ITO WD 16(3)(1), MUMBAI V. PANCHRATNA CO OP HSG SOC. LTD, MUMBAI

ITA 5726/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62693 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 10-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VERMA, JUDICIAL MEMBER ITA NO.5726/MUM/2011 (ASSESSMENT YEAR: 2003-04) INCOME-TAX OFFICER-16(3)(1), MATRU MANDIR, MUMBAI -400 007 ....... APPELLANT PAN: AADCP 5730 A VS PANCHRATNA CO-OP. HSG. SOC. LTD., 21, PANCHRATNA, MP MARG, MUMBAI 400 004 ..... RESPONDENT APPELLANT BY: SHRI P.C. MAURYA RESPONDENT BY: NONE DATE OF HEARING: 12.07.2012 DATE OF PRONOUNCEMENT: 25.07.1012 O R D E R PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT (A)-27 MUMBAI DATED 08.04.2011 AND THE GROUNDS RAISED BY THE REVENUE THEREIN READ AS UNDER: 1. THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF THE AMOUNT RECEIVED FROM PARTIES ON ACCOUNT OF TRANSFER FEES ` 20,28,000/-, GENERAL MAINTENANCE ` 32,68,309/-, MISCELLANEOUS INCOME OF ` 1,18,897/-, CHANGE OF USER CHARGES OF ` 35,660/-, LIFT CHARGES OF ` 2,700/-, ADVERTISEMENT OF ` 23,358/-, NON-OCCUPANCY CHARGES ` 8,28,443/- AND CAR PARKING CHARGES OF ` 1,70,640/- TREATING THESE AMOUNT EXEMPT UNDER THE PRINCIPLE OF MUTUALITY. ITA 5726/MUM/2011 PANCHRATNA CO-OP. HSG. SOC. LTD. 2 2. THE LD. CIT (A) ERRED IN FOLLOWING THE DECISION OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR THE A.Y. 2002- 03 AND A.Y. 2006-067 WHEREIN IT HAS BEEN HELD THAT ALL AMOUNTS RECEIVED BY THE CHS ON THE GROUNDS OF TRANS FER CHARGES ARE EXEMPT UNDER THE PRINCIPAL OF MUTUALITY . THE DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AN D THE ISSUE IS SUBJUDICE. 2. THE ASSESSEE IN THE PRESENT CASE IS A CO-OPERATI VE HOUSING SOCIETY. THE RETURN OF INCOME FOR THE YEAR UNDER C ONSIDERATION WAS FILED BY IT ON 01.12.2003 DECLARING NIL INCOME. IN THE ASSESSMENT COMPLETED U/S.143(3) VIDE ORDER DATED 28.02.2006, T HE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE AO AT ` 65,01,765/- AFTER MAKING THE FOLLOWING ADDITIONS: TRANSFER FEES (CONTRIBUTION TO REPAIRS & RENOVATION ` 20,28,000 AMOUNT RECD. FROM PARTIES ON ACCOUNT OF GENERAL MAINTENANCE ` 32,68,309 MISCELLANEOUS INCOME (REFERRED TO AS EXPENSES IN AO ` 1,18,897 CHANGE OF USER CHARGES ` 35,660 LIFT PASS CHARGES ` 2,700 ADVERTISEMENT ` 23,358 NON-OCCUPANCY CHARGES ` 8,28,443 CAR PARKING CHARGES ` 1,70,640 3. AGAINST THE ORDER PASSED BY THE AO U/S.143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) DI SPUTING VARIOUS ADDITIONS MADE BY THE AO TO ITS TOTAL INCOME. THE LD. CIT (A) ALLOWED THE SAID APPEAL OF THE ASSESSEE AND DELETED ALL THE ADDITIONS MADE BY THE AO FOLLOWING APPELLATE ORDER OF HIS PREDECESSOR PASSED IN ASSESSEES OWN CASE FOR THE AY 2002-03 AND 2006-07 WHEREIN SIMILAR ADDITIONS MADE BY THE AO WERE DELETED. AGGRIEVED B Y THE ORDER OF THE LD. CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, NOBODY HAS APP EARED ON BEHALF OF THE ASSESSEE. THIS APPEAL OF THE REVENUE THEREF ORE IS BEING DISPOSED OFF EX-PARTE QUA -THE-RESPONDENT-ASSESSEE AFTER HEARING ARGUMENTS OF LD. DR AND PERUSING THE RELEVANT MATERIAL ON RECORD . IT IS OBSERVED ITA 5726/MUM/2011 PANCHRATNA CO-OP. HSG. SOC. LTD. 3 THAT THE VARIOUS ADDITIONS MADE BY THE AO TO THE TO TAL INCOME OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WERE DELET ED BY THE LD. CIT (A) FOLLOWING THE ORDERS OF HIS PREDECESSOR IN ASSE SSEES OWN CASE FOR AY 2002-03 AND 2006-07. THE SAID ORDERS PASSED BY THE LD. CIT (A) FOR AY 2002-03 AND 2006-07 WERE CHALLENGED BY THE R EVENUE BY WAY OF APPEALS FILED BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS COMMON ORDER DATED 26 TH AUGUST, 2011 PASSED IN ITA NO.2858 & 2860/MUM/2010 HAS ALREADY DISMISSED THE SAID APPEAL S OF THE REVENUE UPHOLDING THE ORDERS OF THE LD. CIT (A) DEL ETING THE SIMILAR ADDITIONS MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE IN THE AY 2002-03 AND 2006-07. AS HELD BY THE TRIBUNAL RELYI NG INTER ALIA ON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE C ASE OF MITTAL COURT PREMISES CHS LTD. VS. ITO 320 ITR 414, THE VA RIOUS AMOUNTS RECEIVED BY THE ASSESSEE-SOCIETY FROM ITS MEMBERS W ERE EXEMPT UNDER THE PRINCIPLE OF MUTUALITY AND THE ADDITIONS MADE B Y THE AO OF THE SAID AMOUNTS TO THE TOTAL INCOME OF THE ASSESSEE WE RE NOT SUSTAINABLE AS RIGHTLY HELD BY THE LD. CIT (A). 5. AT THE TIME OF HEARING BEFORE US THE LD. DR HAS RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F SIND CHS VS. ITO 317 ITR 47 IN SUPPORT OF THE REVENUES CASE. A PERUSAL OF THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT HOWEVER SHOWS THAT THE SAME, IN FACT, SUPPORTS THE CASE OF THE AS SESSEE AS IS EVIDENT FROM THE FOLLOWING OBSERVATIONS RECORDED BY THEIR L ORDSHIPS: WHETHER THE FEE WAS VOLUNTARY OR NOT WOULD MAKE NO DIFFERENCE TO THE PRINCIPLE OF MUTUALITY. PAYMENTS WERE MADE UNDER THE BYE-LAWS OF THE ASSESSEE WHICH CONSTITUTE D A CONTRACT BETWEEN THE ASSESSEE AND ITS MEMBERS WHICH WAS VOLU NTARILY ENTERED INTO AND VOLUNTARILY CONDUCTED AS A MATTER OF CONVENIENCE AND DISCIPLINE FOR RUNNING OF THE ASSESSEE-SOCIETY. IF ANY AMOUNT WAS RECEIVED MORE THAN WAS CHARGEABLE UNDER THE BYE -LAWS OR THE GOVERNMENT NOTIFICATION, THE ASSESSEE WAS BOUND TO REPAY THE AMOUNT AND IF IT RETAINED THE AMOUNT IT WOULD B E IN THE NATURE ITA 5726/MUM/2011 PANCHRATNA CO-OP. HSG. SOC. LTD. 4 OF PROFIT MAKING THAT SPECIFIC AMOUNT EXIGIBLE TO T AX. UNDER THE BYE-LAWS, CHARGING OF TRANSFER FEES HAD NO ELEMENT OF TRADING OR COMMERCIALITY. SINCE THERE WAS NO TAINT OF COMMERCI ALITY THE QUESTION OF EARNING PROFITS WOULD NOT ARISE WHEN TH E ASSESSEE FROM THE FUNDS RECEIVED APPLIED THE MONEYS RECEIVED TOWARDS MAINTENANCE OF THE SOCIETY AND PROVIDING THE MEMBER S WITH USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES. THUS, THE PRINCIPLE OF MUTUALITY WAS APPLICABLE TO THE ASSESSEE WHICH HAD AS ITS PREDOMINANT ACTIVITY, THE MAINTENANCE OF THE PROPER TY OF THE SOCIETY WHICH INCLUDED ITS BUILDING(S) AND AS LONG AS THERE WAS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS, THE RECE IPT OF TRANSFER FEES WAS NOT LIABLE TO TAX. 6. THE ISSUES INVOLVED IN THE PRESENT APPEAL FILED BY THE REVENUE THUS ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL PASSED IN ASSESS EES OWN CASE FOR THE AY 2002-03 AND 2006-07 AS WELL AS BY THE DECISI ON OF HONBLE HIGH COURT IN THE CASE OF MITTAL COURT PREMISES CHS LTD. (SUPRA) AND SIND CHS (SUPRA) AND RESPECTFULLY FOLLOWING THE SAI D JUDICIAL PRONOUNCEMENTS, WE UPHOLD THE IMPUGNED ORDER OF LD. CIT (A) DELETING THE ADDITIONS MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF TRANSFER FEES, GENERAL MAINT ENANCE CHARGES, MISCELLANEOUS INCOME, CHANGE OF USER CHARGES, LIFT CHARGES, ADVERTISEMENT, NON-OCCUPANCY CHARGES AND CAR PARKIN G CHARGES HOLDING THAT THE SAID AMOUNTS ARE EXEMPT UNDER THE PRINCIPLES OF MUTUALITY. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5TH JULY 2012. SD/- ( VIVEK VERMA ) JUDICIAL MEMBER SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER MUMBAI, DATE: 25TH JULY, 2012 ITA 5726/MUM/2011 PANCHRATNA CO-OP. HSG. SOC. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)27, MUMBAI. 4) THE CIT-CITY -16, MUMBAI. 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN