|COURT:||Bombay High Court|
|CORAM:||A. A. Sayed J, S. C. Dharmadhikari J|
|CATCH WORDS:||co-op housing society, mutuality, transfer fees|
|COUNSEL:||F. V. Irani|
|DATE:||December 18, 2014 (Date of pronouncement)|
|DATE:||December 22, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Transfer Fees recd by Co-op Hsg Soc from incoming & outgoing members (even in excess of limits) is exempt on the ground of mutuality|
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 AO 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. On appeal by the department to the High Court HELD dismissing the appeal:
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. 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 voluntarily 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. 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. 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 recognized 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.
sorry what is happening to revenue! Are they forgetting what is cooperative movement? common Amenities provided by the society is attracting Art 43A of the constitution of india.
Revenue need be a meaningful set up if not it would harm itself and its purpose!
This is one more instance, in the long never ended series, of vexing ‘battle of wits ‘staged in appeal forums/ courts, bringing to surface otherwise avoidable in fructuous litigation. In the larger public interests, it is now left to the Law and Revenue Ministries, being duty bound, to become alive to the resulting hardships flowing from such frivolous disputes being perpetuated. More so, in the light of / taking useful guidance from the serious strictures lately passed by the Bench in HERE
CIT vs. Kishan Ratilal Choksey (Income Tax Appeal No. 1001 of 2011 decided on 17 April, 2014)
Abuse of process of law –filing of appeals/revisions by the Tax Authorities in ‘covered’ matters
“It has now been recognized by Article 43A of the Constitution of India….. The members may be owning individually the flats or immovable properties but enjoying, in common, the amenities, advantages and benefits.”
As independently viewed, however, according to the scheme of the State law on “Flats”, and of the separate law on Apartments as well, if closely read and strictly understood, the purchaser is entitled to and given an exclusive possession and enjoyment of ONLY the within ‘area’/interiors of the Flat /Apartment. The rest of the building complex / areas, that is even the exteriors of the building, inclusive of what are described as “Common areas and Facilities”,- other certain ‘limited areas’ such as in the basement for car park, – are vested in the members as a body, for common possession and enjoyment of them all. Be that as it may, if to proceed on the a fore stated premise, the principle of ‘mutuality’ upheld by the court should apply with a greater force.
The court has, in support of/strengthening the view taken, referred to Article 43A of the Indian Constitution. In fact, the further improvements of the law on housing co-operatives lately brought in, in the form of, inter alia, the 97th Amendment of the Constitution, could be regarded to have added all the more credence /strength to fortify the said view.