TMI Blog2017 (2) TMI 1497X X X X Extracts X X X X X X X X Extracts X X X X ..... ment rights not land or building - No authority is required to hold that terms land or building or both do not include development rights and that in the case before there was transfer of such rights only. In light of the above discussion and respectfully, following in the case of Raj Ratan CHS [ 2011 (2) TMI 96 - ITAT MUMBAI] we hold that FAA was not justified in taxing the sum in the hands of the assessee, as same was the income of the members of the society. GOA. 2 is decided in favour of the assessee. Addition of receipt towards corpus fund - FAA held that payment by the developer to the society could not be treated as payment towards corpus of the society, that the AO had rightly held that the disputed amount was to be assessed as income from other sources - AR argued that the assessee had received only during the year, that the CIT(A) had wrongly assessed the income under the head income from other sources - HELD THAT:- We find that the FAA had held that ₹ 3. 50 crores only were to be taxed during the year under consideration, that the income was to be taxed under the head income from other sources. It is a fact that society had not given possession of land to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PER Rajendra A.M.- Challenging the order, dated 11/01/2016, of the CIT (A)-33, Mumbai the assessee and the Assessing Officer (AO)have filed cross appeals for the year under consideration. Assessee-a Co-operative Housing Society (Society) filed its return of income on 30/07/2012. 2. During the course of hearing before us, the Departmental Representative(DR)stated that the AO filed additional grounds of appeal with regard to re-opening of the assessment proceed - ings. He stated that no new or factual material was required to be referred to for deciding the legal issues raised in the additional grounds. The Authorised Representative(AR)of the assessee left the issue to the discretion of the Bench. We find that the AO has raised only legal grounds, hence , we admit the same. Brief facts: 3. Assessee-Society is registered under the Maharashtra Cooperative Society Act, 1960. It owned 12 three floored buildings comprising of eight residential Flats in each building on a plot of land measuring around 9973. 19 m . The plot of land on which the said buildings were constructed was held by it as a lessee under a long-term lease of 90 years, beginning from 16/05/1977, vide l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice was returned by the postal authorities with the remark intimation posted-unclaimed . However, the AO treated it a valid service of notice. Thereafter, it was noticed that assessee had filed its return belatedly on 30/07/2012 for the year under appeal declaring income of ₹ 1. 25 lakhs. It was also found by the AO that subsequently the case was also selected for scrutiny under CASS on the basis of the pieces of AIR information. He issued a notice u/s. 143(2) on 23/09/2013 and completed the assessment u/s. 143 (3) r. w. s. 147 of the Act on 27/03/2014, determining its income at ₹ 103. 58 crores. 4. First ground of appeal, filed by the assessee, is about reopening of the assessment u/s. 147 of the Act. Additional grounds filed by the AO also deal with re-opening and issue of notice u/s. 143(2)of the Act. 4. 1. In the appellate proceedings before the First Appellate Authority (FAA), the assessee argued that for the AY. under appeal time-limit to issue notice as per the provisions of section 143(2)available to the AO was up to 30/09/2013 and the time-limit for completing the scrutiny assessment u/s. 143(3) was available up to 31/03/2014, that the notice u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, that in the case under consideration notice u/s. 148 was issued before intimation u/s. 143(1) was issued, that there was no fresh material to issue reopening notice, that the judicial forums are unanimous that if time limit available u/s. 143(3) is available, a notice u/s. 148 should not be issued, that in the order sheet, in the reasons recorded, in the notice issued for levying penalty u/s. 271(1)(B)of the Act, the AO had clearly mentioned that assessment was passed u/s. 143(3)r. w. s. 14. He referred to pages 401-455 of the PB and relied upon cases of Jagmohan Sharma (ITA/1384/Kol/2013, dated 05. 09. 2014, AY :2006-07); M/s. Roy Co. (ITA/166/Kol/2013 dated 05. 09. 2014, AY: 2005-06) and Tcp Ltd. (323ITR346). He further contended that the members were paid compensation by the developer in their individual capacity, that the receipt of such income was disclosed by them in their respective returns, that corpus fund contributed by developer to the Society was also offered in its return, that amounts received by members of the society could not be assessed in the hands of the assessee, that provisions of Section 50C were not applicable, that the society was not the owner of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan building was not demolished, that builder was given right to develop only the rear portion of the property, that in that matter members had entered into agreement with the developer. In his rejoinder, the AR argued that the department cannot approbate and reprobate at the same time, that for service of notice it cannot be argued that there was no service of notice when the AO himself had talked of constructive service. 4. 4. We have heard the rival submissions and perused the material. We find that in the present case development-agreement was executed by the society and the developer, that the developer had made payments to the flat owners in their individual capacity, that contribution towards corpus of the society was also paid by developer, that the society as well as individual member had offered receipt of income in their returns, that the AO and the FAA were of the view that payment made by the developer was to be taxed in the hands of the society. 4. 4. 1. Here, it will be useful to take notice of the case of Raj Ratan Palace Co-operative Housing Society(supra), wherein the Tribunal had dealt with the similar issue. It that matter the society consisted of 51 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and it did not absolve the society from the taxability of the entire proceeds. Thus, a sum of ₹ 3, 02, 16, 828/- was added by the Assessing Officer . On appeal, the Commissioner(Appeals) upheld the addition made by the Assessing Officer. After considering the submission of the both the sides, the Tribunal has held as under - It was apparent from records that under the agreement dated 18-5-1996 the assessee society gave permission to the developer to construct on the society s land. No part of the land was ever transferred to the society. The society merely gave permission to the developer to carry out development in the rear side of the existing building R after demolishing a small bungalow which was in existence. Clauses 12 13 of the agreement dated 18-5-1996 clearly mentioned that the developer would pay compensation to the society and members. The sum was quantified at ₹ 2, 00, 16, 828/-. Out of this only a sum of ₹ 2, 51, 000/- was paid to the society. Admittedly, the remaining sum and the additional sum payable under clause 13 of the agreement dated 18-5-1996 was paid to the individual members of the society under 51 different agreements. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em to tax in their individual returns. In fact, copies of orders of the Tribunal in respect of individual members who received amount from the developers and offered to tax was also placed before the Tribunal. 3. As the decision is based on a finding of fact which is not challenged by the Revenue as being perverse, we see no reason to entertain the proposed question of law. 4 Accordingly, appeal is dismissed with no order as to costs. We find that facts of the case before us are almost similar to the facts of Raj Ratan Palace CHG(supra). As stated earlier, the developer had made payments to the Society as well as to the members and they had offered the amounts, received by them, for taxation. In our opinion, once the members had shown the income received by them in their hands there can - not be any justification for taxing the same in the hands of society. No double taxation and no double deduction is one of the well recognised and fundamental principles of taxation. In our opinion, signing of agreement by the members or society cannot be base for taxing of income. As per the scheme of the Act, income received by any person or income accrued to him has to be taxed. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with the scheme framed for the co-operative societies undergoing re-develo pmnent, that the society had assisted the developer to inflate its development expenses, that the society had broken the string of principle of mutuality, that it had accepted contribution to corpus fund from non-member i. e. developer, that it had deposited the money in REC Bond, that it was violation of Societies Act, that it received compensation on transfer of asset for distribution among the members, that the disputed sum was not received in accordance with the permissible parameters of law applicable to the Societies, that it was just a receipt of non recurring nature, that same was to assessed under the head income from other sources. He further added interest amount of ₹ 1. 43 crores receivable on the deposit to the income of the assessee. 8. 1. Before the FAA, the assessee made elaborate submissions. After considering the available material the FAA held that payment of ₹ 15 crores by the developer to the society could not be treated as payment towards corpus of the society, that the AO had rightly held that the disputed amount was to be assessed as income from other sources, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by it should be allowed. After considering the submission of the assessee the FAA held that payment of ₹ 9. 04 crores, made by the developer, was application of income accrued and arisen to the assessee society during the year under consideration. He referred to cases of Sitaldas Tirthdas (41ITR367), Vibhuti Glass works (177ITR439) and MK Brothers Pvt. Ltd. (63ITR28) and held that the AO had correctly taxed ₹ 9. 04 crores paid by developer to MHADA on behalf of the society as income from other sources. 9. 2. Before us, the AR argued that the developer had to pay MHADA certain sums for developments, that AO had wrongly held that premium paid by the developer was the income of the assessee. Alternatively, it was argued that even if it was to be treated as income taxable in the hands of the society, same should have been allowed as an expense, that nothing would survive for taxation. The DR left the issue to the discretion of the Bench. 9. 3. We find that the developer had made payment to MHADA, that the AO treated it as income of the assessee. In our opinion, payment made to a government agency in persuance of an agreement cannot be treated inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, were not taxable for the AY 2011-12. Confirming his order , we hold that there is no infirmity in that order and he has rightly deleted the addition made on account of corpus fund and interest accrued on it. First Ground of appeal is decided against the AO. 12. Next is about allowing deduction u/s. 80P of the Act. During the assessment proceedings, the AO held that the society had violated the principles of mutuality, that the provisions of section 80P were not applicable to a Co-op. Housing Society, that the assessee had made deposits out of money received against redevelopment agreement and from different channels, that same was not permissible under byelaws of the society, that it had transferred a sum of ₹ 2. 97 crores from the corpus fund to the P L account, that such investment in banks would not qualify for deduction u/s. 80P of the Act. Finally, he denied the assessee the benefit of deduction u/s. 80P. 12. 1. During the appellate proceedings the assessee referred to provisions of section 80P(2) of the Act especially 80P(2)(c)(ii) and 80P(d) of the Act and relied upon the case of Daoba Coop Sugar Mills Ltd. 230/774, Ashok APT CHS Ltd. (ITA/2845/M/2010), Sagar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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