ITO WD 19(2)(4), MUMBAI vs. NEW SEAGULL CO OP HSG. SOCIETY LTD, MUMBAI

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ITA 4648/MUM/2016Status: DisposedITAT Mumbai29 December 2016AY 2012-133 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the transfer fees collected under the head 'building betterment fund' are exempt on the principles of mutuality. This decision was based on the prevailing judgment of the Hon'ble Bombay High Court, which had not been altered by the Supreme Court.

What were the facts?

The Revenue appealed against a CIT(A) order that allowed exemption for transfer fees collected by a co-operative housing society. The society claimed these fees, termed 'building betterment fund', were exempt based on the principle of mutuality.

What were the issues?

Whether transfer fees collected by a co-operative housing society are exempt from tax under the principle of mutuality. Whether the CIT(A) was correct in following High Court judgments when the Revenue considered the matter sub-judice before the Supreme Court.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI G.S.PANNU

For Appellant: Ms. Beena Santosh
For Respondent: Shri Bhupendra G. Fafadia
Hearing: 29/12/2016Pronounced: 29/12/2016

The captioned appeal filed by the Revenue pertaining to assessment year 2012-13 is directed against an order passed by CIT(A)-30, Mumbai dated 07/04/2016, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 03/03/2015.

2.

In this appeal, the only issue is as to whether the transfer fee collected under the name ‘building betterment fund’ amounting to Rs.39.00 lacs is entitled for exemption under the principle of mutuality. The respondent is a co-operative housing society and it was noticed that during the year under consideration it had collected transfer fee from incoming and outgoing members of Rs.39.00 lacs. On being show-caused, the assessee claimed before the Assessing Officer that the said amount was exempt in terms of the principles of mutuality following the judgment of the Hon'ble Bombay High Court in the case of Mittal Court Premises Co-op.Society Ltd. vs. ITO, (2009) 184Taxaman 292 (Bom). The decision of the Hon'ble Bombay High Court in the case of CIT vs. Darbhanga Mansions CHS Ltd. in of 2012 dated 1/12/2014 was also cited by the assessee. The Assessing Officer did not accept the plea of the assessee only on the ground that the decision of Hon'ble Bombay High Court in the case of Mittal Court Premises Co-op. Society Ltd. (supra) has not been accepted by the Department and the matter is sub-judice before the Hon'ble Supreme Court. As a consequence, the sum of Rs.39.00 lacs was sought to be taxed.

3.

The CIT(A) has since set-aside the stand of the Assessing Officer following the judgment of the Hon'ble Bombay High Court in the case of Mittal Court Premises Co-op.Society Ltd. (supra) as well as the judgment of Hon'ble Bombay High Court in the case of Darbhanga Mansions CHS Ltd (supra). Against such a decision of the CIT(A), Revenue is in appeal before me.

4.

It was common point between the parties that the judgment of the Hon'ble Bombay High Court relied upon by the CIT(A) continues to hold the field and the same has not been altered by Hon'ble Supreme Court. In this view of the matter, I find no error on the part of the CIT(A) in holding that the amount received from members as transfer fee under the head ‘building betterment fund’ is exempt on the principles of mutuality. As a consequence, appeal of the Revenue is dismissed.

5.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 29/12/2016

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