9911796707
TMI Blog2021 (9) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 (hereinafter referred to as Act) dated 30/12/2011 by the ld. Income Tax Officer 14(1)(4), Mumbai (hereinafter referred to as ld. AO). ITA No.4708/Mum/2015 (Assessment Year :2011-12) ITA No.4709/Mum/2015 (Assessment Year :2012-13) ITA No.3250/Mum/2017 (Assessment Year :2013-14) These appeals in ITA Nos. 4708/Mum/2015, 4709/Mum/2015, & 3250/Mum/2017 for A.Y.2011-12 to 2013-14 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-29, Mumbai in appeal No.CIT(A)-29/IT-68 & 144/ACIT-18(2)/14-15, CIT(A)-29/IT-420/ACIT- 18(2)/2015-16 respectively dated 29/06/2015 & 27/02/2017 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 07/03/2014, 20/02/2015 & 23/02/2016 respectively by the ld. Asst. Commissioner of Income Tax-14(1) / ld. Asst. Commissioner of Income Tax-18(2) , Mumbai (hereinafter referred to as ld. AO). ITA No.3711/Mum/2014 to 3717/Mum/2014 Assessment Year :2004-05 to 2010-11) These appeals in ITA Nos. 3711/Mum/2014 to 3717/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. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises, it was sold to non-member i.e. the third party at market rate by execution of a sale deed. The ld. AO observed that with regard to transaction carried out with a non-member, profit motive was involved and the said profit motive cannot be covered by the "concept of mutuality" as claimed by the assessee society. 2.2. During the year, the assessee had sold one of its vacant premises to M/s Khosla Investment Pvt. Ltd., vide sale agreement dated 31/01/2004 for sum of Rs. 1,37,49,500/- being amount received towards members contribution and Rs. 500 towards membership fees. No income was offered to tax by the assessee society. 2.3. The ld. AO treated the amount of Rs. 1,37,49,500/- less cost of construction as submitted by the assessee vide letter dated 16/11/2011 i.e. Rs. 45,45,000/-. Accordingly, the ld. AO proceeded to treat the amount received in the sum of Rs. 1,37,49,500/- less cost of construction of Rs. 45,45,000/- as income of the assessee and accordingly, brought the balance gain of Rs. 92,04,500/- as income from capital gains in the hands of the assessee society. 2.4. The assessee clarified the fact before the ld. CIT(A) that the assessee society was originally formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of sale M/s. Khosla Investment Pvt Ltd, was an outsider. Accordingly, the concept of mutuality cannot be made applicable on the said transaction. Accordingly, he held that the profit arising from the sale transaction shall be chargeable to tax in the hands of the assessee society. The ld. CIT(A) directed the ld. AO to compute the capital gains at Rs. 3,92,000/- as under:- Sale Consideration Rs. 13,749,500/- Sales Cost of Land Rs. 88,17,500/- Sales Cost of Construction Rs. 45,45,000/- Capital Gains Rs. 3,92,000/- 2.6. The ld. CIT(A) while determining the capital gain at Rs. 3,92,000/- had categorically observed that the ld. AO had accepted the said computation in the remand proceedings which is quite evident from the fact that the ld. AO had no comments to offer in his remand report in respect of this issue. 2.7. Aggrieved by this finding of the ld. CIT(A) granting relief to the assessee, the Revenue is in appeal before us. 2.8. We find from the perusal of the remand report that the ld. AO had categorically stated that he has no comments to offer on the submissions made by the assessee before the ld. CIT(A). Hence, it could be safely concluded that the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are given on rent in accordance with demand and supply and there is a rent agreement between the assessee society and M/s. Lupin Ltd. Several factors i.e. demand, supply, need of the tenant and suitability of the tenant to the society play decisive factors in giving properties on rent. It was also stated that the rental income actually earned by the assessee is much more than the municipal valuation. The ld. CIT(A) observed that assessee had contended that the municipal value represents the same for which the property might reasonably be expected to let from year to year as contemplated in Section 23(1)(a) of the Act. The ld. CIT(A) directed the ld AO to adopt Municipal value for the property to be the fair rental value in respect of property let out to M/s. Lupin Ltd. However, since the annual rent actually received by the assessee is more than the municipal value, the ld. CIT(A) directed the ld. AO to adopt the rental income offered to tax by the assessee in respect of property let out to M/s. Lupin Ltd. Against this direction, the Revenue is in appeal before us. 3.4. We find that the ld. AR vehemently argued that in the year 2007, substantial development took place which had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal. 4.2. As stated earlier, the assessee had six office premises which was lying unsold with it. Out of that, one office premise was let out to M/s. Lupin Ltd., during the year under consideration. The remaining 5 properties were indeed lying vacant during the A.Y.2004-05. The details of properties remaining vacant are as under:- Office No.2, A Wing, 6th Floor (5000 sq.ft) Vacant Office No.2, A Wing, 4th Floor (5000 sq.ft) Vacant Office No.10, B Wing, 2nd Floor (5000 sq.ft) Vacant 9B, C Wing, 2nd Floor (2500 sq. ft) Vacant B Wing, 9th Floor (960 sq.ft) Vacant 4.3. The ld. AO proceeded to determine the deemed rental income in respect of this vacant properties on the basis of rent of Rs. 10,25,000/- received by the assessee from Trans Expo Trade Pvt. Ltd. in A.Y.2007-08 considering the same to be the ALV of the vacant property during the year and applied 25% discount to bring it down to the ALV as applicable for A.Y.2004-05. By this process, he determined the deemed rental income of five vacant properties at Rs. 3,40,69,080/- and made addition under the head 'income from house property'. This was done on the basic premise that assessee's case falls under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Vivek Jain vs. ACIT reported in 14 Taxmann.com 146. When the Bench confronted the ld. AR as to whether there is any other High Court decision contrary to the decision of the Hon'ble Andhra Pradesh High Court quoted by the ld. DR, the ld. AR answered in negative. Accordingly, we are inclined to follow the decision of the Hon'ble Andhra Pradesh High Court relied upon by the ld. DR supra wherein it was held as under:- "10. While interpreting a statute, the court may not only take into consideration the purpose for which it had been enacted, but also the mischief it seeks to suppress. Sneh Enterprises v. Commissioner of Customs [2006] 7 SCC 714. It is evident that clause (c) has been inserted as a protection to the assessee in cases where, on account of vacancy, the rent received or receivable on a property which has been let out is less than the sum referred to in clause (a ). Prior to its amendment, even in such cases it was the sum referred to in clause (a) which was to be taken as the annual value of the property. 11. In order to attract section 23(l)(c), the following requirements must be fulfilled (i) the property, or any part thereof, must be let; and (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the Legislature itself. The question is not what may be supposed and has been intended but what has been said - Unique Butyle Tube Industries (P.) Ltd. v. Uttar Pradesh Financial Corpn. [2003] 113 Comp. Cas. 374 (SC). The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed. It cannot imply anything which is not expressed ; it cannot import provisions in the statute so as to supply any assumed deficiency. The object of this rule is to prevent a taxing statute being construed "according to its intent, though not according to its words". It has even been said that "if the provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect - Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC); Cape Brandy Syndicate v. IRC [1921] 1 KB 64 ; Bethlehem Hospital In re [1875] L.R. 19 Eq 457; A.V. Fernandez v. State of Kerala 1957 SCR 837 ; IRC v. Bladnoch Distillery Co. Ltd. [1948] 1 All ER 616 ; CST v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC); CIT v. V. MR. P. Firm, Muar, AIR 1965 SC 1216 ; CED v. Kantilal Trikamlal [1976] 105 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may remain vacant cannot exceed the period for which the property has been let out. If the property has been let out for a part of the previous year, it can be vacant only for the part of the previous year for which the property was let out and not beyond. For that part of the previous year during which the property was not let out, but was vacant, clause (c ) would not apply and it is only clause (a) which would be applicable, subject of course to sub-sections (2) and (3) of section 23 of the Act. Such a construction does not lead to any hardship, inconvenience, injustice, absurdity or anomaly and, therefore, the rule of ordinary and natural meaning being followed cannot be departed from. Sneh Enterprises' case (supra). We are in agreement with the interpretation of section 23(1)(c) by the Tribunal, and are of the opinion that the benefit thereunder cannot be extended to a case where the property was not let out at all. 16. We find no merit in the submission that the words "property is let" are used in clause (c) to take out those properties which are held by the owner for self-occupation from the ambit of the said clause. As noted hereinabove, section 23(2)(a) takes out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenant in subsequent assessment year cannot be used as a fair rental value for an earlier assessment year in respect of property that is let out to different tenant. While that has been held for a let out property, the same principle would indeed be applicable for vacant property also. We have also held in ground No.2 of the Revenue hereinabove that in such a scenario, municipal value should be adopted with the actual rent and higher of those two should be considered as the annual value. We find that the ld. CIT(A) has also directed the ld. AO to consider only the municipal value as the annual value in respect of vacant properties, on which finding, we do not find any infirmity. Accordingly, the ground Nos. 3 & 4 of the Revenue are dismissed and additional ground raised by the assessee is dismissed. In effect, the order of the ld. CIT(A) with regard to determination of annual value for the vacant properties is upheld. 5. The ground No.5 raised by the revenue is general in nature and does not require any specific adjudication. 6. The last issue to be decided in the appeal of the assessee for the A.Y.2004-05 is as to whether the ld. CIT(A) was justified in confirming the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de letter dated 03/03/2014 before the ld. CIT(A) stating that the concept of mutuality as stated in the case of M/s. Sind Co-operative Housing Pvt. Ltd., vs. ITO by the Hon'ble Jurisidictional High Court reported in 317 ITR 47 and the decision of the Hon'ble Supreme Court in the case of Bangalore club vs. CIT reported in 350 ITR 509 had laid down four questions to be answered:- i) Is there any commerciality involved? ii) From the moneys received are the services offered in nature of profit sharing or privileges or advantages and conveniences? iii) Are the participants and the contributors are identifiable and belonged to the same class in the case of co-operative society? iv) Do the members have the right to share the surplus and do they have any right to deal with the surplus. 6.2. The assessee stated that the aforesaid four conditions are mutually duly satisfied in the instant case as under:- "In this regard, the appellant would like to state that in our case, admittedly there is no commerciality involved, because the fund has been taken from both the transferor and transferee which has gone to the Members' contribution account of the Society and the same is utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of the Society which is based on concept of mutuality. Since neither the funds of our Society was deployed somewhere else nor the assessee was in receipt of interest income that can be said to be utilized for the purpose other than the purpose as stated in the bye-laws. Therefore, the concept of mutuality was not breached in our case. Hence, we request your Honour that the view taken by the A.O. that the receipt of Rs. 5,00,000/- should be taxed as it was tainted with commercial motive is baseless and unjustified." 6.3. Assessee further submitted that clause (H)(g) pertaining to transfer of shares and interest in the capital/ property of the Society of the bye-laws of the assessee permits the collection of donations paid voluntarily by the member. Voluntary donations are acceptable by the Society. The transfer fee received of Rs. 5,00,000/- is only voluntarily received as per the bye-laws of the Society and has gone into the accounts of the Society to be utilized for the welfare of the members. The principle of mutuality has also been fully complied with, in respect of this receipt. Such receipts are not in the nature of an income and therefore, cannot be brought to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court" HELD: * "The doctrine of mutuality, based on common law principles, is premised on the theory that a person cannot make a profit from himself. An amount received from oneself, therefore, cannot be regarded as income and taxable. Section 2(24) defines taxable income. The income of a cooperative society from business is taxable under section 2(24)(vii) and will stand excluded from the principle of mutuality. The essence of the principle of mutuality lies in the commonality of the contributors and the participants who are also the beneficiaries. The contributors to the common fund must be entitled to participate in the surplus and the participants in the surplus are contributors to the common fund. The law envisages a complete identity between the contributors and the participants in this sense. The principle postulates that what is returned is contributed by a member. Any surplus in the common fund shall therefore not constitute income but will only be an increase in the common fund meant to meet sudden eventualities. A common feature of mutual organizations in general can be stated to be that the participants usually do not have property rights to their share in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ownership remaining with the society, the receipts cannot be bifurcated into two segments of receipt so as to hold the former to be outside the purview of mutuality classifying it as income of the society with commerciality. * There is no reason to take a view different from that taken by the High Court, that the Notification dated 09-08-2001 is applicable only to cooperative housing societies and has no application to a premises society which consists of non-residential premises. * In the result, appeal preferred by the revenue is dismissed." 6.6. We find that in the aforesaid decision, the Hon'ble Supreme Court had categorically held in para 24 of the notification dated 09/08/2001 which has been heavily relied upon by the ld. AO in the instant case before us. It is applicable only to Co-operative housing societies and not applicable to a premises society (like assessee herein). Hence, reliance placed by the ld. AO on the said notification does not advance the case of the revenue. 6.7. The ld. DR also pointed out that the decision of Mumbai Tribunal in the case of Hatkesh Co-operative Housing Society Ltd., relied upon by the ld. CIT(A) in ITA Nos. 494-500/Mum/2011 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
