Harbour Heights Coop Hsg Soc Ltd, Mumbai vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No. 106 /Mum/2013 ( नधा रण वष / Assessment Year 2004-05

Harbour Heights Coop बनाम/ Income Tax Officer Housing Society Limited, 12(2)(2), Vs. N.A. Sawant Marg, 134 Aayakar Bhavan, Colaba, Mumbai 400020. Mumbai - 400 005. थायी ले खा सं . /PAN : AAAJHO164N (अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Shri Homiyar Madan Respondent by : Shri Love Kumar

ु वाई क तार ख / Date of Hearing सन : 08-01-2015 घोषणा क तार ख /Date of Pronouncement : 22-04-2015 -04-2015[

आदे श / O R D E R PER R.C. SHARMA, AM :

This is an appeal filed by the assessee is directed against the order passed by the ld. CIT(A) - 10, Mumbai dated 25-10-2012 for the A.Y. 2004-05 in the matter of order passed u/s 143(3) r.w.s. 148 of the Income Tax Act, 1961.

2. The only grievance of the assessee relates to the taxability of transfer fee received from members of housing society in excess of Rs. 25,000/- from each member.

3. Rival contentions have been heard and record perused. The facts of the case in brief are that the assessee is a co-operative housing society and the 2 ITA 106/M/13

only issue involved in this case is the taxability of a sum of Rs. 7,48,100/- received by the assessee on account of transfer fees in respect of four flats in the society. The A.O. has brought the said amount to tax by following the decision of the Tribunal in the case of Panchratna Co-op. Hsg. Society. The transfer fees so received from the members of the society were treated by the A.O. as "income from other sources" and did not allow the benefit of principle of mutuality. By the impugned order, the ld. CIT(A) held that only transfer fees of Rs. 25000/- per member is eligible for benefit of mutuality and accordingly he after giving relief of Rs. 1 lac being deduction on account of transfer fees admissible in accordance with the bye-laws @ Rs. 25,000/- per flat and balance was brought to tax net.

4. The ld. A.R. placed on record copy of Tribunal's order dated 24-12-2009 in ITA No. 784/Mum/2008 for A.Y. 2003-04 in assessee's own case wherein similar issue was decided in favour of assessee.

5. On the other hand, the ld. D.R. relied on the order of the ld. CIT(A).

6. We have considered the rival contentions, carefully gone through the orders of authorities below and found that exactly similar issue has been decided by the Tribunal in assessee's own case in assessee's favour holding as under:-

"Let us now apply the various tests which are to be considered for applying the principle of mutuality to a case of a co-operative housing society based on our earlier discussion

(1) Is there any commerciality involved?

This has to be found from the bye-laws of the co-operative housing society. In case of the co-operative housing society, admittedly there is no commerciality involved. Once there is no commerciality involved the first test of profitability does not exist. The first requirement of mutuality is therefore met.

(2) From the moneys received are the services offered in the nature of profit sharing or privileges, advantages and conveniences. In case of a 3 ITA 106/M/13

co-operative housing society, the only activities which it can carry out in terms of its bye-laws are basically maintenance of its property which includes building or buildings.

The subscription and or contributions received by the members can only be expended for the purposes of maintenance and providing other privileges, advantages and conveniences to its member in terms of its bye-laws. Another test of mutuality is thus satisfied.

(3) Are the participants and contributors identifiable and belong to the same class in the case of co-operative housing society. The class of members is clearly identifiable. Members are ordinary members of associate members. The participants and contributors are the members. The members may come in or go out. The fact that only some members from those who contributed may participate in the surplus, as held by the Supreme Court is irrelevant as long as the class is identifiable. This test is also satisfied in the case of a housing co-operative society.

(4) Do the members have the right to share in the surplus and do they have a right to deal with its surpluses. In terms of the bye-laws, it is only the members who have a right to share in the surplus. Under the M.C.S. Act, no part of the funds, as provided in S.64 can be paid by way of bonus or dividend or otherwise distributed among its members except as provided therein. Under S 67 there is a limit on the dividend to be paid on liquidation. Under section 110 of the M/C.S. Act, the surplus can only be dealt with in the manner provided therein which includes any member or devoted to objects provided by the bye-laws or be transferred to another society with similar object. Rule 90 of the rules provide how the surplus is to be divided. The surplus then can be distributed in terms of the bye-laws to members and or by operation of law to another society having the same objective. In other words yet another test of mutuality is satisfied.

Once these tests are satisfied, in our opinion there can be no doubt that the principle of mutuality will apply to a co-operative housing society which has its predominant activity, the maintenance of the property of the society which includes its building or buildings and as long as there is no taint of commerciality, trade or business."

7. We further find that recently the Hon'ble Bombay High Court in the case of CIT vs. Darbhanga Mansion CHS Ltd. in Income tax Appeal No. 1474 of 2012 order dated 18-12-2014 has decided exactly similar issue in favour of assessee. It was clearly held by the Hon'ble jurisdictional High Court that transfer fees in excess of Rs. 25,000/- received by the Co-operative Housing 4 ITA 106/M/13

Society is covered by the principle of mutuality. Respectfully following the decision of Hon'ble jurisdictional High Court as well as the Tribunal in assessee's own case, we do not find any merit in the order of ld. CIT(A) for bringing to tax the transfer fees received by the Housing Society in excess of Rs. 25,000/- per flat/member.

13. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 22nd April, 2015.

आदे श क घोषणा खल ु े #यायालय म% &दनांकः 22-04-2015 को क गई ।

Sd/- sd/- (VIVEK VARMA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER मुंबई Mumbai; &दनांक Dated 22-04-2015

व.6न.स./ RK , Sr. PS

आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु7त(अपील) / The CIT(A) - Concerned,, Mumbai

4. आयकर आय7 ु त / CIT --Concerned, Mumbai

5. :वभागीय 6त6न<ध, आयकर अपील य अ<धकरण, मुंबई / DR, ITAT, Mumbai E Bench

6. गाड@ फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

स या:पत 6त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai