M/S. HEERA PANNA CO-OP HSG. SO. LTD, MUMBAI v. THE ITO 16(2)(4),

ITA 5302/MUM/2007 | 2003-2004
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 530219914 RSA 2007
Assessee PAN AACFH7760C
Bench Mumbai
Appeal Number ITA 5302/MUM/2007
Duration Of Justice 3 year(s) 11 month(s) 22 day(s)
Appellant M/S. HEERA PANNA CO-OP HSG. SO. LTD, MUMBAI
Respondent THE ITO 16(2)(4),
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 29-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2003-2004
Appeal Filed On 07-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.5302/MUM/2007 (ASSESSMENT YEAR: 2003-04) HEERA PANNA CO-OP. HSG. SO. LTD. BHULABHAI DESAI ROAD HAJI ALI MUMBAI -400 026 ....... APPELLANT VS ITO -16(2)(4) MUMBAI ..... RESPONDENT PAN: AACFH 7760 C APPELLANT BY: SHRI HARESH SHAH RESPONDENT BY: SHRI GOLI SRINIWAS RAO DATE OF HEARING: 07.07.2011 DATE OF PRONOUNCEMENT: 29.07.2011 O R D E R PER R.S. PADVEKAR JM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER OF THE LD. CIT (A)-16 MUMBAI DATED 14.05.2007 FOR THE A.Y. 2003-04. THE FIRST ISSUE IS IN RESPECT OF THE ADDI TION OF RS 1 35 000/- CONFIRMED BY THE LD. CIT (A) TOWARDS THE CONTRIBUTI ON RECEIVED FROM EXISTING MEMBER. 2. THE ASSESSEE IS A CO-OPERATIVE HOUSING SOCIETY R EGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT. THE AS SESSEES CASE WAS SELECTED FOR SCRUTINY FOR THE A.Y. 2003-04. IT WAS NOTICED BY THE A.O. THAT THE ASSESSE HAS RECORDED INCOME OF ` 1 60.000/- FROM THE CONTRIBUTION TOWARDS WELFARE FUND BUT THE SAID INC OME WAS NOT ITA 5302/MUM/2007 HEERA PANNA CO-OP. HSG. SO. LTD . . 2 INCLUDED IN THE COMPUTATION OF THE INCOME BY TAKING CONTENTION THAT SAME IS NOT TAXABLE ON THE PRINCIPLES OF MUTUALITY. THE A.O. SOUGHT THE EXPLANATION OF THE ASSESSEE. AFTER EXAMINING T HE REPLY FILED BY THE ASSESSEE THE A.O. OBSERVED THAT THE TRANSFEROR MEMB ERS HAD MADE THE CONTRIBUTION TO OBTAIN MEMBERSHIP FOR TRANSFEREE AN D CONTRIBUTION MADE BY THE OUT-GOING MEMBER IS NOT COVERED UNDER P RINCIPLES OF MUTUALITY. THE A.O. THEREFORE MADE THE ADDITION OF RS 1 60 000/- REJECTING THE CONTENTION OF THE ASSESSEE. THE ASSE SSEE CHALLENGED THE SAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD. CIT (A) RELIED ON SOME DECISIONS OF THE TRIBUNAL TO HOLD THAT THE CONTRIBUTIONS RECEIVED FROM THE OUT-GOING MEMBERS CANNOT COME WITHIN AMBIT OF MUTUALITY. AT THE SAME TIME THE LD. CIT (A) ALSO OBSERVED THAT AT THE MOST THE CONTRIBUTION T O THE EXTENT OF ` 25 000/- AS PER THE CEILING FIXED BY THE GOVERNMENT CAN BE ALLOWED. HE THEREFORE RESTRICTED THE RELIEF TO ` 25 000/- AND CONFIRMED THE BALANCE ADDITION. NOW THE ASSESSEE IS IN APPEAL B EFORE US. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD S. THE LD. COUNSEL SUBMITS THAT NOW THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SINDH CHS LTD. 317 ITR 47 AS WELL AS THE DECISION I N CASE OF MITTAL CHS LTD. 320 ITR 414 AND PLETHORA OF OTHER DECISION S OF THE CO- ORDINATE BENCHES. WE HAVE ALSO HEARD THE LD. D.R. 4. WE FIND THAT NOWHERE IT IS A CASE OF THE A.O. T HAT OBJECT OF THE ASSESSEE-SOCIETY IS A COMMERCIAL TO EARN THE PROFIT . THE JURISDICTIONAL HIGH COURT HAS LAID DOWN THE TESTS IN WHAT SITUATI ON THE PRINCIPLES OF MUTUALITY WILL COME INTO PLAY IN THE CASE OF SINDH CHS LTD (SUPRA). IN THE CASE OF SINDH CHS LTD (SUPRA) IT IS HELD THAT I F THERE IS NO PROFIT MOTIVE THEN IT IS TO BE TREATED AS NON-PROFIT ORGAN ISATION. IN THE CASE OF SINDH CHS LTD (SUPRA) THEIR LORDSHIPS HAVE TAKEN TH E COGNIZANCE OF THE GOVERNMENT NOTIFICATION DATED 9.08.2001 WHICH I S MADE ITA 5302/MUM/2007 HEERA PANNA CO-OP. HSG. SO. LTD . . 3 APPLICABLE TO HOUSING CO-OP. HOUSING SOCIETY. IN T HE PRESENT CASE NOTHING IS THERE ON RECORD TO SHOW THAT THE ASSESSE E-SOCIETY HAD AMENDED ITS BYE-LAWS TO PUT THE RESTRICTION ON THE AMOUNT OF THE TRANSFER FEE TO BE COLLECTED. WE THEREFORE HOLD THAT NO ADDITION CAN BE MADE IN RESPECT OF THE CONTRIBUTION TOWARDS THE WELFARE FUND BY THE OUT-GOING MEMBER. ACCORDINGLY GROUND NO.1 IS ALLO WED. 5. THE NEXT ISSUE IS DISALLOWANCE OF EXPENDITURE OF RS 2 96 323/- CLAIMED AGAINST THE INCOME FROM ADVERTISEMENT. 6. THE ASSESSEE-SOCIETY HAS DECLARED THE INCOME FRO M WRAP ADVERTISEMENT OF ` 24 LAKHS. THE ASSESSEE-SOCIETY HAS UNDERTAKEN RENOVATION WORK WITH THE CONTRACTOR M/S. VELDON COA TS FOR SCAFFOLDING WAS USED BY ONE ADVERTISEMENT-COMPANY AND FOR THE U SE OF THE SAID SCAFFOLDING THE ASSESSEE HAS BEEN PAID RS 24 LAKHS. THE ASSESSEE CLAIMED CERTAIN EXPENDITURE AGAINST THE INCOME LIKE LEGAL AND PROFESSIONAL FEES ESTABLISHMENT EXPENSES DIRECT E XPENSES GENERAL AND ADMINISTRATIVE EXPENSES DEPRECIATION ON BUILDI NG ETC. THE ASSESSEE CLAIMED EXPENSES AGAINST THE SAID INCOME A T 10% OF THEIR TOTAL EXPENDITURE WHICH WAS WORKED OUT TO ` 2 96 323/-. THE A.O. MADE DISALLOWANCE OF ` 2 96 323/- CLAIM AS EXPENDITURE ATTRIBUTABLE FOR EARNING INCOME FROM SCAFFOLDING ADVERTISEMENT EXCEPT EXPENDITURE OR ERECTING SCAFFOLDING AND LEGAL AND PROFESSIONAL FEES BY GIVING THE REASONS THAT THE SAID EXPENDITURE IS NOT CONNECTED FOR EARNING THE INCOME FROM THE SCAFFOLDING. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS. 7. WE HAVE HEARD THE PARTIES. ADMITTEDLY THE INCO ME FROM AN ADVERTISEMENT IS ASSESSED UNDER THE HEAD INCOME FR OM OTHER SOURCES. THE A.O. HAS ALLOWED THE EXPENDITURE WH ICH WAS INCURRED BY THE ASSESSEE FOR PAYMENT TO M/S. VELDON COATS FO R SCAFFOLDING AND ALSO THE LEGAL AND PROFESSIONAL FEES. SO FAR AS OT HER EXPENDITURE CLAIMED BY THE ASSESSEE WHICH WAS FROM THE INDIREC T EXPENSES AND ITA 5302/MUM/2007 HEERA PANNA CO-OP. HSG. SO. LTD . . 4 ALSO DEPRECIATION THE A.O. DECLINED TO ALLOW ANY E XPENDITURE. THE LD. COUNSEL ARGUES THAT SOME EXPENDITURE IS NECESSARY F OR MAINTAINING THE SCAFFOLDING. IN OUR OPINION IF 3% EXPENDITURE IS ALLOWED AS ATTRIBUTABLE FOR EARNING ADVERTISEMENT INCOME EXCL UDING THE DEPRECIATION ON THE BUILDING THAT WILL MEET THE EN DS OF JUSTICE. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE A. O. TO WORK OUT THE ALLOWABLE EXPENDITURE IN THE LIGHT OF OUR ABOVE DIS CUSSION. 8. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 9TH JULY 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE : 29TH JULY 2011 COPY TO:- 1) THE APPLICANT. 2) THE RESPONDENT. 3) THE CIT (A)16 MUMBAI. 4) THE CIT CITY -XVI MUMBAI. 5) THE D.R. H BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 5302/MUM/2007 HEERA PANNA CO-OP. HSG. SO. LTD . . 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 26.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 26.07.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER