ITO 24(3)(4), MUMBAI V. SMALL INDUSTRIES CO-OPERATIVE ESTAE LTD, MUMBAI

ITA 7093/MUM/2010

• Counselvise Citation: 709319914 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2001-2002
• Appeal Filed On: 14-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BABAN D PATIL
• Assessee Lawyers: B V JHAVERI
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , ! '# $ $ $ $ . &'(, ) '# '* BEFORE SHRI DINESH KUMAR AGARWAL, JM AND SHRI B. RAMAKOTAIAH,AM './ I.T.A. NO. 7093/MUM/2010 ( ! , -, ! , -, ! , -, ! , -, / / / / ASSESSMENT YEAR : 2001-02) INCOME TAX OFFICER 24(3)(4), ROOM NO. 706, C-11, 7 TH FLOOR, B.K.C. BANDRA (E), MUMBAI 400 051. VS. M/S SMALL INDUSTRIES CO- OPERATIVE ESTATE LTD., LAGHU UDYOG KENDRA, I.B. PATEL ROAD, GOREGAON (E), MUMBAI 400 063. #. ) './ PAN: AAAAT9243K ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 '/ APPELLANT BY : SHRI BABAN D. PATIL 01./ 2 3 ' / RESPONDENT BY : SHRI B.V. JHAVERI ' 2 4) / // / DATE OF HEARING : 4-7-2012 5&- 2 4) / DATE OF PRONOUNCEMENT : 11-7-2012 / O R D E R PER DINESH KUMAR AGARWAL, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 05-08-2010 PASSED BY THE LD. CIT(A)- 34, MUMBAI FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A COOPERATIVE SOCIETY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. HOWEVER, THE ITA 7093/M/2010 2 ORIGINAL ASSESSMENT WAS COMPLETED ON 30-9-2003 DETE RMINING THE TOTAL INCOME AT RS. 6,78,876/-. ON APPEAL, THE LD. CIT(A) DISMI SSED THE APPEAL. AGAINST THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 4499/MUM/2004 FOR A.Y. 2001-02 DTD. 24-10-2007 WHILE OBSERVING THAT NEITHE R THE A.O. NOR THE LD. CIT(A) HAS GIVEN ANY FINDING WHETHER THE INCOME OF THE ASSESSEE IS EXEMPT ON THE CONCEPT OF MUTUALITY AS CLAIMED BY THE ASSESSEE , SET ASIDE THE ISSUE TO THE FILE OF THE A.O. TO DECIDE THE SAME AFRESH AND IN A CCORDANCE WITH LAW. PURSUANT TO THE ORDER OF THE TRIBUNAL, THE A.O. AFTER ISSUIN G STATUTORY NOTICE U/S 142(1) OF THE INCOME TAX ACT, 1961 (THE ACT) ASKED THE ASSESS EE TO FILE NECESSARY DETAILS ALONG WITH EXPLANATION. IN RESPONSE, THE ASSESSEE SUBMITTED DETAILS OF MONEY COLLECTED FROM THE MEMBERS AS CALLED FOR. HOWEVER, THE A.O. DID NOT ACCEPT THE ASSESSEES SUBMISSION AS ACCORDING TO HIM OUT OF TH E COLLECTION FROM MEMBERS, THE AMOUNT OF PENALTY AND OTHER DUES RS. 6,46,271/- MISCELLANEOUS RECEIPTS RS. 22,950/-, CHARGES FOR ILLEGAL AND WRONGFUL USE OF OPEN SPACE RS. 3,01,278/-, NON-OCCUPANCY CHARGES RS. 1,62,104/- AND SHARE TRAN SFER FEE RS. 60/- AGGREGATING TO RS. 11,49,663/- DO NOT FALL IN PURVI EW OF CONCEPT OF MUTUALITY AND, HENCE, HE ADDED THE SAME AMOUNT OF RS. 11,49,6 63/- TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) WHILE OBSERVIN G THAT THERE IS NO DISPUTE THAT THE IMPUGNED RECEIPTS ARE FROM THE MEMBERS ONLY AND NO AMOUNT OF SUCH RECEIPTS HAS COME FROM A NON-MEMBER, THUS THE CONCE PT OF MUTUALITY IS APPLICABLE TO ALL THE RECEIPTS, FOLLOWED THE DECISI ON OF THE HONBLE BOMBAY HIGH ITA 7093/M/2010 3 COURT IN THE CASE OF SIND CO-OPERATIVE SOCIETY VS. ITO 226 CTR 145 (BOM) : (2009) 317 ITR 47 (BOM) HELD THAT THE CONCEPT OF MU TUALITY IS APPLICABLE IN THE INSTANT CASE AND HENCE DELETED THE ADDITION MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PRINCIPLE OF M UTUALITY IS APPLICABLE IN RESPECT OF INCOME EARNED BY THE ASSESSEE IN THE FOR M OF PENALTY FOR DIFFERENT DEFAULTS, CHARGES LEVIED FOR ILLEGAL AND WRONGFUL U SE OF OPEN SPACE AND NON- OCCUPANCY CHARGES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED BY APPLYING THE PRINCIPLE OF M UTUALITY IN RESPECT OF RECEIPT WHICH IS GENERALLY NOT LEVIED ON THE MEMBERS OF THE SOCIETY AS PER THE BYE-LAWS UNLESS SOMEONE COMMITS DEFAULT WHICH IS CONTRARY TO THE BYE-LAWS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN PLACING RELIANCE ON THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S SIND CO-OPERATIVE HOUSING SOCIETY (226 CTR 125) WHEREIN SUBJECT MATTER OF APPEAL WAS APPLICATION OF PRINCIPLE OF MUTUALITY IN RESPECT OF TRANSFER FEES RECEIVED BY CO-OPERATIVE S OCIETY AND NOT THE CHARGES LEVIED OF PENAL NATURE ON THE MEMBERS AND OTHER BY THE ASSESSEE. 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, SUBMITS THAT THE AMOUNT OF PENALTY AND OTHER DUES A RE NOT IN THE NATURE OF PENALTY BUT THE SAME IS INTEREST ON OUTSTANDING DUE S AND IN SUPPORT HE REFERS TO PAGE 22 TO 29 OF THE ASSESSEES PAPER BOOK TO SH OW THAT THE INTEREST WAS CHARGED FROM THE MEMBERS. HE FURTHER SUBMITS THAT S INCE THE IMPUGNED RECEIPTS ARE FROM THE MEMBERS ONLY AND NO AMOUNT OF SUCH RECEIPTS HAS COME ITA 7093/M/2010 4 FROM THE NON-MEMBERS, THEREFORE, FOLLOWING THE DECI SION OF HONBLE JURISDICTIONAL HIGH COURT IN SIND CO-OPERATIVE SOCI ETY (SUPRA), THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE B Y THE A.O. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT ALL THE RECEIPTS COLLECTED BY THE SOCIETY INCLUDING THE INTEREST ON OUTSTANDING D UES ARE FROM THE MEMBERS ONLY AND NO AMOUNT OF THE RECEIPTS HAS COME FROM NO N-MEMBERS OF THE SOCIETY. IT IS ALSO NOT IN DISPUTE THAT THE AMOUNT COLLECTED BY THE SOCIETY HAS BEEN EXCLUSIVELY USED BY THE SOCIETY FOR THE BENEFIT OF THE MEMBERS OF THE SOCIETY. 7. IN SIND CO-OPERATIVE SOCIETY (SUPRA) IT HAS BEEN HELD (HEADNOTES PAGE 48 & 49): HELD, ALLOWING THE APPEAL, (I) THAT WHETHER THE FE E WAS VOLUNTARY OR NOT WOULD MAKE NO DIFFERENCE TO THE PRINCIPLE OF MUTUAL ITY. PAYMENTS WERE MADE UNDER THE BYE-LAWS OF THE ASSESSEE WHICH CONSTITUTE D A CONTRACT BETWEEN THE ASSESSEE AND ITS MEMBERS WHICH WAS VOLUNTARILY ENTE RED 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 C HARGEABLE UNDER THE BYE- LAWS OR THE GOVERNMENT NOTIFICATION, THE ASSESSEE W AS BOUND TO REPAY THE AMOUNT AND IF IT RETAINED THE AMOUNT IT WOULD BE IN THE NATURE OF PROFIT MAKING THAT SPECIFIC AMOUNT EXIGIBLE TO TAX. UNDER THE BYE -LAWS, CHARGING OF TRANSFER FEES HAD NO ELEMENT OF TRADING OR COMMERCIALITY. SI NCE THERE WAS NO TAINT OF COMMERCIALITY THE QUESTION OF EARNING PROFITS WOULD NOT ARISE WHEN THE ASSESSEE FROM THE FUNDS RECEIVED APPLIED THE MONEYS RECEIVED TOWARDS MAINTENANCE OF THE SOCIETY AND PROVIDING THE MEMBERS WITH USUAL PRIVIL EGES, ADVANTAGES AND CONVENIENCES. THUS, THE PRINCIPLE OF MUTUALITY WAS APPLICABLE TO THE ASSESSEE WHICH HAD AS ITS PREDOMINANT ACTIVITY, THE MAINTENA NCE OF THE PROPERTY OF THE SOCIETY WHICH INCLUDED ITS BUILDING(S) AND AS LONG AS THERE WAS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS, THE RECEIPT OF TR ANSFER FEES WAS NOT LIABLE TO TAX. ITA 7093/M/2010 5 (II) THAT A CO-OPERATIVE HOUSING SOCIETY HAS NO SIM ILARITY WHATSOEVER WITH A PROFESSIONAL ASSOCIATION. SECTION 28(III) OF THE IN COME-TAX ACT, 1961, HAD NO APPLICATION TO THE CASE OF THE ASSESSEE AS IT DEALS WITH THE INCOME DERIVED BY THE PROFESSIONAL OR SIMILAR ASSOCIATION FROM THE SPECIF IC SERVICES PERFORMED FOR ITS MEMBERS. 8. IN ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN SIND CO-OPERATIVE HOUSING SOCIETY (SU PRA) HOLD THAT THE PRINCIPLE OF MUTUALITY WOULD APPLY IN THIS CASE AND ACCORDING LY WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN DELETING THE ADDI TION MADE BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECT ED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. 6 47 8# 2 )68 2 84 9: ORDER PRONOUNCED IN THE OPEN COURT ON 11-7-2012. . 2 5&- ) 7 11-7-2012 & 2 @ SD/- SD/- ( B. RAMAKOTAIAH ) ( DINESH KUMAR AGARWAL ) ) '# / ACCOUNTANT MEMBER ! '# / JUDICIAL MEMBER MUMBAI ; DATED 11/ 7/2012 .!.'./ . R.K. SR. PS ITA 7093/M/2010 6 2 0!4BC C-4 2 0!4BC C-4 2 0!4BC C-4 2 0!4BC C-4/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. D () / THE CIT(A)-34, MUMBAI 4. D / CIT 24, MUMBAI. 5. CF@ 0!4! , , / DR, ITAT, MUMBAI E 6. @G, H / GUARD FILE. ' ' ' ' / BY ORDER '1C4 0!4 //TRUE COPY// I II I/ // /'9 8 '9 8 '9 8 '9 8 (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI