CHETAK CO-OP HSG. SOCIETY LTD, MUMBAI v. ACIT 19(3), MUMBAI

1 ITA NO.7937/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC MUMBAI SMC MUMBAI SMC MUMBAI SMC BENCH BENCH BENCH BENCH MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI BEFORE SHRI R K PANDA BEFORE SHRI R K PANDA BEFORE SHRI R K PANDA BEFORE SHRI R K PANDA ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ITA NO. ITA NO. ITA NO. ITA NO. 7937/MUM/2010 7937/MUM/2010 7937/MUM/2010 7937/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2005 2005 2005 2005- -- -06 0606 06) )) ) CHETAK CO-OP HSG SOCIETY LTD MANU MAHAL 35 PALI HILL BANDRA (W) MUMBAI 50 VS THE ASST COMMR OF INCOME TAX 19(3) MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAAACO996J AAAACO996J AAAACO996J AAAACO996J ASSESSEE BY NONE REVENUE BY SHRI R K GUPTA/DR PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 30.8.2010 OF THE CIT(A)- 30 MUMBAI RELATING TO ASSE SSMENT YEAR 2005-06. 2 DESPITE SERVICE OF NOTICE THROUGH RPAD NONE APPEA RED ON BEHALF OF THE ASSESSEE. THEREFORE THE APPEAL IS BEING DISPOSED O F ON THE BASIS OF THE MATERIAL ON RECORD AND AFTER HEARING THE LD DR. 3 THE ONLY EFFECTIVE GROUND OF APPEAL BY THE ASSESS EE READS AS UNDER: ADDITION OF TRANSFER FEES/DONATION OF ` 44 380/- SHOULD BE DELETED FROM THE INCOME OF COOPERATIVE HOUSING SOCIETY (ACTUALLY DISALLOWED ` 55 126/- LESS DISALLOWANCE OF ` . 10 750/- 3.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS A COOPERATIVE HOUSING SOCIETY CONSISTING OF VARIOUS MEMBERS AND HAS THE C ONCEPT OF MUTUALITY. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECE IVED FEE/DONATION OF 2 ITA NO.7937/MUM/2010 ` 80 126/- FROM INCOMING MEMBERS AND CREDITED THE SA ME TO SOCIETY WELFARE AMENITIES FUND. THE ASSESSING OFFICER ASKED THE AS SESSEE TO EXPLAIN AS TO HOW THE TRANSFER FEE IS COVERED BY THE PRINCIPLE OF MUT UALITY. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING O FFICER HELD THAT TRANSFER FEE IS NOT COVERED UNDER THE PRINCIPLE OF MUTUALITY AND THE DEDUCTION IS ALLOWABLE ONLY TO THE EXTENT OF ` 25 000/-. HE ACCORDINGLY TAXED THE BALANCE AMOUNT OF ` 55 126/- BEING THE DIFFERENCE OF ` 80 126/- ` 25 000/-. 4 IN APPEAL THE CIT(A CONFIRMED THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER FOR WHICH THE ASSESSEE IS IN APPEAL HERE BE FORE US. 5 I HAVE CONSIDERED THE ARGUMENTS MADE BY THE LD DR AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IN I TS STATEMENT OF FACTS HAS MENTIONED THAT IT HAS RECEIVED TRANSFER FEE OF ` 80 126/- FROM THREE INCOMING MEMBERS. ACCORDING TO THE ASSESSEE AS PER ITS STA TEMENT OF FACTS THE ASSESSEE HAS RECEIVED ` 28 000/- AS TRANSFER FEE FROM SHRI RAUL G CHANDNA NI AND SMT NIRMALA G CHANDNANI; ` 19 376/-FROM MRS GEETA MADHAVAN K AND ` 32 750/- FROM SHRI H Y MOTIWALA & OTHERS. IN THE STATEMENT OF FACTS THE ASSESSEE HAS FURTHER MENTIONED THAT ONLY ` 10 750/- CAN BE DISALLOWED BEING THE EXCESS TRANSFER FEE COLLECTED AND ` 69 376/- HAS TO BE ALLOWED ON THE BASIS OF PRINCIP LE OF MUTUALITY. SINCE THE ASSESSING OFFICER HAS ALREADY ALLOWED ` 25 000/-; THEREFORE THE BALANCE AMOUNT OF ` . 44 380/- SHOULD BE ALLOWED WHICH IS PRECISELY TH E GROUND RAISED BY THE ASSESSEE. 3 ITA NO.7937/MUM/2010 5.1 I FIND THE ISSUE NOW STANDS COVERED BY THE DEC ISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND COOPERATIVE HOUSING SOCIETY VS ITO REPORTED IN 317 ITR 47 ACCORDING TO WHICH CHARGING OF TRANSFE R FEES UNDER THE BYELAWS OF THE COOPERATIVE SOCIETY HAS NO ELEMENT OF TRADING O R COMMERCIALITY. MEMBERS ALONE HAVING RIGHT TO SHARE SURPLUS; THEREFORE PRI NCIPLE OF MUTUALITY IS APPLICABLE TO THE SOCIETY. ACCORDINGLY IT WAS HELD THAT RE CEIPT OF TRANSFER FEE IS NOT LIABLE TO TAX. 6 RESPECTFULLY FOLLOWING THE DECISION OF THE JURISD ICTIONAL HIGH COURT I HOLD THAT THE AMOUNT OF ` 44 380/- BEING THE TRANSFER FEE SHOULD BE DELETED FROM THE INCOME OF THE COOPERATIVE HOUSING SOCIETY ON THE B ASIS OF PRINCIPLE OF MUTUALITY. I HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 7 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E. ON 15 TH FEB 2011. SD/- ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 15 TH FEB 2011 RAJ* 4 ITA NO.7937/MUM/2010 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI