TMI Blog2021 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... remand report, the Revenue ought not to have preferred any appeal on this issue before us. Reliance in this regard is placed on the decision of the Hon ble Madras High Court in the case of B Jayalakshmi vs. ACIT [ 2018 (8) TMI 208 - MADRAS HIGH COURT] . Accordingly, the ground No.1 raised by the Revenue is dismissed. Income from house property - Fair rental value in respect of let out property - annual value for the purpose of taxability under the head income from house property - AR argued that in the year 2007, substantial development took place which had contributed for the enhanced rental value that could be derived by the assessee from a different tenant i.e. Trans Expo Trade Pvt. Ltd - HELD THAT:- AO had adopted the annual rent derived by the assessee in A.Y.2007-08 for the similar extent of property let out to a completely different party i.e. Trans Expo Trade Pvt. Ltd., at ₹ 10,25,000/- per month and had discounted 25% from such value in order to arrive at the fair rental value of the property let out to M/s. Lupin Ltd., in A.Y.2004-05. This in our considered opinion, is not correct approach. AO ought to have determined the fair rental value in the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in dispute before us is already decided by the Hon ble Apex Court in the case of ITO vs. Venkatesh Premises Co-operative Society Ltd. [ 2018 (3) TMI 675 - SUPREME COURT]. Thus we hold that the receipt on account of transfer fee / amenities fee cannot be brought to tax as income of the assessee. Accordingly, the ground raised by the assessee is allowed. - ITA No.4708/Mum/2015, ITA No.4709/Mum/2015, ITA No.3250/Mum/2017 And ITA No.4138/Mum/2014 to 4144/Mum/2014, ITA No.3711/Mum/2014 to 3717/Mum/2014 - - - Dated:- 7-9-2021 - Shri M.Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Revenue : Shri Brajendra Kumar For the Assessee : Shri Percy Pardiwala ORDER PER BENCH: ITA No.4138/Mum/2014 to 4144/Mum/2014 Assessment Year :2004-05 to 2010-11) These appeals in ITA Nos. 4138/Mum/2014 to 4144/Mum/2014 for A.Y.2004-05 to 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-25, Mumbai in appeal No. CIT(A)-25/IT-327/14(1)(4)/2011-12 to CIT(A)-25/IT-333/14(1)(4)/2011-12 respectively dated 13/03/2014 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)(ii) r.w.s.147 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a society registered under Maharashtra Government Societies Act, 1960 on 17/02/1994. The assessee society is a conglomerate of private financial bodies such as M/s. Enam Financial and Consultants Pvt. Ltd, Tata Finance Ltd., Federal Bank Ltd., ICICI Bank Ltd, L T Finance Ltd, Vijaya Bank Ltd, Eureka Finstock Pvt. Ltd, etc. The main object of the formation of society was to construct office premises to be utilised by its members with contribution of funds by Indian corporate bodies at equal rates for the purchase of flat of land from MMRDA either owned or on long term lease. Accordingly, assessee society constructed office premises for the commercial purpose on the land taken on lease for 99 years from MMRDA. The assessee received occupancy certificate on 02/11/2002, the building completion certificate on 05/06/2003 and BMC water connection on 08/05/2003. On completion of the project, it was left with 23,450 sq.ft of vacant premises with parking lots comprising of 6 offices. The entire cost of construction was met out from the contribution made by the approved members who had come together for this purposer. As far as the members are concerned, they are given the office premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of construction. The cost of land comes to ₹ 88,17,500/- and cost of construction comes to ₹ 45,45,000/- totaling to ₹ 1,33,62,500/-. Thus, it was pleaded that the total cost that needs to be deducted from the consideration would be ₹ 1,33,62,500/- as against ₹ 45,45,000/ done by the ld. AO. In other words, it was submitted that the ld. AO had not given deduction for the cost of land. It was also submitted that the assessee had vide letter dated 19/12/2011 filed before the ld. AO gave a complete working of capital gains wherein assessee had claimed cost of ₹ 5343/- per sq.ft which include the cost of land, building and other assets and worked out the capital gains at ₹ 3,92,000/-. No infirmity had been pointed out by the ld. AO on the said workings. The ld. CIT(A) sought for a remand report in respect of these clarifications made by the assessee. Ld. AO gave his remand report on 31/12/2013, wherein he had mentioned that he has no comments to offer on this issue. 2.5. The ld. CIT(A) on examining the submissions of the assessee, remand report of the ld. AO and the rejoinder to the remand report submitted by the assessee, observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Lupin Ltd. The details of the property lay out to M/s. Lupin Ltd are as under:- S.No. Name of the Company Area Rented Car Parking Space Allotted Lease Rent Per Month Offered for Taxation Period for which rented 1. M/s. Lupin Ltd., ₹ 5000/- per sq.ft 4 ₹ 3.50 lakhs More than 18 months 3.2. The ld. AO observed that identical premises had been rented out by the assessee society during A.Y.2007-08 to M/s. Trans Expo Trade Pvt. Ltd., on a rent of ₹ 10,25,000/- per month. Accordingly, the ld. AO by applying the provisions of Section 23(1)(a) of the Act sought to treat the rent of ₹ 10,25,000/- to be the fair rental value of the property let out and substituted the same as fair rental value in place of annual rent received by the assessee at ₹ 3,50,000/- per month and made addition accordingly under the head income from house property . In other words, the ld. AO determined the fair rental value of rented out prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to M/s. Lupin Ltd., in A.Y.2004-05. This in our considered opinion, is not correct approach. The ld. AO ought to have determined the fair rental value in the year under consideration based on certain comparable data. Since that was not done by the ld. AO and also in view of the fact that the actual rent received by the assessee is also more than the municipal value for the year under consideration, which fact is not disputed by the Revenue before us, we hold that actual rent received by the assessee at ₹ 3,50,000/- per month in respect of property let out to M/s. Lupin Ltd., should be considered as annual value for the purpose of taxability under the head income from house property . This is the precise direction given by the ld. CIT(A) also by considering the provisions of the Act, on which we do not find any infirmity. Accordingly, the ground No.2 raised by the Revenue is dismissed. 4. The ground No.3 4 raised by the Revenue and additional ground raised by the assessee are only in respect of determination of Annual Lettable Value (ALV) on vacant properties. 4.1. We have heard rival submissions and perused the material available on record. At the outset, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of vacant properties, annual value will be the municipal value u/s.23(1)(a). The assessee pleaded before the ld. CIT(A) that though these five properties as tabulated supra were remaining vacant during the year under consideration, most of them were indeed let out in subsequent years. In fact the assessee genuinely intended to let out these properties but could not find out a suitable tenant thereon. Hence, the property remained vacant for the reason which was beyond the control of the assessee herein. It was also specifically pleaded that the said properties could not be used by the assessee for any other purpose other than letting out hence, intention to let out those properties, was proved. The ld. CIT(A) brushed aside this argument of the assessee stating that the same does not have any merit, since in his opinion, the meaning of word let in section 23(1)(c) cannot be equated with intended to let and more so, the intention to let cannot be verified. Accordingly, he held that the assessee s case does not come under the ambit of section 23(1)(c) of the Act and falls u/s.23(1)(a) of the Act and also directed the ld. AO to calculate the annual value based on the proportionate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 23(1) apply in which event the amount received or receivable, in terms of clause (c) of section 23(1), shall be deemed to be the annual value of the property. Clause (c) does not apply to situations where the property has either not been let out at all during the previous year or, even if let out, was not vacant during the whole or any part of the previous year. Under the Explanation to section 23(1), for the purposes of clause (b) or (c), the amount actually received or receivable by the owner shall not include the amount of rent which the owner cannot realize. Self-occupation by the owner of a house would require the annual value of such house, or part of the house, to be taken as nil under section 23(2)(a) and, where the house cannot actually be occupied by the owner on account of his employment, business or profession, as nil under section 23(2)(b) provided that, in terms of section 23(3)(a), the house or part of the house had not actually been let during the whole or any part of the previous year. As a legal fiction is created the word actually , as used in section 23(3)(c), does not find mention in section 23(1) of the Act. 12. The construction placed on secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tminster [1936] AC 1 (HL), A.V. Fernandez's case (supra) Saraswati Sugar Mills v. Haryana State Board [1992] 1 SCC 418). The meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to that is just or expedient. The expressed intention must guide the court. CIT v. Shahzada Nand Sons [1966] 60 ITR 392 (SC). The Legislature does not waste its words. Ordinary, a grammatical meaning is to be assigned to the words used while interpreting a provision to honour the rule. The Legislature chooses appropriate words to express what it intends and, therefore, must be attributed with such intention as is conveyed by the words employed so long as this does not result in absurdity or anomaly or unless material- intrinsic or external-is available to permit a departure from the rule. Harbhajan Singh v. Press Council of India [2002] 3 SCC 722. 14. The contention that, as clause (c) provides for an eventuality where a property can be vacant during the whole of the relevant previous year, both situations, i.e., property is let and property is vacant for the whole of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reside at such other place in a building not belonging to him, the annual value of the property is also required to be treated as nil, thereby taking it out of the ambit of section 23(1) of the Act. Section 23(3)(a) makes it clear that section 23(2) would not apply if the house, or a part thereof, is actually let during the whole or any part of the previous year. Thus, only such of the properties which are occupied by the owner for his residence, or which are kept vacant on account of the circumstances mentioned in clause (b) of section 23(2), fall outside the ambit of section 23(1) provided they are, as stipulated in section 23(3)(a), not actually let during the whole or part of the previous year. Clause (c) was not inserted to take out from its ambit properties held by the owner for self- occupation inasmuch as section 23(2)(a) provides for such an eventuality. It is only to mitigate the hardship faced by an assessee, and as clause (b) does not deal with the contingency where the property is let and, because of vacancy, the actual rent received or receivable by the owner is less than the sum referred to in clause (a), was clause (c) inserted. In cases where the property has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee collected a sum of ₹ 5,25,060/- comprising of ₹ 25,060/- for transfer fee and ₹ 5 lakhs for other amenities from one of the members of the society i.e. Apple Finance Ltd., in respect of property admeasuring 5000 sq.ft. at office No.6, Tower-C, 4th Floor transferred by the member to Federal Bank. The ld. AO was of the view that the receipt of ₹ 5 lakhs is taxable under the Act. The assessee submitted before the ld. AO that the transfer / entrance fee is collected equally from transferor and transferee and same is not taxable at all in the hands of the assessee society in view of the various decisions of the Tribunal and Hon ble High Courts listed in the assessment order as well as in the order of the ld. CIT(A). The Ld. AO ignored all the above decisions and added ₹ 5 lakhs as income of the assessee. Before the ld. CIT(A), assessee submitted that ₹ 5 lakhs is not taxable as per the principle of mutuality as the amount received thereon comes to the members contribution account of the society and the same is in turn utilized for the mutual benefits of all the members of the society. All the members are identified and they only participate in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can carry out in terms of bye-laws are basically maintenance of its properties which includes building or buildings. The subscription and or contribution received by the Members can only be expanded for the purpose of maintenance and providing other amenities, privileges, advantages and conveniences to its Members in terms of bye-laws. The same has been done by the appellant. Therefore, the second test of mutuality is also satisfied. The third test which is regarding the identity of participants and contributors, it is stated that in the appellant's case both the participants and contributors are identifiable and belonged to same class in the Society. Since the Members are clearly identifiable, the third question of mutuality is also being satisfied. Coming to the 4 test, in terms of the bye-laws, it is only the Members who have right to share the surplus under MCS Act, no part of the fund as 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 MCS Act, the surplus can only be dealt wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in dispute is covered by the decision of this Mumbai Tribunal in the case of Hatkesh Co-op Housing Society Ltd., vs ACIT in ITA Nos. 494-500/Mum/2011 dated 04/09/2013 which in turn had considered the decision of the Hon ble Jurisdictional High Court in the case of Sind Co-operative Housing Society vs. ITO reported in 317 ITR 47 wherein it was held that the transfer fee shall be tax exempt as mutual to the extent of the extant rate as applicable to the class of municipality under which the assessee society falls as per the relevant / current notification issued by the Government. The ld. CIT(A) observed that since in the present case, the transfer fee of ₹ 5 lakhs was received in addition to the permissible monies transfer fee of ₹ 25,000/- excess sum of ₹ 5 lakhs would be taxable in the hands of the assessee. Aggrieved by this finding, the assessee is in appeal before us. 6.5. The ld. AR placed reliance on the decision of the Hon ble Supreme Court in the case of ITO vs. Venkatesh Premises Co-operative Society Ltd., reported in 402 ITR 670 wherein this issue has already been decided in favour of the assessee. The facts of that case and decision rendered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te without receiving a financial benefit from the cessation of the membership. The proceedings in the instant appeal relate to different assessment years based on information gathered by the Assessing Officer pursuant to notice under section 133(6) of the Act. Transfer charges are payable by the outgoing member. If for convenience, part of it is paid by the transferee, it would not partake the nature of profit or commerciality as the amount is appropriated only after the transferee is inducted as a member. In the event of non-admission, the amount is returned. The moment the transferee is inducted as a member the principles of mutuality apply. Likewise, non-occupancy charges are levied by the society and is payable by a member who does not himself occupy the premises but lets it out to a third person. The charges are again utilised only for the common benefit of facilities and amenities to the members. Contribution to the common amenity fund taken from a member disposing property is similarly utilised for meeting sudden and regular heavy repairs to ensure continuous and proper hazard free maintenance of the properties of the society which ultimately enures to the enjo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxmann.com 39. The Revenue had preferred a Special Leave Petition against the said decision before the Hon ble Apex Court and the same has been admitted by the Hon ble Supreme Court which is reported in 84 Taxmann.com 240. We find that this argument of the ld. DR need not be gone into at all in view of the fact that as on date, the issue in dispute before us is already decided by the Hon ble Apex Court in the case of ITO vs. Venkatesh Premises Co-operative Society Ltd., reported in 402 ITR 670. Respectfully following the aforesaid decision of Hon ble Supreme Court, we hold that the receipt of ₹ 5 lakhs on account of transfer fee / amenities fee cannot be brought to tax as income of the assessee. Accordingly, the ground No.1 raised by the assessee is allowed. 6.8. In the result, appeal of the assessee for A.Y.2004-05 is partly allowed and appeal of the Revenue for A.Y.2004-05 is dismissed. 7. The issues raised in assessee s appeals for A.Y.2005-06 to 2010-11 and issues raised in Revenue appeals for A.Yrs 2005-06 to 2013-14 are exactly identical with the years already adjudicated by us for A.Y.2004-05 in the appeal of the assessee as well as in the appeal of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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