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(a) Taxability of money received as assessee's share on sale of common plot.

(b) Taxability of Transfer fees received from members.

3. The assessees' herein are co-operative housing Societies. The assessees are one of the fourteen co-operative housing societies formed in 1947 for providing housing to middle class persons in the then distant suburb of Vile Parle, Mumbai. The Bombay Housing Board allotted housing plots to these housing socities in the year 1960. The Bombay Housing Board also earmarked certain plots as amenities and utilities plots. These plots were conveyed to the fourteen housing societies and each of the fourteen societies held specified shares in each of the common amenities and utility plots. The area comprising the various amenity plots and the purpose thereof was also specified by Government while conveying the land to the Societies.

(e) Two housing societies did not respond to the AO.

6. These assessees contended before the AO that they are not engaged in the regular business of purchase and sale of plots and further, they have held the plots for more than 10 years in common. It was further submitted that during the year relevant to AY 2004-05, another common plot was sold to Indian Police Service and the proceeds were taxed as Capital gains only. However, the AO, after examining the objects of the housing societies, took the view that they have been formed for undertaking purchase and sale of plots. Accordingly, the AO took the view that the intention of the society was to earn profit on sale of plot. Accordingly he assessed the entire proceeds as business income of the assessee. The Ld CIT(A) also confirmed the same. In the case of Suvarnangar co-op housing society, the AO also took the view that the assessee could not prove the ownership of the plot and hence he took the view that entire income is assessable under the head Business.

A.R took support of decision rendered by Hon'ble Supreme Court in the case of Raj Dadarkar & Associates (394 ITR 592), wherein it was held that object clause will not determine the nature of receipt and the circumstances of each case should be taken into account to decide the nature of receipt. The Ld A.R further submitted that these assessees have only allotted the plots, which were acquired from the Government, to its members in the past. These societies have sold the common plots for a School @ 1 per sq.ft. It had sold a plot to Indian Police Service and the receipts were assessed as Capital Gains in the assessment year 2004-05 by the AO himself. Accordingly, the Ld A.R submitted that the tax authorities are not justified in assessing the receipts, being share of the assessees on sale of a common plot, as business income.

8. The Ld D.R, on the contrary, submitted that the objects clause of the assessees clearly states that they have been formed to undertake trading in plots. He further submitted that the assessees have not furnished any material to show the impugned plot formed part of common amenity plots and further whether the amenities, if any, were created on the common plots as envisaged by the Government. These assessees have also failed to prove the ownership of plot. Accordingly, the Ld CIT(A) has held that the amount received is on sale of excess land available with the societies and hence the same is rightly assessed as Business Income.