Loading judgment…
Facts
The assessee, a cooperative housing society, received amounts from new members for building repair fund and membership fees. The AO and CIT(A) treated this as a transfer of immovable property and made additions invoking Section 50C and Section 43CA of the Income Tax Act, based on stamp duty valuation.
Held
The Tribunal held that the amounts received were not for the transfer of property but were membership fees towards building repairs. Therefore, Section 50C of the Income Tax Act was not applicable to these transactions.
Key Issues
Whether the amounts received by a cooperative housing society from new members for building repair and membership fees constitute consideration for the transfer of immovable property taxable under Section 50C and 43CA.
Sections Cited
148, 151A, 50C, 43CA, 2(47), 234A, 234B, 234C, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: HON’BLE SHRI SAKTIJIT DEY&
O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre (NFAC), Delhi passed u/s. 250 of the Income Tax Act, 1961 (the 'Act') dated 30.01.2025 for AY 2019-20. The assessee raised by the following grounds-
Gautam Jyoti Co-operative Housing Society
1. The Ld. National Faceless Appeal Centre (NFAC) Delhi (hereinafter referred to as the "Ld. CIT(A)"] erred in passing the order dated 30.01.2025 by upholding the action of Income Tax Officer Ward 19(1)(1), Mumbai in issuing the notice dated 24.03.2023 under section 148 of the Act without appreciating that the Ld. AO has no information which suggest that the income chargeable to tax has escaped assessment in the case of the Appellant for the relevant assessment year. Therefore, the impugned order passed by Ld. CIT (A) is against the provisions of the act as well as settled judicial precedents hence the impunity order passed by Ld. CIT(A) may be quash and set aside.
The Ld. CIT(A) fail to appreciate that the impugned notice was issued by the Ld. AO is in gross violations of provisions of section 151A of the Act. The impugned notice can only be issued by faceless assessing officer therefore the impunities issued under section 148 of the act is bad in law. Hence, the impugned order passed by Ld. CIT(A) upholding the impugned notice is also void-ab-initio and the same may be quashed and set aside.
3. The CIT(A) erred in passing the impugned order by making a new addition to Rs.59,66,500/- invoking the provisions of section 50C of the Act on alleged transfer of long term capital asset by treating the Appellant as owner of the asset on some extraneous considerations and without appreciating that the provisions of section 50C is not at all applicable to the facts of the present case. Hence, the addition of Rs. 59,66,500/-on alleged transfer of long term capital asset by the Appellant is not at all justified and the same may be deleted.
The Ld. CIT(A) failed to appreciate that the Appellant had not transferred any capital asset during the year under consideration. The Appellant was in receipt of transfer fees of Rs. 25,000/- and also Rs.29,75,000/- towards 'Building repair and Development fund from the incoming member which was shown as Capital Contribution fund. The amount received against capital contribution fund is not the income of the society. Thus, the addition of Rs.59,66,500/-under section 50C of the Act holding the asset as LTCG is not at all justified and the same may be deleted.
5. The Ld. CIT(A) further erred in making the impugned addition of Rs. 59,66,500/- under section 50C of the Act without issuing any notice or giving any opportunity to the Appellant to explain that the provisions of section 50C is not applicable in its case. Thus, the impugned addition of Rs. 59,66,500/- under section 50C of the Act has been made in gross violation of principal of Gautam Jyoti Co-operative Housing Society natural justice and without confronting the Appellant with the same and therefore the same may be deleted.
6. The Appellant denies any liability to pay interest under section 234A, 234B and 234C of the Act. Hence, the same are not leviable. 7. The Appellant craves leave to add, alter, amend, delete, rescind or withdraw any of the grounds of appeal
mentioned hereinabove.”
2. The assessee is co-operative housing society having income from maintenance charges/ interest from investments. The assessee filed the return of income for AY 2019-20 on 31.03.2023. In response to notice u/s. 148 declaring total income of Rs. 47,760/-. The AO reopened the assessment based on the information that during the year under consideration, the assessee has entered into transfer of immovable property for a consideration of Rs.30,00,000/- whereas the stamp duty valuation of the said property is Rs.59,66,500/-. The assessee in response to notice u/s. 142(1) submitted that the assessee is not engaged in the business of sale/purchase of flats/shops etc. The assessee submitted that it is formed by the erstwhile tenants of "Amar Niwas" and the building was handed over to the assessee whereby the tenants became members after payment of 100 times of the rent towards the Building Repair Fund. The assessee further submitted that those tenants who did not join as member of the society continued to be tenants and that if any of the tenants wants to join as members subsequently they were admitted under the same terms. The assessee also submitted that during the year under consideration, Shri. Bhavik Rajesh Dharia and Mrs. Rekha Bhavik Dharia who were occupying a shop in the building became members of the assessee society by paying the impugned amount towards Building Repair Fund. Accordingly the assessee submitted that there is no transfer of shop by the assessee and hence no addition can be made towards the amount received by the assessee. The AO, however, did not accept the submissions of the assessee and proceeded to Gautam Jyoti Co-operative Housing Society make addition of Rs. 29,75,000/- as the income of the assessee from business or profession and treated the difference between the stamp duty value and the consideration received as to the tune of Rs. 29,66,500/- as addition u/s. 43CA of the Act. On further appeal, the ld. CIT(A) confirmed the addition made by the AO stating that the entire amount of Rs. 59,66,500/- is to be added u/s. 50C of the Act. The assessee is in appeal before the Tribunal against the order of the ld. CIT(A).
The ld. AR submitted that the impugned transaction has been erroneously considered by the lower authorities has transfer of immovable property whereas the assessee being a society has collected money towards the building repair fund and towards membership fee since the tenant who is occupying the property became the member of the society during the year under consideration. The ld. AR further submitted that the deed of conveyance was executed on 09.12.1982 where by the erstwhile tenants of the building "Amar Niwas" formed the assessee society and obtained the membership by paying 100 times rent to the land owner of the property (page 60 to 77 of paper book). The ld. AR also submitted that few of the tenants became the member of the assessee society subsequently and at a time of admission as members are required to pay 100 times rent of the property occupied by them as tenants towards the building repair fund besides the membership fees. The ld. AR drew our attention, to the copy of the agreement entered into by the assessee during the year under consideration with Shri. Bhavik Rajesh Dharia and Mrs. Rekha Bhavik Dharia where the it is clearly stated that the amount paid by the members is towards building repair funds and transfer fees (page 11 to 19 of paper book). The ld. AR accordingly argued that the addition made by the lower authorities cannot be sustain since the assessee is not the owner of the property and there is no transfer within the meaning of the Section 2(47) of the Act.
Gautam Jyoti Co-operative Housing Society 4. The ld. DR on the other hand, submitted that the ownership of the building is with the assessee as per the findings of the ld. CIT(A) and the assessee has allowed the right to enjoy the flats/ commercial spaces. Accordingly, the ld. DR relied on the order of the lower authorities.
We heard the parties and perused the material on record. The assessee is a Housing Society formed by the occupants of the building "Amar Niwas". From the perusal of records, we notice that by the deed of conveyance dated 09.12.1982, the occupants who were the tenants of the building became members of the assessee society by paying 100 times of the rent and the building was handed over to the assessee society by the land lord. We further notice that the assessee society has entered into an agreement with Shri. Bhavik Rajesh Dharia and Mrs. Rekha Bhavik Dharia whereby they were enrolled as members and were allotted Shop No.4 after making a contribution of Rs.29,75,000 towards building repair fund and Rs.25,000 towards transfer fees. We also notice that as per the terms of the agreement, the allottees of the Shop shall hold and occupy the said premises as co-partner members i.e. a class members of the society like other old members (refer clause 4 of the agreement in page 16 of paper book). Further it is contended by the assessee that the allottees were already occupying Shop No.4 as tenants and that were admitted as members of the assessee society during the year under consideration by payment of the impugned amounts. In this regard the ld AR submitted minutes of assessee society's meeting 25.07.2018 during the course of hearing wherein it is stated that Shri. Bhavik Rajesh Dharia and Mrs. Rekha Bhavik Dharia who are tenants of Shop No.4 has made an application for membership and upon payment of the due amount the committee will do the needful. From the perusal of these facts, we see merit in the submission of the assessee that the impugned payment received is not a consideration for transfer within the meaning of section 2(47) but Gautam Jyoti Co-operative Housing Society is a membership fees towards building repairs. In our considered view, the provisions of section 50C are not applicable to the impugned transactions. Therefore, we hold that the addition made under section 50C is not sustainable and accordingly direct the AO to delete the same.
In result the appeal of the assessee is allowed.