ITO 16(2)(4), MUMBAI V. THE CASA GRANDE CO OP HOUSING SOCITY LTD, MUMBAI

ITA 4598/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3293 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Source of fund
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO 4598/MUM/2014 ( / ASSESSMENT YEAR: 2007-08) I.T.O -16(2)(4), 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400 07. / VS. THE CASA GRANDE CO-OP. HOUSING SOCIETY LTD. 22, K.S TAYEBJI MARG, LITTLE GIBBS ROAD, MALABAR HILL, MUMBAI-400 006. ./ ./PAN/GIR NO. AAATC 4054A ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI. RAJESH OJHA / RESPONDENT BY : SHRI. K.P. DEWANI / DATE OF HEARING : 12/01/2016 !'# / DATE OF PRONOUNCEMENT : 29/01/2016 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 07.04.2014 OF COMMISSIONER OF INCOME TAX (APPEALS)-27, MUMBAI (HE REINAFTER CALLED AS THE CIT(A)) FOR ASSESSMENT YEAR 2007-08. THE REVENUE HA S RAISED THE FOLLOWING GROUNDS OF APPEAL: 2 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN LAW ON HOLDING THAT THE VOLU NTARY CONTRIBUTION OF RS.70,00,000/- BY ONE OF ITS MEMBER IN LIEU OF TRAN SFERRING RIGHT TO THE EXCLUSIVE USE OF THE VALUABLE ASSETS/FACILITIES BY THE SOCIET Y DURING THE A.Y.2007-08 IS COVERED WITHIN THE PRINCIPALS OF MUTUALITY. 2. THE ISSUE RAISED IN GROUND NO.1 WHETHER THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE VOLUNTARY CONTRIBUTION OF RS.70,00,000/- B Y ONE OF ITS MEMBER IN LIEU OF TRANSFERRING RIGHT TO THE EXCLUSIVE USE OF THE FACI LITIES BY THE SOCIETY IS COVERED WITHIN THE PRINCIPALS OF MUTUALITY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A CO-OPERATIVE HOUSING SOCIETY, RECEIVED DONATION OF RS.70,00,000/- FROM S HRI KIRIT R. JASANI A MEMBER AS VOLUNTARY DONATION AND THE SAME WAS SHOWN UNDER THE HEAD OF BUILDING REPAIRS & RENOVATION IN THE BALANCE SHEET OF THE ASSESSEE. THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.08.2006 AT NIL INCOME AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER A NOTICE U/S 148 OF T HE ACT WAS ISSUED ON 30.03.2012 AND PROPERLY SERVED ON THE ASSESSEE SOCIETY AND THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT WAS FRAMED VIDE ORDER DATED 28.03.2 013 AT RS. 70,06,000/- BY ADDING RS. 70,00,000/- RECEIVED AS VOLUNTARY DONATI ON BESIDES MAKING SOME OTHER ADDITIONS. THE LD. AO ADDED THE SAME TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT SOCIETY COULD NOT PROVE THE INTENTION OF CONCE PT OF MUTUALITY AND THEREFORE, THE 3 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. DONATION RECEIVED FROM SHRI KIRIT R. JASANI A MEMBE R OF THE ASSESSEE SOCIETY FOR REPAIRS IS NON-MUTUAL INCOME OF THE SOCIETY. THE LD . CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE DELETED THE AD DITION OF RS. 70,00,000/- BY HOLDING THAT DONATION RECEIVED FROM SHRI KIRIT R. JASANI FOR BUILDING REPAIRS/ RENOVATION WAS OUT OF MUTUALITY BY DISAGREEING WIT H THE AO ON THE POINT OF MUTUALITY .HE ALSO OBSERVED THAT THE AO CAME TO THE CONCLUSION WITHOUT ANY MATERIAL ON RECORD ON THE CONCEPT OF NON MUTUALITY . THE LD. CIT(A) ALSO OBSERVED THAT A SIMILAR ISSUE HAS BEEN DECIDED IN THE CASE O F THE ASSESSEE IN ITA NO. 467/MUM/2008 ASSESSMENT YEAR 2004-05 IN ITS FAVOUR AND THEREFORE THE ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSE BY ITS O WN ORDER AND THE AO WAS WRONG IN HOLDING THAT THE VOLUNTARY DONATION WAS RECEIVED OUT OF NON-MUTUALITY. 4. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE AO BY ARGUING VEHEMENTLY THAT THE DONATION WAS NOT RECEIVED OUT O F MUTUALITY AND THEREFORE CONSTITUTED INCOME OF THE ASSESEE SOCIETY AND PRAYE D FOR SETTING ASIDE THE ORDER OF THE CIT(A) AND UPHOLDING THE ORDER OF THE AO. THE L D. AR PER CONTRA, WHILE ARGUING THE CASE BROUGHT TO OUR NOTICE THAT THE CA SE OF THE ASSESSEE WAS COVERED IN ITS FAVOUR BY A DECISION OF TRIBUNAL IN ITS OWN C ASE IN ITA NO. 467/MUM/2008: ASSESSMENT YEAR 2004-05 THEREIN A SIMILAR VOLUNTARY DONATION RECEIVED OF RS.1,75,00,000/- FROM A MEMBER TO MAKE GOOD THE SH ORTFALL IN THE EXPENDITURE 4 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. INCURRED BY THE SOCIETY FOR UNDERTAKING THE MAJOR R EPAIRS AND RENOVATION OF THE BUILDING AND THEREFORE THE APPEAL OF THE DEPARTMENT BE DISMISSED AND THE ORDER OF THE CIT(A) WHICH WAS RIGHTLY PASSED BY FOLLOWING TH E DECISION IN THE ABOVE ITA DESERVED TO BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE INVOLVED IN THE APPEAL IS COVE RED DIRECTLY BY ITS OWN CASE IN EARLIER YEAR IN ITA NO. 467/MUM/2008 ASSESSMENT YEA R 2004-05 AND RELEVANT PARAS 9 TO 14 ARE RE-PRODUCED AS UNDER:- 9. WE CONSIDERED THE MATTER IN DETAIL. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE A SI MILAR CASE WAS CONSIDERED BY THE ITAT MUMBAI A BENCH IN THE CASE OF SHREE PARLESHWAR CO-OPERATIVE HOUSING SOCIETY LTD. VS. IT O[8 SOT668(MUM.)]. IN THAT CASE, THE ASSESSEE-SOCIETY H AD AVAILED ADDITIONAL FSI. THE ADDITIONAL FSI WAS UTILIZED FOR CONSTRUCTING ACCOMMODATIONS FOR THE MEMBERS NEWLY ADMITTED IN TH E SOCIETY, WHEN NEW MEMBERS WERE ADMITTED IN THE SOCIETY; SUBS TANTIAL AMOUNTS WERE COLLECTED FROM THEM. THOSE AMOUNTS WER E UTILIZED NOT ONLY FOR CONSTRUCTION OF ACCOMMODATION FUR THE NEW MEMBER BUT ALSO FOR RENOVATING AND EXTENDING FACILITIES TO THE EXISTING MEMBERS. EVEN THOUGH THERE WAS SURPLUS IN HANDS OF THE ASESS EE WHICH WAS UTILIZED FOR THE BENEFIT OF THE OTHER MEMBERS BY WA Y OF RENOVATION AND EXTENSION OF FACILITIES. THE TRIBUNAL HELD THAT THE SURPLUS WOULD NOT BE IN THE NATURE OF INCOME AS THE ENTIRE ACTIVI TY WAS COVERED BY THE PRINCIPLE OF MUTUALITY. THE PRESENT CASE IS FAR BETTER THAN THE ABOVE CASE. IN THE ABOVE A CASE CITED BY THE LEARNE D COUNSEL, THE ASSESEE-SOCIETY IN FACT HAD SURPLUS FUNDS ON THE EX CHANGE OF THE FSI TO THE NEW MEMBERS ADMITTED IN THE SOCIETY. IN THE PRESENT CASE, 5 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. THERE IS NO SUCH QUESTION OF ANY SURPLUS IN THE HAN DS OF THE ASSESSEE-SOCIETY. 10. IN THE PRESENT CASE ONE OF THE MEMBERS VOLUNTEE RED HIMSELF TO CONTRIBUTE SUBSTANTIAL AMOUNT TO THE ASSESSEE-SOCIE TY TO UNDERTAKE SUBSTANTIAL MAINTAINING AND REPAIRING WORK OF THE E XISTING BUILDING. THE REPAIRS AND MAINTENANCE AND UPLIFT OF THE EXIST ING BUILDING AS A WHOLE ARE BENEFICIAL TO ALL THE MEMBERS OF THE SOCI ETY. THEREFORE, IN THE ACTIVITIES CARRIED OUT BY THE ASSESSEE-SOCIETY IN SPENDING THE CONTRIBUTION RECEIVED FROM THE MEMBER, THE PRINCIPL E OF MUTUALITY HAS BEEN STRICTLY OBSERVED. THE APPLICATION OF FUND S IS THE CRUCIAL TEST. HERE THE FUND OF RS.1,75,00,000 WAS CONTRIBUT ED BY ONE OF THE MEMBERS. HOW THE FUNDS WERE EXPENDED? THE FUNDS WER E EXPENDED IN RENOVATING AND REPAIRING THE EXISTING BUILDING F ACILITIES OF WHICH THE BENEFITS ARE AVAILABLE TO ALL THE MEMBERS. THER EFORE THERE IS NO DOUBT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE -SOCIETY IS FOR THE BENEFIT OF THE ENTIRE MEMBERS, AND THEREFORE, FULLY COVERED BY THE RULE OF MUTUALITY. 11. NOW REGARDING THE SOURCE OF FUNDS UTILIZED FOR THE RENOVATION WORK OF THE BUILDING ONE HAS TO SEE THAT THE CONTRI BUTION HAS COME FROM A MEMBER. NO OUTSIDER IS INVOLVED. WHETHER THE CONTRIBUTION HAS COME FROM ALL THE MEMBERS FROM SOME OF THE MEMB ERS OR ONLY OF THE MEMBERS, IT HAS BASICALLY COME FROM THE IN HOUS E OF THE SOCIETY. THERE IS NO TRANSACTION BETWEEN THE ASSESSEE-SOCIET Y AND NON- MEMBER OUTSIDER. THE RECEIPT OF CONTRIBUTION AND AP PLICATION OF THE FUNDS BOTH ARE CONFINED INSIDE THE FRAME OF THE SOC IETY AND ITS MEMBERS. THEREFORE ON THE QUESTION OF RECEIVING THE CONTRIBUTION FROM ONE OF THE MEMBERS OF THE SOCIETY THERE IS NO VALUATION OF THE RULE OF MUTUALITY. THEREFORE, IT IS VERY DIFFICULT TO HOLD THAT THE CONTRIBUTION MADE BY ONE OF THE MEMBERS OF THE SOCI ETY FOR CERTAIN PARTICULAR PURPOSES PARTAKES THE CHARACTER OF INCOM E IN THE HANDS OF THE ASSESSEE SOCIETY. THAT FINDINGS IS QUITE PERVER SE. 12. THERE IS NO ELEMENT OF INCOME AT ALL IN THE PRE SENT CASE. IN FACT THE ENTIRE AMOUNT CONTRIBUTED BY THE MEMBER WAS SPE NT BY THE ASSESSEE-SOCIETY FOR RENOVATING THE BUILDING AND MA KING ADDITIONAL FACILITIES. AS AN ADDITIONAL FACILITY THE ASSESEE-S OCIETY HAS GIVEN THE RIGHT OF ADDITIONAL PARKING SPACE AND RIGHT TO USE ONE OF THE LIFTS TO 6 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. THE DONOR MEMBER. BUT IT HAS TO BE SEEN THAT THE EN TIRE AMOUNT HAS BEEN SPENT FOR THE MEMBERS. THERE IS NO SURPLUS IN THAT ACCOUNT. WHERE THERE IS NO SURPLUS IN THAT ACCOUNT THERE IS NO QUESTION OF INCOME. THEREFORE, ONE HAS TO SEE THAT AS A MATTER OF FACT, EVEN BEFORE APPLYING THE PRINCIPLE OF MUTUALITY THERE IS NO QUE STION OF INCOME ARISING AT ALL. 13. IF WE EXAMINE THE CASE FROM ANOTHER ANGLE, IT IS TO BE SEEN THAT IT IS ONLY A QUESTION OF EXPENDITURE. THE MEMBER WH O VOLUNTEERED HIMSELF TO CONTRIBUTE RS.1,75,00,000 TO UNDERTAKE T HE REPAIR WORK WAS IN FACT REIMBURSING THE SOCIETY OF THE EXPENDIT URE INCURRED BY THE SOCIETY. THE SOCIETY HAS INCURRED EXPENDITURE IN EX PANDING THE FACILITIES AND IN CARRYING OUT EH REPAIR WORKS. THE RE WAS SHORTAGE OF FUNDS THAT SHORTAGE WAS MADE GOOD BY THE MEMBER. SO THAT IS ONLY A QUESTION OF REIMBURSEMENT OR COMPENSATING THE EXPEN DITURE. THEREFORE AS FAR AS THE ASSESSEE SOCIETY IS CONCERN ED. IT HAS NOT EARNED ANYTHING. SO THERE IS NO QUESTION OF ANY INC OME AT ALL. THE SOCIETY BY ITSELF DOES NOT HAVE ITS OWN INCOME. THE EXPENDITURES ARE MET BY THE CONTRIBUTION MADE BY THE MEMBERS OR MEMB ER. EVEN IF THE MEMBER WANTS TO HAVE SOME EXTRA FACILITIES AND THE DEMAND IS SUPPORTED BY THE REMAINING MEMBERS THE ADDITIONAL F ACILITIES CAN BE ERECTED ONLY THROUGH THE MEDIUM OF CO-OPERATIVE SOC IETY. A MEMBER OF A HOUSING SOCIETY CANNOT INCUR ANY EXPENDITURE D IRECTLY EVEN THOUGH THE EXPENDITURE WAS INCURRED FOR THIS PERSON AL BENEFIT. THE WORK HAS TO BE CARRIED OUT THROUGH THE OFFICE OF TH E SOCIETY. THE SOCIETY ALONE CAN UNDERTAKE SUCH WORK. THEREFORE, I N FACT EVEN IN A CASE WHERE A PERSONAL BENEFIT IS GIVEN TO AMBER BY DOING SOME WORK. THE SAME WORK IS DONE BY THE SOCIETY FOR AND ON BEH ALF OF THAT MEMBER. THEREFORE, ON THIS GROUND ALSO THERE IS NO QUESTION OF ANY INCOME. 14. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE LOWER AUTHORITIES HAVE ERRED IN TREATING THE SUM OF RS.1,75,00,000 AS THE INCOME OF THE ASSESSEE-SOCIETY. IT IS ACCORDING LY DELETED. 5.1 FURTHER IN THE CASE OF THE CIT VS. DARBHANGA MANSIO N CO-OP HOUSING SOCIETY LTD. AND SU PRABHAT CO-OPERATIVE HOUSING SO CIETY LTD. VS. INCOME TAX 7 ITA NO. 4598/MUM/2014 (A.Y. 2007-08) ITO VS. CASA GRANDE CO-OP. HOUSING SOCIETY LTD. OFFICER, THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THE SAME ISSUE IN FAVOUR OF THE ASSESSEE WHILE DECIDING THE SUBSTANTIAL QUES TION OF LAW. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION THE JURISDICTIO NAL HIGH COURT AND CO-ORDINATE BENCH AS REFERRED TO ABOVE DISMISS THE APPEAL OF TH E REVENUE. THE AO IS DIRECTED ACCORDINGLY. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH JANUARY, 2016 SD/- SD/- (AMIT SHUKLA) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED :29.01.2016 PS. ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. 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