ITO 12(3)(2), MUMBAI V. RAHEJA CHAMBERS PREMISES CO OP SCOEITY LTD, MUMBAI

ITA 7980/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8406 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER & SHRI P.M.JAGTAP, ACCOUNTANT MEMBER. I.T.A. NO.7980/MUM/2011 ASSESSMENT YEAR : 2008-09. THE INCOME-TAX OFFICER, M/S RAHEJA CHAMBERS PREMISES 12(3)(2), MUMBAI. VS. CO-OP.SOCIETY, 1 ST FLOOR, NARIMAN POINT, MUMBAI 400 021. PAN AAAAR 1054L APPELLANT. RESPONDENT . APPELLANT BY : SHRI A.B. KOLI. RESP ONDENT : SHRI MANOJ C. DIXIT. DATE OF HEARING : 07-11-2012 DATE OF PRONOUNCEMENT : 07-11-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(APPEALS)-23, MUMBAI DATED 13-09-2011 WHEREBY HE DELETED THE ADDITIONS OF RS.14,69,000/- AND RS.7,64,399/- MADE BY THE AO ON ACCOUNT OF REPLACEMENT AND DEVELOPMENT FUNDS RECEIVED FROM THE MEMBERS TREATIN G THE SAME AS TRANSFER FEES AND ON ACCOUNT OF NON-OCCUPANCY CHARGES RESPECTIVEL Y. 2. THE ASSESSEE IN THE PRESENT CASE IS A COOPERATIV E HOUSING SOCIETY WHICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON ON 19-09-2008 DECLARING TOTAL INCOME AT NIL. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS RECEIVED REPLACEMENT AND D EVELOPMENT FUND AMOUNTING TO 2 ITA NO.7980/MUM/2011. RS.17,69,000/- FROM ITS MEMBERS IN RESPECT OF TRANS FER OF PREMISES TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION. HE ALSO NOTICE D THAT THE ASSESSEE HAS RECEIVED NON-OCCUPANCY CHARGES OF RS.8,52,713/- FROM ITS MEM BERS WHO HAD LET OUT THEIR PREMISES. ACCORDING TO THE AO, THE CONTRIBUTION REC EIVED BY THE ASSESSEE SOCIETY TOWARDS REPLACEMENT AND DEVELOPMENT FUND WAS IN THE NATURE OF TRANSFER FEES IN RESPECT OF TRANSFER OF 12 PREMISES AND THE SAME REC EIVED OVER AND ABOVE RS.25,000/- IN RESPECT OF TRANSFER OF EACH PREMISES WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE SOCIETY AS INCOME FROM OTHER SOURCES. SIMILARLY, HE HELD THAT THE NON-OCCUPANCY CHARGES RECEIVED BY THE ASSESSEE OVER AND ABOVE 10% OF THE SERVICE CHARGES/MAINTENANCE CHARGES WERE CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE SOCIETY AS INCOME FROM OTHER SOURCES. ACCO RDINGLY, ADDITIONS OF RS.14,69,000/- (RS.17,69,000 - RS.3,00,000) AND RS .7,64,399/- (RS.8,52,713 - RS.88,314) WERE MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF TRANSFER FEES AND NON-OCCUPANCY CHARGES RESPECTIVEL Y UNDER THE HEAD INCOME FROM OTHER SOURCES. ON APPEAL, THE LEARNED CIT(APP EALS) DELETED BOTH THESE ADDITIONS RELYING ON THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE EARLIER YEARS AS WELL AS THE DECISION OF HONBLE BO MBAY HIGH COURT. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT BOTH THE IS SUES RAISED IN THIS APPEAL OF THE REVENUE ARE SQUARELY COVERED IN FAVOUR OF THE ASSES SEE BY THE VARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS THAT OF THE HONBLE BOMBAY HIGH COURT. IN ONE OF SUCH CASES, NAMELY, SIND CO-OPERATIVE HOUSING SOCIETY VS . ITO 317 ITR 47, THE HONBLE BOMBAY HIGH COURT HAS DECIDED A SIMILAR ISS UE RELATING TO TRANSFER FEES IN 3 ITA NO.7980/MUM/2011. FAVOUR OF THE ASSESSEE AND THE RELEVANT OBSERVATION S RECORDED BY THEIR LORDSHIPS IN THIS CONTEXT ARE EXTRACTED BELOW : WHETHER THE FEE WAS VOLUNTARY OR NOT WOULD MAKE NO DIFFERENCE TO THE PRINCIPLE OF MUTUALITY. PAYMENTS WERE MADE UNDER TH E BYE-LAWS OF THE ASSESSEE WHICH CONSTITUTED A CONTRACT BETWEEN THE A SSESSEE AND ITS MEMBERS WHICH WAS VOLUNTARILY ENTERED INTO AND VOLUNTARILY CONDUCTED AS A MATTER OF CONVENIENCE AND DISCIPLINE FOR RUNNING OF THE ASSES SEE-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 BE IN THE NATURE OF PROFIT MAKING THAT SPECIFIC AMOUNT EXIGIBLE TO TAX. UNDER THE BYE-LAWS, CHARGIN G OF TRANSFER FEES HAD NO ELEMENT OF TRADING OR COMMERCIALITY. SINCE THERE WA S NO TAINT OF COMMERCIALITY THE QUESTION OF EARNING PROFITS WOULD NOT ARISE WHEN THE ASSESSEE FROM THE FUNDS RECEIVED APPLIED THE MONEYS RECEIVED TOWARDS THE 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 PREDOMI NANT ACTIVITY, THE MAINTENANCE OF THE PROPERTY OF THE SOCIETY WHICH I NCLUDED ITS BUILDING(S) AND AS LONG AS THERE WAS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS, THE RECEIPT OF TRANSFER FEES WAS NOT LIABLE TO TAX. 4. IT IS ALSO OBSERVED THAT THE SECOND ISSUE RELATI NG TO TAXABILITY OF NON- OCCUPANCY CHARGES IS ALSO SQUARELY COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F MITTAL COURT PREMISES CO- OP. SOCIETY LTD. 320 ITR 414 WHEREIN IT WAS HELD TH AT THE OBJECT OF NON-OCCUPANCY CHARGES COLLECTED BY THE ASSESSEE SOCIETY FROM ITS MEMBERS AS PER BYE-LAWS WAS TO INCREASE ITS FUNDS WHICH COULD BE UTILIZED TO PROVI DE SERVICES, AMENITIES AND FACILITIES TO ITS MEMBERS. IT WAS HELD THAT THE PRI NCIPLE OF MUTUALITY, THEREFORE, WAS APPLICABLE TO THE NON-OCCUPANCY CHARGES AND THE SAM E WERE NOT TAXABLE IN THE HANDS OF THE ASSESSEE-SOCIETY. 5. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO-OP. HOUSING SOCIE TY (SUPRA) AND MITTAL COURT 4 ITA NO.7980/MUM/2011. PREMISES CO-OP. SOCIETY LTD. (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF TRANSFER FEES AND NON-OCCUPANCY CHARGES AND DISMISS THIS APPEAL O F THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF NOV., 2012. SD/- SD/- (B.R. MITTAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 7 TH NOV., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, D-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMB AI. WAKODE