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TMI Blog2015 (11) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... mium on transfer in excess - Held that:- This issue is also covered by the decision of Hon’ble Bombay High Court in the case of Sind Cooperative Housing Society, [2009 (7) TMI 15 - BOMBAY HIGH COURT] as held Payments were made under the bye-laws of the assessee which constituted a contract between the assessee and its members which was voluntarily entered into and voluntarily conducted as a matter of convenience and discipline for running of the assessee-society. If any amount was received more than was chargeable under the bye-laws or the Government notification, the assessee was bound to repay the amount and if it retained the amount it would be in the nature of profit making that specific amount exigible to tax. Under the bye-laws, charging of transfer fees had no element of trading or commerciality. Since there was no taint of commerciality the question of earning profits would not arise when the assessee from the funds received applied the moneys received towards maintenance of the society and providing the members with usual privileges, advantages and conveniences. Thus, the principle of mutuality was applicable to the assessee which had as its predominant activity, the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utuality is satisfied, therefore, not liable to tax. 5. From the record, we found that the ITAT vide its order dated 28-9-2008for the assessment year 2003-04, 2004-05, 2005-06 has directed the AO to examine the resolution passed by the Special General meeting of the society on 17-12-2006, where the purpose of utilization of special development funds for the benefit of society s members was decided. From the record we found that following were the purpose of utilization of the special development fund as per resolution of the special general meeting of the society held on 17-12-2006. 1) Construction of Society's Cultural Centre. 2) Beautification of the Cultural Centre from time to time. 3) Health care and clinical care for the Member and their families. 4) Gymnasium, library and Indoor game facilities to the members their families. 5) Education Loans for the members and / or their children. 6) Purchasing land and leasing it to new members in order to expand the Society. 7) Organize or promote Sports cultural Activities. 8) Security Safety of the Members' Property. After going through the material placed on record we found that amount rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to make an additional utilization of the FSI on the plot allotted by the assessee. The assessee which looked after the infrastructure, required the payment of the premium in order to defray the additional burden that must be cast as a result of the utilization of the FSI. The point, however, was that there was a complete mutuality between the assessee and its members. The amount was not taxable. 8. As the facts and circumstances during the years under consideration are same with respect to nature of receipts and complete mutuality between the assessee and its members, respectfully following the decision of Hon ble Bombay High Court reproduced above, we do not find any merit in the order of lower authorities taxing the contribution towards special development funds (for giving NOC) as liable to tax. Accordingly, the AO is directed to delete the addition so made in all the years under consideration. 9. The next ground taken by the assessee in the assessment year 2003-04 and 2005-06 pertains to taxing land premium on transfer in excess of ₹ 25,000/- taxed by the AO. 10. Ld. AR placed on record order of the Tribunal in case of The Friends Co-op Housing society Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have the right to share in the surplus and do they have a right to deal with its surpluses. In terms of the bye laws it is only the members who have a right to share in the surplus. Under the Maharashtra Cooperative Societies Act, no part of the funds, 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 the Maharashtra Cooperative Societies Act, the surplus can only be dealt with in the manner provided therein which includes any member or devoted to objects provided by the bye-laws or be transferred to another society with similar object. Rule 90 of the Rules provide how the surplus is to be divided. The surplus thus can be distributed in terms of the bye-laws to members and/or by operation of law to another society having the same objective. In other words, yet another test of mutuality is satisfied. Once these tests are satisfied, in our opinion, there can be no doubt that the principle of mutuality will apply to a co-operative housing society which has as its predominant activity, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the non-occupancy charges collected by the assessee-society were in excess of the limits laid down by the aforesaid notification. It remanded the issue to the Assessing Officer with a direction to treat non-occupancy charges received by the assessee-society over and above the 10 per cent of the maintenance charges as non-taxable in its hands, as the same was governed by the principles of mutuality. HELD The restrictions imposed by the notifications issued by the State of Maharashtra on the amount of transfer fee when the member desires to transfer his shares or occupancy rights are only in respect of housing residential societies. In the instant case, the assessee was not a housing residential society and, consequently, those notifications would not be applicable. The bye-laws of the society were nothing but the contract between the society and the members. Under those bye-laws, it was the member who had to make the payment. Any inter se arrangement between the incoming members and the transferee was irrelevant insofar as the society was concerned. There was an agreement by which the amount was paid by the transferee. Insofar as the assessee-society was concerned, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon ble Bombay High Court in the case of Sind Cooperative Housing Society, 317 ITR 47, wherein the Hon ble High Court has held as under :- If the object of the assessee company claiming to be a mutual concern or club is to carry on a particular business and money is realized both from the members and from non-members, for the same consideration, by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole disclose the same profit earning motive and are alike tainted with commerciality. On the other hand, if it is merely a mutual arrangement whether fees or subscriptions are collected for extending facilities to members like usual privileges, advantages and conveniences even if some surplus is generated, then that surplus cannot be regarded as profit as long as the contributors and participants as a class are the same and they have a say over the distribution of the surplus. In a Co-operative Housing Society there can be members and associate members. We have already quoted from the judgments where reference is to members as a class and that class may be diminished by membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principle of mutuality was applicable to the assessee which had as its predominant activity, the maintenance of the property of the society which included its buildings) and as long as there was no taint of commerciality, trade or business, the receipt of transfer fees was not liable to tax. 13. As the facts and circumstances during the year under consideration are same, respectfully following the order of the jurisdictional High Court, we do not find any merit in the action of the lower authorities for taxing the land premium on transfer received from the members of the society. 14. The decision of the Hon ble Bombay High Court in the case of Sind Cooperative Housing Society Ltd. was not accepted by the AO only on the plea that the revenue is in further appeal before the Hon ble Supreme Court against the order of Hon ble High Court. This observation of the AO is devoid of any merit. The non acceptance of Hon ble Bombay High Court s judgment by the revenue is not sustainable in view of the same Court s decision in Bank of Baroda Vs. HC Srivastava and others, 256 ITR 385 as laid down by the Mumbai Tribunal in ITO Vs. Grand Paradi CH Society Ltd., ITAT G Bench, Mumbai i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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