ITO 16(2)(1), MUMBAI V. MAHALAXMI COMMERICAL PREMISES CHS LTD, MUMBAI

ITA 5187/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8711 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KETAN
• Keywords: Share purchase agreement

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHRI B. R. MITTAL, JM AND SHRI B. R. JAIN, A M ITA NO.5187/MUM/2011 ASSESSMENT YEAR: 2007 -08 THE ITO 16(2)(1), MATRU MANDIR, MUMBAI-400 007 VS. M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 PAN NO : AAAAM 0239 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY : SHRI KETAN PANCHMIA DATE OF HEARING : 0 3 .10.2012 DATE OF PRONOUNCEMENT : 12.10.2012 ORDER PER B. R. JAIN, A.M. : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 04.03.2011 OF LD. CIT(A)-27, MUMBAI RAISES THE FOLLOWING GROUNDS IN APPEAL:- 1. THE LD. CIT(A) ERRED IN DELETING THE ADDITION O N ACCOUNT OF TRANSFER FEES OF `. 19,21,800/- FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF M/S. S UPRABHAT CHS AND M/S. SHYAM CHS WHEREIN IT HAS BEEN HELD THA T ALL AMOUNTS RECEIVED BY THE CHS ON THE GROUNDS OF TRANS FER CHARGES ARE EXEMPT UNDER THE PRINCIPLE OF MUTUALITY . THE DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AN D THE ISSUE IS SUB-JUDICE. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF NON-OCCUPANCY CHARGES OF `. 34,381/- FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF MI TTAL COURT CHS AND M/S. SUPRABHAT CHS WHEREIN IT HAS BEEN HELD THAT ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 2 NON-OCCUPANCY CHARGES TAKEN FROM MEMBERS WHO HAVE L ET OUT THEIR FLATS IS EXEMPT UNDER PRINCIPLE OF MUTUALITY. THE DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THE ISS UE IS SUB- JUDICE. 2. IN THE FIRST GROUND IN APPEAL BRIEFLY THE FACTS ARE THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF `. 20,21,800/- HAS BEEN RECEIVED BY THE ASSESSEE AS TR ANSFER PREMIUM COLLECTED ON TRANSFER OF FLATS. UPON PERUS AL OF THE BYE LAWS OF THE CO-OPERATIVE HOUSING SOCIETY, THE MAXIMUM AMOUN T THAT COULD BE RECOVERED UPON SUCH TRANSFER COULD BE `. 25,000/- ONLY. THE RELEVANT CLAUSE OF THE BYE-LAW HAS ALSO BEEN REPRODUCED AT I NTERNAL PAGE 3 OF THE ASSESSMENT ORDER WHICH READS AS UNDER :- 40(D) IF THE COMMITTEE IS SATISFIED THAT THE MEMBE R IS PRIMA FACIE ELIGIBLE TO TRANSFER HIS SHARES AND INTEREST IN THE CAPITAL/PROPERTY OF THE SOCIETY, THE COMMITTEE SHAL L DIRECT THE SECRETARY OF THE SOCIETY TO INFORM THE MEMBER WITHI N 3 DAYS OF THE DECISION OF THE COMMITTEE TO MAKE THE COMPLIANC E AS UNDER: (I) TO SUBMIT AN APPLICATION, FOR TRANSFER OF HIS SHARE S AND INTEREST IN THE CAPITAL/PROPERTY OF THE SOCIETY, IN THE PRESCRIBED FORM, ALONG WITH THE SHARE CERTIFICATE; (II) TO SUBMIT AN APPLICATION FOR MEMBERSHIP OF THE PROP OSED TRANSFEREE IN THE PRESCRIBED FORM; (III) TO GIVE VALID REASONS FOR THE PROPSOESD TRANSFER; (IV) TO DISCHARGE ALL THE LIABILITIES TO THE SOCIETY, (V) TO PAY THE TRANSFER FEE OF `. 50/-. (VI) TO REMIT ENTRANCE FEE OF `. 10/- PAYABLE BY THE PROPOSED TRANSFEREE. (VII) TO PAY AMOUNT OF PREMIUM AT THE RATE TO BE FIXED BY THE GENERAL BODY MEETING BUT NOT EXCEEDING 2.5 PERCENT OF THE DIFFERENCE BETWEEN THE BOOK VALUE AND SALE PRIC E REALIZED BY THE TRANSFER OF HIS FLAT AND SUBJECT TO THE MAXIMUM AMOUNT MENTIONED BELOW WHICHEVER IS LESS. ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 3 THE AMOUNT OF PREMIUM IS PAYABLE BY OUTGOING MEMBER ONLY. AREA UNDER MAXIMUM AMOUNT OF PREMIUM TO BE PAID 1 MUNICIPAL CORPORATION AND DEVELOPMENT AUTHORITY `. `.`. `. 25,000 2 A CLASS MUNICIPAL AREA `. 20,000 3 B CLASS MUNICIPAL AREA `. 15,000 4 C CLASS MUNICIPAL AREA `. 10,000 5 RURAL SECTOR `. 5,000 NO ADDITIONAL AMOUNT TOWARDS DONATION SHALL BE RECOVERED FROM TRANSFEROR OR TRANSFEREE. (EMPHASIS ADDED). 3. THE RESPONDENT/ASSESSEE HOWEVER, FOUND TO HAVE C OLLECTED FOLLOWING AMOUNTS WHICH ARE FAR IN EXCESS OF THE AMOUNT OF PR EMIUM STATED IN THE BYE-LAWS OF THE SOCIETY. SR. NO. MEMBERS NAME & ADDRESS TRANSFER FEES PAID 1 GLENMARK PHARMACEUTICALS LTD. 301, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 25,000 2 M.B. AHUJA, 701, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 25,000 3 M.B. AHUJA, 702, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 25,000 4 S.A. NOORUL AMEENA, 301-A, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 25,000 TOTAL 1,00,000 ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 4 SR. NO. MEMBERS NAME & ADDRESS REPAIRS FUND RECEIVED COMMON AMENITIES FUND 1 GLENMARK PHARMACEUTICALS LTD. 301, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 3,08,000 3,08,000 2 M.B. AHUJA, 701, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 1,86,100 1,86,100 3 M.B. AHUJA, 702, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 2,20,600 2,20,600 4 S.A. NOORUL AMEENA, 301-A, MAHALAXMI CHAMBERS, 22, BHULABHAI DESAI ROAD, MUMBAI-400 026 2,46,200 2,46,200 TOTAL 9,60,900 9,60,900 4. THE ASSESSING OFFICER CONSIDERING THE BYE-LAWS O F THE CO-OPERATIVE HOUSING SOCIETY AND EXCESSIVE PAYMENTS HAVING BEEN RECOVERED TOOK THAT SUCH RECOVERIES ARE VIOLATIVE OF THE BYE-LAWS. HE, THEREFORE, HELD THAT THE AFORESAID RECEIPTS ARE NOT EXEMPT ON THE GROUND OF MUTUALITY. HE, THEREFORE, AFTER CONSIDERING THE ENTIRE GAMUT OF TH E CASE LAWS BEFORE HIM, BROUGHT AN AMOUNT OF `. 19,21,800/- OUT OF THE TOTAL RECEIPTS OF `. 20,21,800/- UNDER THE HEAD INCOME FROM OTHER SOUR CES. 5. THE LD. CIT(A) CONSIDERING THE JUDGMENT OF HON'B LE BOMBAY HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HSG. SOCIET Y AND ALSO THE SUBSEQUENT JUDGMENTS IN THE CASE OF M/S. SHYAM CHS AND SUPRABHAT CHS HELD THAT THE TRANSFER FEE ARE EXEMPT FROM TAX UNDER THE PRINCIPLE OF ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 5 MUTUALITY. ACCORDINGLY, THE ADDITION OF `. 19,21,800/- MADE BY THE A.O. STOOD DELETED. 6. HEARD PARTIES WITH REFERENCE TO THE MATERIAL ON RECORD. THE MAXIMUM AMOUNT THAT HAS BEEN NARRATED TO BE CHARGEA BLE AS TRANSFER FEE UNDER CLAUSE 40(D)(7) OF THE BYELAWS OF THE SOCIETY ARISES ONLY ON ACCOUNT OF CONTRACT BETWEEN THE SOCIETY AND THE MEMBER. IN ANY EVENT, IF THE MEMBER HAS PAID THE AMOUNT IN EXCESS AND THE SOCIET Y HAS TAKEN THE SAME AS RECEIPT, THE SAME IS AN ARRANGEMENT BETWEEN THE SOCIETY AND THE MEMBER. ANY SUCH SURPLUS ON THAT ACCOUNT STILL IS AVAILABLE FOR DISPOSAL IN FAVOUR OF THE MEMBER OR FOR THE OBJECT FOR WHICH THEY MAY SPECIFY. THERE IS THUS NO ELEMENT OF PROFIT IN THE AMOUNTS T HAT HAVE BEEN CHARGED IN EXCESS TO THE AMOUNT STATED IN CLAUSE 40(D)(7) O F THE BYE-LAWS OF THE SOCIETY. THE PRINCIPLE OF MUTUALITY, THEREFORE, CA NNOT BE IGNORED IN CASES LIKE THIS. THAT BEING SO THE JUDGMENT BY HON'BLE B OMBAY HIGH COURT IN THE CASE OF MITTAL COURT PREMISES CO-OPERATIVE SOC IETY LTD. VS. ITO [2009] 184 TAXMAN 292 (BOM) AS ALSO THE JUDGMENT BY THE JU RISDICTIONAL HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HSG. SOCIETY VS. ITO [2009] 317 ITR 47 (BOM) SQUARELY COVERS THE ISSUE. THE REVENUE HO WEVER, DID NOT BRING ANY CONTRARY DECISION TO OUR NOTICE ON THIS ISSUE. THE LD. CIT(A), THEREFORE, CANNOT BE SAID TO HAVE ERRED IN DELETING THE ADDITION. WE, THEREFORE, REJECT GROUND NO. 1 RAISED IN APPEAL BY THE REVENUE. ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 6 7. AS REGARDS THE GROUND NO.2 IN APPEAL BY THE REVE NUE, THE ASSESSING OFFICER BROUGHT TO TAX AS INCOME OF THE ASSESSEE AN AMOUNT OF `. 34,381/- COLLECTED AS NON-OCCUPANCY CHARGES BY THE SOCIETY. THE REASONS TAKEN FOR BRINGING THE SAID AMOUNT TO TAX AS PROFITS AND GAIN S ARE STATED AT INTERNAL PAGE 9 OF THE ASSESSMENT ORDER AND THE SAME ARE REP RODUCED BELOW:- (A) THE MINUTES SHOW THAT THIS AMOUNT WAS CHARGED WITH THE INTENTION OF MAKING A GAIN, FOR THE ASSESSEE SOCIET Y AND WAS GOVERNED BY THE PROFIT MOTIVE. (B) THIS CHARGE WAS NOT VOLUNTARY. (C) MICRO-ECONOMIC ANALYSIS IN SUCH CASES SHOWS THA T SUCH A CHARGE IS PAID AT LEAST PARTLY, BY THE TENANT TO WH OM THE PREMISES HAVE BEEN SUB-LET. THE TENANTS DO NOT EXE RCISE THE RIGHTS AND PRIVILEGES OF MEMBERSHIP. THEY ARE CONT RIBUTORS BUT NOT PARTICIPANTS. THEREFORE, THERE IS NO IDENTITY BETWEEN THE CONTRIBUTORS AND THE PARTICIPANTS. 8. THE LD. CIT(A) HOWEVER, FOLLOWING THE JUDGMENT B Y HON'BLE BOMBAY HIGH COURT IN THE CASE OF MITTAL COURT PREMISES CO -OPERATIVE SOCIETY LTD. (SUPRA) HELD THAT NON OCCUPANCY CHARGES ARE ALSO EX EMPT FROM TAX UNDER THE PRINCIPLE OF MUTUALITY AND, THEREFORE, DELETED THE ADDITION. 9. HAVING HEARD THE PARTIES WITH REFERENCE TO THE M ATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE DECISION REACHED BY THE LD. CIT(A) IN DELETING THE ADDITION, AS THE SAME DID NOT CONSTITUTE ASSESS EES INCOME CHARGEABLE TO TAX BY APPLYING THE PRINCIPLE OF MUTUALITY. GRO UND NO. 2 IN APPEAL BY THE REVENUE, THEREFORE, STANDS REJECTED. ITA NO : 5187/MUM/2011 M/S. MAHALAXMI COMMERCIAL PREMISES CHS LTD. 7 10. IN THE RESULT, THE APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.10.2012 SD/- - SD/- ( B. R. MITTAL ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 12.10.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI