Income Tax Appellate Tribunal - Mumbai
The Juhu Vile Parle Development Co-Op ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
'J' BENCH, MUMBAI.
BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI R.K. PANDA, AM
I.T.A.No.3132/Mum/2009
(Assessment Year: 2004-05)
The Assistant Commissioner of Vs. The Juhu Vile Parle
Income Tax, Circle-21(1), Development Co-operative
R.No.601, Pratyakshakar Housing Association Ltd.
Bhavan, BKC., Bandra(E), 51, Jaihind Club, Jaihind
Mumbai-400 051. Society, N.S.Road No.11,
JVPD Scheme, Juhu,
Vile Parle(W), Mumbai-400 049
PAN: AABFT5293P
(Appellant) (Respondent)
Appellant by : Mr. Sumeet Kumar, Sr. DR
Respondent by : Mr. S.S.Phadkar
ORDER
Per R.V.Easwar, President: This is an appeal by the revenue and the only ground taken is as under:-
"On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made by the Assessing Officer of Rs.74,17,895/- on protective basis under the head 'capital gain'.
2. The appeal relates to the assessment year 2004-05. The assessee is a co-operative society managing the common affairs of 14 societies situated at Juhu Vile Parle Development Scheme. It filed a return of income for the year ended 31.03.2004 showing income from property, business and other sources. The total income shown was Rs.115/- only. The return was accompanied by internal audit report indicating various heads of income and expenditure.
3. While completing the assessment under section 143(3) of the Income Tax Act, the Assessing Officer noticed that the object of the society was to take possession of the common properties 2 ITA No.5797/M/09 from the managing committee of the 14 co-operative societies under JVPD scheme and to hold them and settle the terms of the disposal thereof by grant, lease, sale etc. and to consider proposals for the disposal of any common property for the general and beneficial advantage of the 14 societies. The common properties were found to be held by one or the other of the 14 co-operative housing societies under the lease deed executed in their favour by the Bombay Housing Board. The lease was for a period of 999 years. The 14 societies in turn have leased out a portion of their land as independent plots to various constituent society members. All the 14 societies were independently registered as co-operative housing societies. The Assessing Officer found that the assessee's role was only to manage and maintain the common lands belonging to all the societies and for this purpose the assessee was collecting funds from all the societies and incurring common expenses out of the same. Such expenses were in the form of property tax, water charges, security, electricity etc. On these facts, the Assessing Officer concluded that the assessee society was nothing but an entity created to collect funds from the 14 housing societies and apply them for their benefit and the benefit of their members at large. The Assessing Officer further noticed that during the relevant previous year plot no.4/A7 was transferred to the promoters of Vasundhara Co-operative Housing Society Ltd. which belonged to the Maharashtra Cadre of Indian Police Service under compulsory acquisition since it was a reserved plot as per the original deed of conveyance executed by the Bombay Housing Board. The original deed of conveyance was executed in April, 1990 in favour of the 14 co-operative housing societies who jointly owned them. For transfer of the plot to the Vasundhara Co-operative Housing Society Ltd. during the relevant previous year a sum of Rs.74,17,895/- was realised by the assessee. The Assessing Officer considered that the 3 ITA No.5797/M/09 aforesaid amount represented capital gains in the assessee's hands. The assessee pointed out that the amount was received for and on behalf of the 14 members societies which fact was clearly mentioned in the conveyance deed that the amount was received for the use, for the welfare of the JVPD scheme and the amounts stood in the balance sheet and was shown as deposits received from the 14 members societies. The Assessing Officer after considering the assessee's plea took the view in para 11 of the assessment order that the amount received for transfer of the plot has been camouflaged by routing the same through the accounts of the assessee society though the income by way of capital gains should be considered in the hands of the 14 members societies only. Having stated thus, he opined in para 12 of the assessment order that as a protective measure the amount received by the assessee needs to be brought to tax in its hands. He accordingly brought the entire amount of Rs.74,17,895/- to tax in the assessee's hands as income by way of capital gains.
4. On appeal, the CIT(A) noticed that conveyance deed was executed between the proposed society of the Police Officers and the 14 society members on 14.05.2003 for a total consideration of Rs.77,14,920/- and that the 14 members societies agreed to deposit the sale consideration with the assessee in proportion to their ownership in the plot. The amount was so deposited with the assessee society which after deducting the expenses incurred on development and maintenance of the plot credited the balance of Rs.74,17,895/- in the ratio of the ownership rights to the accounts of the 14 societies members in its books of account. The CIT(A) further found that the memorandum of understanding had been entered into between the 14 members societies and the proposed Vasundhara Co-operative Housing Society and finally conveyance deed was executed on 4 ITA No.5797/M/09 14.05.2003. On these facts, he held that the Assessing Officer was right in considering the net sale proceeds of Rs.74,17,895/- for the purpose of working out the capital gains, but held that if the 1.4.1981 value was adopted as the cost of acquisition in terms of section 48, and indexation benefit is also allowed, there would be net capital loss of Rs.57,65,385/-. In this view of the matter, he deleted the addition of capital gains on protective basis in the assessment of the assessee.
5. The revenue is in appeal to contend that the assessee is practically the owner of the plot and since the monies are still lying with it, not having been handed over to the 14 societies, the Assessing Officer was right in holding that the assessee should be protectively assessed in respect of the capital gains. On the other hand, the learned counsel for the assessee submitted that the assessee was merely holding possession of the plot, that it was not the owner of the plot and there was no transfer of the plot by the assessee and therefore there was no question of any capital gains being assessed in the hands of the assessee on protective basis.
6. On a careful consideration of the facts and the rival contentions, we are inclined to uphold the decision of the CIT(A). It is not the case of the department that the assessee was the owner of the plot and therefore it should be assessed to capital gains. There is no dispute that the plot was owned by 14 different co-operative housing societies in specific shares and that the assessee was merely put in possession of the plot for the purpose of common management. The plot was originally allotted to the 14 co-operative housing societies by the Bombay Housing Board under an indenture dated 26.04.1960 (pages 47 to 74 of the paper book) and in the light of this indenture it cannot be said that the assessee became the owner of the plot.
5 ITA No.5797/M/09The byelaws of the assessee society, a copy of which is placed at pages 105 to 112 of the paper book, shows that the 14 co- operative housing societies were holding the residential plot, which was part of the land in JVPD scheme. The proportionate share of these societies in the property and their liability to pay the cost of development of the property is also mentioned in the byelaws. There is no document to which our attention was drawn on behalf of the department transferring the ownership of the plot to the assessee society. The finding of the CIT(A) which is not challenged before us is that the conveyance deed was executed by the 14 societies members on 14.5.2003 in favour of Vasundhara Co-operative Housing Society Ltd. formed by the Maharashtra Cadre of IPS. Earlier to this conveyance, there was a memorandum of understanding entered into between these parties on 26.1.2000, a copy of which is at pages 75 to 104 of the paper book. A perusal of the memorandum of understanding shows that it was executed between the 14 co-operative housing societies, the assessee and the promoters of Vasundhara Co- operative Housing Society Ltd. Clause (iii) of the preamble states that the society was formed by the 14 societies and registered under the Maharashtra Co-operative Societies Act to take possession of the property from the managing committees of the 14 co-operative housing societies and to hold and utilise the property for providing suitable utilities and amenities such as play ground, schools, colleges etc. and to do all such acts and things as are of common interest to the 14 societies. The memorandum of understanding does not show the assessee as a owner of the property. Capital gains can arise to a person only if he owns the plot and transfers the same for consideration. The assessee not being the owner of the plot but merely holding possession thereof on behalf of the 14 co-operative societies and managing the same for the common benefit of the member societies cannot be considered as the owner of the property in 6 ITA No.5797/M/09 order to bring the sale price to tax in its hands as capital gains. This is also supported by the accounting entries which show that the respective shares of the 14 housing societies in the sale consideration, after deducting the common expenses, has been divided in proportion to their respective shares in the property and credited to their accounts and shown as deposits in the assessee's balance sheet. In the absence of any transfer by the assessee, no capital gains can be assessed in its hands even on protective basis.
7. We thus affirm the decision of the CIT(A) but for different reasons and dismiss the appeal filed by the revenue with no order as to costs.
Order pronounced in the open court on this 4th day of November, 2010.
Sd/- Sd/-
( R.K. PANDA ) ( R.V.EASWAR )
Accountant Member President
Mumbai, Dated 4th November, 2010.
somu
Copy to :
1. The Appellant
2. The Respondent
3. The CIT-City-21,Mumbai.
4. The CIT(A)-XXI, Mumbai
5. The DR 'J' Bench
/True Copy/ By Order
Asstt. Registrar, I.T.A.T, Mumbai