Commissioner of Income-tax v. Darbhanga Mansion CHS Ltd
[Citation -2014-LL-1218]

Citation 2014-LL-1218
Appellant Name Commissioner of Income-tax
Respondent Name Darbhanga Mansion CHS Ltd.
Court HC
Date of Order 18/12/2014
Judgment View Judgment
Keyword Tags co-operative housing society • principle of mutuality • source of income • binding judgment • memo of appeal • body corporate • legal entity • savings bank • repair fund
Bot Summary: According to the Revenue, the assessee is a co-operative housing society. Once the bye-laws of the society prohibit receipt of transfer fees Rs. 25,000 and that is the spirit of the Government notification as well, then the society cannot claim any exemption from tax. The same have been decided in favour of the assessee and against the Revenue following the Division Bench judgment in the case of Sind Co-operative Housing Society v. ITO. Therefore, the order of the Assessing Officer was set aside by the first appellate authority. Repeatedly the Revenue has failed in convincing the Tribunal that Sind Co-operative Housing Society will not cover the society's case. In the present case, what has been argued and vehemently is the amount was received by the society when the flat and the garage were transferred. The society as a legal entity owns the building but the amenities are provided and that is how the terms flat and the housing society are defined in the statute in question. We do not find any reason to deviate from the principle laid down in Sind Co-operative Housing Society's case and which followed a Supreme Court judgment.


JUDGMENT This appeal by Revenue challenges order passed by Incometax Appellate Tribunal on April 4, 2012. Mr. Malhotra submits that following question is substantial question of law: "Whether, on facts and in circumstances of case and in law, Income-tax Appellate Tribunal was justified in upholding Commissioner of Income-tax (Appeals)'s order and rejecting Departmental appeal in accepting assessee's plea that contribution of Rs. 39,68,000 paid towards'heavy repair fund' is covered by principle of mutuality and is not chargeable to tax?" Mr. Malhotra complains that Tribunal failed to notice distinguishing features from judgment of this court in case of Sind Cooperative Housing Society v. ITO reported in [2009] 317 ITR 47 (Bom). Tribunal has applied and followed this judgment without adverting to facts and circumstances therein and equally of assessee's case. Mr. Malhotra invites our attention to order passed by Assessing Officer and submits that Assessing Officer has not committed any error in holding that amount and which is to tune of Rs. 39,68,000 has been rightly brought to tax. He submits that contribution paid or made by members is occasioned by transfer of flat. It is nothing but transfer fees in terms of Government resolution which is extensively referred to by Assessing Officer. amount of transfer fees cannot exceed Rs. 25,000. If it cannot so exceed then judgment in case of Sind Co-operative Housing Society (supra) was distinguishable. Mr. Malhotra has heavily relied upon findings of Assessing Officer. He submits that those findings are rendered after referring to resolution as also bye-laws of co-operative housing society. Mr. Malhotra has submitted despite judgment of this court in case of Sind Co-operative Housing Society (supra) has admitted three appeals on February 18, 2013, and which are raising identical question. Therefore, principle of mutuality which has been invoked and applied cannot be straightaway applicable. appeal, therefore, deserves to be admitted. On other hand, Mr. Irani, appearing on behalf of respondent, relied upon order passed by this court in case of this very society, namely, Income Tax Appeal No. 1453 of 2007, decided on August 3, 2010. Mr. Irani would submit that merely because question as framed by Tribunal and based on ground raised by Revenue does not bifurcate amount of transfer fee and contribution to building heavy repair fund does not mean that judgment in case of Sind Co-operative Housing Society (supra) will not bind this court. That squarely binds this court and, therefore, this appeal does not raise any substantial question of law, it deserves to be dismissed. He also relies upon order passed on October 11, 2010, by another Division Bench of this court in case of this very assessee being Income Tax Appeal (Lodging) No. 1906 of 2010. There Revenue raised identical question but this court held that issue is answered already in favour of assessee and against Revenue by Division Bench judgment in Sind Co- operative Housing Society (supra). For such reasons and in case of this very assessee this court having already taken view in favour of assessee, it should not proceed to admit this appeal, more so, when it does not raise any substantial question of law. With assistance of both advocates, we have perused memo of appeal and all annexures thereto. According to Revenue, assessee is co-operative housing society. It received sum of Rs. 39,68,000 on account of transfer of flat and garage and credited it to "general amenities fund" as well as "repair fund". This receipt of Rs. 39,68,000 has been claimed as exempted from tax by assessee. return of income was filed for assessment year 2005-06 declaring nil income. same was processed and later on upon compliance with statutory formality Assessing Officer held that if assessee's source of income is nothing but interest on fixed deposits and interest on savings bank account, then this sum is nothing but receipt on account of transfer of flat and garage, namely, flat Nos. 12B and 2A. Assessing Officer disallowed exemption by holding that principle of mutuality will not apply. Once bye-laws of society prohibit receipt of transfer fees Rs. 25,000 and that is spirit of Government notification as well, then society cannot claim any exemption from tax. Aggrieved by such order passed on November 30, 2007, by Assessing Officer society carried matter to Commissioner of Income- tax (Appeals). Commissioner of Income-tax (Appeals)'s order is dated March 15, 2011. He relied upon judgment of Division Bench in Sind Co- operative Housing Society (supra). What Commissioner of Income-tax (Appeals) held in this case by relying upon all orders of this court even in case of this very assessee that dispute raised by Revenue for three assessment years 1999-2000, 2001-02, 2003-04 have been subject matter of legal proceedings. same have been decided in favour of assessee and against Revenue following Division Bench judgment in case of Sind Co-operative Housing Society v. ITO. Therefore, order of Assessing Officer was set aside by first appellate authority. We find that when Revenue approached Tribunal, in its grounds of appeal, it raised following ground: "The learned Commissioner of Income-tax (Appeals) erred in deleting addition of Rs. 39,68,000 made on account of contribution to heavy repair fund following decision of hon'ble High Court of Bombay in case of Sind Co-operative Housing Society Ltd., wherein it has been held that said contributions made by members of society are exempt from taxation under principle of mutuality. decision has not been accepted by Department and issue is sub judice." Upon perusal of this question itself, it is evident that Revenue was of opinion that judgment delivered by Division Bench of this court would come in its way and argument, therefore, was that Revenue has not accepted this judgment and principles laid down therein. When such was position brought to notice of Tribunal, then natural response of Tribunal was that judgment of jurisdictional High Court is sought to be distinguished. If it is sought to be distinguished then distinguishing features should be pointed out and by bringing satisfactory and proper material. Merely arguing that assessee is co-operative housing society, it received this sum on account of transfer of flat and garage and credited it to "general amenities fund" as well as "repair fund" was not enough. We do not see how this approach of Tribunal can be faulted by Revenue. Mr. Malhotra trying to persuade us and by contending that Division Bench in Sind Co-operative Housing Society (supra) was not concerned with legal effect of Government notification dated August 9, 2001. That placed cap or outer limit of Rs. 25,000 on receipt of transfer fee and occasioned by transfer of flat. That amount has to be received and retained by society under that head. submission is that Division Bench has clarified matter in judgment itself. In that regard our attention is invited to paragraph 43 and preceding paragraphs of report. Mr. Malhotra would submit that charging of transfer fees as per bye-laws has no element of trading or commerciality, that is principle on which Division Bench proceeded. It also proceeded by holding that contribution can come from both outgoing or incoming members. However, so long as there was principle of mutuality and which could be applied, then, according to Mr. Malhotra, this judgment must be seen as restricted to that aspect alone. More so, when in case of Sind Co- operative Housing Society (supra) there was no restriction or outer limit on transfer fees. Upon careful perusal of judgment passed by Division Bench and order passed by Tribunal impugned in this case, we see no merit in this contention of Mr. Malhotra. very issue and very question was raised repeatedly in case of assessee-society. Repeatedly Revenue has failed in convincing Tribunal that Sind Co-operative Housing Society (supra) will not cover society's case. contribution is made to repair fund or to general fund and credited as such. While it may be true that it is occasioned by transfer of flat and garage, yet we do not see how merely because there was cap or restriction placed on transfer fees or quantum thereof, in this case principle of mutuality cannot be applied. underlying principle and of co-operative movement has been completely overlooked by counsel for Revenue. Revenue seems to be of view that co-operative housing society makes profit, if it receives something beyond this amount of Rs. 25,000. There has to be material brought and which will have definite bearing on this issue. If amount is received on account of transfer of flat and which is not restricted to Rs. 25,000 but much more, then different consideration may apply. restricted to Rs. 25,000 but much more, then different consideration may apply. However, in present case, what has been argued and vehemently is amount was received by society when flat and garage were transferred. Therefore, it must be presumed to be nothing but transfer fees. It may have been credited to fund and with view to demonstrate that it is nothing but voluntarily contribution or donation to society but still it constitutes its income. However, for rendering such conclusive finding there has to be material brought by Revenue on record. Beyond urging that it has been received at time of transfer of flat and credited to such fund will not be enough to displace principle laid down in decision of Sind Co- operative Housing Society. attempt of Revenue, therefore, is nothing but overcoming binding judgment of this court. In present case, Commissioner of Income-tax (Appeals) and Tribunal both have held that receipt may have been occasioned by transfer but principle of mutuality will still apply. It is typical relationship between member of cooperative society and particularly housing society and society which is body corporate and legal entity by itself that is forming basis of principle laid down by Division Bench. Co-operative movement is socio-economic and moral movement. It has now been recognised by article 43A of Constitution of India. It is to foster and encourage spirit of brotherhood and co-operation that Government encourages formation of co-operative societies. members may be owning individually flats or immovable properties but enjoying, in common, amenities, advantages and benefits. society as legal entity owns building but amenities are provided and that is how terms "flat" and "housing society" are defined in statute in question. We do not, therefore, find any reason to deviate from principle laid down in Sind Co-operative Housing Society's case and which followed Supreme Court judgment. In present case, therefore, Tribunal following its earlier views and applying ratio of this judgment, dismissed Revenue's appeal and confirmed Commissioner of Income-tax (Appeals) finding. concurrent findings, therefore, in this case are in consonance with factual materials brought on record. There is substance in argument of Mr. Irani that Assessing Officer had before him material in form of bye-laws of society. bye-laws also are in consonance with Government resolution and stipulate sum of Rs. 25,000 towards transfer fees. assessee in this case is presumed to have received nothing but transfer fees and it is that underlying presumption which has prevailed upon Assessing Officer to take particular view. We find that Assessing Officer has been, therefore, rightly corrected by Commissioner of Income-tax (Appeals). Without any material, cogent and satisfactory, being produced, sum and in its entirety as credited could not be assumed to be transfer fees. receipt thereof may have been occasioned by transfer of flat and garage. In such circumstances, we do not find that Tribunal committed any error of law apparent on face of record in dismissing Revenue's appeal. Its order cannot be termed as perverse as well. appeal is devoid of merits and is dismissed. No order as to costs. *** Commissioner of Income-tax v. Darbhanga Mansion CHS Ltd.
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