TMI Blog2023 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... MAAR. On bare perusal of the affidavit submitted by the Treasurer, it is clear that the amount given by the outgoing member Mr. Sanjay Prakash Sahjwani (towards Building Betterment Fund ) has been transferred by the Appellant Society towards Major Repair Fund . Appellant accounted the said transaction of Rs 17,70,000/- in its books of accounts on 7-3-2020 under the accounting head Major Repair Fund and has reported Net amount of Rs 15,00,000, CGST 9% of Rs 1,35,000/- and SGST 9% of Rs 1,35,000/-. Appellant has also received transfer premium of Rs 29,500/- [25,000 Net+2250 CGST+2250 SGST] from the outgoing member Mr Sanjay Sahjwani which Appellant has accounted in its books of account on 7-3-2020. The appellant is trying to give a colour of voluntary and gratuitous payment for amount received from a Transferor/Outgoing member which is collected and will be used for carrying out Major Repairs in future as is evident from the Affidavits submitted by the outgoing member Mr Sanjay Sahjwani and Shri Chandresh Thakker, Treasurer of the Appellant Society. Accounting entries in the books of accounts also supports the view taken by MAAR. The observations of MAAR agreed upon, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt finalizes on the bids received for the repairs to be carried out. 3.4 The appellant referred to the provisions of Sec 7 and Sec 2 (84) of the CGST Act, 2017, decision of the Hon ble Supreme Court of India, in the Case of Calcutta Club Limited v State of West Bengal vide C.A. No. 4184 of 2009, decision of the Hon ble Jharkhand High Court in case of Ranchi Club Ltd v Chief Commissioner, decision of the Hon ble Gujarat High Court in the case of Sports Club of Gujarat Ltd v UOI and the decision of the Maharashtra AAAR Ruling for Rotary Club of Mumbai Nariman Point to support its contention that maintenance charges collected by the society are in the form of reimbursement collected for upkeep of the premises, where no benefit goes to the society each every expense is incurred from the maintenance charges collected by the society is to maintain the society premises. Similarly, the expenses incurred by the society are already subject to GST and charging tax on maintenance fees would amount to double taxation. 3.5 Appellant submitted that as per Sec 7 of the CGST Act, 2017, supply should be made in the course of furtherance of business. A gratuitous payment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall give 15 days notice of his intention to do so the Secretary of the Society in the prescribed form, along with the consent of the proposed transferee in the prescribed form. (b) On receipt of such notice, the Secretary of the Society shall place the same before the meeting of the Committee, held next after the receipt of the notice, pointing out whether the member is prima facie eligible to transfer his shares and interest in the capital/property of the Society, in view of the provisions of Section 29(2) (a) of the Act. (c) In the event of ineligibility (in view of the provisions of section 29(2) (a) (b) of the Act) of the member to transfer his shares and interest in the capital/property of the Society, the Committee shall direct the Secretary of the Society to inform the member accordingly within 8 days of the decision of the Committee. (d) No Objection Certificate of the Society is not required to transfer the shares and interest of the transferor to transferee. However in case such a certificate is required by the transferor or transferee, he shall apply to the Society and Committee of the Society may consider such application on merit, within one mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 (e) (ix) of the Cooperative Housing Societies, MAAR observed that the appellant cannot collect amounts as voluntary donations from Transferor or Transferee in excess of premium i.e Rs. 25,000/- (as also mentioned by the appellant during the course of the final hearing) fixed by the society for transfer of flats. Therefore, MAAR found that the society cannot at all accept voluntary donations from a Transferor or Transferee in transgression of the Model Bye Laws of Cooperative Housing Societies in Maharashtra and therefore the amounts received by the society from the Transferor cannot be considered as voluntary donations. 3.7.5 Vide its reply dated 29.04.2022, the appellant has stated that it was submitting an Affidavit by an outgoing member (Mr. Sanjay Prakash Sahjwani), which states that the payment is solely made out of his own discretion and not in lieu of NOC or any other Service. MAAR have perused the said document submitted by the appellant and found that the said document is not clear and complete. However, from whatever can be seen in the said Affidavit, MAAR observed that the amount of Rs. 17,70,000/- has been given to the society by the outgoing member towards Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aurant. Similarly, in the subject case the outgoing member being happy with the services received has paid contributions to the Appellant society which is liable to be taxed under GST Laws as consideration for good services received in the past. Further, the contributions are made by the outgoing members only because they have been a part of the said society. It is not that an outsider has given any contribution to the Appellant society. The receipt of contribution by the Appellant from its members whether outgoing or not, is only because of the fact that the members are or have been a part of the society. If the Appellant society had received contributions from outsiders to the effect that the same was a donation then probably on case to case basis it could have been treated differently. 3.7.8 MAAR further observed that incomplete copy of affidavit submitted by the appellant in respect of an outgoing member by the name Mr. Sanjay Prakash Sahjwani mentions that the amount is being given towards Building Betterment Fund . Further, the appellant has also submitted a copy of the Affidavit of Shri Chandresh Thakker, Treasurer of the Appellants Society, wherein it is mentioned tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant Society cannot take Voluntary Contributions at all from an outgoing member (transferor of a flat) in view of Bye Laws No. 7 (e) and 38 (e) (ix) of the Model Bye laws for Cooperative Housing Societies in Maharashtra. MAAR observed that the appellant is trying to give a colour of voluntary and gratuitous payment for amount received from a Transferor/Outgoing member which is collected and will be used for carrying out Major Repairs in future as is seen from the Affidavit submitted by Shri Chandresh Thakker, Treasurer of the Appellant Society. 3.7.11 MAAR further observed that activities rendered by the appellant Society to its members are supply of services in view of the amended Section 7 of the CGST Act, 2017 and contributions/charges collected by the Appellant Society from its members are chargeable to tax under the GST Laws. This has been accepted by the appellant and accordingly it has withdrawn Question Nos. 1 and 3 of the application. MAAR has held above that the contributions received from outgoing members are payments for taxable services received from the appellant in the past and for taxable activities of the Appellant in future pertaining to Major Repairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Major Repair Funds of the Society, it is clear that the said payment is for the inducement of, the supply of goods or services or both, either by the recipient if he continues to be a member, or by any other person (meaning, other members). There is a famous case of M/s MP Finance Group CC (In Liquidation) v C SARS reported in 69 SATC 141 in which one important legal proposition explained and the High Court of Appeal ruled that income received by a taxpayer from illegal gains will be taxable in the hands of the taxpayer. Thus though the collection of charges of society might be illegal under some other law, but since it is covered by the scope of supply and other ingredients of GST levy, it is taxable. 3.7.16 Finally, MAAR held that the receipt of amount from an outgoing member in the name of gratuitous payment from an outgoing member is taxable under the CGST Act, 2017. 4. Therefore, being aggrieved of the Impugned Order passed by MAAR, the present appeal is being filed before MAAAR, on basis of following the grounds. GROUNDS OF APPEAL 5. The Appellant, in their Appeal memorandum, have, inter-alia, mentioned the following grounds: 1. The Contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no service performed by the Society at all. vi. The Contribution does not pass the test given u/s 2(31) of the CGST Act which states that any consideration received should be in inducement of supply of services or goods. Since there is no supply of services or goods by the society, the entire contribution should not be subject to GST. vii. We further rely on CESTAT judgement of Futura Polyster Ltd. vs Commissioner of Central Excise, Chennai [2006] 5 STT 154 (CHENNAI-CESTAT) which stated in case of facts found that No Tax is payable merely on the basis of entries passed in books of accounts . The ARA has failed to prove that there was indeed any service that was passed between the Society and the outgoing member. Further it only relies on the basis of Ledger accounts. 2. Statement that Voluntary Contributions are not Voluntary but for Building Betterment and Repairs is Incorrect i. The Learned ARA Authority errs in stating that Voluntary Contribution is not Voluntary but a compulsory payment against Building Betterment and Repairs is incorrect. ii. We have submitted an Affidavit which the ARA states in its order as Half Baked which specifically mentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided any reasonable explanation that the voluntary contributions provided by outgoing members is in fact not voluntary but in lieu of NOC provided as per By Laws. ii. We have already given affidavits by the Treasurer of the Society which clearly states that no contribution is being taken in lieu of NOC. It is entirely out of its own free will that an outgoing member makes the said contribution. iii. It is incorrect and objectionable to doubt the authenticity .of the above affidavit. The ARA Authority states that preparation of the Affidavit is an afterthought on the part of the Treasurer of the Society. iv. We hereby state that the Affidavit itself was made mandatory due to the observations made by the concerned ARA authority to prove without an iota of doubt that the said contributions were being taken voluntarily. It is extremely unfair to doubt the intention of the affidavit where the intention was only to remove any doubts regarding the nature of such voluntary contributions. v. The ARA further goes on to state that we have submitted in our ARA 01 that Every outgoing member makes a gratuitous payment in gratitude of the years he has stayed in the society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... food and beverage bill. Therefore, in case of a restaurant-the first act is done by the restaurant to add a service charge which is then presented to the customer. The other way of rewarding the restaurant staff is by way of giving a tip to the waiter. When the waiter is given a tip, the same is voluntary as an act first done by the customer and there is no GST added by him on that. Similarly, in case of voluntary contribution, it is an initial act done gratuitously by the outgoing member to the society and contrary to a service charge, is not invoiced by the society to the member. Therefore, the comparison drawn by the AAR is unfounded and not comparable to a voluntary contribution by the member to the society. viii. Further we would like to point out as also pointed out by the ARA authorities that the Model By Laws under the Maharashtra Co-operative Societies Act do not allow us to collect any amount of more than Rs 25,000/- in lieu of NOC. Any deviation from the Model Bye Laws needs to be discussed in the AGM. We have already provided the Affidavit from an outgoing member that the amount was collected out of his own free will. Any more scrutiny of the same should not be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. From the above definition Consideration includes any payment made (in the subject case payment is made by Transferor which is termed as voluntary contribution by applicant) in money and since the payment is made towards Major Repair Funds of the society, it is clear that the said payment is for the inducement of, the supply of goods or service or both, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outgoing member has paid an amount to the appellant which appellant claims to be voluntary contribution. It is observed that the appellant is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) which provides services to its members and charges GST on maintenance charges recovered from its Members. The Appellant is also collecting funds from its members for future major repairs and renovation of the premises to keep the building in better condition. Such funds may not have immediate utilization purpose. The amount will only be utilized as and when need of repair to society building arises and once the Applicant finalizes on the bids received for such repairs to be carried out. Any amount collected by society for the repair services agreed to be supplied by society in the near future is an advance and is exigible to tax at the time of receipt of the amount from members. 12. In the instant case, outgoing member of the society, Mr Sanjay Prakash Sahjwani, has made payment of Rs 17,70,000/- to the society which appellant claims to be voluntary contribution on his own will and volition. On bare perusal of the affidavit submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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