THE SINDHI IMMIGRANTS CO OP HSG SOCIETY LTD, MUMBAI V. ITO WD 22(2)(2), MUMBAI

ITA 7360/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88112 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 27-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 7360/MUM/2012 ASSESSMENT YEAR: 2009-10 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS, SINDHI SOCIETY CHEMBUR, MUMBAI 400 071 PAN:-AAATT 0524 E VS. ITO WD 22(2)(2) (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI VIMAL PUNIYA, SHRI VISHAL SHAH, SHRI HIMANSHU GANDHI,K & SHRI NARENDRA KALRA REVENUE B Y : SHRI SACCHIDANAND DUBEY DATE OF HEARING : 27 .01.2015 DATE OF PRONOUNCEMENT : 27.01.2015 PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE , AGAINST ORDER DATED 09.10.2012, PASSED BY LD. CIT(A)-33, MUMBAI F OR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2009-10, ON THE FOLLOWING GROUNDS WHICH READS AS UNDER:- THE LEARNED CIT(A) OUGHT NOT TO HAVE CONFIRMED TH E ADDITION OF RS.29,24,910/-, BEING AMENITY FUND, AN AMOUNT COLLE CTED ON TRANSFER OF PROPERTIES, AS AMOUNT COLLECTED IS EXEM PTED UNDER THE PRINCIPLE OF MUTUALITY. THE LEARNED CIT(A) OUGHT NOT TO HAVE CONFIRMED THE ADDITION OF RS.32,26,025/- THE MEMBERSHIP FEES FOR GYMKHANA, RE CEIVED FRO NON SOCIETY MEMBERS, AS INCOME OF THE SOCIETY. ITA NO. 7360/MUM/2012 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS 2 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT BO TH THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2006-07, 2003-04, 2004-05 & 2007-08. SO FAR AS ISSUE REGARDING GROUND NO. 1, LEARNED COU NSEL SUBMITTED THAT, THIS MATTER HAS BEEN RESTORED BACK TO THE FILE OF T HE AO AND IN THE SET ASIDE PROCEEDINGS THE ASSESSING OFFICER HAS DECIDED THE ISSUE IN FAVOUR. THE SECOND ISSUE HAS ALSO BEEN SET ASIDE TO THE FIL E OF THE AO, WHICH TOO HAS BEEN DECIDED BY THE ASSESSING OFFICER IN THE FA VOUR OF THE ASSESSEE. LD. DR ADMITTED THE SAID CONTENTION OF THE LEARNED COUNSEL. 3. THE ASSESSEE IS A CO-OPERATIVE HOUSING SOCIETY, WHICH IS A PLOT OWNER SOCIETY REGISTERED ON 09.02.1948. SO FAR AS T HE ISSUE OF AMENITY FUND TRANSFER FEES, ASSESSING OFFICER HELD THAT PAY MENT FROM THE MEMBERS UP TO RS.25,000/- IS NOT CHARGEABLE TO TAX AND THEREFORE, OUT OF RS.34,69,910/- ONLY TO RS.5,45,000/- WAS LESS TH AN RS.25,000/- AND THE BALANCE AMOUNT OF RS.29,24,910/- WAS TO BE ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. SO FAR AS THE SECOND ISSUE IS CONCERNED, THE AO HELD THAT GYMKHANA LIFE MEMBERSHIP FEES FROM OTHERS , THE CONCEPT OF PRINCIPLE OF MUTUALITY IS NOT APPLICABLE HENCE SAME IS TO BE ADDED AS INCOME. THIS VIEW OF THE AO HAS BEEN CONFIRMED BY T HE LD.CIT(A). 4. WE FIND THAT THE ISSUE RAISED IN GROUND NO. 1, T HAT IS, ADDITION ON ACCOUNT OF AMENITY FUND TRANSFER FEES, HAS BEEN DEC IDED BY THE TRIBUNAL IN THE FOLLOWING MANNER:- WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT THI S ISSUE HAS BEEN ADJUDICATED BY THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF SIND COOPERATIVE HSG LTD. (SUPRA) WHEREIN THEIR LOR DSHIPS HAVE OBSERVED IN PARA 35 & 36 AS UNDER: CONSIDERING THE SE PRINCIPLES, ITA NO. 7360/MUM/2012 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS 3 THE QUESTION IS WHETHER ON THE FACTS BEFORE US, THE PRINCIPLE OF MUTUALITY WOULD BE ATTRACTED IN RESPECT OF THE TRAN SFER FEE RECEIVED BY THE HOUSING CO-OPERATIVE SOCIETIES GOVE RNED BY THE PROVISIONS OF THE MAHARASHTRA CO-OPERATIVE SOCIETIE S ACT AND THE RULES. IN WALKESHWAR TRIVENI CO-OP. HOUSING SOCIETY LTD. (2004) 267 ITR (AT) 86 ; (2004) 88 ITD 158 (MUM) (SB), THE TRIBUNAL ITSELF HAS HELD THAT THE AMOUNT RECEIVED FROM THE T RANSFEROR MEMBER WOULD NOT BE EXIGIBLE TO TAX. IT IS ONLY THE SIND CHS AND NATIONAL CHS LTD. THEIR BYE-LAWS PROVIDE THAT THE A MOUNT HAS TO BE PAID BY THE TRANSFEROR MEMBER. THE ISSUE, THEREF ORE, OF THE TRANSFEROR OR THE TRANSFEREE FOR THOSE ASSESSEES RE ALLY DOES NOT ARISE. HOWEVER, WE WILL HAVE TO ANSWER THE ISSUE CO NSIDERING WHAT WAS CONSIDERED IN THE CASE OF WALKESHWAR (2004 ) 267 ITR (AT) 86 (BOM) AND CONSIDERING THE MODEL BYE-LAWS WH ICH ARE NOT ADOPTED BY MOST HOUSING SOCIETIES. WE HAVE NOTED TH E BYE-LAWS AS ALSO THE PROVISIONS UNDER THE ACT AND THE RULES. THE TRANSFER FEE CAN BE APPROPRIATED ONLY IF THE TRANSFEREE IS A DMITTED TO MEMBERSHIP. THE FACT THAT A PROPOSED TRANSFEREE MAY MAKE PAYMENT IN ADVANCE BY ITSELF IS NOT RELEVANT. THE A MOUNT CAN ONLY BE APPROPRIATED ON THE TRANSFEREE BEING ADMITT ED AS A MEMBER. AS IT IS A TRANSFER FEE, IF THE TRANSFEREE IS NOT ADMITTED AS A MEMBER, THE AMOUNT RECEIVED WILL HAVE TO BE RE FUNDED, AS THE AMOUNT IS PAYABLE ONLY ON A TRANSFER OF RIGHTS OF THE TRANSFEROR I THE TRANSFEREE. IF IT IS HELD THAT PAY MENT OF TRANSFER FEES IS BY A STRANGER, IT WILL CERTAINLY BE IN THE NATURE OF GIFT AND NOT INCOME. IF AN AMOUNT IS RECEIVED MORE THAN WHAT IS CHARGEABLE UNDER THE BYE-LAWS OR GOVERNMENT DIRECTI ONS, THE SOCIETY IS BOUND TO REPAY THE SAME AND IF IT RETAIN S THE AMOUNT IT WILL BE IN THE NATURE OF PROFIT MAKING AND THAT SPE CIFIC AMOUNT WILL BE EXIGIBLE TO TAX. CONSIDERING THE BYE-LAWS, AS TH E MAIN ACTIVITY OF A CO-OPERATIVE HOUSING SOCIETY IS TO MAINTAIN TH E PROPERTY OWNED BY IT AND TO RENDER SERVICES TO ITS MEMBERS B Y WAY OF USUAL PRIVILEGES, ADVANTAGES AND CONVENIENCES, THER E IS NO PROFIT MOTIVE INVOLVED IN THESE ACTIVITIES. THE AMOUNT LEG ALLY CHARGEABLE AND RECEIVED GOES INTO THE FUND OF THE SOCIETY WHIC H IS UTILIZED FOR THE REPAIRS OF THE PROPERTY AND COMMON BENEFITS TO ITS MEMBERS. 6 SINCE IN THE CASE IN HAND, THE AMOUNT HAS NOT REC EIVED UNDER PRESSURE OR COERCION OR CONTRARY TO THE BYE-LAWS OF THE SOCIETY; THEREFORE, PRINCIPLES OF MUTUALITY WILL APPLY. ACCO RDINGLY, FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF SIND COOPERATIVE HSG. LTD. (SUPRA), WE ALLOW THE CL AIM OF THE ASSESSEE. 13.1 SINCE IN THE CASE IN HAND, THE ASSE SSEE HAS CLAIMED THAT THE BYE-LAWS OF THE SOCIETY HAS BEEN A MENDED FROM TIME TO TIME AND UNDER THE AMENDED BYE-LAWS, THE AS SESSEE IS ITA NO. 7360/MUM/2012 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS 4 ALLOWED TO RECEIVE THE TRANSFER CHARGES WITHOUT ANY RESTRICTION OF RS.25.000/-. SINCE THE AMENDED BYE-LAWS HAS NOT BEE N PRODUCED BEFORE US AND AS PER THE OLD BYE-LAWS, TRANSFER CHA RGES UPTO RS.25,000/- WAS PERMITTED TO RECEIVE BY THE ASSESSE E. THEREFORE, THIS ISSUE IS REMANDED TO THE RECORD OF THE ASSESSI NG OFFICER TO VERIFY WHETHER THE AMENDED BYE-LAWS OF THE SOCIETY PERMITS TO RECEIVE THE TRANSFER CHARGES AS CLAIMED BY THE ASSE SSEE AND THEREAFTER DECIDE THE ISSUE AS PER LAW IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF SIND CO- OPERATIVE HOUSING SOCIETY (SUPRA). ACCORDINGLY, THI S GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 5. IN SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER VIDE ORDER DATED 14.12.2012 HAS DECIDED THIS ISSUE IN THE FOLLOWING MANNER: 5. TRANSFER CHARGES RECEIVED FROM MEMBERS IN EXCESS OF RS.25000/- I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE AND DIRECTION OF THE HONBLE ITAT AND HAVE VERIFIED THE DETAILS SUBMITTED ON RECORD. THE SOCIETY HAS NOT ADOPTED NE W BYE LAWS AND IT IS BASED ON THE RESOLUTIONS PASSED BY T HE SOCIETY AND IT IS CLEAR THAT LIMIT OF RS.25,000/- IS NOT AP PLICABLE. THE ENTIRE AMOUNT RECEIVED AS TRANSFER CHARGES FALLS UN DER THE PRINCIPAL OF MUTUALITY AND HENCE NOT TAXABLE. FURTHER THIS ISSUE IS COVERED BY OTHER DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE FOLLOWING CASES:- A) SIND CO-OPERATIVE HOUSING SOCIETY VS. INCOME-TAX OF FICER (BOMBAY HC) 317 ITR 47 B) MITTAL COURT PREMISES CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO (ITA NO. 999 OF 3=2004) (BOM HC) C) SHYAM CHS VIDE ITA NO. 92, 93, 206 OF 2009, DATED 17.07.2009 (BOM HC) ITA NO. 7360/MUM/2012 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS 5 6. THUS, IN VIEW OF THE AFORESAID FACTS THE ISSUES RAISED IN THIS YEAR ARE COVERED BY THE EARLIER YEARS PRECEDENCE AND ACC ORDINGLY, GROUND NO. 1 IS TREATED AS ALLOWED. 7. SIMILARLY, THE ISSUE RAISED, IN GROUND NO. 2 I.E . ON ACCOUNT OF GYMKHANA LIFE MEMBERSHIP FROM OTHERS, THE TRIBUNAL IN APPEAL OR THE A.Y. 2007-08, VIDE ORDER DATED 07.03.2012 HAS DECID ED THE ISSUE IN THE FOLLOWING MANNER: WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW . THE CASE OF THE AO IS THAT THE ASSESSEE HAS RECEIVED FEES FROM THE NON- MEMBERS OF THE SOCIETY AND HERE IS AN ELEMENT OF PR OFIT MOTIVE, THEREFORE, THE PRINCIPLES OF MUTUALITY HAS NO APPLI CATION. WE ARE OF THE VIEW THAT NEITHER THE AO NOR THE CIT(A) DISC USSED THE ISSUE ELABORATELY WITH REGARD TO THE ELEMENT OF PRO FIT MOTIVE IN RECEIVING THE MEMBERSHIP FEES FROM NON-MEMBERS OF T HE SOCIETY BY THE ASSESSEE AND THERE IS NO FINDING THAT ON WHA T BASIS THEY COME TO THE SAID CONCLUSION. IN OUR CONSIDERED OPIN ION THE MATTER NEEDS DETAILED VERIFICATION AND EXAMINATION OF THE FACTS. WE, THEREFORE, SET ASIDE THE ORDER OF HE CIT(A) AND RES TORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE A ND DECIDE THE ISSUE AFRESH KEEPING IN VIEW OF THE DECISION IN 200 0-01 AND 2006- 07 AND ALSO THE CASE LAW RELIED UPON BY THE LEARNED DR (SUPRA) AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. THUS, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTI CAL PURPOSE IN ALL THREE YEARS UNDER CONSIDERATION. 8. IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFI CER HAS DECIDED THIS ISSUE IN THE FAVOUR OF THE ASSESSEE IN THE FOLLOWIN G MANNER: 5. LIFE MEMBERSHIP FEES FOR GYMKHANA RECEIVED FROM NON MEMBERS OF THE SOCIETY. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESSEE. THE ASSESSEE HAS FILED BYE LAWS OF THE GYMKHANA, WHICH STATES THAT EVERY APPLICANT IS MADE SYMPATHIZER MEMBER OF THE S OCIETY. FACTS AMOUNT MADRAS GYMKHANA AS REFERRED BY LD. DR ARE DI FFERED ITA NO. 7360/MUM/2012 THE SINDHI IMMIGRANTS CHSL, LITTLE MALABAR HILLS 6 FROM THAT OF THE ASSESSEE AS THE CASE REFERRED IS O N INVESTMENT OF SURPLUS FUND IN CORPORATE ENTITIES AND CHALLENGING THE REOPENING OF THE CASE AND HENCE THE CASE IS NOT APPLICABLE HE RE. CONSIDERING THE FACTS THAT EVERY PERSON IS MADE A S YMPATHIZER MEMBER OF THE SOCIETY AND ALSO CONSIDERING THE DEFI NITION OF THE MEMBERS AS GIVEN IN THE ABOVE SIGHTED CASE LAW, IT IS CLEAR THAT RECEIPTS ARE FROM MEMBERS AND FOR MEMBERS. THE TRAN SACTION IS FALLING WITHIN THE PURVIEW OF THE PRINCIPLE OF MUTU ALITY AND HENCE NOT TAXABLE. THEREFORE THE AMOUNT OF RS.7,98,000/- RECEIVED TOWARDS LIFE MEMBERSHIP FEES FALLS WITHIN THE PURVI EW OF PRINCIPLE OF MUTUALITY AND HENCE NOT TAXABLE. 9. IN VIEW OF THE ABOVE AND CONSISTENT WITH THE VIE W TAKEN IN THE EARLIER YEARS, HE HOLD THAT ADDITION WHICH AS BEEN CONFIRMED BY THE LD.CIT(A) IS UNCALLED, AS IT IS NOT TAXABLE IN VIEW OF THE PRINCIPLE OF MUTUALITY. ACCORDINGLY, GROUND NO. 1 AND 2 AS RAIS ED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY JANUARY, 2015. SD/- SD/- (D. KARUNAKA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.01.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.