TMI Blog2016 (10) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... al matrix the case, we are of the considered view and agree with the findings of the learned CIT(A) that as per the submissions put forth by it, the assessee has not been able to controvert that factual findings of the AO in leading him to treat the receipt of money by the assessee from transfer of plot as business income. We, therefore, uphold the findings of the authorities below - Decided against assessee Amount received from members as ‘transfer fees’ - nature of income - Held that:- was received by the assessee society from the transaction of the structure on plot No. 26 by Prakash R. Tolat and Gautam R. Tolat to Mehta & Shah. This fact was not brought to the notice of the AO. On detection thereof, the AO brought the said transfer fee received by the assessee to tax in the assessee’s hands. In respect of the assessee’s claim that the said transfer fee received by it was not exigible to tax based on the concept of mutuality, we find that the learned CIT(A) on examination of the facts on the issue rightly concluded that the concept of mutuality did not operate in this transaction. Mehta & Shah who paid the said transfer fee were only nominal members of the assessee society an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public utilities which were jointly owned by 14 societies were sold in the year under consideration and their share of the sale consideration was offered by the societies to tax under the head Capital Gains . Keeping in view the object of the cooperative housing societies of carrying on the trade of buying and selling as well as developing land as envisaged in byelaws, the AO held that the sale consideration received by the societies constituted their business income and accordingly their respective share was brought to tax by him in their hands as business income. On appeal, the learned CIT(Appeals) confirmed the decision of the Assessing Officer. The matter thereafter was carried before the Tribunal in the appeals filed by the assessee societies in the present case and the Tribunal vide its order dated 17th Nov., 2005 passed in ITA No.4241/Mum/ 2000 and others restored the issue to the file of the AO to decide the same afresh after taking into consideration the final decision rendered in the case of other cooperative housing societies. During the course of set aside proceedings, the assesee could not furnish any details about the final decision rendered in the case of other coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary compliance on their part so as to decide the issue as per the direction given by the Tribunal in the first round vide his order dated 17th Nov., 2005. We, therefore, restore this issue once again to the file of the AO for deciding the same fresh as per the direction given by the Tribunal vide its order dated 17th Nov., 2005. The assessees are directed to furnish the addresses of the other cooperative housing societies to the AO who shall enforce their compliance in order to decide this issue as per the direction given by the Tribunal. 2.2 Pursuant to the order of the Coordinate Bench dated 25.11.2011, the AO accordingly issued notices under section 142(1) of the Income Tax Act, 1961 (in short 'the Act') dated 02.08.2012, 03.09.2012 and 23.11.2012 calling upon the assessee to file details in the matter. After considering the submissions put forth by the assessee, extracted at para 4 on page 4 to 8 of the order of assessment; the AO observed that the assessee could not provide any new information and that the submissions now put forth were found to be similar to what it had put forward in earlier assessment proceedings before the AO, and in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Societies as Business Income being an adventure in the nature of trade and accordingly brought the profit on sale thereof of ₹ 23,00,000/- arising to the assessee to tax in the assessee s hands as business profits as against LTCG admitted thereon by the assessee. In addition thereto, the AO brought to tax in assessee s hands an amount of ₹ 5,02,000/- received by the assessee from members as transfer fees . The assessment was accordingly concluded under section 143(3) r.w.s. 253 of the Act vide order dated 19.03.013 wherein the assessee s income was determined at ₹ 43,74,000/-. 3. Aggrieved by the order of assessment for A.Y. 1995-96 dated 19.03.2013, the assessee preferred an appeal before the CIT(A)-32, Mumbai. The learned CIT(A) disposed off this appeal vide order dated 18.04.2013 allowing the assessee partial relief. 4. The appeal in this case was fixed on a number of occasions. On these occasions either none appeared on behalf of the assessee or adjournments sought were granted on the request of the learned A.R. for the assessee. On 21.09.2016, when the case was called for hearing, neither was anyone present for and on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arefully considered the material on record. The issue for consideration before us is whether the assessee s share of profit in sale of land in the year under consideration, allotted to it alongwith 13 other Cooperative Societies by the Bombay Housing Board in 1960, is to be brought to tax as Business income as held by the authorities below or as capital gains as claimed by the assessee. The facts of the matter as emanate from the record, the observation/findings of the AO, the submissions of the assessee before the learned CIT(A) and the learned CIT(A) s decision thereon at paras 3.2 and 3.3 of the impugned order are as extracted hereunder: - 3.2 The facts of the case, observation / findings of the AO in this regard in the assessment order are summarized as under: - i. The Hon'ble ITAT, 'F' Bench, Mumbai vide their order in ITA No,5864/Mum/2008 dated 25.11.2011 set aside the issue to the file of the AO. ii. This issue related to sale of common plot of land no. 29 acquired in 1950 jointly by 14 co-op. societies of JVPD Scheme. The portion of sale consideration pertaining to the appellant was ₹ 23,00,000/-. The appellant in its return of income had of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not specifically give proof of plot allotted to each of the 14 co-operative societies or any document/evidence which could specify the area allotted to them to claim the ownership right on the lease hold land given by the Bombay Housing Board in the year 1960. He further observed that the Board has allotted the total 6,07,036 sq.yds. which could be observed from the schedule I under the head Pubic Amenity which includes Play Ground, Public Hall, Recreation Ground, Shop and public building, municipal offie, police station, fire brigade, post office bank and shops. Under schedule II, for public utility, the area allotted was 815,467 sq.yds which include play ground, secondary school for boys and girls, ladies club, primary school for boys and girls, club, hospital, shop and proposed widening of roads of 100 fts. and 60 fts. viii. The AO observed that the main issue involved in this case was that the assessee society has received amount of share on sale of common plot, as income chargeable to taxes under the head Profit and Gains of Business. ix. The AO further observed that a similar issue in the case of M/s. Vithalnagar Co-op Hsg. Ltd. had come up for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In 1960 the Bombay Housing Board earmarked the land conveyed by the Govt. of Bombay State for residential purposes and for common members. ii. Certain plo6ts were marked as amenities and utility plots which were conveyed jointly to the fourteen societies and each of the fourteen societies held specified shares in each of the common amenities and utility plots, it was submitted that the entire cost of the land (including that held for common amenities) were paid by the societies and ultimately borne by the members in proportion to their respective size of the plot. iii. It was submitted that the plots held for common amenities were from time to time allotted by 14 societies to various parties for specified purposes and in most cases for very nominal sums or token annual lease of ₹ 1/- per annum. iv. It was submitted that the area comprising the various amenity plots and the purpose thereof was also specified by the Government as a part of the conveyance of the land to the societies and hence the said societies did not have any discretion in respect of the area of the said amenity plots or the purpose and had to dispose them for the user specified or use them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. x. The assessee in the alternative and without prejudice submitted that what should be added to the total income is ₹ 7,28,000/- since the assessee had already offered ₹ 15,72,000/- as capital gains at the time of filing the return of income. 3.4 I have considered facts of the case, oral contentions and written submissions of the appellant as against the observations / findings the AO in the assessment order. The contentions and submissions of the appellant are being discussed and decided as under:- i. It is clear from the directions setting aside the issue to the file of the AO that the Hon'ble. ITAT required the AO to decide the issue afresh as per the directions given by the Tribunal vide their order dated 17.11.2005. ii. During the course of the assessment proceedings, the AO required the appellant to furnish the details. The AO observed that such details furnished by the appellant were similar to what was made during the earlier assessment proceedings before the AO as well as before the CIT(A) and Hon'ble ITAT. The names and addresses of 11 co-op. societies were submitted to the AO. The AO at para 5 of the assessment order has clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Housing Board for common facilities and general utilities. Under such facts and circumstances the AO treated the receipt of money from transfer of plot by the assessee as business income. vi. In the submission made, the appellant has not been able to rebut factual observation given by the AO in para 8.2 of, his order and. summarized here in above. vii. It is further seen from the records available that in the case of Jai Hind CHS Ltd. similar receipt in the A.Y. 1995-96 was treated as business income as against income from capital gains offered by the society. In the similar fact, in the case of Hatkesh CHS Ltd. the receipt from the transfer of plot in A.Y. 1995-96 was treated as business profit in the first appellate level. viii. From the above facts it is clear that the prominent and only view available before the AO at the time of making decision was that such profit has been treated as business profit and not capital gains in the case of similarly placed societies. The Ld. AR of the appellant has not been able to produce any contrary view taken by the AO of other co-op. societies similarly placed either during the course of assessment proceedings or during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth by it, the assessee has not been able to controvert that factual findings of the AO in leading him to treat the receipt of money by the assessee from transfer of plot as business income. We, therefore, uphold the findings of the authorities below and consequently dismiss ground No. 1 of assessee s appeal. 7. Ground No. 2. 7.1 In this ground, the assessee had challenged the learned CIT(A) s order in upholding the AO s action in bringing to tax as business income an amount of ₹ 5,02,000/- received from members as transfer fees incidental to sale of plot which is against the principle of mutuality. 7.2 According to the learned D.R. for Revenue, that the amount of ₹ 5,02,000/- was received by assessee from transfer of structure by Shri Prakesh R. Tolat and Gautam Tolat on plot No. 26 to Mehta Shah is not disputed. The learned A.R. for the assessee submitted that the learned CIT(A) was of the view that since the new owners, Mehta Shah were enrolled as nominal members with no voting rights or any rights or interest in the property of the assessee society except for the flat purchased and occupied by them, this was not in consonance with the principles of mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Sind Co-op. Housing Society vs. ITO, 317 ITR 147 (Born) and in the case of Mittal Court Premises Co- op. Society vs. ITO 320 ITR 414 (Bom). 4.4 I have considered facts of the case, oral contentions and written submissions of the appellant as against the observations / findings of the AO in the assessment order. The contentions and submissions of the appellant are being discussed and decided as under:- i. It is the fact of the case that the question amount has been received by the appellant society from transfer of structure by Shri Prakash R. Tolat and Shri Gautham R. Tolat on plot no. 26 to Mr. Mehta Shah. This amount has been added by the AO as transfer fee. ii. In these set of facts it is clear that Shri Prakash R Tolat and Shri Gautham R Tolat being owners of the original plot No.26 sold the structure standing on Plot No.26 to Mehta Shah. In turn Mr. Shah paid transfer fees of ₹ 2,50,000/- for getting consent from the societies and also paid donation of ₹ 10,00,000/-. The original owner Mr. Tolat and brothers filed a suit in the co- operative court for allotting permission of FSI to Mehta Shah. As the outcome of the court proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Hatkesh CHS Ltd. have in detail, discussed about the principles of mutuality and in this decision the decisions of Bombay High Court relied upon by the assessee have been referred to and considered. In the order of Suvarnanagar CHS Ltd. for A.Y. 2002-03 dated 11.04.2014, the Hon'ble ITAT did not have occasion to consider the decision in the case of Hatkesh CHS Ltd. (Supra). vii In view of facts of the case, discussion here in above, further relying on above decision of Hon'ble ITAT in the case of Hatkesh Co-op. Housing Society Ltd. vs. ACIT 21(1) (Supra) and respectfully following the same, the contentions and submissions made by appellant are not found to be acceptable and are therefore rejected. 6.3.2 From the discussion of the learned CIT(A) in the impugned order on this issue (supra), it is not disputed that an amount of ₹ 5,02,000/- was received by the assessee society from the transaction of the structure on plot No. 26 by Prakash R. Tolat and Gautam R. Tolat to Mehta Shah. This fact was not brought to the notice of the AO. On detection thereof, the AO brought the said transfer fee received by the assessee to tax in the assessee s hands. In ..... 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