HATKESH CO.OP. HSG SOC. LTD, MUMBAI V. ACIT 21(1), MUMBAI

ITA 498/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70936 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 18-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL K HAKANI; NEELAM C JADHAV
• Keywords: Capital asset; Gift; Business income; Capital receipt; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NOS. ! / ASSESSMENT YEARS 494/MUM/2011 1996-1997 495/MUM/2011 2000-2001 496/MUM/2011 2001-2002 498/MUM/2011 2002-2003 499/MUM/2011 2006-2007 500/MUM/2011 2007-2008 HATKESH CO.OP. HSG. SOC. LTD. PLOT NO.51, JAI HIND SOCIETY, 2 ND FLOOR, JAI HIND CLUB, N. S. ROAD NO.11, J.V.P.D. SCHEME, VILE PARLE (WEST), MUMBAI-400 056 / VS. ASST. CIT, CIRCLE 21(1), 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BLDG., NO. C-10, BANDRA (EAST), MUMBAI-400 051 ./! ./PAN/GIR NO. AAALH 0017 Q ( ' # /APPELLANT ) : ( $ # / RESPONDENT ) ' # % / APPELLANT BY : SHRI RAHUL K. HAKANI & MS. NEELAM C. JADHAV $ # & % / RESPONDENT BY : SHRI RAJARSHI DWIVEDY ' ()* & + / DATE OF HEARING : 05.07.2013 ,-. & + / DATE OF PRONOUNCEMENT : 04.09.2013 / / O R D E R PER SANJAY ARORA, A. M.: THESE ARE THE APPEALS BY THE ASSESSEE FOR SIX YEARS , BEING ASSESSMENT YEARS (A.YS.) 1996-97, 2000-01, 2001-02, 2002-03, 2006-07 AND 2007-08, CONSEQUENT TO THE DISPOSAL OF ITS APPEALS CONTESTING ITS ASSESSMENTS U/S.143(3) (R.W.S. 147, SAVE THE LAST TWO 2 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT YEARS) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) BY THE COMMISSIONER OF INCOME TAX (APPEALS)-32, MUMBAI (CIT(A) FOR SHORT ). THE ISSUES ARISING IN THESE APPEALS BEING COMMON, THE SAME WERE TAKEN UP TOGETH ER FOR HEARING TOGETHER, AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER. 2.1 THE PRINCIPAL ISSUE INVOLVED IS TAXABILITY OR O THERWISE OF SUMS RECEIVED BY THE ASSESSEE, A RESIDENTIAL HOUSING CO-OPERATIVE SOCIET Y, BY WAY OF TRANSFER FEE AND TDR PREMIUM. WHILE THE ASSESSEE CLAIMS THE SAME AS TAX- EXEMPT ON THE GROUND OF MUTUALITY, RELYING ON THE DECISION BY THE TRIBUNAL IN ITS OWN CASE FOR OTHER YEARS, AS WELL AS BY THE HONBLE JURISDICTIONAL HIGH COURT, THE REVENUE BASE S ITS CASE ON THE FACTUAL FINDINGS ISSUED BY ITS AUTHORITIES, AS WELL AS, AGAIN, ON TH E SAME DECISIONS BY THE HONBLE JURISDICTIONAL HIGH COURT. THE ASSESSMENT ORDER FOR A.Y. 2002-03 (IN ITA NO.498/MUM/2011) BEING THE LEAD ORDER, WE SHALL ADO PT THE SAME FOR THE PURPOSE OF DISCUSSING THE FACTS/CASE, EVEN AS WAS DONE AT THE TIME OF HEARING. THE SPECIFIC GROUNDS RAISED FOR THIS YEAR ARE AS UNDER: 1. THE LEARNED CIT(A) 32 HAS ERRED IN CONFIRMING T HE FINDINGS THAT TRANSFER CHARGES RS.18,53,760/- RECEIVED BY THE ASS ESSEE WHICH IS PLOT OWNER SOCIETY AS TAXABLE WITHOUT APPRECIATING FULL FACTS AND CONSIDERING VARIOUS JUDGEMENTS PASSED BY HON. BOMBAY HIGH COURT AND HON. TRIBUNAL. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN TREAT ING THE T.D.R. PREMIUM RECEIVED OF RS.24,06,798/- AS INCOME AND HA S FURTHER ERRED IN NOT CONSIDERING THE DIRECTION GIVEN BY HON. TRIBUNAL IN ORDER DATED 4 TH MARCH 2008. 3. THE LEARNED CIT(A) 32 HAS ERRED IN REJECTING THE APPELLANTS ALTERNATIVE PLEA THAT IN CASE TRANSFER FEES ARE TRE ATED AS INCOME THE EXPENSES INCURRED BY THE SOCIETY OF RS.34,69,365/- SHOULD BE CONSIDERED FOR ALLOWING AS EXPENSES. GROUND NO. 3 IS IN EFFECT AN ALTERNATE GROUND, WHIL E GROUND NO.2 DOES NOT ARISE OUT OF THE IMPUGNED ORDER. IN FACT, IT DOES NOT ARISE OUT OF T HE ORDER BY THE TRIBUNAL; THIS BEING THE SECOND ROUND BEFORE IT, SO THAT THE PRINCIPAL AND T HE SOLE ISSUE IN THIS APPEAL IS AS RAISED 3 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT PER GROUND NO.1, I.E., THE TAXABILITY OR OTHERWISE OF THE TRANSFER FEES OR TRANSFER PREMIUM, AS VARIOUSLY DESCRIBED, IN LAW IN THE FACTS AND CIR CUMSTANCES OF THE CASE. THE TRIBUNAL IN THE FIRST ROUND, VIDE ITS ORDER DATED 04.03.2008 (I N ITA NO.7677/MUM/2003/COPY ON RECORD), SET ASIDE THE MATTER BACK TO THE FILE OF T HE A.O. TO BE DECIDED AS PER LAW IN ACCORDANCE WITH THE DECISION BY THE SPECIAL BENCH I N WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. VS. ITO [2004] 88 ITD 159 (MUM) (SB), STATING AS UNDER: 3. THE GROUNDS OF APPEAL NOS.1 & 2 OF THE ASSESSE E FOR ASSESSMENT YEARS 2001-02 & 02-03, GROUND OF APPEAL NOS. 2 & 3 FOR A.Y. 1996-97 AND THE GROUND OF APPEAL NO.1 & 2 OF THE ASSESSEE FOR A .Y. 2000-01 ARE COMMON IN NATURE AND RELATES TO THE ISSUE OF TAXABI LITY OF TRANSFER FEES RECEIVED BY THE SOCIETY AND THE DISALLOWANCE OF EXP ENDITURE THERETO. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISS UE IS COVERED WITH THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF VITHALNA GAR CO-OPERATIVE HOUSING SOCIETY LTD., VS. DCIT AND OTHERS IN ITA NO S.4241/M/00, 2728/M/99 AND 5023/M/99 FOR ASSESSMENT YEAR 1995-96 ORDER DT.17.11.05 WHEREIN THE ISSUE WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO FOLLOW THE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. VS. ITO IN 88 ITD 159 (MUM.) (SB). THE LD. DR HAS NOT OPPOSED THE SUBMISS IONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. WE HAVE CONSIDERED THE RI VAL SUBMISSIONS. WE FIND THAT THE ISSUE IN THESE GROUNDS OF APPEAL OF T HE ASSESSEE REGARDING THE TAXABILITY OF TRANSFER FEES RECEIVED BY THE APPELLA NT SOCIETY ON THE PRINCIPLE OF MUTUALITY AND THE ISSUE OF DISALLOWANCE OF EXPEN SES RELATING THERETO CLAIMED BY THE ASSESSEE IS COVERED WITH THE DECISIO N OF MUMBAI TRIBUNAL IN THE CASE OF VITHALNAGAR CO-OPERATIVE HOUSING SOCIET Y LTD. (SUPRA) AND WE BEING IN AGREEMENT WITH THE SAID DECISION OF THE MU MBAI TRIBUNAL IN THE CASE OF VITHALNAGAR CO-OPERATIVE HOUSING SOCIETY LT D., SET ASIDE THE ISSUE IN THESE GROUNDS OF APPEAL OF THE ASSESSEE IN ALL T HE FOUR APPEALS TO THE FILE OF THE ASSESSING OFFICER, WHO IS DIRECTED TO DECIDE THE ISSUE IN ACCORDANCE WITH THE DECISION OF SPECIAL BENCH OF THE MUMBAI TR IBUNAL IN THE CASE OF WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. VS. ITO REPORTED IN 88 ITD 159 (MUM.) (SB) AND ANY OTHER DECISION WHICH MA Y BE AVAILABLE TO HIM, WE DECIDE ACCORDINGLY. 2.2 THIS IS A SUBSISTING ISSUE IN THE ASSESSEES CA SE, ACROSS ALL THE YEARS, WITH IT BEING, SIMILARLY, THE SECOND ROUND BEFORE US FOR A.YS. 199 6-97, 2000-01 AND 2001-02, HAVING BEEN DECIDED BY THE TRIBUNAL EARLIER VIDE ITS ORDER DATED 04.03.2008 (SUPRA). THE REVENUE IN THE SET ASIDE PROCEEDINGS HAS PROCEEDED TO DECID E THE MATTER IN VIEW OF THE FACTUAL 4 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT FINDINGS, AND BY FOLLOWING THE DECISION IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY VS. ITO [2009] 317 ITR 47 (BOM). 3.1 BEFORE US, THE ASSESSEES PRINCIPAL CASE WAS TH AT THE MATTER IS COVERED BY THE DECISION OF THE TRIBUNAL IN ITS OWN CASE, I.E., FOR A.YS. 2003-04 TO 2005-06, VIDE ORDER (IN ITA NOS.6346 TO 6348/MUM/2009) DATED 24.06.2011 (CO PY ON RECORD). IT HAS BEEN SINCE CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN SIND CHS (SUPRA) THAT IT IS IMMATERIAL AS TO WHETHER THE TRANSFER FEE IS PAID BY THE TRANS FEROR (OUTGOING) MEMBER OR BY THE TRANSFEREE (INCOMING) MEMBER. AS SUCH, THE PRINCIPL E OF MUTUALITY WOULD GOVERN THE TRANSACTION OF RECEIPT OF TRANSFER FEE EITHER WAY. FURTHER, IN MITTAL COURT PREMISES CO- OPERATIVE SOCIETY LTD. VS. ITO [2010] 320 ITR 414 (BOM), IT HAS BEEN FURTHER EXPL AINED THAT THE GOVERNMENT NOTIFICATION DATED 09.08.2001 A ND 27.11.1989 WOULD NOT BE APPLICABLE TO A COMMERCIAL SOCIETY BUT ONLY TO A RE SIDENTIAL HOUSING SOCIETY. THE ASSESSEE-SOCIETY IS A PLOT OWNERS SOCIETY AND NOT THAT OF RESIDENTIAL FLAT OWNERS AND, ACCORDINGLY, THE SAID NOTIFICATION/S ISSUED BY THE SATE GOVERNMENT UNDER THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960 (MHSA) IS NOT APPL ICABLE TO IT. ACCORDINGLY, THERE IS NO QUESTION OF THE SOCIETY HAVING CHARGED ANYTHING BEY OND OR IN EXCESS OF THE AMOUNT PRESCRIBED UNDER THE LAW. THERE IS NOTHING IN THE B YE-LAWS OF THE SOCIETY WHICH RESTRICTS THE AMOUNT THAT COULD BE CHARGED BY WAY OF TRANSFER FEES, WHICH IS IN ANY CASE TO BE APPLIED ONLY TOWARD THE SPECIFIED OBJECTS OF THE SO CIETY, FOR THE COMMON GOOD AND BENEFIT OF ITS MEMBERS. IT IS ALSO, AS EXPLAINED, IMMATERIA L AS TO WHO CONTRIBUTES AS LONG AS THERE IS IDENTITY BETWEEN THE CONTRIBUTORS AS A CLASS AND THE PARTICIPANTS, SO THAT AT EACH POINT OF TIME THE CONTRIBUTORS AS A BODY ARE COMPRISED OF TH E SAME SET OF PERSONS WHO ARE ENTITLED TO PARTICIPATE (IN THE PROFITS/SURPLUS OR THE FUND) . THIS IS PRECISELY THE BASIS ON WHICH THE FIRST APPELLATE AUTHORITY ALLOWED IT RELIEF FOR THE ANTERIOR YEARS, I.E., A.YS. 2003-04 TO 2005-06, SINCE CONFIRMED BY THE TRIBUNAL VIDE ITS O RDER DATED 24.06.2011 (SUPRA). 3.2 THE LD. DR WAS EQUALLY VEHEMENT IN SUPPORT OF T HE IMPUGNED ORDER. THE LD. CIT(A), AS A READING OF HIS ORDER WOULD SHOW, EXAMI NED THE ISSUE THREADBARE VIDE PARAS 5 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT 3.3 TO 3.8 OF HIS ORDER, ALSO REPRODUCING THE NOTIF ICATION DATED 09.08.2001 ISSUED U/S.79A OF THE MHSA. THE ASSESSEE-SOCIETY HAS CHARGED TRANS FER FEE MUCH IN EXCESS OF THE MAXIMUM LIMIT OF RS.25,000/- STIPULATED THEREBY FOR BEING CHARGED PER TRANSFER BY A CO- OPERATIVE HOUSING SOCIETY. IN FACT, THE ENTIRE TRAN SFER FEE OF RS.18.54 LACS UNDER REFERENCE COMES FROM A SINGLE PERSON, SHRI VINOD PAREKH QUA TWO PLOTS (REFER PG.2 OF THE ASSESSMENT ORDER DATED 28.02.2003). HOW COULD ONE, UNDER THE CIRCUMSTANCES, SAY THAT THERE IS NO PROFIT ELEMENT OR CONSIDERATION INVOLVE D ? THE HONBLE COURT IN SIND CHS (SUPRA) HAS HELD THAT ANY AMOUNT CHARGED BY A HOUSI NG SOCIETY IN EXCESS OF THE PRESCRIBED LIMIT AND RETAINED BY IT WOULD BE EXIGIBLE TO TAX. IT IS FACILE TO SAY THAT THE SAID NOTIFICATION IS NOT APPLICABLE TO THE ASSESSEE-SOCI ETY AS IT IS A PLOT OWNERS SOCIETY AND NOT A FLAT OWNERS SOCIETY. IN FACT, THE SOCIETY IN SIND CHS (SUPRA) WAS ALSO A PLOT OWNERS SOCIETY . THE VERY FACT THAT THE GOVERNMENT DID NOT CONSIDE R IT NECESSARY TO OR IN FACT ISSUE A SEPARATE NOTIFICATION SPECIFICALLY FOR SUCH SOCIE TIES WOULD NOT MEAN THAT IT IS NOT APPLICABLE THERETO; ON THE CONTRARY, WOULD ONLY IMP LY THAT IT IS APPLICABLE TO SUCH SOCIETIES INASMUCH AS THE PLOT OWNERS SOCIETIES ARE ALSO HOU SING SOCIETIES MEANT TO SATISFY, AND AS MUCH, THE NEED FOR HOUSING AND, FURTHER, GOVERNED B Y THE MHSA AS WELL AS THE MODEL BYE-LAWS ISSUED THERE-UNDER. THAT IS, TO SAY THAT W HILE THERE IS A LEGAL BAR ON A RESIDENTIAL FLAT SOCIETY, SO THAT IT COULD LEGALLY CHARGE ONLY AS MUCH, BUT NO CORRESPONDING BAR ON A RESIDENTIAL HOUSING SOCIETY WHERE FORMED BY THE PLO T OWNERS, IS MISCONCEIVED, AND THE ONLY IMPLICATION, IF AT ALL, OF NON-ISSUE OF A SEPA RATE NOTIFICATION FOR SUCH SOCIETIES IS THAT THE NOTIFICATION COVERS THE SAME AS WELL. THAT APAR T, THE ASSESSEE-SOCIETY HAS, UPON CHARGING OF TRANSFER FEE AND TDR PREMIUM, ALLOWED N OT ONLY THE TRANSFER OF MEMBERSHIP, BUT ALSO THEREBY ALLOWED ITS MEMBERS TO PURCHASE TD RS FROM THE OPEN MARKET AND LOAD IT TO THEIR EXISTING STRUCTURES. AS FOUND BY THE REVEN UE UPON INSPECTION, THE MEMBERS HAD DEMOLISHED THEIR EXISTING STRUCTURES AND CONSTRUCTE D NEW BUILDINGS; IN FACT, MULTI-STORIED BUILDINGS, ON THEIR ALLOTTED PLOTS, EITHER LETTING THE FLATS CONSTRUCTED OR SELLING THE SAME TO NON-MEMBERS. AS SUCH, APART FROM MEMBERS, A SUBSTAN TIAL PART OF THE HOUSING ON THE SOCIETYS LAND IS OWNED AND/OR OCCUPIED BY NON-ME MBERS, CONSIDERABLY DILUTING THE 6 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPA NTS THAT THE SOCIETY IS SUPPOSED TO REPRESENT, AT LEAST IN SUBSTANCE. FURTHER, ALL THE COMMON UTILITIES OF THE SOCIETY VIZ. PARKS, ROADS, ELECTRIC/WATER SUPPLY, DRAINAGE, STREET LIGH TS, ETC., ARE BEING EQUALLY ENJOYED BY THE MEMBERS AS WELL AS NON-MEMBERS RESIDING THEREAT. THIS IS A CLEAR CASE OF COMMERCIALITY HAVING IMBUED THE OPERATIONS OF THE SOCIETY . NONE OF THESE PRIMARY FACTS HAVE BEEN DENIED, MUCH LESS REBUTTED BY THE ASSESSEE BEFORE E ITHER OF THE AUTHORITIES BELOW. HOW COULD, UNDER SUCH CIRCUMSTANCES, THE ASSESSEE BE CO NSIDERED AS A TAX-EXEMPT ENTITY, OR AT LEAST IN RELATION TO THE TRANSFER FEES AND TDR PREM IUM RECEIVED BY IT ON THE GROUND OF MUTUALITY ? THE COLLECTION OF THESE SUMS, WHICH ARISE FROM YE AR TO YEAR, HAVE TO BE SEEN IN LIGHT OF THESE DEVELOPMENTS, AND NOT AS ISOLATED IN CIDENTS OR IN AN ISOLATED MANNER. 3.3 THE LD. AR, IN REJOINDER, WOULD, WITH REFERENCE TO THE VARIOUS PROVISIONS OF MHSA, VIZ. SECTIONS 2(16), 2(27), AND 4, CLARIFY TH AT THE ASSESSEE-SOCIETY IS A HOUSING SOCIETY, FURTHER, FALLING, UNDER THE CLASSIFICATION TENANT OWNERSHIP HOUSING SOCIETY (UNDER RULE 10(5)), OPERATING ON COOPERATIVE PRINCI PLES. THE LAND WAS ALLOTTED TO THE MEMBERS BY COLLECTING THERE-FROM THE SAME AMOUNT AS WAS REQUIRED TO BE DEPOSITED ON ACCOUNT OF LEASE WITH THE HOUSING BOARD; THE RELEVA NT FIGURES BEING BORNE OUT BY ITS BALANCE-SHEET FOR THE RELEVANT YEAR (AY 1996-97). THERE IS, THUS, NO QUESTION OF ANY PROFIT. AGAIN, WITH REFERENCE TO SECTIONS 64, 67, 7 0, 110 OF MHSA, IT WAS SOUGHT TO BE EMPHASIZED THAT THE SURPLUS INURES ONLY TO THE MEMB ERS AND, FURTHER, IS SUBJECT TO ADEQUATE CONTROL QUA ITS INVESTMENT AND APPLICATION. THE QUESTION OF TA XABILITY OF TRANSFER FEE COLLECTED IN EXCESS OF THE NOTIFICATION/S ISSUE D BY THE STATE GOVERNMENT CAME FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITS OWN CASE FOR A.YS. 2003-04 TO 2005-06, WHEREAT THE TRIBUNAL CONFIRMED THE PRINCIPLE OF MUTUALITY O N SUCH TRANSFER FEES AS WELL, I.E., COLLECTED IN EXCESS OF THE LIMIT IMPOSED BY THE GOV ERNMENT PER THE SAID NOTIFICATION/S. IN FACT, IN MITTAL COURT PCS LTD. (SUPRA), THE HONBLE COURT HAS HELD THAT SUCH EXCES S, IF COLLECTED, WOULD HAVE TO BE REFUNDED AND, IN ANY CA SE, A MEMBER IS NOT PROHIBITED FROM GIFTING ANY AMOUNT TO THE SOCIETY FOR ITS OBJECTS. THE ISSUE OF TDR PREMIUM, AGAIN, STANDS CONSIDERED BY THE HONBLE COURT IN THE CASE OF CIT VS. JAI HIND CHS LTD. [2012] 7 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT 349 ITR 541 (BOM), WHEREIN, FOLLOWING ITS APPROVAL OF THE PRINCIPLE OF MUTUALITY IN RESPECT OF NON-OCCUPANCY CHARGES PAID BY A MEMBER T O THE SOCIETY IN MITTAL COURT PCS LTD. (SUPRA), IT STANDS CLARIFIED THAT THE SAME PRINCIPL E WOULD APPLY TO THE CASE OF TDR PREMIUM AS WELL, AS THE SAID PREMIUM IS REQUIRED TO DEFRAY THE ADDITIONAL BURDEN THAT WOULD BE CAST ON UTILIZATION OF ADDITIONAL FSI. IN FACT, THIS ASPECT HAS ALSO BEEN CONSIDERED AND UPHELD BY THE TRIBUNAL IN ITS OWN C ASE FOR A.Y. 2002-03, WHERE, FOLLOWING THE DECISION OF THE SPECIAL BENCH IN WALKESHWAR TRIVENI CHS LTD. (SUPRA), IT ALLOWED THE ASSESSEES CLAIM ON TDR PREMIUM; THE S PECIAL BENCH HAVING ALLOWED THE SAME ON TRANSFER FEES. WITH REGARD TO THE COMMON FACILITIES AND AMENITIES BEING PROVIDED BY THE SOCIETY, THE REVENUES CHARGE WAS PLEADED AS NOT CORRECT. A LL THE EXPENSES BORNE BY THE SOCIETY, AS ITS ACCOUNTS WOULD REVEAL, ARE TOWARD PROVISION OF VARIOUS SERVICES TO THE MEMBERS, VIZ. PEST/RODENT CONTROL, TRASH COLLECTION, PLOT BE AUTIFICATION AND MAINTENANCE, CLEANING, ETC. THE SAME ARE INCURRED BY PAYING CHARGES FOR TH E PURPOSE, ON THE PRODUCTION OF THE VOUCHERS, TO THE MEMBERS ONLY. WHERE, HOWEVER, THE VOUCHERS ARE NOT FORTHCOMING, SO THAT THE CLAIM IS NOT SUBSTANTIATED, THE AMOUNT IS WRITTEN BACK IN ACCOUNTS, AGAIN SWELLING THE SOCIETYS FUNDS. THE SERVICES/AMENITIES STATED BY THE REVENUE, VIZ. COMMON ACCESS ROADS, GARDENS, DRAINAGE, WATER SUPPLY, ELECTRICITY SUPPLY, ETC. ARE IN FACT NOT PROVIDED BY THE SOCIETY . 4. WE HAVE HEARD THE PARTIES, AND PURSED THE MATERI AL ON RECORD. 4.1 WE SHALL, BEFORE WE PROCEED TO DISCUSS THE ISSU E ARISING FOR OUR CONSIDERATION, CONSIDER IT RELEVANT TO BRIEFLY VISIT AND STATE THE LAW IN THE MATTER, WHICH IS FAIRLY WELL SETTLED AND, IF WE MAY SAY SO, TRITE, HAVING BEEN S UBJECT TO ELUCIDATION BY THE APEX COURT TIME AND AGAIN, AS RECENTLY IN THE CASE OF BANGALORE CLUB VS. CIT [2013] 350 ITR 509 (SC), RENDERED ON A REVIEW OF THE PRECEDENTS, INCLU DING THE LOCUS CLASSICUS ON THE SUBJECT. THE HONBLE COURT SUMMED UP THE RATIONALE AND PHILO SOPHY OF THE CONCEPT OF THE MUTUALITY VERY SUCCINCTLY IN THE FOLLOWING WORDS: 8 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT THE PRINCIPLE OF MUTUALITY RELATES TO THE NOTION THAT A PERSON CANNOT MAKE A PROFIT FROM HIMSELF. THE CONCEPT OF M UTUALITY HAS BEEN EXTENDED TO DEFINED GROUPS OF PEOPLE WHO CONTR IBUTE TO A COMMON FUND, CONTROLLED BY A GROUP, FOR A COMMON BE NEFIT. ANY AMOUNT SURPLUS TO THAT NEEDED TO PURSUE TO THE COMM ON PURPOSE IS SAID TO BE SIMPLY AN INCREASE OF THE COMMON FUND AN D AS SUCH NEITHER CONSIDERED INCOME NOR TAXABLE . (EMPHASIS, BY UNDE RLINING, OURS) THE APEX COURT, FURTHER, CULLED OUT, ONCE AGAIN, T HE BASIC PRINCIPLES AND PARAMETERS ATTENDING MUTUALITY, SO THAT A DECISION IN EACH CAS E WOULD HAVE TO BE TAKEN ON THE TOUCHSTONE OF THE SATISFACTION OR OTHERWISE THEREOF IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS IN FACT HERE THAT THE DIFFERENCE ARISES. THAT IS, THE ISSUE IS NOT IN THE PRINCIPLE OF MUTUALITY PER SE , BUT IN ITS APPLICATION, AS ALSO OBSERVED BY THE A PEX COURT IN THE CASE OF THE CIT VS. KUMBAKONAM MUTUAL BENEFIT FUND LTD. [1964] 53 ITR 241 (SC), WHICH IN FACT IT FOLLOWS IN BANGALORE CLUB (SUPRA). AS FAMOUSLY PUT BY IT IN CIT VS. ROYAL WESTERN INDIA TURF CLUB LTD. [1953] 24 ITR 551 (SC), THE PRINCIPLE THAT NO ONE C AN MAKE PROFIT OUT OF HIMSELF IS TRUE ENOUGH BUT MAY IN ITS APPLIC ATION EASILY LEAD TO CONFUSION (PG. 560). AGAIN, AS CLARIFIED IN CIT VS. BANKIPUR CLUB LTD. [1997] 226 ITR 97 (SC), WHICH IT AGAIN NOTED WITH APPROVAL, THAT WHETHER OR NOT THE PERSON S DEALING WITH EACH OTHER ARE A MUTUAL CLUB OR CARRYING ON A TRADING ACTIVITY OR ADVENTUR E IN THE NATURE OF TRADE, IS LARGELY A QUESTION OF FACT; FURTHER EMPHASIZING THAT AT WHAT POINT DOES THE REL ATIONSHIP OF MUTUALITY END AND THAT OF TRADING BEGINS IS A DIFFICULT AND V EXED QUESTION . A HOST OF FACTORS MAY HAVE TO BE CONSIDERED TO ARRIVE AT THE CONCLUSION ( PAGE 110). IT IS THESE FACTORS, IN LIGHT OF THE FINDINGS OF FACT, THAT WE BELIEVE WE ARE REQUIR ED TO CONSIDER IN THE INSTANT CASE. THE THREE PERQUISITES WHICH FORM THE ESSENTIAL CON DITIONS FOR MUTUALITY, AS LISTED BY THE HONBLE APEX COURT, IN THE SAID CASE ARE AS UNDER: A) COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTI CIPANTS (OF COURSE, RECKONED AS A CLASS); B) THE ACTIONS OF THE PARTICIPANTS MUST BE IN FURTH ERANCE OF THE MANDATE OF THE SOCIETY - WHICH IS A MATTER OF FACT, TO BE D ETERMINED FROM THE MEMORANDUM AND ARTICLES OF ASSOCIATION, RULES OF TH E MEMBERSHIP, RULES OF ORGANIZATION, ETC.; AND 9 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT C) THERE MUST BE NO SCOPE OF PROFITEERING BY THE CO NTRIBUTORS FROM THE FUND MADE BY THEM, WHICH COULD ONLY BE EXPENDED ON OR RETURNED TO THEM. ENTITY BASED CLAIMS 4.2 WE SHALL FIRST EXAMINE THE ASSESSEES CLAIM FOR BEING A MUTUAL CONCERN IN LIGHT OF THE FOREGOING. THIS IS AS, AS EXPLAINED BY THE APEX COURT IN BANGALORE CLUB (SUPRA), AS ALSO EARLIER, AS IN THE CASE OF BANKIPUR CLUB LTD . (SUPRA), IT IS THE ARRANGEMENT CLAIMED AS A MUTUAL CONCERN OR ASSOCIATION, THAT HAS TO BE SEE N AS SATISFYING, OR NOT SO, THE CONDITIONS OF MUTUALITY. CLEARLY, THE ARRANGEMENT IN ITS ENTIR ETY AND THE WHOLE GAMUT OF ITS OPERATIONS WOULD HAVE TO BE SEEN, AS EXPLAINED BY T HE APEX COURT IN BANGALORE CLUB (SUPRA). OUR FIRST OBSERVATION IN THE MATTER IS THA T WE ARE UNABLE TO SEE AS TO HOW THE PRINCIPLE OR THE NOTION OF MUTUALITY COULD BE EXTEN DED TO A COOPERATIVE HOUSING SOCIETY, BE IT A FLAT OWNERS SOCIETY OR A PLOT OWNERS SOCI ETY, BEING MEANT TO PROVIDE HOUSING FACILITY, I.E., IN ITS DESIGN, CONCEPT AND FORM, AS PREVALENT IN THE INSTANT CASE. THE REASON IS SIMPLE. A GROUP OF PEOPLE COME TOGETHER AND JOIN HA NDS FOR A DEFINED, NON-PROFIT PURPOSE - SOMETHING THEY COULD OR ARE REQUIRED TO DO EVEN I NDIVIDUALLY, TO ENABLE IT BEING SO DONE MORE ADVANTAGEOUSLY IN TERMS OF TIME, EFFORT, MANAG EMENT, ECONOMY, ETC., I.E., BETTER ORGANIZATION IN SHORT. TAKE A COMMON DAY EXAMPLE, D RAWING FROM THE AREA OF HOUSING ITSELF. THE FLAT OWNERS IN A BUILDING DESIRE TO PRO VIDE SECURITY FOR THEMSELVES A BASIC NEED, WHICH EACH OF THEM WOULD EVEN OTHERWISE WANT FOR HIMSELF. THEY APPOINT SECURITY STAFF, PAYING THEIR SALARY, UNIFORM, ETC., BY POOLI NG MONEY THROUGH MONTHLY SUBSCRIPTIONS, SO AS TO MEET THE OPERATIONAL COST. THIS COULD BE E XTENDED TO CLEANING OR ANY OTHER MAINTENANCE SERVICES OF THE BUILDING (FOR COMMON AR EAS) AS WELL. A MUTUAL ARRANGEMENT CANNOT, BY DEFINITION, LEAD TO ANY SCOPE FOR INCOME IN THE HANDS OF THE CONTRIBUTORS OR THE PARTICIPANTS , TOWARD WHICH WE HAVE CITED SOME EVERYDAY EXAMPLES . THE SURPLUS ONLY REPRESENTS THE EXCESS OF SUCH CONTRIBUTIONS TOWARD A COMMON PURPOSE OVER THE ACTUAL EXPENDITURE. THIS IS PRECISELY WHY, WHERE AND TO TH E EXTENT THE SAME LEADS TO SOME INCOME, AS WHERE THE SURPLUS IS PARKED AS A DEPOSIT IN A BANK YIELDING INTEREST INCOME, THE SAME HAS BEEN, ONCE AGAIN, CLARIFIED BY THE APEX CO URT IN THE CASE OF BANGALORE CLUB 10 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT (SUPRA) TO BE OUTSIDE MUTUALITY. THIS IS EVEN IF THE BANKS ARE ALSO MEMBERS AND, TWO , THAT THE INTEREST INCOME IS TO BE APPLIED FOR COMMON PUR POSES. THAT IS, THE DIFFERENCE OR THE DICHOTOMY BETWEEN THE SURPLUS WITH A MUTUAL CONCE RN/ASSOCIATION, ON ONE HAND, AND THE INCOME ARISING TO IT (WHICH COULD ONLY BE FROM A SOURCE OUTSIDE ITSELF), ON THE OTHER, IS PLAIN AND MANIFEST IN THE TERMS OF THE ARRANGEMENT ITSELF. HOWEVER, A BREAK IN THE MUTUALITY, AS IN THE CASE OF INTEREST INCOME, MAY NOT NECESSARILY LEAD TO DISBANDING OR RELEGATING THE AR RANGEMENT OR THE ASSOCIATION AS NOT A MUTUAL CONCERN. THE SAME WOULD ONLY BE WHERE THE SA ME GOES TO THE VERY ROOT, AS AN ESSENTIAL INGREDIENT OF THE SO CALLED MUTUAL ARRANG EMENT, AS WAS FOUND BY THE APEX COURT IN THE CASE OF KUMBAKONAM MUTUAL BENEFIT FUND LTD. (SUPRA), WHERE THE ENTITY WAS FOUND TO BE SET UP FOR TRADING PURPOSES, EVEN AS THE BANK ING ACTIVITY, AS PURSUED BY THE COMPANY AS ITS OBJECT, WAS LIMITED ONLY TO ITS MEMBERS. THE APEX COURT NEVERTHELESS FOUND IT TO BE NOT A MUTUAL CONCERN . OTHER THAN IN SUCH CASES WHERE THE VIOLATION IS P ERVASIVE, PERMEATING THE ARRANGEMENT OR ITS OPERATIONS IN ITS DIFFERENT OR ESSENTIAL ASPECTS, SO THAT THE ENTITY DOES NOT RETAIN THE ESSENTIAL ATTRIBUTES OF MUTUALITY, ALL THAT WOULD RESULT IS IN EXCLUDING SUCH INCOME FROM THE AMBIT OF MUTUALITY . SO, HOWEVER, THE ARRANGEMENT CANNOT IN ANY CASE LE AD TO, APART FROM A RIGHT TO IT BEING SPENT FOR COMMON PURPOSES, OR TO RECEIVE THE PROPORTIONATE SHARE ON WINDING-UP, A CAPITAL ASSET OR SCOPE FOR GENERATION OF INCOME IN THE HANDS OF THE INDIVIDUAL MEMBERS OR CONTRIBUTORS. IT MAY BE THAT THE ASSOCIATION HAS AC CUMULATED SIZEABLE FUNDS OR ASSETS OVER A PERIOD OF TIME, OR THAT ON ACCOUNT OF THE AMENITI ES OR PRIVILEGES IT PROVIDES TO ITS MEMBERS, ITS MEMBERSHIP IS A PRIZED COMMODITY. TH E SOCIETY MAY FOR THAT REASON RESTRICT ITS MEMBERSHIP OR CHARGE A GOOD AMOUNT TOW ARDS SECURING ITS MEMBERSHIP, APART FROM OTHER QUALIFICATIONS. THAT, HOWEVER, WOULD NOT AGAIN RESULT IN ANY INCOME IN THE HANDS OF ITS MEMBERS PER SE . ON THE CONTRARY, WHERE IT IS FOUND TO BE A MONEY SPINNING UNIT, THE CLUB CHARGING A HEFTY PREMIUM, WHICH HAS NO CORRESPONDENCE WITH ITS ACTIVITIES OR EXPENSES ON THE AMENITIES OR PRIVILEGES IT PROVI DES, IT COULD WELL BE CHARGED FOR PROFITEERING. THAT THOUGH WOULD BE A MATTER OF FAC T, TO BE DECIDED ON THE CONSPECTUS OF 11 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT THE CASE. HOWEVER, THE CHARGE, AS CAUTIONED BY THE APEX COURT IN BANGALORE CLUB (SUPRA), CANNOT BE LEVIED LIGHTLY, AND THE MANDATE (OF THE C LUB) MUST NOT BE CONSTRUED MYOPICALLY, AND SPACE MUST BE MADE FOR SITUATIONS LEADING TO BE NEFIT TO THE MEMBERSHIP BOTH IN THE SHORT TERM AS WELL AS THAT MAY ACCRUE TO THE ORGANI ZATION INDIRECTLY IN THE LONG RUN. IN NO CASE, HOWEVER, COULD THE MEMBERS OF THE ASSOCIATION OR CLUB TRADE ON THEIR MEMBERSHIP RIGHTS, AS THE MEMBERS IN THE INSTANT CASE ARE IN A POSITION TO . THIS IS PRECISELY WHY MEMBERSHIP OF MOST SOCIAL OR OTHER DEFINITE CAUSE C LUBS IS RESTRICTED, AND NOT TRANSFERABLE, OR IS SO TO A VERY DEFINED CLASS OF PERSONS, AS NEX T OF KIN, WHICH THUS OPERATES AS A SUITABLE QUALIFICATION AS WELL AS RESTRICTION. A MEMBER INCA PABLE OF OR NOT DESIROUS OF CONTRIBUTING OR PARTICIPATING FURTHER, MAY QUIT THE ASSOCIATION. 4.3 IN THE CASE OF A HOUSING SOCIETY AS THE PRESENT ONE, HOWEVER, THE CONTRIBUTORS, BY VIRTUE OF THEIR MEMBERSHIP, OBTAIN A VALUABLE CAPIT AL ASSET IN THEIR OWN HANDS, I.E., THE LEASEHOLD RIGHT IN THE PLOTS ALLOTTED TO THEM, AS W ELL AS THE INTEREST IN THE SUPER STRUCTURE. NO DOUBT, THE SAID STRUCTURE HAS ONLY BEEN FUNDED B Y THEM, BUT THEN IT IS ONLY ON THE LAND LEASED TO THEM BY THE SOCIETY, SO THAT INDEPENDENT OF THE RIGHTS IN LAND, LEASED TO THEM ON A 998 YEAR LEASE, THE SAME IS OF NO VALUE. IT IS THIS THAT THEY MAY ENCASH OR CAPITALIZE ON OR EVEN TRADE ON, AS SAY BY LETTING THE PROPERTY. S UCH VALUABLE RIGHTS THAT INURE TO THE MEMBERS, I.E., SEPARATE AND DISTINCT FROM THE RIGHT S THAT VEST IN THEM AS A PART OF THE CLASS OF CONTRIBUTORS, MILITATES AGAINST THE VERY NOTION OF MUTUALITY, WHICH IN ITS CONCEPT AND OPERATION CANNOT YIELD ANY INCOME TO THEM IN THEIR INDIVIDUAL CAPACITY. IN FACT, THEY HAVE PRACTICALLY ALL THE RIGHTS, AND AT A COST, AND WHIC H THEY MAY LEVERAGE TO GENERATE INCOME FOR THEMSELVES. TO EXEMPLIFY, CONSIDER THIS: A MEMB ER, TO WHOM A PLOT IS ALLOTTED, LETS OUT THE HOUSE BUILT THEREON, EARNING A MONTHLY RENT. OF COURSE, THE RENT HE RECEIVES IS HIS INCOME, AND HAS NOTHING TO DO WITH THE SOCIETY OR I TS INCOME. SO HOWEVER, IT IS ONLY BY VIRTUE AND ON ACCOUNT OF HE BEING A MEMBER OF THE H OUSING SOCIETY THAT HE COULD GENERATE THE RENTAL INCOME. THIS, THUS, IS OUR BASIC OBJECTION, INASMUCH AS A M UTUAL CONCERN, BY ITS VERY NATURE AND CONCEPT, CANNOT LEAD TO ANY PROFIT, ON THE BASIS OF CONTRIBUTION TO AND PARTICIPATION THEREIN, TO THE CONTRIBUTOR/PARTICIPA NT . WE HAVE DELIBERATELY TAKEN AN 12 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT EVERYDAY EXAMPLE OF LETTING, AND INDEPENDENT OF THE TRANSFER AND TDR PREMIUM ISSUES WHICH DOG SUCH CASES, AND IS THE BONE OF CONTENTION BETWEEN THE PARTIES, ONLY TO CLARIFY OUR OBJECTION, WHICH GOES TO THE ROOT OF THE MATTER , THOUGH IS AT HEART, VERY SIMPLE. THERE IS NO CREATION OF ANY FUND AT THIS STAGE, I.E., WHE N THE SOCIETY IS FORMED AND THE MEMBERS ARE ENROLLED; THE SOCIETY CHARGING THE MEMBERS FOR GRANTING LEASE WHAT STANDS CHARGED TO IT (ON GETTING 999 YEARS LEASE FROM THE GOVERNMENT) . THE ARRANGEMENT, THUS, IN ITS DESIGN AND CONCEPT, IS NOT A MUTUAL ARRANGEMENT, EVEN AS I NDEPENDENT AND APART FROM THE SAID RIGHTS, THE PLOT OWNERS OR MEMBERS MAY ORGANIZE THE MSELVES FOR ANY MUTUAL ACTIVITY, EVEN IF IT ARISES OR IS CONSEQUENTIAL TO THEIR HOLD ING THE SAID RIGHTS, AS THE MAINTENANCE ACTIVITY REFERRED TO EARLIER. AS SUCH, ANY INCOME, BE IT IN THE FORM OF TRANSFER FEES OR TDR PREMIUM, THAT ARISES TO THE SOCIETY/ASSOCIATION ON ACCOUNT OF THE SAID ARRANGEMENT WOULD, BY DEFINITION, BE INELIGIBLE FOR MUTUALITY. THIS ASPECT OF THE MATTER, I.E., THE NATURE OF THE RIGHTS ARISING ON THE GRANT OF LEASE BY THE HOUSING SOCIETY, STANDS IN FACT EXAMINED AND DISCUSSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CAS E IN CIT VS. PRESIDENCY CO-OPERATIVE HOUSING SOCIETY LTD. [1995] 216 ITR 321 (BOM) IN THE CONTEXT OF THE ISSU E OF TAXABILITY OF THE RECEIPT OF TRANSFER FEE. WITH REFERENCE TO I TS DECISION IN THE CASE OF SHREE NIRMAL COMMERCIAL LTD. V. CIT [1992] 193 ITR 694 (BOM), IT NOTES WITH APPROVAL T HAT THE ARRANGEMENT IS AKIN TO A SALE OR TRANSFER OF SUBSTA NTIAL RIGHTS TO THE MEMBERS. IN THE CITED CASE, THE COMPANY DEVISED A SCHEME, WHERE-UNDER NON -REFUNDABLE DEPOSITS WERE ACCEPTED FROM THE SHAREHOLDERS AGAINST RIGHT TO OCCUPANCY IN THE FLOOR SPACE ON LAND OBTAINED BY IT ON LEASE FROM THE GOVERNMENT FOR CONSTRUCTION OF CO MMERCIAL PREMISES. THE COURT HAVING REGARD TO THE MANNER IN WHICH THE SAID DEPOSITS WER E TAKEN FROM THE SHAREHOLDERS AND HAVING REGARD TO THE FACT THAT THE SHAREHOLDERS WER E ENTITLED TO ASSIGN THE FLOOR SPACE TO OTHERS ON THE PAYMENT OF COMPENSATION AND TO TRANSF ER THEIR OCCUPANCY RIGHTS BY SELLING SHARES, HELD THAT THE WHOLE TRANSACTION WAS IN REAL ITY A SALE OF FLOOR SPACE BY THE ASSESSEE- COMPANY TO ITS SHAREHOLDERS. AFTER PARTING WITH THE RIGHT OF OCCUPANCY OF THE FLOOR AREA TO EVERY MEMBER, WHAT REMAINED WITH THE ASSESSEE WAS M ERELY OWNERSHIP IN THE TECHNICAL 13 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT SENSE OF THE WORD. THE RECEIPT BY WAY OF NON-REFUND ABLE DEPOSITS WAS ACCORDINGLY TREATED AS A TRADING RECEIPT (AT PAGE 328). THE STRIKING SI MILARITY WITH THE INSTANT CASE MAY BE NOTED, AND THIS IS PRECISELY THIS POINT THAT WE WER E TRYING TO BRING FORTH WHEN WE SAID THAT THE ARRANGEMENT LEADS TO SUBSTANTIAL RIGHTS IN THE HANDS OF THE MEMBERS, WHICH THEY MAY SUBSEQUENTLY USE OR DEPLOY FOR THEIR PROFIT. THE HO NBLE COURT IN PRESIDENCY CHS LTD. (SUPRA), IN ENDORSING THE LEASE AGREEMENT AS COMMER CIAL, EXAMINED THE MATTER FROM SEVERAL ANGLES, COUNTERING ALL THE ARGUMENTS ADVANC ED, INCLUDING WITH REGARD TO THE TRANSFERABILITY BEING NOT OPEN, AND THAT THE SOCIET Y RETAINS THE RIGHT TO REJECT A PROPOSED TRANSFER. CONTINUING FURTHER, IT WOULD ALSO BE NOTED THAT THE ARRANGEMENT IS VIOLATIVE OF THIRD CONDITION (C) BY THE HONBLE APEX COURT IN BANGALORE CLUB (SUPRA), WHEREAT IT MAKES CLEAR THAT ALL THE MEMBERS WOULD, BY VIRTUE OF THEIR BEIN G CONTRIBUTORS AND PARTICIPANTS, ARE ENTITLED TO A RIGHTS TO THE SURPLUS BEING EXPENDED OR RETURNED TO THEM, WHICH OF COURSE WOULD INCLUDE THE RIGHT TO DECIDE ON ITS DISTRIBUTI ON, AS LONG AS IT IS IN FURTHERANCE OF THE MANDATE OF THE ASSOCIATION, AND NO FURTHER. THE RIG HTS IN THEIR RESPECTIVE FLATS/HOUSES, A VALUABLE RIGHT BY ALL MEANS, ARISES TO THE MEMBERS OF A HOUSING SOCIETY BY VIRTUE OF THEIR MEMBERSHIP OF THE SOCIETY. THE ASSOCIATION, THUS, B ECOMES AN INSTRUMENT OR VEHICLE FOR HOLDING WEALTH AND, CONSEQUENTLY, FOR GENERATION OF INCOME BY LEVERAGING THEREON, I.E., BY THE MEMBER-CONTRIBUTORS IN THEIR INDIVIDUAL CAPA CITY. THIS, THE SUBSTANTIAL RIGHTS OR THE CAPITAL ASSET, IS PRECISELY WHAT THEY IN FACT TRADE ON BY PAYING TRANSFER FEE AND/OR TDR PREMIUM TO THE SOCIETY. THIS IS IMPERMISSIBLE UNDE R THE CONCEPT OF MUTUALITY WHERE THE ASSETS, IF ANY, COULD BE HELD ONLY BY THE FUND OR T HE ASSOCIATION, I.E., BY THE MEMBERS COLLECTIVELY, AND IN FURTHERANCE OF AND TOWARD THE OBJECT/S FOR WHICH THEY HAD GROUPED OR ORGANIZED THEMSELVES IN THE FIRST PLACE, AND WHICH COULD INCLUDE ANY LAWFUL ACTIVITY, SAVE ONE THAT IS COMMERCIAL IN NATURE OR FOR PROFIT, I.E ., WHICH HAS PROFIT AS ITS MOTIVE. IN FACT, PER SECTION 2(24)(V) R/W S. 28(III), THE ACT SPECIF ICALLY SEEKS TO BRING INCOME OF SUCH TRADE OR LIKE ASSOCIATION TO TAX AS BUSINESS INCOME. WE H AVE ALREADY EXPLAINED, ON THE BASIS OF SETTLED LAW, THAT A MUTUAL CONCERN, IN ITS CONCEPT AND OPERATION, IS INCAPABLE OF GENERATING 14 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT INCOME, FOR ITSELF, MUCH LESS FOR ITS MEMBERS. AND , WHERE SO, WHICH COULD, IF AT ALL, BE ONLY INCIDENTAL, AND WOULD AGAIN BE TAXABLE. THIS THEREFORE CONSTITUTES OUR FIRST AND PRIMARY OBJECTION TO THE ASSESSEES CASE FOR BEING ALLOWED EXEMPTION OR ITS VARIOUS INCOME OR CATEGORIES OF INCOME ON THE PRINCIPLE OF MUTUALITY; A HOUSING SOCIETY, AS THE ONE BEFORE US, BY ITS VERY DESIGN AND CONCEPT BEING NOT A MUTUAL CONCERN, CONFER AS IT DOES ON ITS INDIVIDUAL MEMBERS VALUABLE, TRANSFERAB LE RIGHTS, I.E., IN THEIR OWN RIGHT, PROPERTY BY DEFINITION, WHICH THEY CAN HOLD INDEPEN DENT OF EACH OTHER, I.E., INDEPENDENT AND APART FROM THEIR RIGHTS TO THE COMMON FUND OR P ROPERTY THAT THEY AS MEMBERS MAY HOLD OR ENJOY AS A BODY OR A GROUP . IT MAY BE ARGUED THAT SUCH A HOUSING SOCIETY MAY BY ITS BYE LAWS PROHIBIT TRANSFER, IN WHICH CASE THE OBJECTION WOULD NOT HOLD. THE ARGUMENT IS MISPLACED. THE VERY FACT THAT THE ARRANGEMENT LE ADS TO CREATION OF WEALTH IN THE HANDS OF THE INDIVIDUAL MEMBER-CONTRIBUTORS IS SUFFICIENT FOR THE PURPOSE OF HOLDING IT AS NOT A MUTUAL CONCERN OR ASSOCIATION. FURTHER ON, AS THE M ATTER IMPINGES ON THE CIVIL RIGHTS, THE PROVISIONS OF COMMON LAW AS WELL AS THAT RELATING T O HOLDING AND ENJOYMENT OF PROPERTY, AND IMMOVABLE PROPERTY IN PARTICULAR, WOULD NEED TO EXAMINED, BESIDES THE PROVISIONS OF THE RELEVANT CO-OPERATIVE SOCIETIES ACT, BEFORE ONE COULD AUTHORITATIVELY COMMENT ON THE LEGALITY OF THE STATED EMBARGO ON TRANSFER. IN FACT , SUCH RESTRICTION - WHICH IS HYPOTHETICAL, AND ASSUMED ONLY FOR THE PURPOSE OF DISCUSSION, IF STIPULATED, WOULD DEFEAT THE VERY CONCEPT AND OPERATION OF THE CO-OPERATIVE MOVEMENT QUA THE HOUSING SECTOR, WHICH IS IN FACT A LEADING AND SUCCESSFUL EXAMPLE OF THE APPLIC ATION OF THE CO-OPERATIVE MOVEMENT, REPRESENTING A PRIMARY NEED OF THE PEOPLE, AS INDEE D IT, I.E., THE CO-OPERATIVE MOVEMENT, HAS ADDRESSED VITAL CONCERNS AND PRESENTED ITSELF A S AN EFFECTIVE INSTRUMENT IN ORGANIZING HUMAN EFFORT AND RESOURCES TO GENERATE WEALTH AND I NCOME FOR ITS MEMBERS AND, THUS, SERVE AS A VEHICLE OR AGENT FOR SOCIAL AND ECONOMIC UPLIFTMENT. EXAMPLES OF CO-OPERATIVE MOVEMENT IN THE AREAS OF MILK AND DAIRY FARMING, BA NKING, ETC., ABOUND. THE SCOPE AND NATURE OF OUR EXAMINATION IS ONLY QUA TAXATION, I.E., WITH REGARD TO THE APPLICATION OF THE DOCTRINE OF MUTUALITY ON, FIRSTLY, CO-OPERATIVE HOU SING SOCIETIES PER SE AND, SECONDLY, ON ITS SPECIFIC INCOMES, UNDER THE GIVEN PARAMETERS - NOTHING MORE, AND NOTHING LESS. 15 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT WE MAY FURTHER ALSO CLARIFY THAT OUR OBJECTION AFO RESAID TO THE CO-OPERATIVE HOUSING SOCIETY, AS THE PRESENT ONE, AS BEING GOVER NED BY MUTUALITY OR BEING A MUTUAL CONCERN, IS AN IN PRINCIPLE OBJECTION, STATED UPON TAKING AN OVERALL VIEW AND PERSPECTIVE OF THE DESIGN AND OPERATION OF SUCH SOCIETIES; THEI R PURPOSE; AND THE NATURE OF THE RIGHTS THAT IT LEADS TO IN THE HANDS OF THE INDIVIDUAL MEM BERS (AS DISTINCT AND OPPOSED TO FROM THAT AS A GROUP). IN THIS, WE FIND OURSELVES FULLY SUPPORTED BY THE DECISION IN THE CASE OF PRESIDENCY CHS LTD. (SUPRA), WHEREIN THE HONBLE COURT EXAMINED THE NATURE OF RE CEIPT UNDER REFERENCE, VIZ. TRANSFER FEES, TO HOLD IT T O BE ONLY INCOME, A TERM OF THE WIDEST IMPORT. WE HAVE ALREADY STATED THAT BY VERY DEFINIT ION, A MUTUAL CONCERN CANNOT BY ITS OPERATIONS, I.E., WHICH CONSTITUTE ITS PRIMARY OBJE CT/S, GENERATE INCOME, WHICH COULD ONLY BE INCIDENTAL TO ITS MAIN OBJECTS, AS BY WAY OF AN APPLICATION OF ITS FUNDS OR WEALTH, VIZ. INTEREST ON BANKING DEPOSIT, RENT ON PROPERTY, ETC. THAT IS, THE CONCEPT OF MUTUALITY AND INCOME GENERATION FROM ITS PRINCIPAL ACTIVITIES ARE CONTRARY TO EACH OTHER, AS EXPLAINED BY THE APEX COURT, ONCE AGAIN, IN BANGALORE CLUB (SUPRA). THIS HOWEVER DOES NOT AND WOULD NOT IN ANY MANNER IMPLY THAT NO PART OF THE R ECEIPT OF SUCH SOCIETY CAN BE EXEMPT ON THE GROUND OF MUTUALITY. THIS IS AS MUTUALITY IS ESSENTIALLY AN ACTIVITY BAS ED PHENOMENON . A HOUSING SOCIETY MAY CHOOSE TO FUND THE MAINTENA NCE EXPENDITURE NOT THROUGH INCOME ARISING FROM, SAY, INTEREST OF BANK DEPOSITS - AS IN THE INSTANT CASE, BUT BY MONTHLY SUBSCRIPTION FROM ITS MEMBERS. THE SURPLUS IN SUCH A MAINTENANCE FUND, I.E., EXCESS OF COLLECTION OVER A PERIOD OVER THE MAINTEN ANCE EXPENDITURE INCURRED THEREAT, WOULD NOT BE THE SOCIETYS INCOME, WHICH BY DEFINIT ION HAS TO ARISE FROM OUTSIDE ONESELF, THE GROUP REPRESENTING THE SOCIETY. THIS WOULD BE S O EVEN IF THE SOCIETY TRANSFERS THIS EXCESS TO ITS GENERAL FUND, TO BE APPLIED FOR OTHE R COMMON BENEFIT APPLICATIONS, I.E., APART FROM MAINTENANCE. AND, FOR THE SAME REASON - SUCH A CTIVITIES BEING AGAIN MUTUAL, WITH THE RECEIPT ONLY REPRESENTING THEIR FUNDING. FURTHER, A GAIN, IT NOT INTENDED TO SUGGEST OR IMPLY IN ANY MANNER THAT THE EXPENDITURE INCURRED ON ITS VARIOUS ACTIVITIES BY A HOUSING SOCIETY, TO BE CONSIDERED AS MUTUAL, COULD OR IS TO BE ONLY IN THE NATURE OF REVENUE EXPENDITURE, AS MAINTENANCE EXPENDITURE REFERRED TO BY US. THE COMM ON BENEFIT EXPENDITURE COULD 16 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT INCLUDE THAT YIELDING ENDURING BENEFIT, AS TOWARD I NFRASTRUCTURE FACILITIES, AS BY WAY OF INTERNAL ROADS, PARKS, STREET LIGHTS, DRAINAGE, WAT ER AND ELECTRIC SUPPLY, ETC. ALL WE HAVE STATED AND CLARIFIED IS THAT THE CONCEPT OF INCOME AND MUTUALITY ARE ANTITHESIS TO EACH OTHER . THIS WE CONSIDER TO BE ALSO THE RATIO OF THE DECI SION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRESIDENCY CHS LTD. (SUPRA). 4.4 BE THAT AS IT MAY, WE PROCEED TO EXAMINE THE SP ECIFIC FACTS OF THE CASE. THE MAIN OBJECTS OF THE SOCIETY AND REGULATIONS WITH REGARD TO THE LEASE GRANTED BY THE SOCIETY, IS WHILE CLAUSES 2 AND 6, WHICH READ AS UNDER (REPRODU CED AT PARA 3 OF THE ASSESSMENT ORDER): 2. THE OBJECTS OF THE SOCIETY SHALL BE TO CARRY O N THE TRADE OF BUILDING, AND OF BUYING, SELLING, HIRING LETTING AND DEVELOPING L AND IN ACCORDANCE WITH CO- OPERATIVE PRINCIPLES AND TO ESTABLISH AND CARRY ON SOCIAL, RECREATIVE AND EDUCATIONAL WORK IN CONNECTION WITH ITS TENANTS AND THE SOCIETY SHALL BE FULL POWER TO DO ALL THINGS IT DEEMS NECESSARY ALL EXPED IENT FOR THE ACCOMPLISHMENT OF ALL OBJECTS SPECIFIED IN ITS BYE- LAWS, INCLUDING THE POWERS TO PURCHASE, HOLD, SELL, EXCHANGE, MORTGAGE, RENT LEASE, SUB-LEASE, SURRENDER, ACCEPT, SURRENDERS OF, AND DEAL WITH LAN DS OF ANY TENURE AND TO SELL BY INSTALLMENTS AND SUBJECT TO ANY TERMS OR CO NDITIONS AND TO MAKE AND GUARANTEE ADVANCES TO MEMBERS FOR BUILDING OR PURCH ASING PROPERTY AND TO ERECT, PULL DOWN, REPAIR, ALTER OR OTHERWISE DEAL W ITH ANY BUILDING THEREON. (EMPHASIS, OURS) CLAUSE 6 READS AS: 6. MEMBER SHALL NOT ARRANGE, UNDER LET OR PART WIT H THE POSSESSION OF THE PROPERTY OR ANY PART THEREOF WITHOUT THE PREVIOUS C ONSENT IN WRITING OF THE SOCIETY. IT IS FURTHER INCORPORATED AS: ON EVERY PERMITTED DISPOSITION, OR DEVOLUTION OF O R DEALING WITH THE SAID PLOT OR BUILDING THE MEMBER (A) SHALL PAY TO THE SO CIETY HALF THE PREMIUM RECEIVED BY HIM FROM THE PURCHASER MEMBER IN RESPEC T OF THE VACANT PLOT SOLD AND (B) SHALL PAY TO THE SOCIETY, IN CASE OF T HE PLOT TOGETHER WITH BUILDING THEREON, HALF THE AMOUNT RECEIVED BY HIM O VER AND ABOVE THE CAPITAL COST. 17 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT NOW, WITHOUT DOUBT, A TRADING OR COMMERCIAL PURPOS E COULD NOT DEFINE A MUTUAL CONCERN, WHILE THE ASSESSEE-SOCIETYS OBJECT ITSELF STATES THAT ASSESSEE COULD BUY, DEVELOP AND SELL LAND. THE SAME WOULD ONLY BE AT MARKET RAT ES, SO THAT THE PROFIT MOTIVE IS BUILT INTO THE TRANSACTION/S. ON THIS BEING PUT TO THE LD . AR DURING HEARING, IT WAS CLARIFIED BY HIM THAT NO SUCH ACTIVITIES, THOUGH PERMISSIBLE UND ER ITS CHARTER, HAVE BEEN PERUSED BY THE ASSESSEE, AND WHERE SO, INCOME ARISING THERE-FROM W OULD BE TAXABLE. AS SUCH, ADMITTEDLY IF ANY OF THE ASSESSEES ACTIVITIES ARE IMBUED WITH COMMERCIALITY, THE SAME WOULD LEAD TO INCOME CHARGEABLE TO TAX UNDER SECTION 4 OF THE ACT . IN THIS REGARD, IN OUR VIEW, THE PROVISION FOR CHARGE OF PREMIUM BY THE ASSESSEE-SOC IETY AND, FURTHER, WORKED AT ONE HALF THE AMOUNT OF THE PREMIUM RECEIVED BY THE TRANSFERO R-MEMBER FROM THE TRANSFEREE- MEMBER CANNOT BUT BE CONSIDERED AS A COMMERCIAL TRA NSACTION. AS SUCH, NOT ONLY DOES THE ARRANGEMENT LEAD TO CREATION AND HOLDING OF WEALTH/ PROPERTY BY THE INDIVIDUAL-MEMBERS, IT ALLOWS THEM TO ENCASH OR OTHERWISE EXPLOIT IT, P AYING THE SOCIETY ITS SHARE. THAT IS, THE SOCIETY ALSO PARTAKES OF THE PROFIT ARISING ON THE SUBSEQUENT TRANSFER BY A MEMBER, TO THE EXTENT OF 50% THEREOF. IF THAT IS NOT COMMERCIAL, W HAT IS, WHILE THE LAW HAS LAID DOWN (AS BY THE APEX COURT, AMONG OTHERS, IN CIT VS. BANKIPUR CLUB LTD. (SUPRA), WOULD DISQUALIFY A CONCERN AS A MUTUAL ENTITY ON A VERY TAINT OF COM MERCIALITY. THIS IS PRECISELY WHAT WEIGHED WITH THE HONBLE COURT IN PRESIDENCY CHS LTD. (SUPRA) IN HOLDING THE ARRANGEMENT, FOR WHICH IT ALSO EXAMINED THE TERMS O F THE LEASE, PROVIDING FOR A LIKE CLAUSE, IN HOLDING THE ARRANGEMENT AS COMMERCIAL IN NATURE. SURELY, THIS IS NOT TO MEET THE REGULAR OPERATIONAL EXPENSES, TRANSFER BEING AN UNC ERTAIN AND VARIABLE PHENOMENON, WHICH ARGUMENT WAS AGAIN CONSIDERED BY THE HONBLE COURT. THE SOCIETY IS THUS A 50% STAKE HOLDER IN THE INDIVIDUAL PROPERTY, I.E., AS B UILD-UP IN THE HANDS OF THE MEMBERS. THE TRANSFERS MAY BE FEW, AND UNCERTAIN IN TIMING, BUT WHAT IS IMPORTANT AND RELEVANT IS THAT THE SOCIETY IS FIRSTLY CLAIMING A STAKE, RECKONED A T 50%, AND TWO, REALIZING IT. THOUGH IT MAY NOT APPEAR NOT TO HAVE SOLD ANYTHING, IT HAS TH US REALIZED THE ACCRETION IN VALUE OF THE PROPERTY, IN WHICH IT CONSIDERS TO HAVE A DEFINED S HARE, TO THAT EXTENT. THE TRANSFER FEES, AGAIN BY WAY OF THE DEFINED SHARE (50%) PREMIUM AT THE TIME OF NEXT TRANSFER WOULD 18 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT STAND TO BE WORKED OUT WITH REFERENCE TO THE PRESEN T TRANSFEREES COST. THE SOCIETY, BY RECEIVING TRANSFER FEES, IS, THUS, ONLY SEEKING T O MONETIZE ITS WEALTH I.E., TO THE EXTENT IT CONSIDERS IT TO HAVE A STAKE THEREIN. IT MAY BE ARG UED, OSTENSIBLY NOT WITHOUT MERIT, THAT IN THAT CASE, TRANSFER FEES IS NOT INCOME. THIS IS AS THAT ITS RECEIPT YET LEAVES THE CAPITAL STRUCTURE OF THE SOCIETY UNDISTURBED, THE ARGUMENT THAT PREVAILED WITH THE HONBLE COURT IN PRESIDENCY CHS LTD. (SUPRA) IN DECLARING IT AS INCOME IN CHARACTER. TRU E, BUT WHAT NEEDS TO BE BORNE IN MIND IS THAT THE POSITION STILL REMA INS MUCH THE SAME. WHAT THE ASSESSEE IS PARTAKING OF IS WHAT WOULD OTHERWISE, I.E., BUT FOR THE CHARGE OF TRANSFER FEE, OR ITS CHARGE AT A NOMINAL SUM, UNLINKED TO THE PREMIUM OR THE CONSIDERATION FOR TRANSFER, LEGALLY ACCRUE OR ARISE TO THE TRANSFEROR-MEMBER. I N FACT, IT STILL DOES; IT IS ONLY THAT THE ASSESSEE CONSIDERS ITSELF TO HAVE A RIGHT THEREIN W HICH, THEREFORE, THE TRANSFEROR IS CALLED UPON TO DISCHARGE, MAKING IT AS A CONDITION FOR NOC . THE ASSESSEES RIGHTS OR CAPITAL STRUCTURE AS PER ITS CHARTER, OR BOOKS, REMAINS UNT OUCHED. IN FACT, EVEN IF THE LEASE DEED EXECUTED WITH THE MEMBERS WERE TO CONTAIN SUCH A CL AUSE, IN IMPLEMENTATION OF WHICH THE TRANSFER FEE CLAUSE IS MANDATED IN THE SOCIETYS BY E LAWS, AS IN FACT POINTED OUT BY THE HONBLE COURT, OUR POINT IS STILL MADE AND IN FACT MORE VALIDLY. THAT IS, THAT THE LEASE GRANTED IS A COMMERCIAL TRANSACTION, AND THUS COMME RCIAL CONSIDERATIONS IMBUE ITS OPERATIONS, AS INDEED WAS FOUND BY THE HONBLE COUR T. NOW IT CANNOT BE THAT WHILE THE LEASE DEED IS A COMMERCIAL TRANSACTION, AS FOUND BY THE HONBLE COURT, THE BYE LAW, CONTAINING LIKE CLAUSE; IN FACT, FACILITATING THE R ELEVANT CLAUSE IN THE LEASE DEED, IS NOT. COUPLE THIS WITH THE FACT, WHICH IS AGAIN UNCONTROV ERTED, THAT NO MONTHLY OR PERIODIC SUBSCRIPTIONS ARE CHARGED, SO THAT THERE ARE NO CON TRIBUTIONS, AND THE MAINTENANCE ACTIVITIES OF THE SOCIETY FUNDED WHOLLY OR MAINLY O UT OF INTEREST ON BANK DEPOSITS, AND IT IS CLEAR THAT THE MANNER AND OPERATION OF THE ASSESSEE -SOCIETY IS CLEARLY NOT GOVERNED BY MUTUALITY. IN SUM, THE ASSESSEES OBJECTS ALLOWING IT TO CONDU CT BUSINESS AND, FURTHER, ITS ARTICLES (BYE LAWS) RESERVING A RIGHT IN THE LEASE HOLD RIGHTS GRANTED TO ITS MEMBERS, WHICH IN FACT ENABLE IT TO CHARGE A PART (50%) OF T HE PREMIUM ARISING TO THEM ON TRANSFER AS TRANSFER FEE, AS ALSO TDR PREMIUM TOWARD FURTHER CONSTRUCTION, TAINTS ITS OBJECTS WITH 19 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT COMMERCIALITY, EXCLUDING MUTUALITY . NO SPECIFIC SERVICES, EXCEPT SOME ROUTINE PAPER WORK, A PART OF THE NORMAL ADMINISTRATIVE FUNCTIONS , IT MAY BE APPRECIATED, IS RENDERED FOR THE PURPOSE, WHILE PREMIUMS LINKED TO MARKET RATES ARE CHARGED ON THE BASIS OF THE AREA AND/OR ON THE BASIS OF THE TRANSACTION VALUE. THIS CONSTITUTES OUR SECOND OBJECTION TO THE ASSESSEE BEING NOT ELIGIBLE FOR BEING CONSIDERED AS A MUTUAL CONCERN . IT WOULD BE ALSO NOTED THAT THIS ARISES DIRECTLY OUT OF AND IS INCID ENT TO THE CREATION AND HOLDING OF WEALTH BY THE INDIVIDUAL MEMBERS THAT THE ARRANGEMENT ALLO WS, AND WHICH FORMED OUR FIRST OBJECTION TO THE SAME BEING CONFERRED MUTUALITY STA TUS. THE TWO OBJECTIONS, THUS, DOVETAIL EACH OTHER . 4.5 OUR THIRD AND FINAL OBJECTION TOWARD THE SAME I S THE BREAK-DOWN IN THE IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPANTS. THE SAME , THOUGH NOT APPARENT FROM THE RECORD, HAS BEEN FOUND OBTAINING ON THE GROUND ON A PHYSICAL INSPECTION BY THE REVENUE. THE SAME, IT WOULD BE APPRECIATED, ARISES OR SPRING S DIRECTLY FROM IT PURSUING THE POLICY OF ALLOWING THE INDIVIDUAL MEMBERS TO PURCHASE TDRS FROM OUTSIDE AND LOAD THEM ON TO THEIR EXISTING STRUCTURES. NO RESTRICTIONS HAVE BEE N STATED TO BE PLACED BY THE SOCIETY IN THIS REGARD, WHICH IN ANY CASE WOULD NOT ALTER THE CHARACTER OF THE TRANSACTION, THOUGH PROVIDE US OF A VIEW OF ITS REGULATION IN THE MATTE R, I.E., THE SALE OR THE LETTING OF THE NEW STRUCTURE PROPOSED TO BE SET UP BY A MEMBER. IN SHO RT, THE MEMBERS CAN EXPLOIT, EVEN ASSUMING AS SUBJECT TO SOME REASONABLE RESTRICTIONS , THEIR CAPITAL ASSETS AS PERMISSIBLE UNDER LAW. THIS HAS RESULTED IN A COMMONALITY OF IN TEREST IN THE RESIDENTIAL BUILDINGS ON THE SOCIETYS LAND; THE MEMBERS HAVING EITHER SOLD OR OTHERWISE LET THE FLATS TO NON MEMBERS. THE ASSESSEES CLAIM OF NOT RECEIVING ANY AMOUNT FR OM, OR NOT PROVIDING ANY SERVICES TO, THE NON-MEMBERS, ONLY NEEDS TO BE STAT ED TO BE REJECTED. IN FACT, THE VERY FACT THAT THE ASSESSEE CLAIMS OF SUCH SERVICES BEING EXT ENDED ONLY TO MEMBERS PROVES THAT NON MEMBERS, AND IN SUFFICIENT NUMBERS, ARE ALSO RESIDI NG THEREAT . THE NON MEMBERS RESIDING IN THE FLATS BUILT BY THE MEMBERS ON THEIR PLOTS HA VE ACCESS TO AND ENJOY THE SAME FACILITIES, VIZ. THE INTERNAL ROADS, PARKS, DRAINAG E, WATER AND ELECTRIC SUPPLY, ETC., AS THE 20 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT MEMBERS RESIDING IN THEIR HOUSES OR IN THE FLATS IN THE BUILDINGS CONSTRUCTED BY THEM. CAN IT POSSIBLY BE SAID THAT THOUGH RESIDING AT THE RES IDENTIAL UNITS ON THE SOCIETYS LAND, THEY DO NOT USE THE ROADS OR WATER OR ELECTRICITY OR PAR KS, ET. AL. HOW WOULD THEY POSSIBLY RESIDE IN THAT CASE. AGAIN, IS IT THAT SEPARATE AND PARALLEL FACILITIES, BEING ESSENTIAL, HAVE BEEN SET UP OR PROVIDED ? THERE IS NOTHING ON RECORD TO INDICATE THAT. THEY ARE NOT, AND IN FACT CANNOT POSSIBLY BE DENIED THE SAME COMMON FACI LITIES SET UP FOR THE RESIDENTS, AND NEITHER IS THERE ANY MATERIAL ON RECORD TO SUPPORT OR REASON TO JUSTIFY THE SAID DENIAL. IN FACT, THE ASSESSEE ITSELF JUSTIFIES CHARGING OF THE TDR PREMIUM ON THAT BASIS, I.E., THE ADDITIONAL SUPPORT SERVICES REQUIRED TO SUPPORT THE ADDITIONAL FSI . THE ASSESSEE-SOCIETY CONVENIENTLY STATES OF NO SUCH FACILITIES/AMENITIES BEING PROVIDED BY IT. THEN WHO, WE WONDER, IS PROVIDING THESE BASIC, ESSENTIAL SERVICE S, SO VITAL FOR RESIDENCE ? FURTHER, IN THAT CASE, THERE WOULD BE NO SCOPE FOR RECOVERING A NY SUM EVEN FROM THE MEMBERS. AS REGARDS ITS CLAIM OF INCURRING EXPENDITURE ON PEST/ RODENT CONTROL, CLEANING SERVICES, TRASH COLLECTION, ETC. AND THE LIKE, THE SAME MAY WELL BE TRUE. BUT THE QUESTION IS: ARE THE BASIC SERVICES REQUIRED FOR RESIDING AT THE SOCIETYS LAN D, VIZ. INTERNAL ROADS, PARKS, LIGHTING, ELECTRICITY, WATER, DRAINAGE, SECURITY, ETC., THE I NFRASTRUCTURAL FACILITIES SET UP BY THE HOUSING SOCIETY, AVAILABLE ONLY TO THE MEMBERS, OR TO NON-MEMBERS AS WELL? THE ASSESSEE HAS BEEN COMPLETELY UNABLE TO ADDRESS THIS BASIC QU ESTION RAISED BY THE REVENUE, INSPITE OF BEING SPECIFICALLY QUESTIONED ON THIS ASPECT DUR ING HEARING. IN FACT, IT HAS NOT DISPUTED THE PRIMARY FACTS AS LISTED IN ITS RESPECT AS LISTE D BY THE LD. CIT(A) AT PARA 3.7 (PAGES 11 THROUGH 14) OF HIS ORDER FOR AY 2002-03. IF THESE A RE, ON WHICH WE HAVE NO DOUBT, COMMONALITY OF INTEREST, AS CHARGED BY THE REVENUE AND, RESULTANTLY, A BREAK DOWN OF THE IDENTITY BETWEEN CONTRIBUTORS AND PARTICIPANTS, CAN NOT BE DENIED; RATHER, IS PATENT AND THE NATURAL CONCLUSION. THIS IN FACT ALSO VIOLATES ANOTHER BASIC CONDITION OF MUTUALITY. THAT IS, THERE MUST BE NO DEALINGS WITH THE NON-MEMBERS, AND AT BEST MA RGINAL. THE NUMBER OF NON-MEMBER FAMILIES RESIDING AT THE SOCIETYS LAND, EITHER IN ABSOLUTE NUMBERS OR AS A RATIO OF THE TOTAL RESIDENT FAMILIES, WHICH WOULD AGAIN VARY FROM YEAR TO YEAR, IS ANYBODYS GUESS. THE NON 21 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT MEMBERS, OR INCREASE IN THEIR NUMBERS OVER TIME, CO NSIDERING THAT ONE HOUSE GETS CONVERTED INTO A MULTI STORIED BUILDING, COMPRISING SEVERAL FLATS (RESIDENTIAL UNITS), WHICH IS WHAT IN FACT MAKES THE CONVERSION LUCRATIVE, SO THAT THERE HAS BEEN A DELUGE OVER TIME, CANNOT BE SAID TO BE UNSUBSTANTIAL, IF NOT ACTUALLY FAR IN EXCESS OF THE MEMBERS, PARTICULARLY CONSIDERING THAT THE TOTAL PLOTS WERE ONLY 81 IN NUMBER. WE HAVE ALREADY STATED WHY THEY ARE, AS RESIDENTS, AS MUCH A PART O F AND BENEFICIARIES OF THE ASSESSEES LAND AND INFRASTRUCTURE FACILITIES SET-UP, AS THE CONTRIBUTORS. THEY ARE THUS PARTICIPANTS, THOUGH NOT IN THE SOCIETYS FUND, BUT AS PARTAKERS OF THE OUTPUT/SERVICES/AMENITIES ROLLED OUT OR SUBSTANTIALLY ROLLED OUT BY THE SOCIETY. THE RE IS A CLEAR MISMATCH BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS, WHEN CONSIDE RED NOT FROM THE LIMITED STAND POINT OF THOSE HAVING A RIGHT IN THE SURPLUS FUND, BUT THOSE HAVING A STAKE IN AND ACTUALLY AVAILING OF THE SERVICES AND AMENITIES FOR WHICH THE SOCIETY IS SET UP. WHILE THE RIGHT IN THE SURPLUS WOULD ARISE FOR CONSIDERATION OR FOR GIVING EFFECT TO ONLY ON THE CLOSURE OR WINDING UP, THE RIGHT TO AVAIL OF AND BENEFIT FROM THE ASSESSEE S SERVICES IS A FAR MORE RELEVANT, REAL RIGHT, I.E., OF PRACTICAL, EVERYDAY IMPORT. IT IS F OR THIS THAT WE CONSIDER SUCH RESIDENT NON- MEMBERS AS PARTICIPANTS INASMUCH AS THEREBY THEY ACTUALLY PARTICIPATE IN ITS ACTIVITIES/ AMENITIES. THEY IN FACT IN THAT SENSE ARE MORE PRIV ILEGED THAN THE MEMBERS THEMSELVES, AVAILING OF THE FRUITS OF THE ACTIVITIES WITHOUT CO NTRIBUTING OR HAVING CONTRIBUTED THEREFOR! NO DOUBT, THE PRIMARY PURPOSE INITIALLY WAS TO PROM OTE HOUSING FOR ITS MEMBERS, BUT ONCE THE FLATS CONSTRUCTED ON THE PLOTS ALLOTTED TO THE MEMBERS ARE TRANSFERRED TO NON-MEMBERS OR OTHERWISE LET TO THEM, I.E., BY CONVERTING THEIR HOUSES INTO MULTI-STORIED BUILDINGS, THE MEMBERSHIP BECOMES A LUCRATIVE INVESTMENT OR A SOUR CE OF INCOME FOR THE MEMBERS. MUTUALITY CEASES AND COMMERCIALITY STEPS RIGHT IN; RATHER, DOMINATES, TAKING CENTRE STAGE AS IT WERE. IN FACT, THE WHOLE EXERCISE OF TDR PREM IUM IS ONLY TO EXPLOIT THEIR ADVANTAGEOUS POSITION, A CAPITAL ASSET, WITH THE AS SESSEE RAKING IN THE MOOLAH. IN VIEW OF THE FOREGOING DISCUSSION AND ANALYSIS, I N OUR VIEW THE ASSESSEE IS NOT A MUTUAL CONCERN AND ITS VARIOUS RECEIPTS CANNOT BE C ONSIDERED AS TAX EXEMPT ON THAT GROUND. IF, HOWEVER, IT IS FOR ANY YEAR ABLE TO EST ABLISH MUTUALITY QUA A PARTICULAR RECEIPT, 22 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT THE SAME BEING ACTIVITY BASED, IN CONSONANCE WITH I TS BYE LAWS, THE SAME THOUGH CAN BE CONSIDERED. RECEIPT-WISE CLAIMS 5. THOUGH WE HAVE CONSIDERED THE ASSESSEES CASE FO R BEING TAX-EXEMPT AS A MUTUAL CONCERN, WE MAY ALSO DEAL INDIVIDUALLY WITH ITS CLA IM FOR EXEMPTION QUA TRANSFER FEES AND TDR PREMIUM AS BEING GOVERNED BY MUTUALITY, PARTICU LARLY WITH REFERENCE TO THE CASE AS MADE OUT. THIS IS ALSO NECESSARY AS THE REVENUE HAS , THOUGH MAKING OUT A CASE OF THE ASSESSEE BEING NOT ENTITLED TO ITS CLAIM OF BEING A MUTUAL CONCERN, DENIED IT EXEMPTION ON THESE SPECIFIC RECEIPTS, WHICH WE BELIEVE TO BE THE ONLY RECEIPTS IN THE MAIN, OTHER THAN BANK INTEREST, WHICH IS AGREEABLY TAXABLE. TRANSFER FEE 5.1 THE CLAIM FOR EXEMPTION ON THIS RECEIPT ARISES FOR ALL THE ASSESSMENT YEARS UNDER REFERENCE. THE ASSESSEE RELIES FOR THE PURPOSE ON T HE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN SIND CHS V. ITO [2009] 317 ITR 41 (BOM) AND MITTAL COURT PREMISES CO- OPERATIVE SOCIETY LTD. VS. ITO [2010] 320 ITR 414 (BOM), BESIDES BY THE TRIBUNAL I N ITS OWN CASE FOR AYS. 2003-04 TO 2005-06 (SUPRA). OUR FIRST OBJECTION TO THE TRANSFER FEES BEING CONS IDERED AS TAX-EXEMPT IN THE PRESENT CASE IS THAT THE SAID INCOME ARISES IN EXER CISE OF THE RIGHTS CONFERRED BY THE ARRANGEMENT, WHICH IS BY DEFINITION NOT A MUTUAL AR RANGEMENT, BUT A CLEAR CASE OF COMMERCIAL RIGHTS, WHICH IN SUBSTANCE IS AKIN TO A SALE, AS EXPLAINED BY THE HONBLE COURT IN ITS CASE IN PRESIDENCY CHS LTD. (SUPRA), I.E., IN THE ASSESSEES OWN CASE. WITHOUT PREJUDICE, IN OUR CLEAR VIEW, THE ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DECISIONS IN THE CA SE OF PRESIDENCY CHS LTD. (SUPRA) AND SIND CHS (SUPRA). IT IS WELL SETTLED THAT IT IS THE QUALITY OF THE RECEIPT THAT DETERMINES ITS NATURE. THE NATURE OF THIS RECEIPT HAS IN FACT BEEN EXAMINED, IN LIGHT OF THE UNDERLYING ARRANGEMENT IN PURSUANCE TO WHICH IT ARISES, IN ITS OWN CASE IN PRESIDENCY CHS LTD. (SUPRA), TO FIND IT AS ONLY INCOME. WITH REFERENC E TO THE DECISION BY THE APEX COURT IN 23 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT NATIONAL CEMENT MINES INDUSTRIES LTD. V. CIT [1961] 42 ITR 69 (SC), THE HONBLE COURT DRAWS ON THE PROPOSITION THAT IT IS NOT THE NATURE OF THE RE CEIPT UNDER GENERAL LAW BUT IN COMMERCE THAT IS MATERIAL . EXAMINING THE BYE LAWS AND THE LEASE AGREEMENT, W HICH PROVIDED FOR RETAINING A RIGHT TO A SHARE IN THE EX CESS THAT THE MEMBERS MAY RECEIVE WHILE TRANSFERRING THEIR RIGHTS, THE HONBLE COURT WAS OF THE VIEW THAT THE RECEIPT BY WAY OF TRANSFER FEES IS ONLY IN THE NATURE OF INCOME; IN FACT, ONE THAT HAD BEEN CONTRACTUALLY PROVIDED FOR. ITS CAPITAL STRUCTURE REMAINED UNDIST URBED, SO THAT THERE WAS NO QUESTION OF IT BEING A CAPITAL RECEIPT OR ON CAPITAL ACCOUNT. T HE PURPOSE OF INSERTING THE CLAUSE FOR THE SOCIETY TO RECEIVE PAYMENT EVERY TIME THE LEASE CHA NGED HANDS WAS IN ITS VIEW ONLY TO ENSURE INCOME, SO THAT IT HAD THEREBY PROVIDED FOR A SOURCE OF INCOME. REFERENCE IN THIS CONTEXT IS DRAWN TO THE DETAILED DISCUSSION, ALSO E NTAILING FACTS, AS APPEARING AT PAGES 327 TO 331 OF THE REPORTS. ACCORDINGLY, IT WAS HELD THAT TRANSFER FEE WAS NOT A CAPITAL RECEIPT, BUT INCOME CHARGEABLE TO TAX . THE HONBLE COURT DID NOT GO IN TO THE FURTHER QU ESTION AS TO WHETHER IT WAS ASSESSABLE AS BUSINESS INCOME OR AS INCOME FROM OTHER SOURCES; THE SAME BEING LARGELY IRRELEVANT. TRUE, THE QUESTION OF MUT UALITY, AS OBSERVED BY IT LATER IN SIND CHS (SUPRA), WAS NOT BEFORE THE HONBLE COURT, AS ALSO SOUGHT TO BE ARGUED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY. HOWE VER, AS AFORE-STATED, THE CONCEPT OF INCOME AND MUTUALITY ARE ANTITHESIS TO EACH OTH ER, SO THAT ONE EXCLUDES THE OTHER. AFTER EXPLAINING THE CONCEPT OF MUTUALITY IN LIGHT OF THE PRECEDENTS, AND EXAMINING THE FACTS OF THE CASE, THE APEX COURT IN BANKIPUR CLUB LTD. (SUPRA) HELD THAT THE SURPLUS ARISING IS NOT INCOME FOR THE PURPOSES OF THE ACT, BEING A RESUL T OF A MUTUAL ARRANGEMENT. THIS STANDS REITERATED BY IT IN BANGALORE CLUB LTD . (SUPRA). THAT IS, IT IS NOT POSSIBLE TO SAY THAT A RECEIPT CONSTITUTES INCOME, THOUGH IS SUBJECT TO MUTUALITY; INCOME, BY DEFINITION, FLOWING FROM OUTSIDE ONESELF, WHILE THE BASIS OF MU TUALITY IS THAT ONE CANNOT PROFIT OUT OF ONESELF. IN FACT, AS A CAREFUL READING OF THE DECIS ION IN PRESIDENCY CHS LTD. (SUPRA) WOULD SHOW, THE HONBLE COURT CONSIDERED IT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AS RECEIPT BORNE OUT OF A COMMERCIAL TRANSACTION, BARR ING MUTUALITY. THAT IS, NOT ONLY WAS IT FOUND BY THE HONBLE COURT AS OF INCOME IN NATURE , I.E., AS OPPOSED TO CAPITAL, SO THAT 24 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT IMPLICIT THEREIN IS THE FINDING OF IT BEING REVENUE IN NATURE AND, FURTHER, AS ARISING FROM AN OUTSIDE SOURCE, BUT ALSO AS OF COMMERCIAL OR TRA DING IN NATURE . THOUGH IT STOPPED SHORT OF CATEGORIZING IT AS A BUSINESS RECEIPT, A F INDING QUA WHICH WAS NOT RELEVANT, THE RECEIPT BEING IN ANY CASE TAXABLE, IT WOULD BE NOTE D THAT THE HONBLE ADVERTS TO THE BYE LAWS (AT PG. 330 H OF THE REPORTS), OBSERVING THAT THE SAME PROVIDED FOR CARRYING ON BUSINESS OF BUILDING, AND OF BUYING AND SELLING, ET C., LEAVING THIS ASPECT TO BE DECIDED BY THE TRIBUNAL. HOW COULD, THEREFORE, ONE MAY EVEN THINK OF TRANSFE R FEES AS NOT BEING THE ASSESSEES INCOME ? COMING, NEXT, TO THE DECISION IN THE CASE OF SIND CHS (SUPRA). IN OUR VIEW, THE SAME DOES NOT ASSIST THE ASSESSEES CASE. FIRSTLY, FOR THE REASON THAT THE DECISION IN THE CASE OF PRESIDENCY CHS LTD. (SUPRA) WOULD PREVAIL, BEING RENDERED IN THE FACTS OF THE ASSESSEES CASE, AND AFTER CONSIDERING THE LAW IN T HE MATTER, WHICH HAS NOT UNDERGONE ANY CHANGE (REFER: BANGALORE CLUB LTD . (SUPRA)). TWO, THE HONBLE COURT IN SIND CHS (SUPRA) DOES NOT GIVE A BLANK OR CLEAN CHIT TO TRANSFER FEE S AS TAX-EXEMPT, AND ITS DECISION OF IT BEING SUBJECT TO MUTUALITY IS A QUALIFIED ONE. AS E XPLAINED, A RECEIPT CANNOT BE BOTH INCOME AND MUTUAL AT THE SAME TIME. AS SUCH, IT CANNOT BE THAT A RECEIPT, BEARING A SINGLE CHARACTER, AS A TRANSFER FEE IN THE INSTAN T CASE, IS PARTLY INCOME AND PARTLY MUTUAL. THE ONLY MANNER, THEREFORE, THAT THE DECI SION IN THE CASE OF SIND CHS (SUPRA) IS TO BE INTERPRETED AND UNDERSTOOD IN HARMONY AND REC ONCILED WITH A SERIES OF DECISIONS BY THE APEX COURT QUA MUTUALITY, AS WELL AS IN THE CASE OF PRESIDENCY CHS LTD. (SUPRA), AS IT INDEED HAS TO BE, IS THAT THOUGH THE HONBLE COURT WAS OF THE VIEW THAT TRANSFER FEE IS PER SE INCOME, WAS OF THE FURTHER AND CLEAR VIEW THAT INA SMUCH AS THE SAME IS CHARGED BY THE SOCIETY IN TERMS OF ITS BYE LAWS IN FURTHERANCE OF ITS OBJECTS, A REASONABLE AMOUNT, NOT EXCEEDING THAT AS PROVIDED IN THE RELEVANT NOTIFICA TION ISSUED BY THE STATE GOVERNMENT UNDER THE RELEVANT STATUTE (AS MCS ACT, 1960), HAS TO BE RESPECTED AND ACCORDED MUTUALITY STATUS. THAT IS, IT PROVIDES FOR A SMALL WINDOW OF EXEMPTION. AGAIN, NOT PROVIDING FOR ANY SUCH REASONABLE LIMIT, IT MAY BE APPRECIATED, WOULD, APART FROM BEING OPEN TO THE CHARGE OF IT BEING INCOME, ALSO ATTRA CT THE CHARGE OF COMMERCIALITY, THE VERY 25 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT REASON WHY, THOUGH BEING COLLECTED UNDER ITS BYE LA WS, IT WAS CONSIDERED AS INCOME IN PRESIDENCY CHS LTD. (SUPRA). THE HONBLE COURT IN SIND CHS (SUPRA) IN FACT REFERS MORE THAN ONCE IN THE DECISION TO THE OBJECTS OR OPERATI ONS OF THE SOCIETY BEING NOT TAINTED WITH COMMERCIALITY, SO THAT THE SAME CONSTITUTES A FUNDA MENTAL CONSIDERATION THAT CANNOT BE, OR SEEN TO BE, VIOLATED, WHILE IN OUR CASE THE HONBLE COURT HAS ALREADY FOUND THE TRANSACTION OF TRANSFER FEES TO BE ARISING OUT OF OR AS A RESUL T OF A COMMERCIAL TRANSACTION, WITH IN FACT IT BEING LINKED TO THE TRANSFER CONSIDERATION, I.E. , MARKET RATE, IN PRINCIPLE. THE HONBLE COURT IN SIND CHS (SUPRA), FURTHER MAKES IT ABUNDANTLY CLEAR THAT ANY EXCESS OVER THE AMOUNT STIPULATED UNDER THE NOTIFICATION WOULD BE S UBJECT TO SECTION 72 OF THE INDIAN CONTRACT ACT, I.E., LIABLE TO BE REFUNDED AND, FURT HER, IF RETAINED BY THE SOCIETY, WILL NOT BE SUBJECT TO MUTUALITY; IT STATING AS: (PG. 62) IF, THEREFORE, ANY AMOUNT HAS BEEN RECEIVED BEYOND THE AMOUNT NOTIFIED BY THE GOVERNMENT AND THAT AMOUNT HAS NOT BEEN REFUNDE D TO THE MEMBERS, TO THAT EXCESS AMOUNT, AS ALREADY HELD, THE PRINCIPLE OF MUTUALITY WILL NOT APPLY. THIS, WE MAY ADD, IS ALSO THE READING OF THE SAID D ECISION BY THE TRIBUNAL IN THE CASE OF KKEMCAS LTD. V. ASST. CIT [2013] 143 ITD 594 (DEL). THE HONBLE JURISDICTION AL HIGH COURT IN BHARATIYA BHAVAN CO-OPERATIVE VS. SMT. KRISHNA H. B AJAJ & ORS. (IN W.P. NO.1094 OF 2004 DATED 17.02.2010/COPY PLACED ON REC ORD) CONFIRMED THE PROTECTION OF SS. 65 AND/OR 72 OF THE CONTRACT ACT, I.E., IN PRINCIPL E, AS APPLICABLE TO ALL SUMS PAID IN EXCESS OF THAT PRESCRIBED BY OR UNDER LAW, BEING ILLEGAL. THIS WOULD ALSO EXPLAIN OUR OBSERVATION EARLIER THAT THE HONBLE COURT HAS REGARDED THE REC EIPT AS INCOME PER SE . THE SAID DECISION HAS THUS TO BE NECESSARILY REGARDED AS PROVIDING A LEEWAY IN A LIMITED MANNER FOR ACCORDING EXEMPTION UNDER THE EXIGENCIES OF THE SIT UATION OBTAINING. THIS IS AS A RECEIPT COULD NOT, IN PRINCIPLE, BE PARTLY MUTUAL AND PARTL Y NOT SO, UNLESS OF COURSE THE TWO PARTS CAN BE SAID TO BEAR DIFFERENT CHARACTERS, AS WAS FO UND IN CIT VS. W.I.A.A. CLUB LTD. [1982] 136 ITR 569 (BOM). THE APEX COURT IN CHOWRINGHEE SALES BUREAU P. LTD. VS. CIT [1973] 87 ITR 542 (SC) AND SINCLAIR MURRAY & CO. P. LTD. VS. CIT [1974] 97 ITR 615 26 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT (SC), AMONG OTHERS, HAS CLARIFIED THAT WHERE SUMS A RE WRONGLY RETAINED, THE SAME WOULD BE EXIGIBLE TO TAX, AND WHICH WOULD ALSO BE SO ON T HE GROUND OF UNJUST ENRICHMENT. THE DECISION IN THE CASE OF MITTAL COURT PCS LTD. (SUPRA), ALSO RELIED UPON BY THE ASSESSEE, WOULD NOT APPLY AS THE SAME IS IN RESPECT OF NON-OCCUPANCY CHARGES, AND IS IN FACT IN LINE WITH THE DECISION IN THE CASE OF SIND CHS (SUPRA), DISCUSSED HEREINABOVE. AS REGARDS THE ASSESSEES RELIANCE ON THE ORDER BY TH E TRIBUNAL IN ITS CASE (FOR AYS 2003-04 TO 2005-06/ SUPRA/ PB PGS. 1-8), WE FIND THE SAME A S OF NO CONSEQUENCE IN VIEW OF THE DECISION IN THE CASE OF PRESIDENCY CHS LTD. (SUPRA) AND SIND CHS (SUPRA). AGAIN, THE DECISION BY THE TRIBUNAL IN THE CASE OF ITO V. DAMODAR BHUVAN CHS (IN ITA NO. 1610/MUM/2010 DATED 16.9.2011/PB PGS. 42 46), HOL DING THAT THE QUANTUM OF RECEIPT WITH REFERENCE TO THE RESTRICTION THEREON BY ANY LA W AS OF NO CONSEQUENCE IS CONTRARY TO THE DECISION BY THE HONBLE COURT IN SIND CHS (SUPRA). IN FACT, EARLIER ON THE SPECIAL BENCH OF THE TRIBUNAL IN WALKESHWAR TRIVENI CO-OPERATIVE HOUSING SOCIETY LTD . (SUPRA) HELD AS UNDER, EMPHASIZING QUID PRO QUO IN SUCH PAYMENTS , AND WHICH, IT WOULD BE SEEN, IS IN CONFORMITY AND AGREEMENT WITH THE DECISIONS BY THE HONBLE COURT IN SIND CHS (SUPRA) AND BHARATIYA BHAVAN CO-OPERATIVE VS. SMT. KRISHNA H. B AJAJ & ORS. (SUPRA): 85. COOPERATIVE HOUSING SOCIETIES IN OUR COUNTRY P LAYING A VERY SPECIAL AND PROMINENT ROLE IN CATERING TO THE HOUSING NEEDS OF OUR PEOPLE. IF THE SOCIETY IS A VOLUNTARY ASSOCIATION, CREATED FOR MUT UAL HELP WITHOUT PROFIT MOTIVE, NO TAX IS BEING CHARGED ON THE INCOME OF SU CH SOCIETY. THIS PROFILE OF TAXATION AT TIMES TEMPTS THE HUMAN INGENUITY TO DEFILE THE LAW. CONSEQUENTLY, THE SPIRIT OF MUTUALITY IS ABUSED WIT H IMPURITY. TO HOOD- WINK THE LAW PREMIUM IS WORDED UNDER DIFFERENT NAME S, VIZ. DONATION, WELFARE FUND, COMMON AMENITIES FUND, ETC. ETC. SUCH CONTRIBUTIONS ARE COMPULSIVE TO EFFECT THE TRANSFER . SOCIETY CAN PUT INTERDICT ON THE TRANSFER DE HORS SUCH CONTRIBUTIONS. AS SUCH THERE IS QUID PRO QUA IN ACCEPTING SUCH CONTRIBUTIONS. SUCH CHARGES ARE NEIT HER LEGAL NOR VOLUNTARY. PROFIT IS THE PRIME OBJECT FOR MAKING SUCH CHARGES TO EFFECT THE TRANSFER. THIS AMOUNTS TO MAL-PRACTICE. SUCH UNLAWFUL OR ILLE GAL MEANS SHOULD NOT BE ENCOURAGED. THE HONBLE COURT IN SIND CHS (SUPRA) HAS CLARIFIED THE RECEIPT TO BE CONTRACTUAL . A CONTRACT IN VIOLATION OF LAW IS VOID AB INITIO ; THE LEGAL CONSEQUENCES OF TAXATION THOUGH 27 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT WOULD FOLLOW. THE REGULATION BY LAW OF COMMERCIAL S OCIETIES, AS UNDER REFERENCE IN MITTAL COURT PCS LTD. (SUPRA), IS DIFFERENT, SO THAT THEY STAND ON A DIF FERENT FOOTING. UNDER THE CIRCUMSTANCES, THEREFORE, THE IMPUGNED T RANSFER FEES SHALL BE TAX EXEMPT AS MUTUAL TO THE EXTENT OF THE EXTANT RATE AS APPLI CABLE TO THE CLASS OF MUNICIPALITY UNDER WHICH THE ASSESSEE-SOCIETY FALLS, PER THE RELEVANT/ CURRENT NOTIFICATION ISSUED BY THE GOVERNMENT. OUR SAID DECISION THOUGH WOULD HAVE ORD INARILY BEEN SUBJECT TO OUR FINDING THE ASSESSEE-SOCIETY AS NOT OR NO LONGER A MUTUAL C ONCERN, SO THAT NO PART OF THE TRANSFER FEES WOULD BE EXEMPT. HOWEVER, THE FIRST APPELLATE AUTHORITY HAS ALLOWED IT PART RELIEF ON THE SAME LINES AS AFORE-STATED, WITH THE REVENUE BE ING NOT IN APPEAL. HIS ORDER IS THEREFORE CONFIRMED. WE DECIDE ACCORDINGLY. TDR PREMIUM 5.2 THIS ISSUE ARISES FOR AYS. 2006-07 & 2007-08, E VEN AS THE ASSESSEE HAS, BY MISTAKE, ALSO RAISED IT FOR A.Y. 2002-03; THE SAME BEING NOT BEFORE THE TRIBUNAL WHILE DECIDING THE APPEAL IN THE FIRST INSTANCE NOR, CONS EQUENTLY, BEFORE THE REVENUE IN THE SECOND ROUND (REFER PARA 2.1 OF THE ORDER). OUR FIR ST OBSERVATION IS THAT THE ASSESSEE AND ITS ACTIVITIES, FOR THE DETAILED REASONS LISTED HEREINB EFORE, IS NOT GOVERNED BY THE PRINCIPLE OF MUTUALITY, SO THAT NO PART OF ITS INCOME WOULD BE E XEMPT ON THE BASIS OF MUTUALITY. FURTHER, IN OUR CONSIDERED VIEW, THE MATTER ARISING FOR CONSIDERATION BEING A MIXED QUESTION OF FACT AND LAW CANNOT BE SAID TO BE COVER ED BY THE DECISION IN THE CASE OF JAI HIND CHS LTD. (SUPRA). THIS IS FOR THE CLEAR AND SIMPLE REASON TH AT WHETHER COMMERCIALITY IS INVOLVED, OR THE TRANSACTION IS GU IDED BY PROFIT MOTIVE, IS LARGELY A MATTER OF FACT, TO BE DETERMINED ON THE CONSPECTUS OF THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. THE ASSESSEES CHARTER AS WELL AS ITS O PERATIONS HAVE BEEN FOUND TO BE IMBUED WITH COMMERCIALITY. BESIDES, AS FOUND BY THE REVENU E IN THE INSTANT CASE, COMMON FACILITIES ARE BEING ENJOYED BY BOTH THE MEMBERS AN D THE NON-MEMBERS, SO THAT THERE IS A BREAK DOWN OF THE IDENTITY, SO ESSENTIAL AND VITAL TO PRESERVE MUTUALITY. REFERENCE IN THIS CONTEXT IS MADE TO THE DETAILED FINDINGS AT PARA 3. 7 (AT PAGES 11 THROUGH 14) OF THE IMPUGNED ORDER (FOR AY 2002-03). THE FINDINGS, AS A FORE-STATED (REFER PARAS 4.4, 4.5 OF 28 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT THIS ORDER) REMAIN UNCONTROVERTED. ALL THIS, THEN, EXPLAINS THE NON-APPLICATION OF THE DECISION IN THE CASE OF JAI HIND CHS LTD. (SUPRA) IN THE INSTANT CASE. THE LD. AR BEFORE US HAS SOUGHT TO JUSTIFY THE CLAIM, STATING THAT SERVI CES SUCH AS PEST/RODENT CONTROL, TRASH BAG/COLLECTION, PLOT BEAUTIFICATION, CLEANING, ETC. , ARE PROVIDED ONLY TO MEMBERS. THAT MAY WELL BE TRUE, EVEN AS WE HAVE ALREADY EXPRESSED OUR DISAGREEMENT WITH THE CLAIM, AND HAVE NO REASON TO HOLD THAT THE BASIC SERVICES SUCH AS INTERNAL ROADS, PARKS, WATER AND ELECTRIC SUPPLY, DRAINAGE, STREET LIGHT, ETC. ARE N OT ENJOYED BY THE NON-MEMBERS RESIDING AT THE SOCIETYS LAND AS WELL. SO, HOWEVER, THE QUESTION IS, HOW IS THE ARGUMENT R ELEVANT ? IF THE ASSESSEE HAS INSTITUTED AND, ACCORDINGLY, RAISE D A MAINTENANCE FUND FOR THESE SERVICES, SURELY THE SAME SHALL BE GUIDED BY MUTUALITY. IT IS NOBODYS CLAIM THAT THE TDR PREMIUM IS COLLECTED OR EVEN CHARGED FOR THAT PURPOSE. IN F ACT, EVEN IF DID, THE SAME WOULD BE OF NO MOMENT, AS AGAIN THERE WOULD BE NO IDENTITY BETWEEN THE CONTRIBUTORS AND PARTICIPANTS; THE TDR PREMIUM BEING A SPECIFIC RECEIPT FOR, IF AT ALL, A SPECIFIC PURPOSE, I.E., TO PROVIDE INFRASTRUCTURE SUPPORT FOR THE ADDITIONAL FSI, WHIC H AGAIN CONTRADICTS THE CLAIM OF THE SAID FACILITIES BEING NOT PROVIDED TO ALL, WHILE THE INF RASTRUCTURE IS FOR ALL RESIDENTS, I.E., INCLUDING NON-MEMBERS. WE ARE CONSIDERING THE TAXAB ILITY OF TDR PREMIUM, ASSUMING FOR THE MOMENT THAT THE ASSESSEE IS A MUTUAL CONCER N. THE CLAIM OF CERTAIN MAINTENANCE SERVICES AS PEST CONTROL, CLEANING, TRASH COLLECTIO N, ETC., AS BEING LIMITED TO MEMBERS, IS THUS OF NO RELEVANCE IN THIS REGARD. WE FIND THAT THE ARRANGEMENT HAS LED TO NOT ONLY A COMPLETE BREAK DOWN OF IDENTITY, I.E., BETWEEN CONTRIBUTORS AND PARTICIPAN TS, AS EXPLAINED AT PARA 4.5 ABOVE, BUT ALSO TO HUGE SUMS TO THE SOCIETY AND OPPORTUNITY FO R PROFIT FOR ITS MEMBERS, IN VIOLATION OF CONDITION # 3 PRESCRIBED BY THE HONBLE APEX COURT IN BANGALORE CLUB (SUPRA); THE FIGURES, WHICH HAVE ASSUMED VOLUME AND REGULARITY OVER TIME, AS READILY AVAILABLE, BEING AS: ASST. YEAR TRANSFER FEES TDR PREMIUM A.Y. 1996-97 RS.13,56,000/- A.Y. 2000-01 RS.1,02,07,653/- A.Y. 2001-02 RS.10,95,620/- 29 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT A.Y. 2002-03 RS.18,53,760/- RS.24,06,798/- A.Y. 2006-07 RS.15,45,000/- RS.56,44,670/- A.Y. 2007-08 RS.41,32,560/- RS.51,27,200/- THE CONDITION AS TO PROFIT, IF ONE WERE TO CONVEY I T MORE CLEARLY AND VIVIDLY, AS STATED IN, WHAT IS KNOWN AS THE STYLESS CASE, AS CLARIFIED BY THE APEX COURT IN ROYAL WESTERN INDIA TURF CLUB LTD. (SUPRA), IS THE IMPOSSIBILITY THAT CONTRIBUTORS SHO ULD DERIVE PROFITS FROM CONTRIBUTIONS MADE BY THEM TO THE FUND WHICH COULD ONLY BE EXPENDED OR RETURNED TO THEMSELVES. FURTHER ON, IN OUR VIEW, THE BREAK DOWN OF MUTUALIT Y WHEN A CONTRIBUTOR-MEMBER TAKES A LOAN FROM THE CLUB ON INTEREST, AS EXPLAINE D BY THE APEX COURT IN BANGALORE CLUB (SUPRA), WOULD APPLY IN EQUAL MEASURE WHEN, SIMILAR LY, HE, ON PAYMENT OF PREMIUM TO THE SOCIETY, ACQUIRES PERMISSION TO PURCHASE TDRS. THIS IS FOR TWO REASONS. FIRSTLY, AS EXPLAINED AT LENGTH IN THIS ORDER, IN OUR VIEW, THE WHOLE CONCEPT OF MUTUALITY SUFFERS AND GETS VITIATED BECAUSE THE ARRANGEMENT LEADS TO ACQU ISITION OF INDIVIDUAL RIGHTS WITH THE MEMBERS ON THE GRANT OF LEASE TO THEM BY THE SOCIET Y. IT WOULD BE SEEN THAT IT IS THIS WHICH IS LATER SOUGHT TO BE CAPITALIZED THROUGH TRANSFER, LETTING, ETC., AND IT IS ONLY SUCH RECEIPTS ARISING TO THE SOCIETY IN THE EXERCISE OF SUCH RIGH TS BY THE MEMBERS AND, CORRESPONDINGLY, PROFIT TO THEM, THAT ARE UNDER CHALLENGE FOR MUTUAL ITY. THE ACQUISITION OF TDRS IS ONLY IN CONTINUATION AND A PART OF THE SAID PROCESS . TWO, AS EXPLAINED BY THE APEX COURT IN BANGALORE CLUB (SUPRA), THE COMMON FUND SHOULD EXIST AND BE APPLI ED BETWEEN THE GROUP/CLUB AND ITS MEMBERS. WHEN THE DEPOSIT BY THE CLUB WITH THE MEMBER-BANK IS GIVEN ON LOAN TO ITS CLIENT, THE CLUBS MONEY GOES OUT OF THIS CLOSED SYSTEM, AND THE MUTUALITY BREAKS. SIMILARLY, THE TDR PREMIUM PAID T O THE SOCIETY IS RECOUPED BY THE MEMBER THROUGH SALE AND/OR OTHERWISE WORKED ON TO G ENERATE INCOME FROM ITS INVESTMENT, AS BY LETTING THE FLAT. THAT IS, HE TRA DES ON IT, MUCH IN THE SAME MANNER AS THE BANK DOES ON THE MONEY BORROWED FROM, OR DEPOSITED WITH IT BY, THE CLUB. 30 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT FINALLY, IN OUR VIEW, THE DECISION IN THE ASSESSEE S CASE IN PRESIDENCY CHS LTD. (SUPRA), AS WELL AS BY THE HONBLE COURT IN SIND CHS (SUPRA), PROVIDING ONLY A LIMITED WINDOW OF EXEMPTION QUA TRANSFER FEES, FOR THE DETAILED REASONS AFORE-STAT ED, WOULD ALSO APPLY TO THE RECEIPT BY WAY OF TDR PREMIUM AS WELL. FOR THE FOREGOING REASONS AND BINDING PRECEDENTS, W E ARE UNABLE TO FOLLOW THE DECISION IN THE CASE OF JAI HIND CHS LTD. (SUPRA) AND BY THE TRIBUNAL IN THE ASSESSEES CASE FOR OTHER YEARS. THE ASSESSEE HAS PLACED A RE SOLUTION DATED 05/8/1996 BY THE ASSESSEE-SOCIETY (FORMING PART OF THE ANNUAL REPORT FOR 1995-96 DATED 25/8/1996). THE SAME IS QUA TDR PREMIUM. IT; RATHER THE REPORT ITSELF, WAS NOT REFERRED TO DURING HEARING BY EITHER PARTY. THERE IS NO REFERENCE THERETO IN T HE ASSESSEES WRITTEN SUBMISSIONS NOR EVEN IN THE ORDERS BY THE AUTHORITIES BELOW. WE ARE THUS CONSTRAINED NOT TO TAKE IT AS A PART OF THE RECORD IN TERMS OF RULE 18 OF THE APPEL LATE TRIBUNAL RULES, 1963. WE, ACCORDINGLY, CONFIRM THE REVENUES STAND IN TREATIN G THE RECEIPT BY WAY OF TDR PREMIUM BY THE ASSESSEE-SOCIETY AS A PART OF ITS INCOME LIA BLE TO TAX UNDER THE ACT. EXPENSES 5.3 THE ASSESSEES ALTERNATE PLEA FOR ALL THE YEARS IS FOR BEING ALLOWED EXPENDITURE IN CASE TRANSFER FEES AND/OR TDR PREMIUM IS CONSID ERED AS INCOME SUBJECT TO TAX. THE SAME HAS BEEN DENIED BY THE REVENUE IN THE ABSENCE OF ANY RELATION BETWEEN THE EXPENSES WITH THE IMPUGNED RECEIPTS. BEFORE US NO I MPROVEMENT IN ITS CASE COULD BE MADE BY THE ASSESSEE. WITHOUT DOUBT, ONLY THE NET I NCOME (ON ANY ACTIVITY OR SOURCE OR ACCOUNT) IS TO BE TAXED, SO THAT THE EXPENDITURE IN CURRED IN ITS RESPECT WOULD IN PRINCIPLE WARRANT DEDUCTION. HOWEVER, IT IS INCUMBENT ON THE ASSESSEE TO SHOW AS TO HOW THE EXPENDITURE BEING CLAIMED AGAINST THE STATED RECEIP TS IS RELATED THERETO OR IS IN ITS RESPECT, AND WHICH IT HAS COMPLETELY FAILED TO. THE EXPENDIT URE HAS APPARENTLY NO CORRELATION THEREWITH, VIZ. FOR AY 1996-97, BEING IN THE MAIN O N NAVRATRA EXPENSES, GET TOGETHER EXPENSES AND MAGAZINE EXPENSES. EVEN IF SUCH EXPEND ITURE, WHICH MAY ALSO INCLUDE FOR OTHER YEARS GENERAL AND ADMINISTRATION EXPENSES, OR FOR MAINTENANCE EXPENSES, IS SHOWN TO BE FUNDED FROM THE SAID RECEIPTS, THE SAME WOULD ONLY BE APPLICATION OF INCOME, AND 31 ITA NOS.494, 495, 496, 498, 499 & 500/MUM/2011 (A.YS. 96-97, 00-01, 01-02, 02-03, 06-07 & 07-08) HATKESH CO-OP. HSG. SOC. LTD. VS. ASST. CIT NOT EXPENDITURE THEREAGAINST. THE LD. AR BEFORE US WAS AT LOSS TO EXPLAIN AS TO HOW THE SAID EXPENDITURE COULD BE CLAIMED AS A DEDUCTION. T HE ASSESSEES CLAIM IS WHOLLY WITHOUT BASIS AND, THUS, STANDS RIGHTLY REJECTED BY THE REV ENUE. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEALS FOR ALL TH E YEARS ARE DISMISSED. '0. 1 (230 & ' 4 0 & 56 ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 04, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 7( DATED : 04.09.2013 ROSHANI , SR. PS, A.K. PATEL, PS & SHASHI, PS '#$ % &'() *#)!' / COPY OF THE ORDER FORWARDED TO : 1. ' # / THE APPELLANT 2. $ # / THE RESPONDENT . 3. ' 8 ( ' ) / THE CIT(A) 4. ' 8 / CIT CONCERNED 5. ;)<= $ (>2 , ' + >2. , ' * / DR, ITAT, MUMBAI 6. = ?3 @* / GUARD FILE. '#$ / BY ORDER, +/, - (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI