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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI RAVISH SOOD, JM
सुनवाई की तायीख / Date of Hearing : 10.02.2017 घोषणा की तायीख /Date of Pronouncement : 05.05.2017 आदेश / O R D E R
PER R.C. SHARMA, AM:
This appeal is filed by the Revenue against the order of the CIT (A) for the AY 2010-2011, in the matter of order passed u/s 143(3) of the Act, wherein the Revenue has taken the following grounds:- “
1. On the facts and in the circumstances of the case and in aw, the Ld CIT (A) erred in deleting the addition of Rs. 40,50,000/- being „income from other sources‟ without appreciating the fact that any amount charged in excess of Rs. 25,000/- for each transfer is in contravention of the Notification of Government of Maharashtra, 2001 and the excess amount will be liable to tax and will not be covered under the concept of Mutuality.
2. On the facts and circumstances of the case ld CIT (A) erred in holding that the receipt of Rs. 40,50,000/- in nature of repair and maintenance and lift fund are not in nature of transfer fees.
3. On the facts and circumstances of the case and in law, the Ld CIT (A) erred i not appreciating the fact that concept of mutuality is not applicable in case of cooperative society as held by Hon‟ble ITAT in case of Hatkesh Cooperative Housing Society (ITA Nos. 494, 495, 496, 498, 499 & 500/Mum/2011 (AYs 96,97, 00-01, 02-03, 06-07 &07-08).
4. For these and other reasons it is submitted that the order of the CIT (A) may be set aside and that of the AO restored.” 2. Rival contentions have been heard and record perused. 3. Brief facts are that the assessee is a cooperative housing society and had received certain funds from members on account of "Repairs and Maintenance Fund" of Rs. 67,03,625/-, and "Members Lift Fund" of Rs. 10,00,000/-. The AO asked the assessee to furnish the details and nature of these funds received. In response to the same, the assessee submitted the details of collection of funds on account of Repairs & Maintenance I Members Lift Fund, which included the Name of the Member, Flat no & Amounts of funds collected from different members. The assessee also submitted the details of expenditure of Rs. 18,49,055/- incurred on account of Repairs and Maintenance of the building out of the above fund collected. The AO further asked the assessee to submit complete name, address & PAN of members of the society, and to confirm whether the society had transferred any flat during the year, and whether any transfer fees was received during the year. In response the above query, assessee submitted a revised list of Repairs & Maintenance funds collected from the members. It was further stated by the assessee that during the year, the society had transferred one Flat no. 1-4 sold by Mrs. Julekha G. Patrawalla to Mr. Pascal Postal, for which the Entrance Fee of Rs. 100/-, Transfer Charges of Rs. 500/-, & Transfer Fee of Rs. 25,000/-, aggregating to Rs.25,600/- was paid by the purchaser of the flat. From the details submitted, it was noted by the AO that during the year, the assessee had received transfer fees from following members which was claimed as voluntary contribution: (i) Mrs. Indrani Choksi of Rs. 9,90,0001- & (ii) Mr. Pascal Postel of RS.20,60,000/- towards Repairs & Maintenance Fund, and (iii) M/s Thakkars Investment Pvt. Ltd. of Rs. 10,00,0001- Total Rs.40,50,000/- 4. According to AO, the aggregate sum of Rs. 40,50,0001- as outlined above represented Transfer Fees in excess of limit prescribed by the Notification of Govt. of Maharashtra i.e. Rs. 25,0001- per flat. The AO stated that in the case of Sind Co-op. Housing Society the Hon'ble High Court of Mumbai held that any amount exceeding the prescribed limit of Rs. 25,0001- per flat is eligible to tax. According to AO, what the Hon'ble High Court considered in the said decision was that the transfer fees collected is not taxable as per notification of 1989, however the Hon'ble High Court had not considered the notification of 2001. From the above, the AO concluded that the findings of Hon'ble High Court proves beyond doubt that any amount exceeding Rs. 25,0001- is taxable, as there is profiteering involved in such amounts received. In the circumstances, the decisions based on the notification of 1989 in Shyam Co-op. Hsg. Society Ltd. & Suprabhat Co- op. Hsg. Soc. Ltd. etc. were also not applicable. The AO further contended that even the decision in the case of Sind Co-op. Hsg. Soc. Ltd. was also not accepted and appeal to Hon'ble Supreme Court had been proposed in the case. In view of the above, the AO held that the amount of Rs. 40,50,000/- collected and credited to various funds were taxable as Income from Other sources.
5. By the impugned order, CIT (A) deleted the addition after observing as under:- “I have perused the assessment order passed by the AO and the above written submissions made by the appellant carefully. 12. The contention of the AO is that the appellant has received excess transfer fees from three members in the guise of Repairs & Maintenance Fund / Members Lift Fund, which is taxable income as it does not constitute the income from the principle of mutuality and accordingly the Assessing Officer brought this income to tax under the head 'Income from Other Sources'. On the other hand the AR of the appellant has contended that these incomes are voluntary contribution received from members of the society for the common purpose of the society and thus covered under the principle of mutuality. 13. The AR has also contended that the issue already stands covered in favour the appellant by the order of the CIT(A) in its own case for A.Y. 2009-10 on identical facts. In support of the above arguments the AR has placed on record the appellate order of the CIT(A) for A.Y. 2009-10. (copy of order for A.Y 09-10 is enclosed at page no of the details submitted). 14. The above arguments of the AR of the appellant have been considered and appears to be correct. My predecessor CIT(A) vide Order dated 07.02.2013 in the case of the appellant for the A.Y.2009-10 [Appeal No. CIT(A)-29/RG-18/182/11- 12] has discussed the matter in detail, and decided the issue in favour of the appellant. While deciding the issue in favour of the appellant, it has been held as under:-
i) The "No Objection" for sale/ transfer of flats were conveyed subject to Entry Fee of Rs. 100/-, Transfer Fee of Rs. 500/-, and Transfer Premium of Rs. 25,000/-. Therefore, only above amounts were required to be paid by the members and there was no precondition from the society to the outgoing member! incoming member to pay a transfer premium more than Rs. 25,000/- in order to obtain No objection Certificate. ii) The contention of appellant regarding contribution being covered under the concept of mutuality was acceptable, since there had been regular withdrawals from the fund to which contributions were made in same/ subsequent years, on account of amounts iii) The issue of receiving voluntary contributions from outgoing/ incoming members was discussed in the General Body and was ratified by the members wherein it was decided that minimum contribution of Rs. 30,000/- for two bed room flat and Rs. 50,000/- for three bed room flat would be taken from outgoing/ incoming members, and there was no maximum limit imposed. Thus, the contributions had been received by the society in view of the authority given by the General Body and were according to Bye-laws of the society. iv) The contribution had not been received from incoming member on the condition of providing membership. i) In the case of Sind Co-op. Housing Society vs. ITO (2009) 317 ITR 47 (Bom.), it was held that "If an amount is received more than what is chargeable under the bye-laws or Government directions, the society is bound to repay the same and if it retains the amount, it will be in the nature of profit making and that specific amount will be exigible to tax". In the case of Mittal Court Premises Co-op. Society Ltd. vs. ITO (2010) 320 ITR 414 (Born.), it was held that "A member desirous to purchase office premises shall contribute to the Society for common Amenity Fund/ Repairs and Welfare Fund sum or sums as may be prescribed by the Managing Committee from time to time for Officers/ Godowns etc., according to the area subject to retification by the General Body Meeting". In the present case, the appellant society had received voluntary contribution from incoming/ outgoing members which were used for repairs of the building which was a common benefit and facilities extended to all these members. These contributions were not as a precondition for giving "No Objection Certificate" for transfer of units. There was a General Body resolution passed empowering the society to receive the contributions from members at the time of transfer of units. The Assessing Officer was therefore not correct in holding that appellant had received transfer fees in excess of Government Notification because the appellant society had received transfer fees only to the permissible extent i.e. Rs. 25,000/- on each transfer. The rest of the contributions were not transfer fee but a voluntary contribution by a member for the better maintenance of the society which is covered under the concept of mutuality and hence not taxable. Accordingly, the addition made by assessing officer was deleted.
I find that in the assessment year under consideration also, the appellant has received only Rs. 25,0001- as Transfer Fees on sale of the flat. The balance contributions are received towards Repairs & Maintenance Fund Members Lift fund etc., and such funds received are used for betterment of society for common benefit. The appellant society has in fact incurred expenses of Rs. 18,49,055/- from "Repairs & Maintenance Fund" during the year. The payment of voluntary contributions by incoming / outgoing members is not a pre-condition for transfer of flats but are collected on voluntary basis. In these circumstances, since the facts of the case are identical to that in A. Y. 2009-10, I find no reason to deviate from the decision of my predecessor in said appeal, for the year under consideration.
While deciding a similar issue in the case of Mittal Court Premises Co- operative Society Ltd., it was clearly held by Hon'ble High Court of Bombay that "Apart from that, even assuming that the Government notifications were applicable, if the society could not have charged excess amount, it would have to be refunded to the members. A member is not prohibited from gifting any amount to the society for the objects of the society. The principle of mutuality would not cease on account of those aspects. At the highest, authorities under the Co-operative Societies Act and Rules, if any action is taken, may direct an additional amount to be refunded. Therefore, in respect of contribution by way of non-occupancy charges, principle of mutuality would apply." Applying the same ratio to the Transfer Fees, the appellant society has not received any excess transfer fee, which it is liable to refund to the members. Instead, the voluntary contribution towards Repairs & Maintenance Fund Members Lift Fund is for the objects of the society, hence the principal of mutuality would apply accordingly.
In view of the above, judicial pronouncements and the appellate order of my predecessor CIT(A) for the A.Y. 2009-10 and the facts and circumstances of the case for the year under consideration being identical, the issue of taxability of the receipts of the society on account of Repairs & Maintenance Fund Members Lift fund and transfer fee, is held to be covered under the principle of mutuality. Accordingly, the addition made of Rs. 40,50,0001- as income from other sources is hereby deleted. Therefore, the grounds of appeal of the appellant are allow.”
Aggrieved with the above decision of the CIT (A), Revenue is in appeal before the Tribunal.
Before us, Ld AR relied heavily on the order of the CIT (A) and reiterated the submissions made before the lower authorities. 8. On the other hand, Ld DR for the Revenue relied on the order of the AO dutifully. 9. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before the Tribunal. After hearing both the parties and on perusal of the order of the CIT (A) in general and the above extracted portion of his order in particular. We find that a categorical finding has been recorded by the CIT (A) to the effect that amount received as transfer fee on sale of flat was only rs. 25,000/-, and the balance contribution was received towards repairs and maintenance funds, Members Lift Funds etc. CIT (A) also observed that funds so received was used for betterment of society for common benefits. Department could not controvert these finding of the CIT (A) by bringing any positive material on record. Thus, while granting relief to the assessee, CIT (A) discussed the issue ie taxability of the receipts of the society on account of Repairs & Maintenance Fund Members Lift fund and transfer fee, at length and relied on the precedents and decided the issue in favour of the assessee. Therefore, we are of the considered view that the decision of the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised
by the Revenue are dismissed.
10. In the result, appeal of the Revenue is dismissed.