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TMI Blog2014 (6) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... limit of Rs.25,000/ - as per notification dated 9/8/2001 is applicable to all kinds of cooperative societies including the plot owner society also - the new model bye laws became mandatory w,e.f 13/3/2009 only till 13/3/2009 it will not lead to any violation of principles of mutuality or any law of govt. until the society has amended its bye laws and placed restriction clauses in its bye laws limiting the transfer fee prior to 13/3/2009 - a member is not prohibited from gifting any amount to the society for the objects of the society - the principle of mutuality would not cease on account of those aspects - authorities under the Co-operative Societies Act and Rules, if any action is taken, may direct an additional amount to be refunded. The principle of mutuality shall apply to Society on facts and circumstances of the case even if the notification was held to be applicable for plot owner's society and accordingly the addition of transfer fees as income from other sources is not sustainable - the FAA has considered the issue in detail – thus, there is no reason to interfere in the order – Decided against Revenue. - ITA Nos. 3844 to 3846/Mum/2012 - - - Dated:- 23-5-2014 - Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble jurisdictional High Court in the case of Mittal Court Premises CHS Limited, 320 ITR 414 (Bom) and also on the decision dated 16-9-2011 rendered by the Mumbai Bench of the Tribunal in the case of Damodar Bhuwan CHS Ltd, passed in ITA No.1610/Mum/2010. Aggrieved by the decision of the learned CIT(A), the Revenue has filed all the three appeals before us. 5. Learned D.R placed heavy reliance on the decision rendered by the Hon ble jurisdictional High Court in the case of M/s Sind Co-op Housing Society, 317 ITR 47 (Mum), on which the AO had placed reliance. Learned DR invited our attention to the following observations made by the AO in the assessment year relating to assessment year 2002-03:- In exercise of the powers conferred by section 79A of the Maharashtra Co-op Act, 1960, the state government hereby issues order in public interest, as under:- 1. Circular no Housing/Transfer of gala/fee/39 dated 27.11.1989 issued by the Commissioner of Cooperation, Cooperative Societies Maharashtra State, Pune, is hereby cancelled. 2. The rate of premium to be charged at the time of transferring rights, share in share capital and flat/gala in a co-op hsg society shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a flat. If such interpretation is not given, then it will result in absurdity in as much as both societies are governed by the same model bye laws under the same Act. But in case of transfer of flat, there is a restriction charging transfer fees of Rs.25,000/- but in case of a plot there would be no limit. Since the lands have been allotted by Govt. to this cooperative housing society for the benefit of members and restriction in transfer fee having imposed by the Govt. again for the benefit of members only to protect them from unreasonably high demand for transfer fee by the society in transferring their membership, the objectives of the Govt. in giving incentives and protecting the rights of members shall be diluted if it were to be accepted, that the society was free to charge any amount from the members solely for the reason that it is not a flat society but a plot owner's society. 5. Though the assessment was reopened on the basis of the decision of Walkeshwar Triveni Co-op Housing Society Ltd reported in 88 ITD 159 (Mum), the Hon ble Mumbai High Court have recently passed an order in the case of M/s Sind Co-op Hsg Soc reported in 317 ITR 47 (Mum). In the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety (supra) would show that the High Court is expressing its view on the amount collected in excess of the limits prescribed under the Bye laws or Government Directions. In the instant case, the case of the AO was that the transfer fee collected by the assessee was in excess of the limits prescribed by the Government, but the AO did not examine as to whether the same was in excess of the limits prescribed under the Bye laws. However, according to the assessee, it has collected the transfer fees as per its Bye laws only. 8. Before us, the Ld D.R placed strong reliance on the decision rendered by Hon ble Supreme Court in the case of CIT Vs. Kumbakonam Mutual Benefit Fund Ltd (1964)(53 ITR 241) and submitted that the Hon ble Apex Court has held that the principles of mutuality will not apply to dividend distributed to share holders, even though the business was carried on with the share holders only by way of accepting deposits and giving loans. However, we are of the view that the above said decision is not applicable to the facts of the instant case. As pointed out by Ld A.R, in the instant case, there is complete identity between the contributors and participators of the commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification would apply to plot owner's society also but to fulfill the directions of the ITAT, a reference was made by this office during appellate proceedings to the Commissioner Cooperation Registrar, competent authority govt. of Maharashtra, vide this office letter dated 8/12/2011 seeking clarification with reference to notification dated 9/8/2001 as under: Please refer to notification NO.SGY-2001/Cir No. 188/ 14- S dated 09-08-2001 issued by Dy. Secretary Government of Maharashtra Co op and Textile Division (copy enclosed). Please also refer to the Model Bye Laws of Co-operative Societies which have been approved by the Commissioner of for Cooperation and registrar CS, MS Pune under his letter No. CCR/ Pune/ Model Bye-laws 2001 dated 02-07- 2001. In order to examine the tax implications under the Income Tax Act in respect of transfer premium charged by the Co-op Hsg. Societies there are some issues which need a clarification from your good office. These are enumerated as under : i) either it is mandatory for the Co-op Hsg. Soc. formed prior to the notification of Model Bye Laws on 02-07-2001 to amend their Bye laws as per the new Model Bye Laws. (ii) If i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 13/3/2009 even by the coop societies which were formed prior to 2/7/2001 and that the notification dated 9/8/2001 restricting the transfer fee is applicable to all kind of cooperative societies. The appellant society was incorporated on 9/12/1947 which was much before the model bye laws were notified. From the bye-laws of the society, it is noted that there is no clause restricting the amount of transfer fee contribution etc to be charged from members. Even after notification of model bye laws which prescribe for limit of transfer fee as per ceilings fixed by govt. from time to time, no amendment to original bye laws of appellant society have been made. The clarification issued by Govt. of Maharashtra now also states that for Cooperative societies it was mandatory to adopt the new model bye laws w.e.f 13/3/2009 only. Thus it was not mandatory for appellant to adopt model bye laws nor was any ceiling placed in the original bye laws of the appellant society. Payments were made under the bye laws of the society which constituted a contract between society and its members and if any amount was received more than what was chargeable under the bye laws, then only the principle of mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y any other law regulating the relationship between members and its association will not be relevant while taxing receipts under the Act. 1n other words privilege of mutuality will not cease to exist in respect of receipts from members by any association beyond the quantum restricted by any law regulating the relationship between members and its association . Thus, respectfully following the judicial decisions, I hold that the principle of mutuality shall apply to appellant Society on facts and circumstances of the case even if the notification was held to be applicable for plot owner's society and accordingly the addition of transfer fees of Rs. 32,36,926/- as income from other sources is not sustainable. I direct A.O to delete the addition of Rs. 32,36,926/ - . 10. On a careful perusal of the order of the learned CIT(A), we notice that the First Appellate Authority has considered the impugned issue in detail and has taken a conscious decision by following the decision rendered by the Hon ble jurisdictional High Court and also by the coordinate benches. Hence, we do not find any reason to interfere with its order in all the three years. 11. In the result, all the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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