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2017 (2) TMI 1497 - AT - Income TaxCapital gain in the hand of members of society - real owner - agreement with a developer for development of said property entered - whether transfer of lease hold was not covered by provisions of section 50C - HELD THAT - The developer had made payments to the Society as well as to the members and they had offered the amounts received by them for taxation. In our opinion once the members had shown the income received by them in their hands there can - not be any justification for taxing the same in the hands of society. No double taxation and no double deduction is one of the well recognised and fundamental principles of taxation. In our opinion signing of agreement by the members or society cannot be base for taxing of income. As per the scheme of the Act income received by any person or income accrued to him has to be taxed. In the case under consideration income was received by the members and they had offered the same for taxation. We also hold that Society was only the lessee and what was transferred to the developer was development rights not land or building - No authority is required to hold that terms land or building or both do not include development rights and that in the case before there was transfer of such rights only. In light of the above discussion and respectfully following in the case of Raj Ratan CHS 2011 (2) TMI 96 - ITAT MUMBAI we hold that FAA was not justified in taxing the sum in the hands of the assessee as same was the income of the members of the society. GOA. 2 is decided in favour of the assessee. Addition of receipt towards corpus fund - FAA held that payment by the developer to the society could not be treated as payment towards corpus of the society that the AO had rightly held that the disputed amount was to be assessed as income from other sources - AR argued that the assessee had received only during the year that the CIT(A) had wrongly assessed the income under the head income from other sources - HELD THAT - We find that the FAA had held that Rs. 3. 50 crores only were to be taxed during the year under consideration that the income was to be taxed under the head income from other sources. It is a fact that society had not given possession of land to the developer during the year under consideration. In our opinion the money received by the assessee during the year i. e. Rs. 3. 50 crores was to be assessed under the head capital gains as claimed by the assessee. Fourth Ground is decided in favour of the assessee. Payment to MHADA treated as income of the assessee - HELD THAT - There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee the same consequence in law does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one s own income which has been received and is since applied. We are of the opinion that disputed amount falls in first category. In the case before us the obligation income was diverted before it reached the assessee. Besides the payment is not in doubt and it is also a fact that same was made in connection with the development of the property. So as a corollary it has to be allowed as an allowable expenditure. - Decided in favour of assessee. Benefit of deduction u/s 80P(2)(d) and 80P(2)(c)(ii) - AO had invoked the provisions of Sec. 80P (2) (f)and denied the society the benefits claimed by it - HELD THAT - The sub sections of 80P deal with different claims and operate in different fields. The provisions of one sub section cannot be imported to another sub section. It is a fact that the Registrar of Co-op. Hsg. Society had not cancelled the registration of the Housing Society on the alleged violation of principle of mutuality or bye laws. In these circumstances in our opinion the FAA has rightly held that deduction claimed by the assessee under sub-sections (d) and (c)(ii) cannot be denied the assessee. Upholding his order we dismiss the ground raised by the AO.
Issues Involved:
1. Reopening of assessment under Section 147. 2. Taxability of compensation received from the developer. 3. Taxability of corpus fund received from the developer. 4. Taxability of the amount paid by the developer to MHADA. 5. Deduction under Section 80P of the Income Tax Act. Detailed Analysis: 1. Reopening of Assessment under Section 147: The assessee argued that the reopening of the assessment under Section 147 was invalid as the time limit for issuing notice under Section 143(2) had not expired. The FAA held that the AO had valid reasons for reopening the assessment as the assessee had not filed its return on time and had not disclosed the income from the redevelopment agreement. The Tribunal upheld the FAA's decision, stating that the AO had acted within the legal framework and the reopening was justified. 2. Taxability of Compensation Received from the Developer: The assessee contended that the compensation received by the individual members of the society should not be taxed in the hands of the society. The Tribunal referred to the case of Raj Ratan Palace Co-operative Housing Society, where it was held that the society merely gave permission to the developer and did not transfer any rights in the property. The compensation received by individual members was taxed in their hands, and thus, it should not be taxed again in the hands of the society. The Tribunal concluded that the compensation received by the members could not be taxed in the hands of the society and ruled in favor of the assessee. 3. Taxability of Corpus Fund Received from the Developer: The AO had treated the corpus fund received from the developer as income from other sources. The FAA upheld this view but limited the taxable amount to Rs. 3.50 crores received during the year under consideration. The Tribunal, however, held that the corpus fund should be taxed under the head capital gains and not as income from other sources. The Tribunal ruled in favor of the assessee, stating that the amount received during the year should be assessed under capital gains. 4. Taxability of the Amount Paid by the Developer to MHADA: The AO treated the amount paid by the developer to MHADA on behalf of the society as income from other sources. The Tribunal disagreed, stating that the payment made to a government agency in pursuance of an agreement cannot be treated as income of the assessee. The Tribunal held that the amount paid by the developer was diverted before it reached the assessee and should be allowed as an expenditure. The Tribunal ruled in favor of the assessee on this issue as well. 5. Deduction under Section 80P of the Income Tax Act: The AO denied the deduction under Section 80P, arguing that the society had violated the principles of mutuality. The FAA allowed the deduction, stating that the society was still registered as a co-operative housing society and the provisions of Section 80P(2) were applicable. The Tribunal upheld the FAA's decision, stating that the different sub-sections of Section 80P operate in different fields and the deduction claimed by the assessee could not be denied. The Tribunal ruled in favor of the assessee, allowing the deductions under Section 80P. Conclusion: The Tribunal ruled in favor of the assessee on all major issues, allowing the appeal partly and dismissing the appeal of the AO. The order was pronounced in the open court on 17th February, 2017.
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