Issue- Whether on the facts and circumstances of the case and in law, the ITAT was justified in upholding the CIT(A)’s order and rejecting the departmental appeal in accepting the Assessee’s plea that the contribution of Rs.39,68,000/- paid towards ‘heavy repair fund’ is covered by the principle of mutuality and is not chargeable to tax.
Facts of the case- Assessee is a Co-operative Housing Society. It received a sum of Rs.39,68,000/- on account of transfer of flat and garage and credited it to ‘general amenities fund’ as well as ‘repair fund’. This receipt of Rs.39,68,000/- has been claimed as exempted from tax by the Assessee. The return of income was filed for Assessment Years 2005-2006 declaring nil income. The same was processed and later on upon compliance with the statutory formality the Assessment Officer held that if the Assessee’s source of income is nothing but interest on fixed deposits and interest on saving bank account, then, this sum is nothing but receipt on account of transfer of flat and garage, namely Flat No.12B and 2A. The Assessing Officer disallowed the exemption by holding that the principle of mutuality will not apply.
Held by CIT (A) & ITAT
However, the CIT(A) and Tribunal allowed the assessee’s claim by relying on Sind Co-operative Housing Society vs. ITO 317 ITR 47.
Held by High Court-
The very issue and the very question was raised repeatedly in the case of the Assessee Society. Repeatedly the Revenue has failed in convincing the Tribunal that Sind Co-operative Housing Society (supra) will not cover the Society’s case. The contribution is made to the repair fund or to the general fund and credited as such. While it may be true that it is occasioned by transfer of a flat and garage, yet, we do not see how merely because there was cap or restriction placed on the transfer fees or the quantum thereof, in this case the principle of mutuality cannot be applied. The underlying principle and of a co-operative movement has been completely overlooked by the Counsel for the Revenue. The Revenue seems to be of the view that a Co-operative Housing Society makes profit, if it receives something beyond this amount of Rs.25,000/-. There has to be material brought and which will have a definite bearing on this issue. If the amount is received on account of transfer of a flat and which is not restricted to Rs.25,000/- but much more, then different consideration may apply. However, in the present case, what has been argued and vehemently is theamount was received by the Society when the flat and the garage were transferred. Therefore, it must be presumed to be nothing but transfer fees. It may have been credited to the fund and with a view to demonstrate that it is nothing but a voluntarily contribution or donation to the Society, but still it constitutes its income. However, for rendering such a conclusive finding there has to be material brought by the Revenue on record. Beyond urging that it has been received at the time of a transfer of the flat and credited to such a fund will not be enough to displace the principle laid down in the decision of Sind Co- operative Housing Society. The attempt of the Revenue therefore is nothing but overcoming the binding judgment of this Court. In the present case, the Commissioner and the Tribunal both have held that the receipt may have been occasioned by the transfer but the principle of mutuality will still apply. It is a typical relationship between the member of the Co-operative Society and particularly a Housing Society and the Society which is a body Corporate and a legal entity by itself that is forming the basis of the principle laid down by the Division Bench. Co-operative movement is a socio economic and a moral movement. It has now been recognized by Article 43A of the Constitution of India. It is to foster and encourage the spirit of brotherhood and co-operation that the Government encourages formation of Co-operative Societies. The members may be owning individually the flats or immovable properties but enjoying, in common, the amenities, advantages and benefits. The Society as a legal entity owns the building but the amenities are provided and that is how the terms “flat” and the “housing society” are defined in the statute in question. We do not therefore find any reason to deviate from the principle laid down in Sind Co-operative Housing Society’s case and which followed a Supreme Court judgment. In the present case, therefore, the Tribunal following its earlier views and applying the ratio of this judgment, dismissed the Revenue’s Appeal and confirmed the Commissioner’s finding. The concurrent findings, therefore, in this case are in consonance with the factual materials brought on record. There is substance in the argument of Mr. Irani that the Assessing Officer had before him the material in the form of the bye-laws of the Society. The bye- laws also are in consonance with the Government Resolution and stipulate a sum of Rs.25,000/- towards transfer fees. The Assessee in this case is presumed to have received nothing but transfer fees and it is that underlying presumption which has prevailed upon the Assessing Officer to take a particular view.
We find that the Assessing Officer has been therefore, rightly corrected by the Commissioner. Without any material, cogent and satisfactory, being produced, the sum and in its entirety as credited could not be assumed to be transfer fees. The receipt thereof may have been occasioned by the transfer of the flat and garage. In such circumstances, we do not find that the Tribunal committed any error law apparent on the face of the record in dismissing the Revenue’Appeal. Its order cannot be termed as perverse as well. The Appeal devoid of merits and is dismissed. No order as to costs.