CIT vs. Darbhanga Mansion CHS Ltd (Bom): ITA No. 1474 of 2012 dated 18/12/2014: www.itatonline.org:
The
assessee, a Co-operative Housing Society, received a sum of Rs.
39,68,000 on account of transfer of flat and garage and credited it to
‘general amenities fund’ as well as ‘repair fund’. The assessee claimed
that the said receipt is exempted from tax on the ground of mutuality.
However, the Assessing Officer held that the principles of mutuality
will not apply. However, the CIT(A) and Tribunal allowed the assessee’s
claim by relying on Sind Co-operative Housing Society vs. ITO; 317 ITR
47 (Bom).
On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:
i)
The very issue and the very question was raised repeatedly in the case
of the assessee society. Repeatedly, the Revenue has failed in
convincing the Tribunal that Sind Co-operative Housing Society will not
cover the Society’s case. The contribution is made to the repair fund or
to the general fund and credited as such. While it may be true that it
is occasioned by transfer of a flat and garage, yet, we do not see how
merely because there was cap or restriction placed on the transfer fees
or the quantum thereof, in this case the principle of mutuality cannot
be applied.
ii) The underlying principle and of a co-operative
movement has been completely overlooked by the Revenue. The Revenue
seems to be of the view that a Co-operative Housing Society makes
profit, if it receives something beyond this amount of Rs. 25,000. There
has to be material brought and which will have a definite bearing on
this issue. If the amount is received on account of transfer of a flat
and which is not restricted to Rs. 25,000/- but much more, then
different consideration may apply. However, in the present case, what
has been argued and vehemently is the amount was received by the Society
when the flat and the garage were transferred. Therefore, it must be
presumed to be nothing but transfer fees. It may have been credited to
the fund and with a view to demonstrate that it is nothing but a
voluntary contribution or donation to the Society, but still it
constitutes its income. However, for rendering such a conclusive finding
there has to be material brought by the Revenue on record. Beyond
urging that it has been received at the time of a transfer of the flat
and credited to such a fund will not be enough to displace the principle
laid down in the decision of Sind Cooperative Housing Society.
iii)
The attempt of the Revenue therefore is nothing but overcoming the
binding judgment of this Court. In the present case, the Commissioner
and the Tribunal both have held that the receipt may have been
occasioned by the transfer but the principle of mutuality will still
apply.
iv) It is a typical relationship between the member of
the Co-operative Society and particularly a Housing Society and the
Society which is a body Corporate and a legal entity by itself that is
forming the basis of the principle laid down by the Division Bench.
Co-operative movement is a socio economic and a moral movement. It has
now been recognised by Article 43A of the Constitution of India. It is
to foster and encourage the spirit of brotherhood and co-operation that
the Government encourages formation of Co-operative Societies. The
members may be owning individually the flats or immovable properties but
enjoying, in common, the amenities, advantages and benefits. The
Society as a legal entity owns the building but the amenities are
provided and that is how the terms “flat” and the “housing society” are
defined in the statute in question. We do not therefore find any reason
to deviate from the principle laid down in Sind Co-operative Housing
Society’s case and which followed a Supreme Court judgment.”
