Income Tax Appellate Tribunal - Mumbai
The Vallabhnagar Co Operative Housing ... vs Assessee on 28 September, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" Bench, Mumbai
Before Shri Jason P. Boaz, Accountant Member
and Shri Sandeep Gosain, Judicial Member
ITA No. 4257/Mum/2014
(Assessment Year: 1995-96)
The Vallabhnagar Co-operative Income Tax Officer-21(2)(4)
Housing Society Ltd. 5th Cloor, C-10, Pratyaksha
51, NS. Road No. 11 Vs. Kar Bhavan, Bandra-Kurla
Jai Hind Club, JVPD Scheme Complex, Bandra (E)
Ville Parle (W), Mumbai 400056 Mumbai 400050
PAN - AAAAV0288J
Appellant Respondent
Appellant by: None Vallabhnagar
Respondent by: Shri Rajneesh K. Arvind
Date of Hearing: 21.09.2016
Date of Pronouncement: 28.09.2016
ORDER
Per Jason P. Boaz, A.M.
This appeal by the assessee is directed against the order of the CIT(A)- 32, Mumbai dated 25.04.2014 for A.Y. 1995-96.
2. The facts of the case, briefly, are as under: -
2.1 The Coordinate Bench of this Tribunal vide its order in ITA No. 7168/Mum/2008 dated 25.11.2011 restored the matter to the file of the Assessing Officer (AO) for a second time for deciding the issues involved afresh in accordance with their earlier order dated 17.11.2005, holding as under: -
"2. The main common issue involved in these appeals relates to the determination of head of income under which the amount received by the assessee as their share of sale consideration of plot of land is chargeable to tax in their hand and the same is raised in ground No.1 of ITA No.7168/Mum/2008 and in the solitary ground raised in ITA Nos.6369/Mum/2009, 5863 & 5864/Mum/2008.
3. The assessee in the present case are cooperative housing societies incorporated in the year 1947 for providing housing facilities in 2 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
Vileparle area. These four societies alongwith other 10 cooperative housing societies acquired land to develop residential colonies in Vileparle area. The said plots were allotted to the societies by the then Government of Bombay Province. In addition, certain plots marked for amenities and public utilities were also given to these 14 cooperative housing societies with specified share therein. These plots marked for amenities and public utilities which were jointly owned by 14 societies were sold in the year under consideration and their share of the sale consideration was offered by the societies to tax under the head "Capital Gains". Keeping in view the object of the cooperative housing societies of carrying on the trade of buying and selling as well as developing land as envisaged in byelaws, the AO held that the sale consideration received by the societies constituted their business income and accordingly their respective share was brought to tax by him in their hands as business income. On appeal, the learned CIT(Appeals) confirmed the decision of the Assessing Officer. The matter thereafter was carried before the Tribunal in the appeals filed by the assessee societies in the present case and the Tribunal vide its order dated 17th Nov., 2005 passed in ITA No.4241/Mum/ 2000 and others restored the issue to the file of the AO to decide the same afresh after taking into consideration the final decision rendered in the case of other cooperative housing societies. During the course of set aside proceedings, the assesee could not furnish any details about the final decision rendered in the case of other cooperative housing societies which had received similar amount against sale of plot jointly owned. There was also no response from the other cooperative housing societies to the notices issued u/s. 133(6). The AO, therefore, brought the amount of sale consideration of plot to tax in the hands of the assessee societies again under the head "Profits & Gains of business or profession". On appeal, the learned CIT(Appeals) upheld the action of the AO on this issue relying mainly on the orders of his predecessor passed the assessee's case in the first round of litigation. Aggrieved by the order of the learned CIT(Appeals), the assessees have preferred these appeals before the Tribunal.
4. We have heard the arguments of both the sides and also perused 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 owned by them. When the issue relating to head of income under which the said mount was chargeable to tax had come up for consideration in the case 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 AO for deciding the same afresh after taking into consideration the final decision rendered on a similar issue in the case of other cooperative housing 3 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
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 direction of the Tribunal. At the time of hearing before us, the learned counsel for f the assessee has submitted that although the assessee in the present case have details about the exact address of the remaining cooperative housing societies, they are not in a position to enforce their attendance before the AO or their compliance to the notices issued by the AO u/s. 133(6). In our opinion, if these details are furnished by the assessee to the AO, the latter is sufficiently empowered to enforce the attendance of the other cooperative housing societies or the necessary compliance on their part so as to decide the issue as per the direction given by the Tribunal in the first round vide his order dated 17th Nov., 2005. We, therefore, restore this issue once again to the file of the AO for deciding the same fresh as per the direction given by the Tribunal vide its order dated 17th Nov., 2005. The assessees are directed to furnish the addresses of the other cooperative housing societies to the AO who shall enforce their compliance in order to decide this issue as per the direction given by the Tribunal."
2.2 Pursuant to the order of the Coordinate Bench dated 25.11.2011, the AO accordingly issued notices under section 142(1) of the Income Tax Act, 1961 (in short 'the Act') dated 02.08.2012, 03.09.2012 and 23.11.2012 calling upon the assessee to file details in the matter. After considering the submissions put forth by the assessee, extracted at para 4 on page 4 to 8 of the order of assessment; the AO observed that the assessee could not provide any new information and that the submissions now put forth were found to be similar to what it had put forward in earlier assessment proceedings before the AO, and in appeal before the learned CIT(A) and the Tribunal. The AO, therefore, vide letter dated 14.12.2012 required the assessee to summit detailed explanation with regard to the facts found in the agreement dated 26.04.1960 between Bombay Housing Board and each of the 14 Cooperative Societies. Notices were also issued under section 133(6) to all the other 13 Cooperative Societies requiring them to provide details of the number of plots with specification such as, plot number, area in sq. Yards, etc. allotted by the Bombay Housing Board to the 14 Cooperative Societies, and elicited responses from only six Cooperative Societies, whose cases were also remanded back to the file of the AO by the Coordinate Bench of this Tribunal. The AO noted that these 4 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
six Cooperative Societies could not furnish material evidence/proof of plots allotted to each of the 14 Cooperative Societies which could specify the area allotted to them to claim ownership right on the leasehold land given to them by Bombay Housing Board in 1960. From Schedule-I, the AO observed that 7,07,036 sq. yards given, ascertainable in Schedule-I, under the head Public Amenity which includes play ground, recreation ground, shops, public building, municipal office, Police station, fire bridge, post office, Bank, etc. From Schedule-II, it was seen that the area allotted was 8,15,467 sq. yards which includes play ground, secondary school and primary school for boys and girls, ladies club, hospital, shops and proposed widening of roads of 100 ft. and 60 ft.
2.3 According to the AO, the main issue involved in the case was that the assessee had received its amount of share on sale of common plot which was income chargeable to tax under the head Profits and Gains of Business and not on capital account as claimed by the assessee. Since the assessee could not furnish required details such as the actual plot number, the amount received from sale of plot No. 29 could not be ascertained as to whether it is an independent plot forming part of the 53 plots allotted to 14 Cooperative Societies; how plot No. 29 was derived/ allotted from the total area of land allotted by the Bombay Housing Society in 1960; whether the plot sold was a part of land allotted for public amenities and public utilities, residential facilities, etc., the AO treated the amount received by the assessee on sale of its share of the excess land available with these Cooperative Societies as 'Business Income' being an adventure in the nature of trade and accordingly brought the profit on sale thereof of `20,24,000/- arising to the assessee to tax in the assessee's hands as business profits as against LTCG admitted thereon by the assessee. In addition thereto, the AO brought to tax in assessee's hands an amount of `5,79,725/- received by the assessee from members as 'transfer fees'. The assessment was accordingly concluded under section 143(3) r.w.s. 253 of the Act vide order dated 19.03.013 wherein the assessee's income was determined at `39,87,140/-.
5 ITA No. 4257/Mum/2014Vallabhnagar Co-operative Housing Society Ltd.
3. Aggrieved by the order of assessment for A.Y. 1995-96 dated 19.03.2013, the assessee preferred an appeal before the CIT(A)-32, Mumbai. The learned CIT(A) disposed off this appeal vide order dated 23.04.2013 allowing the assessee partial relief.
4. The appeal in this case was fixed on a number of occasions. On these occasions either none appeared on behalf of the assessee or adjournments sought were granted on the request of the learned A.R. for the assessee. On 21.09.2016, when the case was called for hearing, neither was anyone present for and on behalf of the assessee nor was any adjournment sought on its behalf. The learned D.R. for Revenue, however, was present and ready to argue the case. In these circumstances, we are of the opinion that the assessee is not interested in pursuing this appeal seriously and we therefore proceed to dispose off the same with the assistance of the learned D.R. and the material on record.
5. In this appeal, the assessee has raised the following grounds: -
"1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the Order u/s 143(3) r.w.s. 253 of the I.T. Act, 1961 of the Assessing Officer charging to tax as Business Income, capital receipt of Rs.20,24,000/- received as assessee's share on sale of common plot of land.
2. The Learned Commissioner of Income Tax (Appeals) erred in confirming the Order u/s 143(3) r.w.s. 253 of the I.T. Act, 1961 of the Assessing Officer charging to tax contribution of Rs.5,79,725/- received from members, incidental on the sale of Plot ("Transfer Fees") which was exempt on the Principle of Mutuality.
3. The assessee craves leave to add, alter or amend the Grounds of Appeal and submit a detailed statement of Facts and Case Laws relied upon at the time of hearing."
6. Ground No. 1:
6.1 According to the learned D.R. for Revenue, the learned CIT(A) had considered in detail the submissions put forth by the assessee in respect of the issue at ground No. 1 which have been summarized at para 3.3(I) to (x) of the impugned order. The learned D.R. submits that in his decision at para 3.4 of the impugned order, the learned CIT(A) after considering the assessee's submissions and the AO's views at para 4.4(i) to (v), has come to 6 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
the conclusion that in its submissions the assessee has not been able to rebut the factual findings rendered by the AO at para 8.2 of his order which had been summarized at para 4.4(i) to (iv) of the impugned order. It is further submitted that the learned CIT(A) upheld the AO's order on this issue as he was of the view that the assessee was not able to produce any material evidence to controvert the AO's view that the profit on sale of land of the assessee and 13 other Cooperative Societies allotted to them by the Bombay Housing Board in 1960 was to be treated as business profit rather than capital gain as contended by the assessee.
6.2.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. The issue for consideration before us is whether the assessee's share of profit in sale of land in the year under consideration, allotted to it alongwith 13 other Cooperative Societies by the Bombay Housing Board in 1960, is to be brought to tax as Business income as held by the authorities below or as capital gains as claimed by the assessee. The facts of the matter as emanate from the record, the observation/findings of the AO, the submissions of the assessee before the learned CIT(A) and the learned CIT(A)'s decision thereon at paras 3.2 and 3.3 of the impugned order are as extracted hereunder: -
"3.2 The facts of the case, observation / findings of the AO in this regard in the assessment order are summarized as under: -
i. The Hon'ble ITAT, 'F' Bench, Mumbai vide their order in ITA No,5864/Mum/2008 dated 25.11.2011 set aside the issue to the file of the AO.
ii. This issue related to sale of common plot of land no. 29 acquired in 1950 jointly by 14 co-op. societies of JVPD Scheme. The portion of sale consideration pertaining to the appellant was Rs. 23,00,000/-. The appellant in its return of income had offered consequent gains as LTCG whereas the sale was treated by the AO as adventure in nature of trade and therefore the entire sale consideration was added as business income.
iii. In their order, the Hon'ble ITAT concurring to their earlier decision vide their order dated 17.11.2005 have directed the AO to decide the issue afresh as per the directions given in the said order dated 17.11.2005.7 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
iv. The AO accordingly issued notice u/s 142(1) dated 02.08.2012 fixing the date of hearing on 13.08.2012. Further notice u/s 142(1) dated 03.09.2012 and 23.11.2012 were also issued. The AO observed that the assessee could not provide any new information and the submission made by the assessee was found to be what was made during the earlier assessment proceedings before the AO as well as before the CIT(A) and Hon'ble ITAT. The reply submitted by the assessee has been reproduced by the AO at para 4, page 4 to 8 of the assessment order.
v. The AO observed that as the submission made by the assessee was not as per the requirement, therefore the assessee was required to submit detailed explanation with regard to the facts found in the agreement dated 26.4.1960 between Bombay Housing Board and each of the 14 Co-operative societies, vide AO's letter dated 14.12.2012, contents of which have been reproduced by the AO at para 5 page 8 & 9 of the assessment order.
vi. Further notices u/s.133(6) were issued to all the 13 co-operative societies who were required to provide the number of plots with specification, plot No., area in sq. yards allotted by Bombay Housing Board to 14 Co-operative societies. The AO observed that out of this, only 6 co-operative societies have responded, out of which, three were assessed to tax with the AO with similar issue. The AO observed that in all the responded cases the matter has been remanded back to the file of AO by the Hon'b1e ITAT as the facts in these cases were also similar to that of the assessee. Names of such cases were listed as under:
a. The Vithalngar Co-op Hsg. Society Ltd. ITO 21(2)(4) b. The Vallabhnagar Co-op Hsg. Society Ltd. ITO 21(2)(4) c. The Nutanlaxmi Co-op Hsg. Society Ltd. ITO 21(1)(3) d. The Navyug Co-op Hsg. Society Ltd.
e. The Swastik Co-op Hsg. Society Ltd.
f. The Azad Nagar Co-op Hsg. Society Ltd.
vii. The AO observed that the above six societies could not specifically give proof of plot allotted to each of the 14 co-operative societies or any document/evidence which could specify the area allotted to them to claim the ownership right on the lease hold land given by the Bombay Housing Board in the year 1960. He further observed that the Board has allotted the total 6,07,036 sq.yds. which could be observed from the schedule I under the head Pubic Amenity which includes Play Ground, Public Hall, Recreation Ground, Shop and public building, municipal offie, police station, fire brigade, post office bank and shops. Under schedule II, for public utility, the area allotted was 815,467 sq.yds which include play ground, secondary school for boys and girls, ladies club, primary school 8 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
for boys and girls, club, hospital, shop and proposed widening of roads of 100 fts. and 60 fts.
viii. The AO observed that the main issue involved in this case was that the assessee society has received amount of share on sale of common plot, as income chargeable to taxes under the head Profit and Gains of Business.
ix. The AO further observed that a similar issue in the case of M/s. Vithalnagar Co-op Hsg. Ltd. had come up for assessment year 1995-96 and the CIT(A) vide order in No.CIT(A)XXX/DC/ Spl.Rg.46/IT.17/97-98 dated 25.5.1999 held that' the activities undertaken by the assessee were similar to the business and amount received from sale were of plot of land were considered as business income. The AO further reproduced the relevant portion at page no. 11 of the assessment order.
x. The AO further observed that as the assessee could not give the area and the actual plot Sr. No., the amount received from the sale of plot No.29 could not be ascertained whether it is an independent plot forming part of the 14 co-operative societies and how the plot No.29 was derived / allotted from the total area of land acquired from the Bombay Housing Board in the year 1960. He further observed that the assessee has failed to prove the piece of land sold not being the part of the land considered for public amenities and public utilities. Further the AO observed that assessee could not prove, as per the board allotments of plots to member (society), the public utilities and the amenities were created out of the total land given to them. He observed that the co-operative formation was created with an aim for construction of residential house with other amenities.
xi. The AO further observed that in this case approximately 53 plots were allotted to various co-operative societies at free of cost or at nominal price by the Bombay Housing Board for common facilities and general utilities which is stated in the assessee's own case in the order passed by the CIT(A)XXI, Mumbai vide order No.CIT(A) XXI/21(2)(4) /IT-350/06-07.
xii. Accordingly the AO treated the amount received on sale of the excess land available with the societies as "Business Income", even though it was not the activity of the co-operative housing society. Accordingly the profit of Rs.23,00,000/- was taxed under the head income from business.
xiii. It is against this action of the AO that the appellant has raised aforesaid two grounds of appeal.
3.3 The submissions of the appellant are summarized as under :-
i. It was submitted that the appellant is amongst 14 co-op. housing societies which were incorporated in and around 1947 for providing housing facilities to middle class persons in suburb of Vile Parle in Mumbai. Thereupon the lands were acquired by Govt.9 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
of Bombay and conveyed to the Bombay Housing Board. In 1960 the Bombay Housing Board earmarked the land conveyed by the Govt. of Bombay State for residential purposes and for common members.
ii. Certain plo6ts were marked as amenities and utility plots which were conveyed jointly to the fourteen societies and each of the fourteen societies held specified shares in each of the common amenities and utility plots, it was submitted that the entire cost of the land (including that held for common amenities) were paid by the societies and ultimately borne by the members in proportion to their respective size of the plot.
iii. It was submitted that the plots held for common amenities were from time to time allotted by 14 societies to various parties for specified purposes and in most cases for very nominal sums or token annual lease of Rs. 1/- per annum.
iv. It was submitted that the area comprising the various amenity plots and the purpose thereof was also specified by the Government as a part of the conveyance of the land to the societies and hence the said societies did not have any discretion in respect of the area of the said amenity plots or the purpose and had to dispose them for the user specified or use them for the said purpose themselves. Thus where plot is disposed for user which is directed by the Government while conveying land, the same cannot tantamount to business.
v. It was submitted that the assessee together with the other 13 Co- op. societies, sold its rights in a common plot on 'AS IS WHERE IS BASIS' during A.Y. 199596 in the manner and under certain compelling circumstances, inter-alia due to encroachment etc. vi. It was further submitted that the acquisition of the land has taken place only once, there being a number of plots for common amenities, the same have been given out to deserving institutions as and when requests were made and found suitable and it was not the case that the same plot was being acquired and sold time and again. It was submitted that sometimes certain amounts are charged from the user for purposes like cinema, petrol pump from where user will be carrying on the business but the fact that a plot has not been given free of cost by itself cannot constitute the same as business activity.
vii. It was submitted that in judicial decisions it has been held that the sale of an item at the prevailing market price or the earning of a surplus over the cost of the asset on sale thereof is not indicative of whether the same was held as a capital asset or stock-in-trade. However shares cannot be treated as stock-in- trade simply because there was appreciation in the value of shares.10 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
viii. The assessee further relying on the decision in the case of Venkatswami Naidu & Co, v. CIT 35 ITR 594 (SC) contended that other things being neutral, ownership of land is prima facie presumed to be on capital account unless there are strong circumstances indicating to the contrary. Therefore the onus is on the revenue to establish that the profit earned in a transaction is within the taxing provisions.
ix. It was submitted that in A.Y. 2004-05 where the assessee society alongwith the 13 other Co-op. societies had sold a plot of land to the promoters of the proposed co-op. housing society to be formed of the Maharashtra Cadre of the Indian Police Services, the CIT(A) had treated the transaction under the head capital gains and since there was no change in the nature of transaction undertaken during 1995-96 and 2004-05 it was requested to treat transaction in A.Y. 1995-96 as capital gains as treated and offered by the assessee.
x. The assessee in the alternative and without prejudice submitted that what should be added to the total income is Rs. 7,28,000/- since the assessee had already offered Rs. 15,72,000/- as capital gains at the time of filing the return of income.
3.4 I have considered facts of the case, oral contentions and written submissions of the appellant as against the observations / findings the AO in the assessment order. The contentions and submissions of the appellant are being discussed and decided as under:-
i. It is clear from the directions setting aside the issue to the file of the AO that the Hon'ble. ITAT required the AO to decide the issue afresh as per the directions given by the Tribunal vide their order dated 17.11.2005.
ii. During the course of the assessment proceedings, the AO required the appellant to furnish the details. The AO observed that such details furnished by the appellant were similar to what was made during the earlier assessment proceedings before the AO as well as before the CIT(A) and Hon'ble ITAT. The names and addresses of 11 co-op. societies were submitted to the AO. The AO at para 5 of the assessment order has clearly observed that the submission was not as per the requirement and therefore the assessee was required to submit detailed explanation with regard to the facts found in the agreement dated 26.04.1960 between the Bombay Housing Board and each of the 14 co-op. societies. iii. The AO also issued notices u/s 133(6) to all the 13 co-operative societies who were required to provide the number of plots with specification, plot No., area in sq. yards allotted by Bombay Housing Board to 14 Co-operative societies. However only 6 co- operative societies have responded, out of which, three were assessed to tax in the charge of the AO himself with similar issue. The AO has observed that in all the cases where response was 11 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
received the matter has been remanded back to the file of AO by the Hon'ble ITAT as the facts in these cases were also similar to that of the assessee.
iv. The AO has further observed that the six societies who responded could not specifically give proof of plot allotted to each of the 14 cooperative societies or any document/ evidence which could specify the area allotted to them to claim the ownership right on the lease hold land given by the Bombay Housing Board in the year 1960. The AO further mentioned the total area of land allotted by the Board for the public amenities and public utility as per Schedule I and II.
v. The AO has further mentioned that as the assessee could not give the area and the actual plot Sr. No., the amount received from the sale of plot No.29 could not be ascertained whether it is an independent plot forming part of the 14 co-operative societies and how the plot No.29 was derived / allotted from the total area of and acquired from the Bombay Housing Board in the year 1960. The AO has further observed that the assessee has failed to prove the piece of land sold not being the part of the land considered for public amenities and public utilities. He further has observed that the assessee could not prove, as per the board allotments of plots to member (society), the public utilities and the amenities were created out of the total land given to them. He has further observed that the co-operative formation was created with an aim for construction of residential house with other amenities and approximately 53 plots were allotted to various co-operative societies at free of cost or at nominal price by the Bombay Housing Board for common facilities and general utilities. Under such facts and circumstances the AO treated the receipt of money from transfer of plot by the assessee as business income. vi. In the submission made, the appellant has not been able to rebut factual observation given by the AO in para 8.2 of, his order and. summarized here in above.
vii. It is further seen from the records available that in the case of Jai Hind CHS Ltd. similar receipt in the A.Y. 1995-96 was treated as business income as against income from capital gains offered by the society. In the similar fact, in the case of Hatkesh CHS Ltd. the receipt from the transfer of plot in A.Y. 1995-96 was treated as business profit in the first appellate level.
viii. From the above facts it is clear that the prominent and only view available before the AO at the time of making decision was that such profit has been treated as business profit and not capital gains in the case of similarly placed societies. The Ld. AR of the appellant has not been able to produce any contrary view taken by the AO of other co-op. societies similarly placed either during the course of assessment proceedings or during the instant proceedings. The Ld. AR rather than dealing with the basic 12 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
question has contended that the consequent gain arisen from sale of plot should be treated as capital gains.
ix. No new facts have been brought to my knowledge to cause departure from the findings of my Ld. Predecessor in this case when he examined the issue in detail in the first round of appellate proceedings. This is also in consonance of the findings of the AO in treating receipts as business receipts in A.Y. 95-96 and the appellant has not been able to give .any contrary decision in the case of any of the remaining 13 co-op. societies. x. The appellant has referred to the decision in first appeal for A.Y. 2004-05 in the case of the assessee. In this regard it is stated that in that year issue was regarding allowance of cost of acquisition of the plot and not of capital gain v/s business income. xi. Accordingly the action of the AO in treating the gain on sale of land is treated as business income of the society and is therefore upheld. Accordingly Ground No. 1 is dismissed." 6.2.2 From a careful appreciation of the assessee's submissions before the authorities below, the AO's views and the learned CIT(A)'s views and findings on the issue before us, it is seen that, as submitted by the learned D.R. at para 5.1 (supra), inspite of the AO allowing the assessee adequate opportunity and requiring it to furnish specific details in respect of all the 14 cooperative societies who were allotted land by the Bombay Housing Board vide agreement dated 26.04.1960, such as total area allotted to them to claim leasehold rights on the land, the number of plots allotted with specification, plot numbers, area in sq. yards, etc. the assessee was not able to furnish the same. Notices issued under section 133(6) of the Act by the AO to the 14 cooperative societies involved also could not elicit any suitable response from most of them. It is seen that even the six societies which responded could not specifically give proof of plot allotted to each of the 14 cooperative societies or documents/evidence which could specify the area allotted to them or that public utilities and public amenities as per Schedule-I and II were created by them thereon. In this factual matrix the case, we are of the considered view and agree with the findings of the learned CIT(A) that as per the submissions put forth by it, the assessee has not been able to controvert that factual findings of the AO in leading him to treat the receipt of money by the assessee from transfer of plot as business income. We, therefore, uphold the findings of the 13 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
authorities below and consequently dismiss ground No. 1 of assessee's appeal.
7. Ground No. 2.
7.1 In this ground, the assessee had challenged the learned CIT(A)'s order in upholding the AO's action in bringing to tax as business income an amount of `5,79,725/- received from members as 'transfer fees' incidental to sale of plot which is against the principle of mutuality.
7.2 According to the learned D.R. for Revenue, that the amount of `5,79,725/- was received by assessee from transfer of structure by Shri Prakesh R. Tolat and Gautam Tolat on plot No. 26 to Mehta & Shah is not disputed. The learned A.R. for the assessee submitted that the learned CIT(A) was of the view that since the new owners, Mehta & Shah were enrolled as nominal members with no voting rights or any rights or interest in the property of the assessee society except for the flat purchased and occupied by them, this was not in consonance with the principles of mutuality. In coming to this finding placed reliance on the decision of a Coordinate Bench of this Tribunal in the case of Hatkesh Co-operative Housing Society Ltd. 9ITA No. 479 to 500/Mum/2011) which had considered the judicial pronouncements cited by the assessee and consequently upheld the AO's action in bringing the 'transfer fees' received by the society to tax in its hands.
6.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. The facts of the case, the observations/findings or the AO and learned CIT(A) as laid out at paras 4.2 to 4.4 of the impugned order are extracted hereunder: -
"4.2 The facts of the case, observations/findings of the Assessing Officer are summarized as under: -
i. The society has received transfer fees of Rs.5,02,000/- for giving No objection certificate.
ii. Shri Prakash R Tolat and Shri Gautham R Tolat being owners of the original plot No.26 sold the structure standing on Plot No.26 to Mehta & Shah. In turn Mr. Shah paid transfer fees of Rs.2,50,000/- for getting consent from the societies and also paid donation of Rs. 10,00,000/-.14 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
iii. The original owner Mr. blat and brothers filed a suit in the co-
operative court for allotting permission of FSI to Mehta & Shah. As the outcome of the court proceeding was not brought before the AO, the transfer fees received from Mehta was treated as business income of the society.
iv. Accordingly the transfer fee of Rs.5,02,000/- received by the society was taxed in the hands of the assessee. However it is seen that in the computation of the assessment order the amount added s Rs. 2,50,000/- only.
v. It is against this action of the AO that the appellant has raised aforesaid ground of appeal.
4.3 The submissions of the appellant are summarized as under :-
i. It was submitted that the Ld. AO has treated the Transfer Fees received of Rs. 2,50,000/- from the incoming member as business income as against claimed as exempt on the grounds of mutuality by the appellant.
ii. The appellant relied on the order of ITAT, Mumbai Bench in the case of Suvarna-nagar CHS Ltd. for A.Y. 2002-03 wherein the amount of transfer fee received was held to be exempt on the basis of principles of mutuality.
iii. The assessee further relied upon the decision of Hon'ble Bombay High Court in the case of Sind Co-op. Housing Society vs. ITO, 317 ITR 147 (Born) and in the case of Mittal Court Premises Co- op. Society vs. ITO 320 ITR 414 (Bom).
4.4 I have considered facts of the case, oral contentions and written submissions of the appellant as against the observations / findings of the AO in the assessment order. The contentions and submissions of the appellant are being discussed and decided as under:-
i. It is the fact of the case that the question amount has been received by the appellant society from transfer of structure by Shri Prakash R. Tolat and Shri Gautham R. Tolat on plot no. 26 to Mr. Mehta & Shah. This amount has been added by the AO as transfer fee.
ii. In these set of facts it is clear that Shri Prakash R Tolat and Shri Gautham R Tolat being owners of the original plot No.26 sold the structure standing on Plot No.26 to Mehta & Shah. In turn Mr. Shah paid transfer fees of Rs.2,50,000/- for getting consent from the societies and also paid donation of Rs.10,00,000/-. The original owner Mr. Tolat and brothers filed a suit in the co- operative court for allotting permission of FSI to Mehta & Shah. As the outcome of the court proceeding was not brought before the AO and the transfer fees received from Mehta was treated as business income of the society. Accordingly the transfer fee received by the society was taxed in the hands of the assessee.15 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
iii. The new owners of the structure viz. Mr. Mehta & Shah would have been enrolled as nominal members of the society. The nominal members who are recognized, as such, in respect of the occupancy and ownership of the flat. sold to them, have no voting rights and they have no rights or interest on the property of the society except the flat purchased and occupied by them. This aspect clearly is in breach of concept of mutuality in so far as nominal members are discriminated against the members. It is also seen in the facts discussed here in above that the money which is charged from the nominal members are used for giving benefits to the members. This also lacks in the concept of mutual concern.
iv. It is further stated that the money which is collected by the society from the members as well as nominal members must be getting deposited in the fixed deposits or the saving deposit. The interest earned thereon is normally used for administrative expenses of the society whereby the benefits are given to the members and such benefits are also enjoyed by the nominal members which have no voting rights, interest or rights of the property of the society including the plot on which the flat purchased by the nominal member exists. This aspect also goes against the concept and principles of mutuality. v. The Hon'ble ITAT, H-Bench, Mumbai in their order dated 04.09.20 13 in the case of Hatkesh Co-op. Housing Society Ltd.
vs. ACIT 21(1), Mumbai in ITA No. 494-500/Mum/2011 for A.Y. 1996-97 and 2000-01 to 2002-03, 2006-07 & 2007-08 after detailed discussion, on the facts similar to those of the appellant, have held that the concerned society does not represent the mutual concern and to such activities the concept of mutuality cannot be applied. In their detailed order the Hon'ble ITAT have considered the various case laws including ones relied upon by the appellant.
vi. The appellant has relied upon the decision of Hon'ble Mumbai ITAT in the case of Suvarna Nagar CHS Ltd. for A.Y. 2002-03. Such order was passed by E.-Bench of Hon'ble Mumbai ITAT on 11.04.2014. In this regard it is stated that the Hon'ble Mumbai ITAT in the case of Hatkesh CHS Ltd. have in detail, discussed about the principles of mutuality and in this decision the decisions of Bombay High Court relied upon by the assessee have been referred to and considered. In the order of Suvarnanagar CHS Ltd. for A.Y. 2002-03 dated 11.04.2014, the Hon'ble ITAT did not have occasion to consider the decision in the case of Hatkesh CHS Ltd. (Supra).
Vii In view of facts of the case, discussion here in above, further relying on above decision of Hon'ble ITAT in the case of Hatkesh Co-op. Housing Society Ltd. vs. ACIT 21(1) (Supra) and respectfully following the same, the contentions and submissions 16 ITA No. 4257/Mum/2014 Vallabhnagar Co-operative Housing Society Ltd.
made by appellant are not found to be acceptable and are therefore rejected."
7.3.2 From the discussion of the learned CIT(A) in the impugned order on this issue (supra), it is not disputed that an amount of `5,79,725/- was received by the assessee society from the transaction of the structure on plot No. 26 by Prakash R. Tolat and Gautam R. Tolat to Mehta & Shah. This fact was not brought to the notice of the AO. On detection thereof, the AO brought the said transfer fee received by the assessee to tax in the assessee's hands. In respect of the assessee's claim that the said transfer fee received by it was not exigible to tax based on the concept of mutuality, we find that the learned CIT(A) on examination of the facts on the issue rightly concluded that the concept of mutuality did not operate in this transaction. Mehta & Shah who paid the said transfer fee were only nominal members of the assessee society and except for the structure purchased and occupied by them, had no voting rights or interest in the property of the society. Following the decision of the Coordinate Bench in the case Hatkesh Co-op Housing Society Ltd. (supra) wherein the Coordinate Bench in a detailed order, after considering judicial pronouncements relied on by the assessee, which were on similar facts as those of the case on hand, we also hold that the assessee does not represent mutual concerns and to such activities the concept of mutuality cannot be applied. In this factual and legal matrix of the case, we concur with the findings of the authorities below that the said 'transfer fee' received by the assessee was to be taxed in its hands. Consequently, the assessee's ground at S. No. 2 is dismissed.
8. In the result, the assessee's appeal for A.Y. 1995-96-10 is dismissed.
Order pronounced in the open court on 28th September, 2016.
Sd/- Sd/-
(Sandeep Gosain) (Jason P. Boaz)
Judicial Member Accountant Member
Mumbai, Dated: 28th September, 2016
17 ITA No. 4257/Mum/2014
Vallabhnagar Co-operative Housing Society Ltd.
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -32, Mumbai
4. The CIT - 21, Mumbai
5. The DR, "F" Bench, ITAT, Mumbai By Order //True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.