Income Tax Appellate Tribunal - Mumbai
The Prisedency Chs Ltd, Mumbai vs Department Of Income Tax on 30 December, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'C' MUMBAI
BEFORE SHRI J. SUDHAKAR REDDY(AM)
REDDY(AM) AND SMT. ASHA VIJAYARAGHAVAN (JM)
ITA. Nos. 1953 & 1954/Mum/2010
Assessment years 1990 - 1991 & 1992-93
Income Tax Officer, Wd.21(1)(4) The Presidency CHS Ltd.,
R.No.60, 6th Floor, Pratyakshakar Vishnu Prasad Desai Bhavan,
Bhavan 2nd Floor, V L Mehta Marg,
Bandra Kurla Complex, Bandra, , Vs. Vile Parle (W),
Mumbai. Mumbai-400 056.
PAN-AAAAT 4479M
(Appellant) (Respondent)
ITA. No. 1957/Mum/2010
Assessment year-2004-05
Income Tax Officer, Wd.21(1)(4) The Presidency CHS Ltd.,
R.No.60, 6th Floor, Pratyakshakar Vishnu Prasad Desai Bhavan,
Bhavan 2nd Floor, V L Mehta Marg,
Bandra Kurla Complex, Bandra, , Vs. Vile Parle (W),
Mumbai. Mumbai-400 056.
(Appellant) (Respondent)
ITA. Nos. 1955/Mum/2010
Assessment year-1995-06
Income Tax Officer, Wd.21(1)(4) The Presidency CHS Ltd.,
th
R.No.60, 6 Floor, Pratyakshakar Vishnu Prasad Desai Bhavan,
Bhavan 2nd Floor, V L Mehta Marg,
Bandra Kurla Complex, Bandra, , Vs. Vile Parle (W),
Mumbai. Mumbai-400 056.
(Appellant) (Respondent)
ITA. Nos. 1956/Mum/2010
Assessment year 1999 - 2000
Income Tax Officer, Wd.21(1)(4) The Presidency CHS Ltd.,
R.No.60, 6th Floor, Pratyakshakar Vishnu Prasad Desai Bhavan,
Bhavan 2nd Floor, V L Mehta Marg,
Bandra Kurla Complex, Bandra, , Vs. Vile Parle (W), Mumbai-400 056.
Mumbai.
2 Presidency Co. Op. Hsg. Soc.
Assessee by: Shri P. K Parida
Department by: Shri Surendra Kumar
ORDER
PER BENCH ITA Nos. 1953 & 1954/Mum/2010 These two appeals are filed by the revenue against the Order of the Commissioner of Income Tax (Appeals)-32, dated 30th December, 2009 wherein the revenue has raised the following grounds of appeal.
1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting premium on transfer fee of Rs. 6,94,820/-- received relying on the decision of the Mumbai High 6,94,820/ Court in the case of Sind Coop. Hsg. Soc. (2009) 26 DTR (Bom)
149.
2. i) In doin doingg so, the Ld. CIT (A) has erred in ignoring certain paras of the above cited judgment wherein it is categorically stated that case--law would pertain to the asst. years prior to Notification this case dated 9/8/2001 of Govt. of Maharashtra for coop. Hsg. Societies.
Societies.
In the instant case, the asst. year being previous to this notification, notification dated 27/11/1989 would be applicable which specified a maximum of upto Rs. 1000/ 1000/-- as transfer premium payable as per the then Bye Bye--laws of Society.
ii) In the instant instant case, the asst. Year in question pertains to period prior to the Notification dated 27/11/1989 of Govt. of Maharashtra for C.H.S. By ignoring this point, the Ld. CIT (A) has failed to appreciate that principle of mutuality will not apply in the case of premium on transfer fees as the Society has charged more amount than the permissible limits as per the bye bye--laws of Coop. Hsg. Societies or Govt. Notification & therefore the society is bound to repay the same & if it retains such excess amount, then will it will be in the nature of profit making & such sum will be exigible to tax.
3 Presidency Co. Op. Hsg. Soc.
3. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the A.O. be restored.
2. The brief facts of the case are that the appellant is a co- operative housing society. It received income from lease rents and from interest on FDs. The assessee filed its return of income declaring total income of Rs. Nil on 13th November, 1990 and 2nd November, 1992 for A.Y. 1990-91 and A.Y. 1992-93 respectively. The assessment was originally completed u/s. 143(3) on 20th March, 1991 assessing total income of Rs. 15,58,793/- for A.Y. 1990-91 and on 31st January, 1994 assessing a total income of Rs. 7,45,000/- for A.Y. 1992-93 making additions on account of subsidy for painting, transfer fees and also transfer fees received in advance. Subsequently, the Ld. CIT (A) allowed assessee's appeal except confirming addition on account of transfer fee. The Hon'ble ITAT confirmed all the reliefs except remitting the issue of transfer fee to the file of the A.O. to be decided on the basis of decision of Walkeshwar Triveni CHS Ltd. - 88 ITD 159.
3. In the fresh assessment proceedings, the assessee was asked to give details of transfer fees paid by the transferors and the transferees. In reply, the assessee stated that the transfer fees paid by the transferors could be presumed to be 50% of the total transfer fees received by the assessee society since the matter is very old and no evidence can be produced regarding the contribution of transferor and transferees. Accordingly, the assessment was completed assessing the total income at Rs. 6,94,820/- and Rs. 4,49,050/- for A.Yrs. 1990-91 and 1992-93 respectively. Aggrieved the assessee carried the matter in appeal before the CIT(A).
4. Before the CIT(A) the learned AR of the assessee had placed reliance on the judgment of High Court of Bombay in the case of Sind Co.Op. Hsg. Society Limited (317 ITR 47, 62-63) and contended that 4 Presidency Co. Op. Hsg. Soc.
this judgment had settled the issue of taxability of any amount received as transfer fees on the concept of Mutuality and has set to rest the controversy regarding its payment by the transferor or transferee. The ld. CIT(A) held that the amount received by the assessee on account of transfer fees is not taxable on the hands of the assessee.
5. Aggrieved by the order of the CIT(A), the revenue in appeal before the ITAT.
6. The ld. D.R. has relied on the order of the AO and he brought to our attention in the order of the ITAT in assessee's own case in ITA No. 64 of 1978 reported at 216 ITR 321 wherein it has been held as follows:
"Amount received by co-operative housing society as its share from out of sale consideration received by members from transfer of lease hold rights by them to third parties is revenue receipt."
7. The learned Counsel for the assessee has strongly relied on the orders of the Ld. CIT (A) and has canvassed that the issues in dispute are covered by the decision of ITAT, Mumbai Benches in assessee's own case for A.Y 2001-02 in ITA No. 3440/Mum/05 vide its order dated 30th March, 2011.
8. We have heard the learned representatives of the parties and perused the record as well as gone through the orders of the authorities below. We find that the Ld. CIT(A) by following the judgment of Sind Co.Op Hsg. Society Ltd, held that the amount received by the assessee for A.Yrs. 1990-91 and 1992-93 of Rs. 6,94,820/- and Rs. 4,49,050/- respectively on account of transfer fees is not taxable in the hands of the assessee on the grounds of 5 Presidency Co. Op. Hsg. Soc.
mutuality. Moreover, we find that the issue is covered by the decision of ITAT in assessee's own case in AY 2001-02 (supra) wherein the ITAT held as under:-
"6........................The Hon'ble Bombay High Court in the case of Sindh Co-op. Hsg. Society Vs. CIT 317 ITR 47 and In the case of Mittal Court Premises CHS Ltd. V/s ITO 320 ITR 414 (Bom.) have held that transfer fees received from members is exempt on the concept of mutuality.
8.1 Further in the case of Sind Co. Op. Hsg. Soc. Vs ITO Mumbai 317 ITR 47 it has been held as follows:
In CIT Vs Presidency Co. Op. Hsg. Soc. Ltd. 216 ITR 321 (Bom.) in the lease deed of the society, there was a clause whereby the member was to pay a portion of the excess amount received to the society while transferring their rights to another. The only issue considered there was the character of income. The Court held that these were no capital receipts but were assessable to tax as income of the society. The issue of mutuality was neither argued nor considered."
9. Therefore the objection of the DR that the decision in the case of Presidency Co. Op. Hsg. Soc. 216 ITR 321 i.e. the assessee's own case has not been brought to the notice of the Bench while deciding for the A.Y. 2001-02 is overruled, as the Bombay High Court has decided by applying the principle of mutuality which was not considered in the case of the assessee in the earlier year.
10. Since the issue in dispute is materially identical to that of the case decided by the ITAT in assessee's own case for AY 2001-02, we respectfully follow the order of the ITAT in AY 2001-02 and since the Order of the learned CIT (A) is in consonance with the Order of the jurisdictional High Court (supra), we hereby uphold the order of CIT(A) in holding that the amount received by the assessee for A.Yrs. 1990-91 and 1992-93 of Rs. 6,94,820/- and Rs. 4,49,050/- respectively on 6 Presidency Co. Op. Hsg. Soc.
account of transfer fees is not taxable in the hands of the assessee on the grounds of mutuality. Accordingly, the grounds raised by the revenue are dismissed.
11. In the result, appeals of the revenue are dismissed.
ITA No. 1957/Mum/201012. In the assessment order, the A.O. has observed that the appellant has received TDR during the year of `.50,40,775/-, which was claimed as exempt on the principles of mutuality. In this regard, the A.O. has asked the appellant to explain as to why TDR premium of `.50,40,775/- shall not be taxed in view of the fact that the additions already made in the assessment for A.Ys. 2001-01, 2001-02, 2002-03 and 2003-04 were confirmed y the CIT(A). In its submission, the appellant has relied upon the decision of the Ld. CIT(A) Commissioner of Income Tax(A) in its own case on the similar issue decided in its favour for the A.Y. 1999-2000. This submission has already been considered by the Commissioner of Income Tax(A) himself while disposing off the appellant's appeal for A.Y. 2001-02. It was also noted by the A.O. that although the decision of the CIT(A) for A.Y. 1999-2000 was pronounced in favour of the appellant, the Department is in further appeal before the ITAT which is still pending. The appellant has further relied on the decision of the Hon'ble ITAT in the case of Jethalal D. Mehta vs. DCIT. However, the said decision has not been accepted by the Department which has filed further appeal before the Mumbai High Court, which is also pending. The A.O. has further observed that while dealing with the appeal for A.Y. 2001-02 in relation to the disallowance of transfer fees and TDR premiums, the CIT(A) has elaborately discussed in his order and confirmed the said additions by 7 Presidency Co. Op. Hsg. Soc.
following the decision of the Hon'ble ITAT in the case of M/s. Walkeshwar Triveni Co-op. Hsg. Soc. Ltd. 88 ITD 159. Similar disallowances have been confirmed by the CIT(A) relying on the same findings given by him in his appellate order for A.Y. 2001-02.
13. The A.O. further noted in the case of Smt. Hansa M. Mehta, assessed with ITO-21(!)(2), and a joint lease right holder in respect of plot No.5 of M/s. Presidency CHS Ltd. during the period under consideration and prior two years, it was seen that she along with one Shri Jaswantrai Parekh have exploited the developmental potential of plot no.5, the Presidency CHS Ld. By constructing a multi-storied structure abutting their bungalow. Consequently, the super-structures constructed were sold in the open market to persons unrelated and unconnected with the society who are presently the residents of such residential units. These people enjoy the common amenities of the Presidency CHS Ltd. This position clearly brings out the fact the Presidency CHS, has collected the premium on TDR to permit the members to reap the commercial benefits arising to them by way of utilizing the TDR for commercial development. Accordingly, transferable development right received of `.50,40,775/- was brought to tax as income from other sources u/s.56.
14. Before the Ld. CIT(A) the AR of the assessee made elaborate arguments which are at 5.2. to 5.3 at pages 5 to 8 of the CIT(A)'s order.
15. The Ld. CIT(A) after considering the arguments of the AR held as follows:
"I have considered the arguments of the appellant and have carefully gone through the judgement cited above. Respectfully following the judgement of Sind Co. Op. Hsg. Society Limited (317 ITR 47), it is held that the amount received by the 8 Presidency Co. Op. Hsg. Soc.
appellant of `.50,40,775/- as premium towards usage of transferable development rights is not taxable in the hands of the appellant on the grounds of mutuality. Accordingly, ground No.3 of the appeal is allowed."
16. Aggrieved, Revenue is in appeal before us and has raised the following grounds:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting premium on transfer fee 6,94,820/-- received relying on the decision of the Mumbai of Rs. 6,94,820/ Court High Cou rt in the case of Sind Coop. Hsg. Soc. (2009) 26 DTR (Bom) 149.
2. i) In doing so, the Ld. CIT (A) has erred in ignoring certain paras of the above cited judgment wherein it is categorically stated that case--law would pertain to the asst. years prior tto this case o Notification dated 9/8/2001 of Govt. of Maharashtra for coop. Hsg. Societies.
In the instant case, the asst. year being previous to this notification, notification dated 27/11/1989 would be applicable which specified a maximum of upto Rs. 1000/ 1000/-- as tran transfer sfer premium payable as per the then ByeBye--laws of Society.
ii) In the instant case, the asst. Year in question pertains to period prior to the Notification dated 27/11/1989 of Govt. of Maharashtra for C.H.S. By ignoring this point, the Ld. CIT (A) has failedfailed to appreciate that principle of mutuality will not apply in the case of premium on transfer fees as the Society has charged more amount than the permissible limits as per the bye bye--laws of Coop. Hsg. Societies or Govt. Notification & therefore the societysociety is bound to repay the same & if it retains such excess amount, then it will be in the nature of profit making & such sum will be exigible to tax.
3. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the A.O. be restored.
17. We find that the issue is covered by the decision of ITAT in assessee's own case for the A.Y. 2001-02 wherein it has been held as follows:
9 Presidency Co. Op. Hsg. Soc.
The last issue is the taxability of TDR Premium. The TDRs are not purchased by the society. A member may purchase TDRs. When the member uses the TDR, the society charges a premium from the member for the additional FSI used by the member. The undisputed fact is that the amount in question by way of TDR premium is received by the society only from the member. Thus in our considered opinion, the decisions of the jurisdictional High Court in the case of Sind Co-op. Hsg. Society (supra) and in the case of Mittal Court Premises CHS Ltd. (supra) cover the issue and the receipt is not taxable on the ground of mutuality. Thus this ground of the assessee is allowed."
Respectfully following the decision of the Co ordinate Bench which in turn has followed the decision of the Jurisdictional High Court, we dismiss the Revenue's appeal.
1955/M/2010- 1955/M/2010-A.Y. 1995- 1995-96
18. While completing the assessment for A.Y. 1995-96, the ITO Ward 21(1)(4), Mumbai initiated penalty proceedings u/s. 271(1)(c) of the I.T. Act. It is seen from the penalty order that the AO considered the gain of `. 20,73,000/- as business profit on the sale of land. The appellant society received the land from Government and thereafter sold this for the purpose other than for which it was originally requisitioned. The income representing the share of profit from the sale was held to be in the nature of business profit arising out of adventure in the nature of trade and accordingly assessed as business income. The portion of the sale consideration amounting to `. 20,73,000/- was therefore, held liable to be taxed u/s. 28 of the I.T. Act as business income. It was confirmed as such my Ld. CIT(A) in the first round. Regarding disallowance of various expenses, only the get together expenses of `. 55,397/- was deleted by the CIT(A) and he confirmed the other additions on account of expenses, such as:
10 Presidency Co. Op. Hsg. Soc.
1. Subsidy for painting of `. 12,000/-
2. Good house keeping of `. 4,27,000/-
3. Lonawala trip expenses of `. 22,367/-
19. The ld. AR of the appellant stated that the AO has applied Sec. 28 on a transaction which is clearly covered u/s. 45 of the I.T. Act. In any case, the AO's action is subject to debatable interpretation. The appellant is not involved in any kind of plotting business where plots are purchased and sold. Having transferred those plots to the eligible members, the appellant has not traded with the object of earning profits. The appellant adopted one approach in respect of this gain whereas the Department had a different point of view in respect of the same transaction. This does not amount to concealment of income or furnishing of inaccurate particulars of income.
20. The quantum disallowance of `.55,397/-, `.22,367/-, `.12,000/- and `.4,29,000/- are related to common benefits. The amount represents the expenditure made by the society and there is not dispute regarding the expense having been incurred. Therefore, the additions are not in the nature of concealed income.
21. On appeal, the Ld. CIT(A) held as follows:
"I have carefully considered the issue. It is a fact that the appellant has entered into a single transaction of transfer of plot of land in the last many years, which was traded as transfer of capital asset and profit was shown as capital gains in the appellant's return of income. The same was treated as business profit by the A.O. and confirmed as such by my Ld. CIT(A) Predecessor. It is not a case where the appellant was engaged in the trading in plots on a regular or semi regular basis. Therefore, the action of the appellant in forming a belief that such one-off transaction resulted in capital gains cannot be imputed with a malafide motive. Similarly, certain expenses claimed to have 11 Presidency Co. Op. Hsg. Soc.
been essential for the functioning of the society but not allowed as such can also not be interpreted to be an addition in the nature of concealed income. In other words, the additions made in the appellant's society are such where the interpretation of a certain income being business or capital gains is involved. Also expenses incurred have not been proved to be bogus, its purpose is also subject to interpretation and in such circumstances, the addition on both the counts cannot be held to be int eh nature of concealed income or resulting from filing of inaccurate particulars of income. Under these circumstances, the A.O. is directed to delete the penalty levied of `.4,65,887/- u/s. 271(1)(c) of the Act."
22. Aggrieved the Revenue is in appeal before us and raised the following ground:
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of `. 4,65,887/- ;levied u/s. 271(1)(c) of the I.T. Act, 1961"
23. We heard both the parties. In the case of Reliance Petro Products Ltd., the Apex Court has held as follows:
Merely because the assessee had claimed the expenditure,which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract penalty u/s.271(1)(c) of the Act. If we accept the contention the revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty. That is clearly not the intendment of the legislature"
24. Further penalty u/s. 271(1)© cannot be levied when two views are possible with respect to a claim i.e. when the issue is debatable, as held in the case of CIT Vs Harshvardhan Chemicals & Minerals ltd. 259 ITR 212 and Durga Kamal Rice Mills Vs CIT 265 ITR 25. We therefore delete the penalty imposed by the AO.
12 Presidency Co. Op. Hsg. Soc.
25. In the result, the revenue's appeal is dismissed.
ITA No. 1956/M/2010-1956/M/2010- A.Y. 1999- 1999-2000
26. While completing the assessment for the A.Y. 1999-2000, the ITO Ward 21(1)(4), Mumbai imposed penalty u/s. 271(1)© of the I.T. Act, 1961. The AO has concluded that the assessee has concealed its income to the extent of `. 15,85,727/- on account of transfer fees and disallowance of various expenses and has levied penalty of `. 5,70,137/-.
27. The Ld. AR of the appellant stated that various expenses have been disallowed by the AO. These were not held to be bogus, but was considered as not allowable. Further regarding the transfer of TDR to its members, the appellant had under a bonafide belief claimed the same as capital receipt not exigible to tax and on the basis of application of doctrine of mutuality, the appellant had not offered the same for taxation. Further, the transfer fees received of `. 3,00,000/- was not also offered for taxation on the ground of mutuality . The Ld. AR drew my attention to the decision of Hon'ble Bombay High Court in the case of Sind Co. Operative Hsg. Soc. Ltd Vs ITO Ward-1(7), Pune - 317 ITR 47, in which it was held that as the amount exclusively used for the benefit of members a class and charging of transfer fees has no element of trading or commerciality and members alone have right to share surplus, the receipt of transfer fees is not liable to tax.
28. The quantum disallowance of expenses of `. 12,85,727/- are related to common benefits. The amount represents the expenditure made by the society and there is no dispute regarding the expense having been incurred. Therefore, the additions are not in the nature of concealed income.
13 Presidency Co. Op. Hsg. Soc.
29. On appeal, the Ld. CIT(A) held as follows:
"I have considered the arguments of the appellant and have carefully gone through the judgement cited above. Respectfully following the judgement of Sind Co. Op. Hsg. Soc. Ltd., it is held that the amount received by the appellant on account of transfer fees is not taxable on the grounds of mutuality. Further, it is not a case of the AO that the expenses are bogus or they have been booked only for inflating the expenses. Whether an expense is made for the purpose of the society or not is a debatable issue and as long as the same is not proved to have never been incurred, concealment penalty cannot be levied in respect of the same. As a result, the AO is directed to delete the penalty levied of `. 4,65,887/- u/s. 271(1)(c) of the I.T. Act."
30. Aggrieved, Revenue is in appeal before us and has raised the following ground:
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty of `. 5,50,995/- levied u/s. 271(1)(c) of the I.T. Act, 1961"
31. We heard both the parties. In the quantum appeal it has been held as follows:
"The TDRs are not purchased by the society. A member may purchase TDRs. When the member uses the TDR, the society charges a premium from the member for the additional FSI used by the member. The undisputed fact is that the amount in question by way of TDR premium is received by the society only from the member. Thus in our considered opinion, the decisions of the jurisdictional High Court in the case of Sind Co- op. Hsg. Society (supra) and in the case of Mittal Court Premises CHS Ltd. (supra) cover the issue and the receipt is not taxable on the ground of mutuality. Thus this ground of the assessee is allowed."
14 Presidency Co. Op. Hsg. Soc.
32. Therefore, the quantum appeal having been allowed, the penalty has no leg to stand. Further with respect to the expenses (i) the expenses have not been found to be bogus by the AO (ii) whether the expenses made for the purpose of the society or not is a debatable issue (iii) there is no dispute that the expenses have been incurred. Therefore, taking into consideration the above factors, we find that concealment penalty is not leviable.
33. In the result, the Revenue's appeal is dismissed.
Pronounced in the open Court on this 29th day of April, 2011.
Sd/- Sd/-
(J. SUDHAKAR REDDY) (ASHA VIJAYARAGHAAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 29th April, 2011
Rj
Copy to :
1. The Appellant
2. The Respondent
3. The CIT-concerned
4. The CIT(A)-concerned
5. The DR 'B ' Bench
True Copy
By Order
Asstt. Registrar, I.T.A.T, Mumbai
15 Presidency Co. Op. Hsg. Soc.
Date Initials
1 Draft dictated on: 27.04.2011 Sr. PS/PS
2. Draft placed before author: 27.04.2011 ______ Sr. PS/PS
3. Draft proposed & placed _________ ______ JM/AM
before the second member:
4. Draft discussed/approved by _________ ______ JM/AM
Second Member:
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 on which file goes to AR
10. Date of dispatch of Order: _________ ______