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Pathare Prabhu co-op. Hsg. Soc. Ltd. Versus ITO-15 (2) (2) , Mumbai

2015 (11) TMI 1301 - ITAT MUMBAI

Amount received towards the development fund - Held that:- From the record found that amount so received by the assessee was within the framework of law of the society, thus, there was no profit motive attributed to the society. In order to bring the contribution within the net of tax, there should exist a pervading profit motive. The transferrable development rights premium was a payment made by a member of the assessee, as a consideration for being permitted to make an additional utilization o .....

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s (for giving NOC) as liable to tax - Decided in favour of assessee.

Taxing land premium on transfer in excess - Held that:- This issue is also covered by the decision of Hon’ble Bombay High Court in the case of Sind Cooperative Housing Society, [2009 (7) TMI 15 - BOMBAY HIGH COURT] as held Payments were made under the bye-laws of the assessee which constituted a contract between the assessee and its members which was voluntarily entered into and voluntarily conducted as a matter of c .....

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when the assessee from the funds received applied the moneys received towards maintenance of the society and providing the members with usual privileges, advantages and conveniences. Thus, the principle of mutuality was applicable to the assessee which had as its predominant activity, the maintenance of the property of the society which included its buildings) and as long as there was no taint of commerciality, trade or business, the receipt of transfer fees was not liable to tax - Decided in fa .....

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rs under consideration, therefore, all the appeals were heard and are now disposed off by this consolidated order. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a registered cooperative Housing Society assessed to tax before the ITO Ward-15(2)(2), Mumbai. In the A.Y.2003-04 The AO issued a notice u/s.143(2) of the Act pursuant to the order of Tribunal, restoring the issues under appeal to the file of AO and giving directions to the AO to examine .....

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inst. However, the AO treated contribution towards special development funds for giving NOC as income from other sources liable to tax. By the impugned order the CIT(A) confirmed the action of AO treating such receipt as income from other sources. 4. Ld. AR placed on record various decisions of the Tribunal wherein contribution towards special development funds was held to be received from participators, who has contributed to the common fund when there is complete identity between the body of c .....

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t funds for the benefit of society s members was decided. From the record we found that following were the purpose of utilization of the special development fund as per resolution of the special general meeting of the society held on 17-12-2006. 1) Construction of Society's Cultural Centre. 2) Beautification of the Cultural Centre from time to time. 3) Health care and clinical care for the Member and their families. 4) Gymnasium, library and Indoor game facilities to the members & their .....

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ied. 6. From the record we also found that amount so received by the assessee was within the framework of law of the society, thus, there was no profit motive attributed to the society. In order to bring the contribution within the net of tax, there should exist a pervading profit motive. For this purpose reliance can be placed on the decision of Hon ble Bombay High Court in the case of Surat district Cotton Dealers Association, 35 ITR 121, wherein it was held that to establish the mutuality, th .....

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herein the Hon ble High Court held as under :- The assessee was a co-operative housing society formed of plot owners, who had obtained a lease of land from the Maharashtra Housing Board. The assessee had entered into sub-lease agreements with its members. The assessee passed a resolution by which it resolved that if any member desired to avail of the benefit of transferable development rights for carrying out construction or additional construction on his/her plot, the member should apply for a .....

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the income of the assessee. On appeal to the High Court :- Held, dismissing the appeal, that the transferrable development rights premium was a payment made by a member of the assessee, as a consideration for being permitted to make an additional utilization of the FSI on the plot allotted by the assessee. The assessee which looked after the infrastructure, required the payment of the premium in order to defray the additional burden that must be cast as a result of the utilization of the FSI. T .....

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(for giving NOC) as liable to tax. Accordingly, the AO is directed to delete the addition so made in all the years under consideration. 9. The next ground taken by the assessee in the assessment year 2003-04 and 2005-06 pertains to taxing land premium on transfer in excess of ₹ 25,000/- taxed by the AO. 10. Ld. AR placed on record order of the Tribunal in case of The Friends Co-op Housing society Ltd., ITA No.962/Mum/2010, order dated 22-10-2010, wherein exactly similar issue was dealt wi .....

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er (Placitum 44-46, page 62-63 of 317 ITR) : Let us now apply the various tests which are to be considered for applying the principle of mutuality to a case of a cooperative 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 the case of the co-operative housing society, admittedly, there is no commerciality involved. Once there is no commerciality involved the first test of profi .....

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oses of maintenance and providing other privileges, advantages and conveniences to its members 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 are clearly identifiable. Members are ordinary members or associate members. The participants and contributors are the members. The members may come in or go out. The fact that only so .....

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s provided in section 64 can be paid by way of bonus or dividend or otherwise distributed among its members except as provided therein. Under section 67, there is a limit on the dividend to be paid on liquidation. Under section 110 of the Maharashtra Cooperative Societies 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 prov .....

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ing or buildings and as long as there is no taint of commerciality, trade or business. For all the aforesaid reasons, the questions as framed will have to be answered in favour of the assessee and against the Revenue. In the absence of any distinguishing feature brought on record by the ld. DR we respectfully following the decision of Hon'ble Jurisdictional High Court (supra), hold that the amount of transfer fee of ₹ 5,81,000/- and TDR premium amount of ₹ 5,97,725/- are not taxa .....

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mercial housing society. Its objects were to manage, maintain and administer the property of the society; to undertake and provide amenities and facilities for the benefit of its members or for public benefit on its own account or jointly with the other co-operative institutions; and to organise social, cultural or recreational activities. It received transfer fee and non-occupancy charges from existing/new members and contended that same was not taxable on principle of mutuality. The Tribunal n .....

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As regards non-occupancy charges, the Tribunal referred to the Government notification, dated 1-8-2001, which set out that the society should not collect non-occupancy charges at the rate exceeding 10 per cent of the service charges (excluding Municipal Corporation/Nagar Palika Taxes). The Tribunal found that the non-occupancy charges collected by the assessee-society were in excess of the limits laid down by the aforesaid notification. It remanded the issue to the Assessing Officer with a dire .....

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ng residential society and, consequently, those notifications would not be applicable. The bye-laws of the society were nothing but the contract between the society and the members. Under those bye-laws, it was the member who had to make the payment. Any inter se arrangement between the incoming members and the transferee was irrelevant insofar as the society was concerned. There was an agreement by which the amount was paid by the transferee. Insofar as the assessee-society was concerned, even .....

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posed of in favour of the members only or for the objects for which they would specify. In those circumstances, the Tribunal erred in holding that the contribution to common amenity fund repairs and welfare fund being the first contribution made by the existing/new member was transfer fee. [Para 7] So far as non-occupation charges were concerned, bye-laws of the society themselves provided for non-occupation charges. The contribution, therefore, was by the member. Object of the contribution was .....

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bove the 10 per cent of the maintenance charges as non-taxable in its hands as the same was governed by the principles of mutuality. [Para 8] Apart from that, even assuming that the Government notifications were applicable, if the society could not have charged excess amount, it would have to be refunded to the members. A member is not prohibited from gifting any amount to the society for the objects of the society. The principle of mutuality would not cease on account of those aspects. At the h .....

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ble High Court has held as under :- If the object of the assessee company claiming to be a "mutual concern" or "club" is to carry on a particular business and money is realized both from the members and from non-members, for the same consideration, by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole disclose the same profit earning motive and are alike tainted with commerciality. On the ot .....

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gments where reference is to members as a class and that class may be diminished by members going out or increased by the members coming in. But the class remains the same. The assessee, a co-operative housing society, was registered with the object principally of looking after the property including building thereon. The bye-laws of the assessee permitted it to change a transfer fee in terms of the notification issued by the Government of Maharashtra. Bye-law 38(3)(ix) provided that the assesse .....

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amount received would have to be refunded, as the amount was payable only on a transfer of rights of the transferor in the transferee. The amount legally chargeable and received went into the fund of the assessee which was utilized for the repairs of the property and common benefits to its members. On appeal contending that the Tribunal overlooked the principle while holding that contribution by the transferee would not attract the principle of mutuality: Held, allowing the appeal, (i) that whe .....

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