[Mittal Court Premises Co-operative Society Ltd. v. ITO
(Bom.), ITA No. 999 of 2004, dated 17-7-2009]
In this case the assessee is a co-operative society of
commercial premises. As provided in the bye-laws, the assessee had received
transfer fees from the transferees and non-occupancy charges from the members.
As regards the transfer fees the Tribunal relied on the decision of the
Special Bench in the case of Walkeshwar Triveni Co-operative Housing
Society Ltd v. ITO, (2004) 88 ITD 159 (Mum.) (SB) and held that the
transfer fees being received from the transferee is not exempt on the basis of
the principles of mutuality. As regards the non-occupancy charges the Tribunal
held that the principles of mutuality would be applicable, but subject to the
10% limit prescribed by the State Government.
On appeal by the assessee, the Bombay High Court referred
to its judgment in the case of Sind Co-op. Housing Society v. ITO, (Bom.),
ITA No. 931 of 2004, dated 17-7-2009 (see August issue) and held as under :
“(i) In Income-tax Appeal No. 931 of 2004 along with
other appeals which we have decided by the separate judgment today, we have
set out the various facts and consequently, the Government Notifications
involved as also the provisions of the Act and the Rules and as such, it is
not necessary to refer to them once again. Suffice it to say that the
Notification issued by the State of Maharashtra putting restrictions on the
amount of transfer fee when the member desires to transfer his shares or
occupancy rights applies only in respect of housing residential societies.
In the instant case, the appellants before us are not housing residential
societies and consequently, those Notifications would not be applicable.
(ii) Insofar as the transfer fee is concerned, the
Tribunal held that it is covered by the decision of the Special Bench in the
case of Walkeshwar Triveny Co-operative Housing Society Ltd. The Tribunal
also noted that the transferees were admittedly not members of the assessee
society on the date on which the payments were made to the assessee society.
The transferees were admitted as members of the society and flats were
entered in their names only after the impugned payments were made to the
assessee society. It was also found that the amounts were paid in excess of
the Government Notifications and consequently, the amount paid as transfer
fees are exigible to tax.
(iii) There is an agreement by which the amount is paid
by the transferee. Insofar as the society is concerned, even if receipt is
issued in the name of transferee it is the nature of admission fee which
could be appropriated only on the transferee being admitted. Merely because
the amount may be appropriated earlier, it will not lose the character of
the amount being paid by a member. As held by us in Income-tax Appeal No.
931 of 2004, the same reasonings will apply to the appellants/petitioners
before us. In the circumstances, question as framed has to be answered in
the negative in favour of the assessee and against the Revenue.
(iv) That brings us to the issue insofar as non-occupancy
charges are concerned. Non-occupancy charges are again payable by a member
on account of the fact that the member is not occupying premises. Bye-laws
themselves provide for non-occupancy charges. Contribution therefore, is by
the member. Object of the contribution is for the purpose of increasing the
society’s funds, which could be used for the object of the society. Object
of the society as noted earlier is to provide service, amenities and
facilities to its members. In these circumstances, in our opinion, the
principles of mutuality as discussed in Income-tax Appeal No. 931 of 2004
must also apply.
(v) The learned counsel for the Revenue contended that
the amount of non-occupancy charges over and above 10% of the maintenance
charges should be held to be assessable to tax. In our opinion, the 10%
limit is not applicable to the commercial society like the appellant
herein.”
