SUVARNA NAGAR CO-OPERATIVE HOUSING SOCIETY LTD, MUMBAI v. ITO 21(2)(4), MUMBAI

ITA 179/MUM/2011 | 2002-2003
Pronouncement Date: 11-04-2014 | Result: Allowed

Appeal Details

RSA Number 17919914 RSA 2011
Assessee PAN AAAAS4938E
Bench Mumbai
Appeal Number ITA 179/MUM/2011
Duration Of Justice 3 year(s) 3 month(s) 4 day(s)
Appellant SUVARNA NAGAR CO-OPERATIVE HOUSING SOCIETY LTD, MUMBAI
Respondent ITO 21(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 11-04-2014
Date Of Final Hearing 13-02-2014
Next Hearing Date 13-02-2014
Assessment Year 2002-2003
Appeal Filed On 07-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI . BEFORE SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDI CIAL MEMBER . / ITA NO. 179 / MUM./ 2011 ( / ASSESSMENT YEAR : 2002 03 ) SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED JAI HIND CLUB BLDG. 2 ND FLOOR PLOT NO.51 N.S. ROAD NO.11 JVPD SCHEME VIDE PARLE (W) MUMBAI 400 049 . . / APPELLANT V/S INCOME TAX OFFICER WARD 21(2)(4) MUMBAI .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAAAS4938E / ASSESSEE BY : MS. ARATI VISSANJI & SHALIN DIVATIA / REVENUE BY : MR. ASHOK SURI / DATE OF HEARING 26 . 0 3 .201 4 / DATE OF ORDER 11.04.2014 / ORDER / PER AMIT SHUKLA J.M. THE PRE SENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 31 ST MARCH 2010 PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXXII MUMBAI FOR THE QUANTUM OF SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 2 ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (FOR SHOR T 'THE ACT' ) FOR THE ASSESSMENT YEAR 2002 03 VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER CHARGING TO TAX AS BUSINESS INCOME CAPITAL GAINS OF ` 73 52 640 RECEIVED BY THE A SSESSEE ON SALE OF COMMON PLOT OF LAND. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER CHARGING TO TAX CONTRIBUTION RECEIVED FROM MEMBERS AGGREGATING TO ` 30 30 000 INCIDENTAL TO SALE OF PLOT WHICH WAS EXEMPT ON THE PRINCIPLE OF MUTUALITY. 2 . FACTS IN BRIEF : BRIEF FACTS QUA THE ISSUE RAISED IN GROUND NO.1 ARE THAT DURING THE YEAR THE ASSESSEE HAS SOLD ITS SHARE IN THE COMMON PLOT NUMBER 22 AS JOINTLY HELD BY 14 CO OPERATIVE HOUSING SOCIETY FOR ` 90 LAKHS AND LONG TERM CAPI TAL GAIN HAS BEEN COMPUTED AT ` 73 52 640 WHICH HAS BEEN INVESTED IN NABARD CAPITAL GAIN BONDS FOR CLAIMING EXEMPTION UNDER SECTION 54EC. THE ASSESSEE ALONG WITH OTHER 14 CO OPERATIVE HOUSING SOCIETIES WERE INCORPORATED IN THE YEAR 1947 FOR PROVIDING HOU SING FACILITIES IN VILE PARLE AREA. THE THEN GOVERNMENT OF THE PROVINCE ACQUIRED THE LAND AND THE INDIVIDUAL PLOTS WERE CONVEYED TO EACH OF THE 14 CO OPERATIVE HOUSING SOCIETIES TO DEVELOP RESIDENTIAL COLONIES. DUE TO CERTAIN CIRCUMSTANCES THESE SOCIETIE S HAVE SOLD PART OF THIS PLOT OF LAND WHICH WERE MARKED FOR AMENITIES AND THE SALE PROCEEDS WERE OFFERED FOR TAXATION AS CAPITAL GAIN. THE ASSESSING OFFICER OBSERVED THAT AS PER THE BYLAWS OF THESE HOUSING SOCIETIES IT IS EMPOWERED TO PURCHASE HOLD SEL L EXCHANGE MORTGAGE RENT OR LEASE ETC. THESE OBJECTS REFERRED TO CARRYING ON TRADE OR BUILDING AND BUYING AND SELLING DEVELOPING LAND IN ACCORDANCE WITH THE TRADING CO OPERATIVE PRINCIPLES. THUS THIS WAS ADVENTURE IN THE NATURE OF TRADE AND THE ENTIR E AMOUNT OF ` 90 LAKHS WAS TREATED AS SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 3 BUSINESS INCOME. THE ASSESSING OFFICER FURTHER HELD THAT THIS ISSUE HAD COME UP FOR CONSIDERATION IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 1995 96 WHEREIN THE ASSESSING OFFICER HAS TAXED THE SALE PROCEEDS UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS . 3 . THE LEARNED COMMISSIONER (APPEALS) ALSO DISMISSED THE ASSESSEES APPEAL WHILE FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 1995 96. 4 . BEFORE US IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT THIS ISSUE H AD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN IT NO.7168/MUM./2008 AND IN CASE OF OTHER SOCIETIES ALSO WHO WERE ONE OF THE PARTIES IN THE SALE OF THE SAID PLOT. IN THE SAID DECISION THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO TH E FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER THE DIRECTION GIVEN BY THE TRIBUNAL DATED 17 TH NOVEMBER 2005 RELEVANT OBSERVATION AND DIRECTIONS FO THE TRIBUNAL ARE AS UNDER: WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PE RUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AMOUNT OF SIMILAR NATURE WAS RECEIVED BY 14 COOPERATIVE HOUSING SOCIETIES INCLUDING THE FOUR ASSESSEE SOCIETIES IN THE PRESENT CASE ON ACCOUNT OF SALE CONSIDERATION OF PLOT OF LAND JOINTLY OWNE D BY THEM. WHEN THE ISSUE RELATING TO HEAD OF INCOME UNDER WHICH THE SAID AMOUNT WAS CHARGEABLE TO TAX HAD COME UP FOR CONSIDERATION IN THE CASES OF THE ASSESSEE BEFORE THE TRIBUNAL IN THE FIRST ROUND THE TRIBUNAL FOUND IT RELEVANT TO ASCERTAIN AS TO WHAT HAD HAPPENED IN THE CASES OF OTHER SOCIETIES. NONE OF THE PARTIES APPEARING BEFORE THE TRIBUNAL HOWEVER COULD FURNISH THE RELEVANT DETAILS IN THIS REGARD. THE ISSUE THEREFORE WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE A.O. FOR DECIDING THE SAME A FRESH AFTER TAKING INTO CONSIDERATION THE FINAL DECISION RENDERED ON A SIMILAR ISSUE IN THE CASE OF OTHER COOPERATIVE HOUSING SOCIETIES. IT APPEARS FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THE DIRECTION OF THE TRIBUNAL HOWEVER HAS NOT BEEN COMPLIED WITH AND THE ISSUE HAS BEEN DECIDED WITHOUT COMPLYING WITH THE DIRECTIONS OF THE TRIBUNAL. AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 4 ALTHOUGH THE ASSESSEE IN THE PRESENT CASE HAVE DETAILS ABOUT THE EXACT ADDR ESS OF THE REMAINING COOPERATIVE HOUSING SOCIETIES THEY ARE NOT IN A POSITION TO ENFORCE THEIR ATTENDANCE BEFORE THE A.O. OR THEIR COMPLIANCE TO THE NOTICE ISSUED BY THE A.O. U/S 133(6). IN OUR OPINION IF THESE DETAILS ARE FURNISHED BY THE ASSESSEE TO TH E A.O. THE LATTER IS SUFFICIENTLY EMPOWERED TO ENFORCE THE ATTENDANCE OF THE OTHER COOPERATIVE HOUSING SOCIETIES OR THE NECESSARY COMPLIANCE OR PART SO AS TO DECIDE THE ISSUE AS PER THE DIRECTION GIVEN BY THE TRIBUNAL IN THE FIRST ROUND VIDE HIS ORDER DAT ED 17 TH NOV. 2005. WE THEREFORE RESTORE THIS ISSUE ONCE AGAIN TO THE FILE OF THE A.O FOR DECIDING THE SAME AFRESH AS PER THE DIRECTION GIVEN BY THE TRIBUNAL VIDE ITS ORDER DATED 17 TH NOV. 2005. THE ASSESSEES ARE DIRECTED TO FURNISH THE ADDRESSES OF THE O THER COOPERATIVE HOUSING SOCIETIES TO THE A.O. WHO SHALL ENFORCE THEIR COMPLIANCE IN ORDER TO DECIDE THIS ISSUE AS PER THE DIRECTION GIVEN BY THE TRIBUNAL. 5 . IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNAL WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE L EARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO DECIDE THE SAME IN VIEW OF THE OBSERVATIONS AND DIRECTIONS GIVEN BY THE TRIBUNAL IN THE AFORESAID CASE. THUS GROUND NO.1 IS ALLOWED FOR STATIS TICAL PURPOSES. 6 . IN GROUND NO.2 THE ASSESSEE HAS CHALLENGED THE TAXABILITY OF TRANSFER FEE OF ` 30.30 LAKHS RECEIVED FROM THE MEMBERS. 7 . THE ASSESSING OFFICER HELD THAT THE ENTIRE TRANSFER FEE RECEIVED FROM MR. PADAMSHRI SONI AMOUNTING TO ` 15.40 LAKHS AN D JUHUGREEN APARTMENTS OWNERS INDIA PVT. LTD. OF ` 15.40 LAKHS AS TAXABLE. THE ASSESSEE HAD CLAIMED THE SAID AMOUNT RECEIVED AS EXEMPT ON THE BASIS OF PRINCIPLE OF MUTUALITY. BEFORE THE ASSESSING OFFICER THE ASSESSEE RELIED UPON THE DECISION OF THE BOMBAY HIGH COURT IN SINDH HOUSING CO OPERATIVE SOCIETY V/S ITO [2009] 317 ITR 147 (BOM.). HOWEVER THE ASSESSING OFFICER AFTER DETAIL DISCUSSION HELD THAT IT IS A REVENUE RECEIPT AND IS LIABLE FOR TAX AS INCOME. HE HAD REFERRED TO THE CONCEPT SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 5 OF PRINCIPLE OF MUTUALITY AND THE DECISION OF THE HON'BLE SUPREME COURT IN BANKIPUR CLUB LTD. AND HELD THAT THIS DOES NOT FALL WITHIN THE REALM OF PRINCIPLES OF MUTUALITY. 8 . BEFORE THE LEARNED COMMISSIONER (APPEALS) THE ASSESSEE RELIED UPON THE DECISION OF BOMBAY HIGH CO URT IN SINDH HOUSING CO OPERATIVE SOCIETY LTD. (SUPRA) AND SUBMITTED THAT THE ASSESSEE HAD RECEIVED TRANSFER FEE FROM EACH OF THE GOING MEMBER ON 14 TH JUNE 2001 AND 15 TH JUNE 2001 WHICH IS MUCH BEFORE THE DATE OF NOTIFICATION BY THE STATE GOVERNMENT ON 9 T H AUGUST 2001. HENCE THE RESTRICTION OF ` 25 000 IN RESPECT OF TRANSFER FEE IS NOT APPLICABLE IN CASE OF THE ASSESSEE. IN ANY CASE THIS RESTRICTION OF ` 25 000 DOES NOT APPLY TO PLOT OWNER CO OPERATIVE HOUSING SOCIETY. HOWEVER THE LEARNED COMMISSIONER ( APPEALS) AFTER DETAIL DISCUSSION REJECTED THE ASSESSEES CONTENTION AND HELD THAT THE SOCIETY COULD HAVE CHARGED TRANSFER FEE OF ` 25 000 EACH AND THEREFORE ONLY TO THIS EXTENT THE PRINCIPLES OF MUTUALITY WILL APPLY IN VIEW OF THE DECISION OF THE BOMB AY HIGH COURT IN SINDH HOUSING CO OPERATIVE SOCIETY (SUPRA). ACCORDINGLY HE DISALLOWED ` 30.30 LAKHS. 9 . BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOT ONLY SQUARELY COVRED BY THE DECISION OF THE BOMBAY HIGH COURT IN SINDH HOUSING CO OPERATIVE SOCIETY (SUPRA) BUT ALSO BY THE DECISION OF BOMBAY HIGH COURT IN MITTAL COURT PREMISES CO OPERATIVE SOCIETY V/S ITO [2010] 320 ITR 414 (BOM.). IN THIS CASE THE HIGH COURT HAVE CATEGORICALLY HELD THAT THE NOTIFICATION ISSUED BY THE ST ATE GOVERNMENT PUTTING RESTRICTIONS ON THE AMOUNT OF TRANSFER FEE AND THE MEMBER DESIRED TRANSFER OF THEIR SHARES OR OCCUPANCY RIGHTS ARE ONLY IN RESPECT OF HOUSING RESIDENTIAL SOCIETY. IN THIS CASE ADMITTEDLY IT IS NOT IN RESPECT OF HOUSING RESIDENTIAL SOCIETY BUT A PLOT SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 6 SOCIETY. THEREFORE IN VIEW OF THE LATER DECISION OF THE BOMBAY HIGH COURT THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 10 . THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDERS OF THE AUTHOR ITIES BELOW. 11 . AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS AND ALSO THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE BOMBAY HIGH COURT IN MITTAL CO OPERATIVE HOUSING SOCIETY LTD. (SUPRA) WHEREIN THE COURT OBSERVED AND HELD AS UNDER: THE NOTIFICATION I SSUED BY THE STATE OF MAHARASHTRA PUTT I NG R ESTRICT I ONS ON T HE AM OUNT OF T R ANSFER FEE WHEN THE M EMBER DESIRES TO TRANSFER HIS SHA R ES OR OCCUPANCY RIGHTS ARE ONL Y IN RES PECT OF HOUS I NG R ES I DENTIAL SOCIETIES . IN THE INSTANT CASE T HE APPELLANTS ARE NOT HOU S IN G R ESIDENT I AL SOCIET I ES AND CONSEQUENTLY THOSE NOTIFICATIONS WOULD NO T BE APPLICABLE. TH E BYE - LAW S ARE NOTHING BUT THE CONTRACT BETWEEN THE SOC I ETY AND THE MEMBE R . U N DER THE S E BYE - LAWS IT IS THE M EMBER WHO HAS TO MAKE THE PAYMENT. ANY INTER SE ARRANGEMENT BETWEEN THE INC O MING MEMBERS AND THE TRANSFEREE I S IRRELEVANT INSOFAR AS THE SOC I ETY IS CONCE R N E D . T HE R E IS AN AGREEMENT BY WHICH THE AMOUNT IS PAID BY THE T R ANSFERE E. INSOFAR AS SOCIETY IS C ONCERNED EV E N IF RECEIPT IS ISSUED IN THE NAME OF TRANSFEREE IT IS THE NATURE O F ADMISSION FEE WHICH COU LD BE APPROPRIATED ONLY ON THE TRANSFEREE BEING ADMITTED. MEREL Y BECAUSE T H E AMOUN T MAY BE APPROPRIATED EARLIER IT WIL L NOT LOSE THE CHARACTER OF THE AMOUN T BE I NG P A I D BY A MEM BER. IN THESE CIRCUMSTANCES THE IDENTITY OF T H E CONTRIBUTO R AND B E N E F IC I ARY BEING SATISFIED AND CONSIDERING THE PROVIS I ONS OF MAHARASHTRA CO - OPERATIVE SOCI ET I ES ACT AND RULES FR AM ED THEREUNDER SURPLUS CAN BE DISPOSED OF IN F AVOUR OF TH E M E M BERS ONLY OR FOR THE OB JE CT S F O R WHICH THEY MAY SPECIFY. 12 . THUS RESPECTFULLY FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT CITED SUPRA WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND HOLD THAT THE AMOUNT OF TRANSFER SUVARNA NAGAR CO OPERATIVE HOUSING SOCIETY LIMITED 7 FEE OF ` 30.30 LAKHS IS NOT TAXABLE IN VIEW OF THE PRINCIPLES OF MUTUALITY. THUS GROUND NO.2 IS ALLOWED. 13 . 13 . IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . 11 TH APRIL 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL 2014 SD / - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD / - AMIT SHUKLA JUDICIAL MEMBER MUMBAI DATED : 11 TH APRIL 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT MUMBAI CITY CONCERNED ; ( 5 ) / THE DR ITAT MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI