TMI Blog2000 (6) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... effected and transferee should not be actually admitted to the membership of the society. On these terms, contribution of a sum of ₹ 3,00,000 was received by the assessee-society which was credited directly to common amenities fund in the balance sheet and was not offered to tax as the income of the society. The Assessing Officer asked the assessee to explain as to why this transfer fee should not be subjected to tax as income in view of the judgment of Hon ble Bombay High Court in the case of CIT v. Presidency Co-operative Housing Society Ltd. [1995] 216 ITR 321 1 and also in view of the decision of ITAT, Bombay Bench B in the case of Sea Face Park Co-op. Housing Society Ltd. [IT Appeal Nos. 5314 to 5316 of 1984]. In response, the assessee replied that in the case of Presidency Co-operative Housing Society Ltd. (supra), the Hon ble Bombay High Court did not consider the applicability of the doctrine of mutuality to the transfer fees received from members. Regarding the decision of Tribunal in the case of Sea Face Park Co-op. Housing Society Ltd. (Supra), the assessee submitted that the Tribunal was not justified in holding that the principle of mutuality was not applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry that all the members should contribute or pay transfer fee, which was impossible. The learned CIT(A) considered these arguments of the assessee and held that the facts of the case of the assessee were similar to that of Presidency Co-operative Housing Society Ltd. s case (supra) decided by the Hon ble Bombay High Court. He therefore upheld the assessment order and dismissed the assessee s appeal. Still aggrieved, the assessee is in appeal before us. 4. During the course of hearing before us, the learned authorised representative of the assessee pointed out that in the balance sheet of the assessee-society as at 31st March 1993, common amenities fund account had a balance of ₹ 3,00,000 which was contribution received during the year from Dr. Batra. A Note to this effect had also been made to the Income Expenditure Account. Thus in the books of society this contribution was duly accounted for and as a contribution from member as distinguished from income. He also pointed out the Resolution passed at the Special General Meeting of the assessee-society held on 12-4-1992 that a contribution of ₹ 3,00,000 shall be received by the assessee from the transferor and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. On such facts it was held that the receipts of an association for the various facilities extended to its members could not be said to be a trading activity. 6. The learned authorised representative of the assessee also relied upon certain Tribunal decisions made in the context of co-operative housing societies. He relied upon the unreported decision of Single Member of Bombay Tribunal in the case of Vasant Mahal Co-operative Housing Society Ltd. [IT Appeal Nos. 4672 and 4673 Bom. of 1994] wherein it was held that transfer fee charged by a co-operative housing society for the mutual benefit of all the members cannot be brought to tax. Further, ITAT, Bombay Bench A , in the case of Lohtse Co-op. Housing Society Ltd. v. Seventh ITO [1994] 51 ITD 608 held that when a payment was received towards common amenities fund voluntarily as a gesture of goodwill it did not constitute income chargeable to tax. Above all, Hon ble Calcutta High Court had in the case of CIT v. Apsara Co-op. Housing Society Ltd. [1993] 204 ITR 6621 held that there was no question of any profit element in having a transfer fee. The learned authorised representative also cited the judgments of Hon ble Andhra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be received by Oval Shiv Shanti Bhuvan Co-operative Housing Society Ltd., at 146, Maharshi Karve Road, Bombay-400 020 (i.e., flat allotted to a member of the Society). The contribution shall be to the Society s Common Amenities Fund, and shall be not exceeding 5% of the difference between the book value of the flat and the price realized, or the prevailing market price for such flats at the time of transfer, whichever is higher; and that the above Resolutions be entered in the Society s Bye-laws as Clause III 3(i)(g ) (Funds). 2. Resolved further that no transfer shall be effected and no transferee shall be actually admitted to membership till the said contribution has been received. 3. Resolved further that the outgoing members in respect of flat No. 15 shall pay ₹ 3.00 lacs only (instead of ₹ 3,75,000 calculated at the maximum rate adopted). Subsequently, a sum of ₹ 3,00,000 as demanded by the society was paid and share certificate was transferred in the name of the Deutsche Bank. 9. During the course of hearing before us, the learned authorised representative of the assessee has relied upon a number of High Court judgments, most of which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in regard to those transfers which were entirely the members own look-out. Therefore, the transfer fee charged were the assessee s revenue receipts chargeable to tax. 11. Somewhat similar view has been taken by Hon ble Bombay High Court in the case of Presidency Co-operative Housing Society Ltd. (supra). The Hon ble High Court held that when a member transfers his lease to another person, the rights of the society as the lessor were not varied nor were they affected in any manner. This was not an amount which was received by the society for the transfer of any of its capital assets or for the creation of any new rights in the capital assets. The rights of the society in its capital assets were not affected in any manner by the transfer in question. Hence it could not be viewed as a capital receipt. There was no regularity about the receipt of such an amount. It depended on the member transferring his interest. But this in itself was not sufficient to take away from the receipt the character of income. The Hon ble High Court held that the clause by which the society was enabled to charge transfer fee was from a commercial view-point to earn an income. In this context, the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir membership in favour of third party. 13. There are, however, judgments of Hon ble Gujarat High Court in the case of CIT v. Adarsh Co-op. Housing Society Ltd. [1995] 213 ITR 677 1 and Hon ble Calcutta High Court in the case of Apsara Co-op. Housing Society Ltd. (supra) where it has been held that the transfer fee realised was not income liable to tax as it was for the benefit of members of the society. The learned authorised representative of the assessee has also relied upon the unreported decision of Single Member of Bombay Tribunal in the case of Vasant Mahal Co-operative Housing Society Ltd. (supra) and the decision of ITAT, Bombay Bench A , in the case of Lohtse Co-op. Housing Society Ltd. (supra). We may state here that insofar as the later decision is concerned, the same does not pertain to transfer fee at all. In that case, one M purchased land opposite assessee-society s property and on M s request, assessee-society released restrictive covenant permitting M to raise a building above 35 ft. height. M, as a gesture of goodwill, paid certain amount to assessee towards Common Amenities Fund. The Tribunal found that it was not commercial transaction and, therefore, it f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividend as long as he held a share. He did not have to fulfil any other condition. His position was in no way different from that of a shareholder in a banking company. While delivering this verdict, Hon ble Supreme Court pronounced that the essence of mutuality lies in the return of what one has contributed to a common fund, and if profits are distributed to shareholders as shareholders the principle of mutuality is not satisfied. 16. On consideration of various aspects, in our considered opinion, the situation in this case is not such as may be perceived to be falling in the ambit of the principle of mutuality. The contribution made in this case can by no means be said to be voluntary or with a view to reap advantages of contribution at a later date. Contribution is made under compulsion, as rightly stated in the decision of the Tribunal in the case of Hatkesh Co-operative Housing Society Ltd. (supra), with a view only to remove the clog put by society on the absolute ownership of the transferor. Hon ble Bombay High Court have held that by such bye-laws the society created a source of income in its favour. Contribution to this income pool of the society is not by the members o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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