M/S. EVEREST CHAMBERS CO-OPERATIVE HOUSING SOCIETY LTD, MUMBAI V. THE ITO WD 16(1)(3), MUMBAI

ITA 6451/MUM/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3600 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 06-06-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 23-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHATURBUJ DAS CHATNANI
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 6451/MUM/2007 ASSESSMENT YEAR : 2004-05 EVEREST CHAMBERS CO- OPERATIVE HOUSING SOCIETY LTD. 10-B GROUND FLOOR BHAUSAHEB HIRE MARG (OFF MOUNT PLEASANT RD.) MALABAR HILL MUMBAI-400 006. PAN : AAAAE 0543 K VS. INCOME TAX OFFICER WARD 16(1)(3) MATRUMANDIR MUMBAI-400 007. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. GOPAL RESPONDENT BY : SHRI CHATURBUJ DAS CHATNANI DATE OF HEARING : 06.06.2013 DATE OF PRONOUNCEMENT : 06.06.2013 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 7.8.2007 FOR THE ASSESSMENT YEAR 2004-05. THE DISPU TE RAISED IN THE APPEAL IS REGARDING APPLICATION OF PRINCIPLE OF MUTUALITY TO TRANSFER FEES OF RS.2,40,000/- RECEIVED BY THE ASSESSEE SOCIETY FROM THE OUTGOING MEMBER. THE APPEAL HAD EARLIER BEEN HEARD AND DECIDED BY THE TRIBUNAL VIDE ORDER DATED 13.3.2008 IN WHICH THE TRIBUNAL UPHELD THE ADDITION OF RS.2,40,0 00/- FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF WALKESHWAR TRIVENI CO- OPERATIVE HOUSING SOCIETY LTD. (88 ITD 159) . SUBSEQUENTLY THE ASSESSEE FILED THE MISCELLANEOUS APPLICATION BEING MA NO.295/M/12 IN WHICH THE ORDER WAS ITA NO.6451/M/07 A Y .04-05 2 RE-CALLED FOR FRESH EXAMINATION IN VIEW OF THE JUDG MENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF SIND CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO (317 ITR 47) . THE PRESENT PROCEEDINGS HAVE THEREFORE ARISEN CON SEQUENT TO THE ORDER OF RECALL PASSED BY THE TRIBUNAL DATED 16.11. 2012. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFICE R DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE RECEIVED THE TR ANSFER FEE OF RS.2,40,000/- FROM AN OUT GOING MEMBER MR. MOTILAL MEHTA WHO HAD TRANSFERRED HIS FLAT TO A NEW MEMBER SHRI HATIM SHE KIR ON 15.2.2004. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT RECEIVED SHOULD NOT BE TREATED AS INCOME. THE ASSES SEE SUBMITTED THAT THE AMOUNT WAS COVERED BY THE PRINCIPLE OF MUTUALITY AN D THEREFORE NOT TAXABLE. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CO NTENTIONS RAISED AND ASSESSED THE TRANSFER FEE RECEIVED AS INCOME OF THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL CASE OF REGENT CHAMBERS CO-OP. SOCIETY VS. ITO (82 ITD 12) . 2.1 IN APPEAL THE CIT(A) OBSERVED THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF WALKESHWAR TRIVENI CO-OPERATIVE HOUSING SOCIETY LTD . (SUPRA), HAD HELD THAT SO LONG AS SOCIETY CHARGES PREMIUM WI THIN FRAME WORK OF LAW NO PROFIT CAN BE ATTRIBUTED TO THE SOCIETY AND SUC H AMOUNT RECEIVED BY THE SOCIETY WILL BE COVERED BY PRINCIPLE OF MUTUALITY. CIT(A) FURTHER OBSERVED THAT NO MATERIAL HAD BEEN PRODUCED TO SHOW THAT AMOUNT H AD BEEN COLLECTED WITHIN THE FRAME WORK OF LAW. THEREFORE IT WAS HELD THAT THE ENTIRE AMOUNT HAS TO BE TREATED AS INCOME OF THE SOCIETY BEING CO LLECTION MADE WITH PROFIT MOTIVE. CIT(A) FURTHER OBSERVED THAT CONTRIBUTION M ADE BY OUTGOING MEMBER ITA NO.6451/M/07 A Y .04-05 3 COULD ALSO NOT BE HELD EXEMPT ON THE GROUND OF PRIN CIPLE OF MUTUALITY BECAUSE CONTRIBUTOR WOULD NOT BE THERE AS PARTICIPANT IN SU RPLUS. RELIANCE WAS PLACED ON THE ORDER DATED 23.9.2005 OF ITAT MUMBAI BENCH OF MANEK-ABAD CO-OP HOUS. SOCIETY LTD. VS. ACIT IN ITA NO.837/MUM/03 FOR ASSESSMENT YEAR 1998- 99 IN WHICH TRANSFER FEE RECEIVED IN EXCESS OF RS .25,000/- FROM THE OUTGOING MEMBER WAS HELD AS NOT COVERED BY THE PRINCIPLE OF MUTUALITY. CIT(A) ALSO NOTED THAT THE ASSESSEE SOCIETY HAD NOT ADOPTED PRO VISIONS OF THE MODEL BYE- LAWS AND THEREFORE IT WAS NOT ENTITLED TO ANY BENEF IT BY WAY OF AMOUNT COLLECTED WITHIN THE FRAME WORK OF LAW UP TO THE LI MIT OF RS.25,000/-. HE THEREFORE UPHELD THE ENTIRE ADDITION MADE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT TRANSACTION FEE RECEIVED BOTH FROM THE OUT GOING MEMBER AND INCOMIN G MEMBER HAS TO BE COVERED BY THE PRINCIPLE OF MUTUALITY IN VIEW OF JU DGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF SIND CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO SUPRA) . IT WAS ALSO SUBMITTED THAT THE ISSUE WHETHER AMOU NT COLLECTED AS TRANSFER FEE IN EXCESS OF PRESCRIBED LIMIT IN GOVER NMENT NOTIFICATION WOULD BE COVERED BY THE PRINCIPLE OF MUTUALITY OR NOT HAD AL SO BEEN CONSIDERED BY HON'BLE HIGH COURT OF BOMBAY IN CASE OF MITTAL COUR T PREMISES CO-OPERATIVE SOCIETY LTD. VS INCOME-TAX OFFICER (320 ITR 414) IN WHICH IT WAS HELD THAT SUCH EXCESS AMOUNT WOULD ALSO BE COVERED BY PRINCIP LE OF MUTUALITY. THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONDITIONS CAREFULLY. THE DISPUTE IS REGARDING APPLICABILITY O F PRINCIPLE OF MUTUALITY TO THE ITA NO.6451/M/07 A Y .04-05 4 TRANSFER FEE RECEIVED BY THE ASSESSEE SOCIETY FROM THE OUTGOING MEMBER WHO HAD TRANSFERRED HIS FLAT TO ANOTHER MEMBER DURING T HE YEAR. THE SOCIETY HAD COLLECTED A SUM OF RS.2,40,000/- FROM THE MEMBER. T HE ISSUE IS WHETHER SUCH COLLECTION WILL BE COVERED BY THE PRINCIPLE OF MUTU ALITY AND THUS EXEMPT FROM TAX. THE AUTHORITIES BELOW HAVE TAXED THE AMOUNT ON THE GROUND THAT THE SAME HAD BEEN COLLECTED FROM OUTGOING MEMBER WHO WA S NOT GOING TO REMAIN AND PARTICIPATE IN THE SURPLUS OF THE SOCIET Y. THEREFORE PRINCIPLE OF MUTUALITY WAS VIOLATED. AUTHORITIES ALSO NOTED THAT THE AMOUNT HAD BEEN COLLECTED IN EXCESS OF THE GOVERNMENT NOTIFICATION WHICH ALLOWED COLLECTION ONLY UP TO LIMIT OF RS.25,000/- ON SUCH TRANSFER FE ES AND THEREFORE THE AMOUNT COLLECTED WAS TAINTED WITH COMMERCIALITY AND PROFIT MOTIVE AND THEREFORE WILL NOT BE COVERED BY PRINCIPLE OF MUTUALITY. WE FIND B OTH THE GROUNDS ON WHICH AUTHORITIES HAVE REJECTED THE CLAIM OF EXEMPTION OF TRANSFER EVEN HAS BEEN CONSIDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT . THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO SUPRA), HAVE HELD THAT TRANSFER FEES CHARGED BY SOCIETY FRO M BOTH INCOMING MEMBER AND OUTGOING MEMBER HAS TO BE UTILIZED EXCLU SIVELY FOR THE BENEFIT OF MEMBERS AND THEREFORE IT HAS NO ELEMENT OF TRADE OR COMMERCIALITY AND WILL BE COVERED BY PRINCIPLE OF MUTUALITY AS MEMBERS HAV E RIGHT TO SHARE SURPLUS. SIMILARLY THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF MITTAL COURT PREMISES CO OPERATIBE HSG. SOCIETY (SUPRA), HAVE HELD THAT ANY AMOUNT OF NON OCCUPANCY CHARGES COLLECTED IN EXCESS OF GOVERNMENT NOTIFICATION WILL ALSO BE COVERED BY THE PRINCIPLE OF MUTUALITY AS MEMBERS AR E NOT PROHIBITED FROM GIFTING AMOUNT TO THE SOCIETY. THE HON'BLE HIGH COU RT OBSERVED THAT AT THE MOST THE AUTHORITIES CAN ASK THE ASSESSEE TO REFUND THE EXCESS AMOUNT BUT IF ITA NO.6451/M/07 A Y .04-05 5 THE AMOUNT COLLECTED IN EXCESS REMAINED WITH THE AS SESSEE IT WILL BE COVERED BY PRINCIPLE OF MUTUALITY. THEREFORE FOLLOWING THES E JUDGMENTS OF HON'BLE JURISDICTIONAL HIGH COURT, CLAIM OF THE ASSESSEE HA S TO BE ALLOWED. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE OF INCOME BEING EXEMPT FROM TAX. 4. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6.6.2013. SD/- SD/- (SANJAY GARG) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 6.6.2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.