AO ignored all the above decisions and added Rs.5 lakhs as income of the assessee. Before the ld. CIT(A), assessee submitted that Rs.5 lakhs is not taxable as per the „principle of mutuality‟ as the amount received thereon comes to the members contribution account of the society and the same is in turn utilized for the mutual benefits of all the members of the society. All the members are identified and they only participate in the affairs of the society and get benefit of the funds. Contributors and participants both are members of the society. Accordingly, it was pleaded that the benefit flowing from the receipts are available to all the members including the members who contributed Rs.5 Lakhs voluntarily for other amenities. The ld. CIT(A) sought for a remand report from the ld. AO. In the remand report dated 31/12/2013, the ld. AO referred to the State Government regulation vide notification dated 09/08/2001 issued u/s. 79A of the Maharashtra Housing Societies Act for Co-operative Housing societies. He observed that whatever consideration required for maintaining essential amenities are already paid by the members and there is no rationale for charging fresh fees from the incoming members. Accordingly, he stated that fees collected by the society as ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 14 - tainted by commercial motive and it should be treated as income. The assessee filed a rejoinder to the remand report vide letter dated 03/03/2014 before the ld. CIT(A) stating that the concept of mutuality as stated in the case of M/s. Sind Co- operative Housing Pvt. Ltd., vs. ITO by the Hon‟ble Jurisidictional High Court reported in 317 ITR 47 and the decision of the Hon‟ble Supreme Court in the case of Bangalore club vs. CIT reported in 350 ITR 509 had laid down four questions to be answered:- i) Is there any commerciality involved? ii) From the moneys received are the services offered in nature of profit sharing or privileges or advantages and conveniences? iii) Are the participants and the contributors are identifiable and belonged to the same class in the case of co-operative society? iv) Do the members have the right to share the surplus and do they have any right to deal with the surplus. 6.2. The assessee stated that the aforesaid four conditions are mutually duly satisfied in the instant case as under:- “In this regard, the appellant would like to state that in our case, admittedly there is no commerciality involved, because the fund has been taken from both the transferor and transferee which has gone to the Members' contribution account of the Society and the same is utilized for the mutual benefit of all the Members of the Society. Therefore, the first requirement of mutuality is satisfied. In regard to 2nd test, in the case of Co-operative Society, the only activities which it can carry out in terms of bye-laws are basically maintenance of its properties which includes building or buildings. The subscription and or contribution received by the Members can only be expanded for the ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 15 - purpose of maintenance and providing other amenities, privileges, advantages and conveniences to its Members in terms of bye-laws. The same has been done by the appellant. Therefore, the second test of mutuality is also satisfied. The third test which is regarding the identity of participants and contributors, it is stated that in the appellant's case both the participants and contributors are identifiable and belonged to same class in the Society. Since the Members are clearly identifiable, the third question of mutuality is also being satisfied. Coming to the 4 test, in terms of the bye-laws, it is only the Members who have right to share the surplus under MCS Act, no part of the fund as provided in section 64 can be paid by way of bonus or dividend or otherwise distributed among its Members, except as provided therein. Under section 67, there is a limit on the dividend to be paid on liquidation. Under section 110 of MCS Act, the surplus can only be dealt with in the manner as provided therein which includes any member are devoted to the objectives provided by the bye-laws or be transferred to another society with similar objectives. Rule 90 of the Rules, provides how the surplus is to be divided. The surplus then can be distributed in terms of bye-laws to the Members and or by operation of law to another Society having same objectives. Thus, yet another test of mutuality is being satisfied. All the 4 test of mutuality is justified. The transfer fee has therefore no business motive. Further, in relation to path breaking decision of Hon'ble Supreme Court in the case of flub vs. CIT, we would like to state that nowhere it is seen that the funds which was received from the transferor or transferee have been utilized for the .purpose other than the purpose of Society. In the case of Bangalore Club, the contribution from the Members were deposited with the Member Cooperative Banks. Therefore, it was seen that the fund was utilized for the purpose of the Society which is based on concept of mutuality. Since neither ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 16 - the funds of our Society was deployed somewhere else nor the assessee was in receipt of interest income that can be said to be utilized for the purpose other than the purpose as stated in the bye-laws. Therefore, the concept of mutuality was not breached in our case. Hence, we request your Honour that the view taken by the A.O. that the receipt of Rs.5,00,000/- should be taxed as it was tainted with commercial motive is baseless and unjustified.” 6.3. Assessee further submitted that clause (H)(g) pertaining to transfer of shares and interest in the capital/ property of the Society of the byelaws of the assessee permits the collection of donations paid voluntarily by the member. Voluntary donations are acceptable by the Society. The transfer fee received of Rs.5,00,000/- is only voluntarily received as per the bye-laws of the Society and has gone into the accounts of the Society to be utilized for the welfare of the members. The principle of mutuality has also been fully complied with, in respect of this receipt. Such receipts are not in the nature of an income and therefore, cannot be brought to tax. 6.4. The ld. CIT(A) on analysing the submissions of the assessee, remand report of the ld. AO and the rejoinder filed by the assessee to the remand report observed that the issue in dispute is covered by the decision of this Mumbai Tribunal in the case of Hatkesh Co-op Housing Society Ltd., vs ACIT in ITA Nos. 494-500/Mum/2011 dated 04/09/2013 which in turn had considered the decision of the Hon‟ble Jurisdictional High Court in the case of Sind Co-operative Housing Society vs. ITO reported in 317 ITR 47 wherein it was held that the transfer fee shall be tax exempt as mutual to the extent of the extant rate as applicable to the class of municipality under which the assessee society falls as per the relevant / current notification issued by the Government. The ld. CIT(A) observed that since in the present case, the transfer fee of Rs.5 lakhs was received in addition to the permissible monies transfer fee of Rs.25,000/- excess sum of Rs.5 lakhs would be taxable ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 17 - in the hands of the assessee. Aggrieved by this finding, the assessee is in appeal before us. 6.5. The ld. AR placed reliance on the decision of the Hon‟ble Supreme Court in the case of ITO vs. Venkatesh Premises Co- operative Society Ltd., reported in 402 ITR 670 wherein this issue has already been decided in favour of the assessee. The facts of that case and decision rendered thereon are as under:- FACTS: “In the course of assessment, the Assessing Officer held that receipt of non-occupancy charges by the assessee-society from its members, to the extent it was beyond 10 per cent of the service charges/maintenance charges permissible under the Government Notification issued under section 79A of the Maharashtra Cooperative Societies Act, 1960, stand excluded from the principle of mutuality and was taxable. The Tribunal held that the Government Notification was applicable to cooperative housing societies only and did not apply to a premises society. It further held that the transfer fee paid by the transferee member was exigible to tax as the transferee did not have the status of a member at the time of such payment and, therefore, the principles of mutuality did not apply. The High Court set aside the finding that payment by the transferee member was taxable while upholding taxability of the receipt beyond the limit specified in the Government Notification. On appeal to the Supreme Court” HELD: “The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 18 - from himself. An amount received from oneself, therefore, cannot be regarded as income and taxable. Section 2(24) defines taxable income. The income of a cooperative society from business is taxable under section 2(24)(vii) and will stand excluded from the principle of mutuality. The essence of the principle of mutuality lies in the commonality of the contributors and the participants who are also the beneficiaries. The contributors to the common fund must be entitled to participate in the surplus and the participants in the surplus are contributors to the common fund. The law envisages a complete identity between the contributors and the participants in this sense. The principle postulates that what is returned is contributed by a member. Any surplus in the common fund shall therefore not constitute income but will only be an increase in the common fund meant to meet sudden eventualities. A common feature of mutual organizations in general can be stated to be that the participants usually do not have property rights to their share in the common fund, nor can they sell their share. Cessation from membership would result in the loss of right to participate without receiving a financial benefit from the cessation of the membership. The proceedings in the instant appeal relate to different assessment years based on information gathered by the Assessing Officer pursuant to notice under section 133(6) of the Act. Transfer charges are payable by the outgoing member. If for convenience, part of it is paid by the transferee, it would not partake the nature of profit or commerciality as the amount is appropriated only after the transferee is inducted as a member. In the event of non-admission, the amount is ITA No.4708/Mum/2015 and other appeals M/s. Laxmi Finance & Leasing Companies Commercial Premises Co- op Housing Society 22 returned. The moment the transferee is inducted as a member the principles of mutuality apply. Likewise, non-occupancy charges are levied by the society and is payable by a member who does not himself occupy the premises but lets it out to a third person. The charges are ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 19 - again utilised only for the common benefit of facilities and amenities to the members. Contribution to the common amenity fund taken from a member disposing property is similarly utilised for meeting sudden and regular heavy repairs to ensure continuous and proper hazard free maintenance of the properties of the society which ultimately enures to the enjoyment, benefit and safety of the members. These charges are levied on the basis of resolutions passed by the society and in consonance with its bye-laws. The receipts in the present case have indisputably been used for mutual benefit towards maintenance of the premises, repairs, infrastructure and provision of common amenities. Any difference in the contributions payable by old members and fresh inductees cannot fall foul of the law as sufficient classification exists. Membership forming a class, the identity of the individual member not being relevant, induction into membership automatically attracts the doctrine of mutuality. If a society has surplus FSI available, it is entitled to utilise the same by making fresh construction in accordance with law. Naturally such additional construction would entail extra charges towards maintenance, infrastructure, common facilities and amenities. If the society first inducts new members who are required to contribute to the common fund for availing common facilities, and then grants only occupancy rights to them by draw of lots, the ownership remaining with the society, the receipts cannot be bifurcated into two segments of receipt so as to hold the former to be outside the purview of mutuality classifying it as income of the society with commerciality. There is no reason to take a view different from that taken by the High Court, that the Notification dated 09-08-2001 is applicable only to cooperative housing societies and has no application to a premises society which consists of non- residential premises. ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 20 - In the result, appeal preferred by the revenue is dismissed.” 6.6. We find that in the aforesaid decision, the Hon‟ble Supreme Court had categorically held in para 24 of the notification dated 09/08/2001 which has been heavily relied upon by the ld. AO in the instant case before us. It is applicable only to Co-operative housing societies and not applicable to a premises society (like assessee herein). Hence, reliance ITA placed by the ld. AO on the said notification does not advance the case of the revenue. 6.7. The ld. DR also pointed out that the decision of Mumbai Tribunal in the case of Hatkesh Co-operative Housing Society Ltd., relied upon by the ld. CIT(A) in ITA Nos. 494- 500/Mum/2011 dated 04/09/2013 has been subsequently reversed by the Hon‟ble Bombay High Court reported in 75 Taxmann.com 39. The Revenue had preferred a Special Leave Petition against the said decision before the Hon‟ble Apex Court and the same has been admitted by the Hon‟ble Supreme Court which is reported in 84 Taxmann.com 240. We find that this argument of the ld. DR need not be gone into at all in view of the fact that as on date, the issue in dispute before us is already decided by the Hon‟ble Apex Court in the case of ITO vs. Venkatesh Premises Co-operative Society Ltd., reported in 402 ITR 670. Respectfully following the aforesaid decision of Hon‟ble Supreme Court, we hold that the receipt of Rs.5 lakhs on account of transfer fee / amenities fee cannot be brought to tax as income of the assessee. Accordingly, the ground No.1 raised by the assessee is allowed. 6.8. In the result, appeal of the assessee for A.Y.2004-05 is partly allowed and appeal of the Revenue for A.Y.2004-05 is dismissed. 9. In respect of determination of annual value (ALV) of the let out property, we find that the Hon’ble Tribunal has dealt at page 8 Para 3.4 on the issue ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 21 - and the ground of appeal raised by the revenue was dismissed. We follow the judicial precedence and direct the A.O to allow the claim of the assessee.. 3.4. We find that the ld. AR vehemently argued that in the year 2007, substantial development took place which had contributed for the enhanced rental value that could be derived by the assessee from a different tenant i.e. Trans Expo Trade Pvt. Ltd. In any case, the ld. AR argued that municipal value should be adopted in place of actual rent received. We find that the ld. AO had adopted the annual rent derived by the assessee in A.Y.2007-08 for the similar extent of property let out to a completely different party i.e. Trans Expo Trade Pvt. Ltd., at Rs.10,25,000/- per month and had discounted 25% from such value in order to arrive at the fair rental value of the property let out to M/s. Lupin Ltd., in A.Y.2004-05. This in our considered opinion, is not correct approach. The ld. AO ought to have determined the fair rental value in the year under consideration based on certain comparable data. Since that was not done by the ld. AO and also in view of the fact that the actual rent received by the assessee is also more than the municipal value for the year under consideration, which fact is not disputed by the Revenue before us, we hold that actual rent received by the assessee at Rs.3,50,000/- per month in respect of property let out to M/s. Lupin Ltd., should be considered as annual value for the purpose of taxability under the head „ income from house property‟. This is the precise direction given by the ld. CIT(A) also by considering the provisions of the Act, on which we do not find any infirmity. Accordingly, the ground No.2 raised by the Revenue is dismissed. 10. The contentions are raised by the Ld.AR on the granting of vacancy allowance and additional ground ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 22 - of appeal on annual value of vacant properties, We find the similar grounds of appeal are raised as discussed in the order and the Honble tribunal has dealt extensively on the facts, law and decided on merits at page 10 to 16 Para 4 to 4.8 of the order and has granted the relief and the facts in the present appeal are similar and the decision is applicable and the appeal of the assessee is partly allowed. ITA No. 4522/Mum/2015, A.Y 2012-13 11. As the facts and circumstances in this appeal are identical to ITA No. 4521/Mum/2015, for A.Y. 2011-12, the decision rendered in above paragraphs would apply mutatis mutandis for this case also. Accordingly, grounds of appeal are partly allowed. 12. In the result, both the appeals filed by the assessee are partly allowed. Order pronounced in the open court on 31.01.2022 Sd/- Sd/- (S RIFAUR RAHMAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 31.01.2022 ITA No. 4521 & 4522/Mum/2015 M/s. Laxmi Finance leasing Companies Commercial Premises Co-op Society Ltd Mumbai - 23 - KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ आ / The CIT(A) 4. आ आ ( ) / Concerned CIT 5. ! !" , आ $ %, हमद द / DR, ITAT, Mumbai 6. () * + / Guard file. ान ु सार/ BY ORDER, ! //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai