OVAL SHIV SHANTI BHUVAN CO-OP HSG. SOC. LTD, MUMBAI V. ITO 12(3)(3), MUMBAI

ITA 6297/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8391 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 06-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 12-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: RAHUL K HAKANI; DR K SHIVARAM
• Keywords: Reasonable cause; Condonation of delay
• Section: 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 6295/M/2011 (AY: 2003-2004) I.T.A.NO. 6296/M/2011 (AY: 2002-2003) I.T.A.NO. 6297/M/2011 (AY: 2004-2005) M/S. OVAL SHIV SHANTI BHUVAN COOP. HSG. SOC. LTD., 146, MAHARSHI KARVE ROAD, CHURCHGATE RECLAMATION , MUMBAI 400 026. PAN:AAAAO0030B VS. ITO-12(3)(3), AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DR. K. SHIVARAM & RAHUL K HAKANI RESPONDENT BY : SHRI OM PRAKASH MEENA, DR DATE OF HEARING: 6.11.2012 DATE OF ORDER: 9.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE THREE APPEALS UNDER CONSIDERED. ALL THE T HREE APPEALS ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2002-2003, 20 03-2004 AND 2004-2005 AGAINST THE DIFFERENT ORDERS OF THE CIT (A)-23, MUM BAI. 2. THE GROUNDS RAISED ARE IDENTICAL IN ALL THE APPE ALS FOR THE SAID THREE ASSESSMENT YEARS AND THEY REVOLVE AROUND THE APPLIC ABILITY OF PRINCIPLE OF MUTUALITY IN RESPECT OF VOLUNTARY CONTRIBUTIONS RECEIVED FRO M THE INCOMING /OUTGOING MEMBERS OF THE COOPERATIVE HOUSING SOCIET Y, THE ASSESSEE. 3. BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASS ESSEE BROUGHT TO OUR NOTICE A PRELIMINARY ISSUE RELATING TO DELAY IN FILING APPEA L. IN THIS REGARD, ASSESSEE REFERRED TO THE PRAYER FOR CONDONATION OF DELAY OF THE APPEA L AND THE DELAY IS 401 DAYS. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ASSESSEE ERRONEOUSLY FILED THE PRESENT APPEAL BEFORE CIT(A) INSTEAD OF BEFORE THE ITAT. IN THIS REGARD, LD AR FOR THE 2 ASSESSEE REFERRED TO THE LETTER DT 4.8.2010 ADDRES SED TO THE ASST REGISTRAR, ITAT, MUMBAI BUT FILED ERRONEOUSLY BEFORE THE CIT(A), MUM BAI. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE PROOF OF FILING OF APPEALS ERR ONEOUSLY BEFORE THE CIT (A) ON 4.8.2010 (PAGE 9 OF THE PAPER BOOK). FURTHER, LD C OUNSEL ALSO BROUGHT TO OUR NOTICE A LETTER OF THE CIT (A) ADDRESSED TO THE ASSESSEE D ATED 23.8.2011 RETURNING THE SAID APPEAL PAPERS TO THE ASSESSEE INFORMING THE MI STAKE THAT CREPT IN FILING OF THE APPEAL BEFORE THE CIT (A) INSTEAD OF BEFORE THE TRI BUNAL. LD COUNSEL MENTIONED THAT IF THE DATE OF FILING OF APPEAL ERRONEOUSLY BEFORE THE CIT (A) I.E. 4.8.2010 IS CONSIDERED, THE SAME IS IN TIME AND THE MISTAKE OF FILING THE APPEALS BEFORE THE CIT (A) IS INADVERTENT, THEREFORE, ASSESSEE HAS A REASONABLE CAUSE WHICH IS APPARENT FROM THE CORRESPONDENCE CITED ABOVE. OTHERWISE, TH E ORDER OF CIT (A) DATED 17.5.2010 WAS RECEIVED BY THE ASSESSEE ON 7.6.2010 AND IN THAT CASE DUE DATE FOR FILING OF APPEAL IS MUCH LATER AFTER 4.8.2010. 4. WE HAVE CONSIDERED THE FACTS MENTIONED ABOVE AND PERUSED THE EVIDENCES FILED BY THE ASSESSEE BEFORE US. IT IS NOTICED THAT THE CIT (A) ERRONEOUSLY ACCEPTED THE APPEAL PAPERS AND HAVING ACCEPTED THE SAID PAPE RS, THE SAME WERE RETURNED TO THE ASSESSEE AFTER EXPIRY OF ONE YEAR AS EVIDENT FROM THE COVERING LETTER DATED 23.8.2011. IN OUR OPINION, ASSESSEE HAS A REASONABL E CAUSE FOR DELAY IN FILING THE APPEAL BELATEDLY. ACCORDINGLY, THE REQUEST FOR CON DONATION OF DELAY OF 401 DAYS IS ALLOWED . 5. FURTHER, ON THE MERITS, LD COUNSEL FOR THE ASSES SEE NARRATED THE FACTS THAT LEAD TO THE DENIAL OF THE BENEFITS OF THE PRINCIPL E OF MUTUALITY. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ASSESSEE IS RESIDENTIAL COOPERATING HOUSING SOCIETY AND THE MEMBERS OF THE SOCIETY MAKES VOLUNTARY CONTRIBU TIONS AT THE TIME OF SALE OR PURCHASE OF FLATS OF THE SOCIETY. BY THIS WAY, THE ASSESSEE RECEIVED DIFFERENT SUMS IN ALL THESE THREE ASSESSMENT YEARS (AY 2002-2003, 200 3-2004 AND 2004-2005) FROM THE MEMBERS OF THE SOCIETY, WHO ARE EITHER THE INCO MING OR OUTGOING MEMBERS OR BOTH OF THE ASSESSEES SOCIETY AND THOSE AMOUNTS AR E VOLUNTARY CONTRIBUTIONS. AO TAXED THE SAID AMOUNT AS TAXABLE INCOME BY NOT GRAN TING THE BENEFITS OF THE PRINCIPLE OF THE MUTUALITY AND THE CIT (A) CONFIRMED THE SAID DECISION OF THE AO IN 3 HIS EX-PARTE ORDER. THE MATTER TRAVELLED TO THE HONBLE TRIBUNAL AND THE APPEAL WAS SET ASIDE TO THE FILES OF THE CIT (A) FOR DECIDING THE ISSUE AFRESH. IN THE REMAND PROCEEDINGS, CIT (A) CONFIRMED THE ADDITIONS MADE B Y THE AO EXCEPT ALLOWING THE ASSESSEE TO THE TUNE OF RS. 25,000/- AS PER THE GOV ERNMENT NOTIFICATION DATED 9.8.2001. 6. WITH THE ABOVE BACKGROUND OF THE ISSUE, BEFORE U S, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID VOLUNTARY CONTRIBU TIONS RECEIVED FROM THE INCOMING / OUTGOING MEMBERS ARE FOR THE WELFARE OF HOUSING S OCIETY; HENCE, THESE AMOUNTS ARE COVERED BY THE PRINCIPLE OF MUTUALITY. FURTHE R, LD COUNSEL RELIED ON VARIOUS DECISIONS TO TAKE STRENGTH IN SUPPORT OF HIS CLAIM THAT THESE AMOUNTS ARE NOT TAXABLE. TO START WITH THE LD COUNSEL REFERRED PARAS 9 TO 12 IN THE ORDER OF THE TRIBUNAL IN ITA NO.521/MUM/2010, DATED 27.8.2010 FOR THE PROPOS ITION THAT THE VOLUNTARY CONTRIBUTIONS BY WAY OF TRANSFER FEE IS COVERED BY THE PRINCIPLE OF MUTUALITY AND THE RELEVANT PARAS FROM THE ORDER OF THE TRIBUNAL ARE R EPRODUCED HERE UNDER: 9. WITH REGARD TO THE TRANSFER FEE AND VOLUNTARY CONTRIBUTION , WE FIND MERIT IN THE PLEA OF THE LD COUNSEL FOR T HE ASSESSEE THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGHCOUR T IN SIND COOPERATIVE HOUSING SOCIETY VS. ITO (2009) 317 ITR 47 (BOM.) WHEREIN IT HAS BEEN HELD (AT PLACITUM 44 TO 46 AT P AGE 62,63 OF THE ITR) AS UNDER: LET US NEW APPLY THE VARIOUS TESTS WHICH ARE TO BE CONSIDERED FOR APPLYING THE PRINCIPLE OF MUTUALITY TO A CASE OF CO OPERATIVE HOUSING SOCIETY BASED ON OUR EARLIER DISCUSSION. (1) IS THERE ANY COMMERCIALITY INVOLVED? THIS HAS T O BE FOUND FROM THE BYE-LAWS OF THE COOPERATIVE HOUSING SOCIET Y. IN THE CASE OF THE COOPERATIVE HOUSING SOCIETY, ADMITTEDLY, THERE IS NO COMMERCIALITY INVOLVED. ONCE THERE IS NO COMMERCIALITY INVOLVED THE FIRST TEST OF PROFITABILITY DOES NOT EXIST. TH E FIRST REQUIREMENT OF MUTUALITY IS, THEREFORE, MET. (2) FROM THE MONEYS RECEIVED ARE THE SERVICES OFFER ED IN THE NATURE OF PROFIT SHARING OF PRIVILEGES, ADVANTAGES AND CONVENIENCES. IN THE CASE OF A COOPERATIVE HOUSING SOCIETY, THE ON LY ACTIVITIES WHICH IT CAN CARRY OUT IN TERMS OF ITS BYE-LAWS ARE BASIC ALLY MAINTENANCE OF ITS PROPERTY WHICH INCLUDES BUILDING OR BUILDINGS. THE SUBSCRIPTION AND/OR CONTRIBUTIONS RECEIVED BY THE MEMBERS CAN ON LY BE EXPENDED FOR THE PURPOSES OF MAINTENANCE AND PROVIDING OTHER PRIVILEGES, 4 ADVANTAGES AND CONVENIENCES TO ITS MEMBERS IN TERMS OF ITS BYE- LAWS. ANOTHER TEST OF MUTUALITY IS THUS SATISFIED. (3) ARE THE PARTICIPANTS AND CONTRIBUTORS IDENTIFIA BLE AND BELONG TO THE SAME CLASS IN THE CASE OF COOPERATIVE HOUSING S OCIETY. THE CLASS OF MEMBERS IS CLEARLY IDENTIFIABLE. MEMB ERS ARE ORDINARY MEMBERS OR ASSOCIATE MEMBERS. THE PARTICIPANTS AND CONTRIBUTORS ARE THE MEMBERS. THE MEMBERS MAY COME IN OR GO OUT . THE FACT THAT ONLY SOME MEMBERS FROM THOSE WHO CONTRIBUTED M AY PARTICIPATE IN THE SURPLUS, AS HELD BY THE SUPREME COURT, IS IR RELEVANT AS LONG AS THE CLASS IS IDENTIFIABLE. THIS TEST IS ALSO SATISF IED IN THE CASE OF A HOUSING COOPERATIVE SOCIETY. (4) DO THE MEMBERS HAVE THE RIGHT TO SHARE IN THE S URPLUS AND DO THEY HAVE A RIGHT TO DEAL WITH ITS SURPLUSES. IN TERMS OF THE BYELAWS IT IS ONLY THE MEMBERS WHO H AVE A RIGHT TO SHARE IN THE SURPLUS. UNDER THE MAHARASHTRA COOPERA TIVE SOCIETIES ACT, NO PART OF THE FUNDS, AS PROVIDED IN SECTION 6 4 CAN BE PAID BY WAY OF BONUS OR DIVIDEND OR OTHERWISE DISTRIBUTED A MONG ITS MEMBERS EXCEPT AS PROVIDED THEREIN. UNDER SECTION 67, THERE IS A LIMIT ON THE DIVIDEND TO BE PAID ON LIQUIDATION. UNDER SECTION 110 OF THE MAHARASHTRA COOPERATIVE SOCIETIES ACT THE SURPLUS CAN ONLY BE DEALT WITH IN THE MANNER PROVIDED THEREIN W HICH INCLUDES ANY MEMBER OR DEVOTED TO OBJECTS PROVIDED BY THE BYE-LA WS OR BE TRANSFERRED TO ANOTHER SOCIETY WITH SIMILAR OBJECT. RULE 90 OF THE RULES PROVIDE HOW THE SURPLUS IS TO BE DIVIDED. THE SURPLUS THUS CAN BE DISTRIBUTED IN TERMS OF THE BYE-LAWS TO MEMBERS AND/OR BY OPERATION OF LAW TO ANOTHER SOCIETY HAVING THE SAME OBJECTIVE. IN OTHER WORDS, YET ANOTHER TEST OF MUTUALITY IS SATISFIED . ONCE THESE TESTS ARE SATISFIED, IN OUR OPINION, THE RE CAN BE NO DOUBT THAT THE PRINCIPLE OF MUTUALITY WILL APPLY TO A COOPERATIVE HOUSING SOCIETY WHICH HAS AS ITS PREDOMINANT ACTIVI TY, THE MAINTENANCE OF THE PROPERTY OF THE SOCIETY WHICH IN CLUDES ITS BUILDING OR BUILDINGS AND AS LONG AS THERE IS NO TAINT OF CO MMERCIALITY, TRADE OR BUSINESS. FOR ALL THE AFORESAID REASONS, THE QUESTIONS AS FRA MED WILL HAVE TO BE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. THE ABOVE DECISION HAS BEEN FOLLOWED BY THEIR L ORDSHIPS IN SHYAM COOPERATIVE HOUSING SOCIETY LTD. VS. CIT IN I NCOME TAX APPEAL NOS. 92, 93 AND 206 OF 2008 DATED 17.7.2009 WHEREIN ON THE QUESTION WHETHER FEE RECEIVED BY THE ASSESSEE SOCIETIES WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE ANY PART TRANSFER OUTGOING OR INCOMING MEMBERS IS NOT LIABLE TO TAX ON THE GROUND OF MUTUALITY? IT HAS BEEN HELD AS UNDER:- IN THE INCOME TAX APPEAL NO.92, 93 AND 206 OF 2008 IN ADDITION IT IS SUBMITTED THAT THE DEMANDS ARE IN RE SPECT OF THE ASSESSMENT YEARS 1999-2000, 2000-2001, 2001-2002. THE TRANSFER 5 PREMIUM WAS CHARGED BASED ON THE GOVERNMENT CIRCULA R DATED 27.11.1989 AND 20.12.1989. IT IS SUBMITTED THAT CLA USE 40(D)(7) OF THE MODEL BYE LAWS DRAFTED ON 2.7.2001 AND THE CIRC ULAR DATED 9.8.2001 WERE THEREFORE, NOT APPLICABLE TO THE CASE OF THE APPELLANT. BY OUR JUDGMENT DATED 17 TH JULY, 2009 IN INCOME TAX APPEAL NO.931 OF 2004 IN THE CASE OF SIND COOPERATIVE HSG. SOCIETY VS. ITO, WE HAVE HELD THAT BOTH CONTRIBUTIONS BY THE OUTGOIN G AND INCOMING MEMBERS ARE SUBJECT TO PRINCIPLE OF MUTUALITY. WE HAVE ALSO DISCUSSED THE EFFECT OF THE GOVERNMENT CIRCULAR DAT ED 27.11.1989 AND 20.12.1989. IN THE LIGHT OF THAT, THE QUESTION HAS TO BE ANSWERED IN THE AFFIRMATIVE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 11. SIMILAR VIEW WAS TAKEN BY THEIR LORDSHIPS IN SU PRABHAT COOPERATIVE HOUSING SOCIETY LTD. VS. ITO IN INCOME T AX APPEAL NO. 1972 OF 2009 WHEREIN ON THE QUESTIONS OF LAW. 1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE APPELLATE TRIBUNAL WAS RIGHT IN COMING TO THE CON CLUSION THAT THE PRINCIPLE OF MUTUALITY DOES NOT APPLY TO VARIOUS AM OUNTS RECEIVED BY THE APPELLANT? 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE SUM OF RS. 7,44,000/- RECEIVED FROM ITS MEMBERS IS LIAB LE TO BE TAXED AS INCOME OF THE APPELLANT? 3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE SUM OF RS. 20,695/- RECEIVED AS INTEREST IS LIABLE TO B E TAXED AS INCOME OF THE APPELLANT? IT HAS BEEN HELD: 5. BOTH PARTIES AGREE THAT THE AFORESAID THREE QUES TIONS ARE COVERED BY THE JUDGMENT OF THE DIVISION BENCH OF TH IS COURT DATED 17 TH JULY, 2009 IN INCOME TAX APPEAL NO.931/2004 (SIND COOPERATIVE HSG. SOCIETY VS. ITO) REPORTED IN (2009) 26 DTR (BO M) 149. ACCORDINGLY, ALL THE THREE QUESTIONS ARE ANSWERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. APPEAL IS DISPOS ED OF IN TERMS OF THIS ORDER WITH NO ORDER AS TO COSTS. 12. IN THE ABSENCE OF ANY OTHER CONTRARY DECISION PLACED ON RECORD BY THE REVENUE AND KEEPING IN VIEW THAT THE DECISION RELIED ON BY THE ASSESSING OFFICER IN CIT VS. PRESIDENCY CO-O PERATIVE HOUSING SOCIETY LTD. (1995) 216 ITR 321 (BOM) HAS ALREADY B EEN CONSIDERED AND DISTINGUISHED BY THEIR LORDSHIPS IN THE CASE OF SIND COOPERATIVE HOUSING SOCIETY (SUPRA), BY OBSERVING THAT THE ISSU E OF MUTUALITY WAS NEITHER ARGUED NOR CONSIDERED, WE RESPECTFULLY FOLL OWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE ARE SUBJECT TO PRINCIPLE OF MUTUALI TY AND ACCORDINGLY 6 WE ARE INCLINED TO UPHOLD THAT THE FINDING OF THE L D CIT (A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . 7. THERE ARE OTHER DECISIONS AS WELL TO DEMONSTRATE ABOVE APPROACH OF THE LAW. FROM THE ABOVE IT IS EVIDENT THAT THE COORDINATE BE NCH TAKEN A DECISION IN THE CASE OF M/S. GRAND PARADI CHS LTD. VIDE ITA NO.521/M/201 0, DATED 27.8.2010, WHICH WAS NOT AVAILABLE WITH THE CIT (A) AT THE RELEVANT POIN T OF TIME. WHILE DECIDING THE CASE IN FAVOUR OF THE ASSESSEE, THE TRIBUNAL HAS FOLLOWE D THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY VS. ITO (2009) 317 ITR 47 (BOM.) AND SHYAM COOPERATIVE HOUS ING SOCIETY LTD. VS. CIT IN INCOME TAX APPEAL NOS. 92, 93 AND 206 OF 2008 DATED 17.7.2009 WHICH DECIDED THE QUESTION WHETHER FEE RECEIVED BY THE ASSESSEE SOCIETIES WH ETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE ANY PART TRANSFER OUTGOING OR INCOMING MEMBERS IS NOT LIABLE TO TAX ON THE GROUND OF MUTUALITY ? AND THE SAID ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE ABOVE CASES. THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRESIDENCY COOPERATIVE HOUSING SOCIETY LTD. (1995) 216 ITR 321 (BOM.) WHICH WAS RELIED UPO N BY THE REVENUE WAS DISTINGUISHED AS EVIDENT FROM PARA 12 OF THE ABOVE EXTRACTED POR TION. 8. THUS, THE ISSUE IS NOW SETTLED THAT THE TRANSFER FEE CONTRIBUTED VOLUNTARILY BY THE INCOME/OUTGOING MEMBER OF THE SOCIETY AT THE EV ENT OF TRANSFER OF THE FLATS, TO THE SOCIETY IS COVERED BY THE PRINCIPLE OF MUTUALIT Y. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AT THE LEVEL OF HONBLE JURISDI CTIONAL HIGH COURT, WE ARE OF THE OPINION THAT THE GROUNDS RAISED BY THE ASSESSEE IN ALL THE THREE APPEALS STAND COVERED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, RE LEVANT GROUNDS OF THE ASSESSEES APPEAL ARE ALLOWED FOR ALL THREE YEARS. 9. THE ALTERNATIVE GROUNDS RAISED WITHOUT PREJUDICE BECOME ACADEMIC ISSUES AND THEREFORE, ARE NOT REQUIRED TO BE ADJUDICATED CONSI DERING THE RELIEF GRANTED TO THE ASSESSEE ON THE MAIN ARGUMENT ITSELF. ACCORDINGLY, GROUNDS RAISED WITHOUT PREJUDICE ARE DISMISSED AS ACADEMIC. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED . 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF NOVEMBER, 2012. SD/- SD/- (VIVEK VARMA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 9 .11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI