The appeals of the assessee for the assessment years 1989-90, 1992-93 and 1993-94 have been directed against the order of the Commissioner (Appeals)-XXXVI, Mumbai dated 18-3-1996, whereas the appeals for the assessment years 1990-91 and 1991-92 have been directed against the order of the Deputy Commissioner (Appeals), D-Range, Mumbai, dated 22-7-1996. The only common ground of appeal involved in these cases is regarding the additions made by the assessing officer in respect of the transfer fee of office premises. One consolidated order is being passed for the sake of convenience as the issue involved in all the cases is identical.
2. The assessee is a co-operative society owning a building called Regent Chambers at 208, Nariman Point, Mumbai-21. The assessee co-operative housing society received the following amounts as contributions for common amenity funds/transfer fees :
2. The assessee is a co-operative society owning a building called Regent Chambers at 208, Nariman Point, Mumbai-21. The assessee co-operative housing society received the following amounts as contributions for common amenity funds/transfer fees :
Assessment year Amount (Rs.)
1. 1989-90 1,73,000
2. 1990-91 47,700
3. 1991-92 47,700
4. 1992-93 3,55,329
5. 1993-94 2,06,910 The assessing officer treated the above receipts as the revenue income in the hands of the society and taxed it accordingly. The decision of the assessing officer was based on the decision of the Bombay High Court in the case of CIT v. Presidency Co-op. Housing Society Mumbai dated 22-2-1993 in IT Ref. No. 64 of 1978. The assessing officer has also relied on another decision of the Tribunal dated 16-10-1987 in ITA Nos. 5314, 5315 & 5316/Bom/1984 for the assessment years 1974-75, 1975-76 and 1979-80 in the case of Income Tax Officer v. Sea Face Park Coop. Housing Society Ltd. The assessee submitted before the assessing officer that the transfer fee is not taxable since the receipt is related to capital account. According to the assessee, the amount is received towards common amenities funds and therefore, the same is a capital receipt and not taxable. It was also submitted by the assessee that the amount is exempted on the ground of mutuality as there was a complete identity of persons paying and persons participating. It was also submitted by the assessee that the said amounts do not partake the character of income as the same are given voluntarily by the members intending to sell the flats. The character of receipts being more in the nature of contribution to the common amenities and heavy repairs to the building of the society, therefore, they are not revenue receipts. The assessing officer, however, rejected the claim of the assessee and observed that the payments in question was not voluntary payment and the same were realised through coercive clauses of the society's bye-laws. Before the learned Commissioner (Appeals), it was contended that the case of Bombay High Court relied upon by the assessing officer, the question of mutuality was not before the court and the assessee was claiming exemption on the principle of mutuality. Regarding the decision of the Tribunal relied upon by the assessing officer, it was contended before the Commissioner (Appeals) that the Tribunal was not justified in rejecting the principle of mutuality in view of the Gujarat and Madras High Court decisions in the cases of CIT v. Shri Jail Merchants Association (1977) 106 ITR 542 (Guj) and CIT v. Merchant Navy Club (1974) 96 ITR 261 (AP) respectively. The learned Commissioner (Appeals) relying upon the order of the Bombay High Court in the case of Presidency Co-op. Housing Society (supra) confirmed the findings of the assessing officer.
3. At the time of hearing, the learned counsel for the assessee contended that the issue of mutuality has not been discussed by the Bombay High Court in the decision relied upon by the tax authorities. According to him, the issue before the Bombay High Court was only whether the amount received were of capital nature or revenue. The learned counsel also placed his reliance on the Gujarat High Court decision in the case of CIT v. Shri Jari Merchants Association (supra). He contended that the present case is exactly identical to the case decided by the Gujarat High Court. He also argued that the corpus of the society is not divisible and the benefit of the amount collected would go to the society only and ultimately, the members of the society are benefitted by the amount collected by the society. The learned counsel also placed his reliance on the case of Commissioner Of Income Tax, Bihar v. Bankipur Club Ltd.. (1997) 226 ITR 97 (SC). The learned counsel also placed his reliance on the decision of the Bombay Tribunal in the case of ITO v. Friends Co-op. Housing Society Ltd. in IT Appeal No. 5960 (Bom) of 1994, dated 30-8-2000 for the assessment year 1988-89. The learned Departmental Representative relied on the findings of the tax authorities and further contended that this issue is squarely covered in favour of the department in the following cases decided by the Bombay Bench of the Tribunal.
3. At the time of hearing, the learned counsel for the assessee contended that the issue of mutuality has not been discussed by the Bombay High Court in the decision relied upon by the tax authorities. According to him, the issue before the Bombay High Court was only whether the amount received were of capital nature or revenue. The learned counsel also placed his reliance on the Gujarat High Court decision in the case of CIT v. Shri Jari Merchants Association (supra). He contended that the present case is exactly identical to the case decided by the Gujarat High Court. He also argued that the corpus of the society is not divisible and the benefit of the amount collected would go to the society only and ultimately, the members of the society are benefitted by the amount collected by the society. The learned counsel also placed his reliance on the case of Commissioner Of Income Tax, Bihar v. Bankipur Club Ltd.. (1997) 226 ITR 97 (SC). The learned counsel also placed his reliance on the decision of the Bombay Tribunal in the case of ITO v. Friends Co-op. Housing Society Ltd. in IT Appeal No. 5960 (Bom) of 1994, dated 30-8-2000 for the assessment year 1988-89. The learned Departmental Representative relied on the findings of the tax authorities and further contended that this issue is squarely covered in favour of the department in the following cases decided by the Bombay Bench of the Tribunal.
(i) Presidency Co-op. Housing Society Ltd. v. ITO [ITA No. 6254 (Bom) of 1999, dated 17-8-2001] for the assessment year 1986-87;
(ii) Oval Shivshanti Bhuvan Co-op. Housing Society Ltd. v. ITO [ITA No. 8868 (Mum) of 1995, dated 16-6-2000] for the assessment year 1993-94; and
(iii) Asstt. CIT v. Maker Tower Premises Co-op. Housing Society Ltd. [ITA No. 5771 (Mum) of 1996, dated 15-8-2000] for the assessment years 1992-93 and 1993-94.
4. We have carefully considered the submissions made by the rival parties. We have also gone through the decisions of the Tribunal relied upon by the learned counsel and the learned Departmental Representative. The first issue for consideration is whether the amount received is of capital nature or the same is a revenue receipt. The society is receiving these amounts from the members who are transferring their flats/office as per the bye-laws of the society. Therefore, the contention of the learned counsel that these payments are being made by the members voluntarily is without any substance. The amounts are being received as per the bye-laws of the society and the question of any voluntary payment does not arise. Bombay High Court in the case of CIT v. Presidency Co-op. Housing Society Ltd. & Ors. (supra) has held that where the co-op. housing society granting leases to its members and there is an agreement between the society and its members that on transfer of lease, the member would pay a portion of the excess receipt to the society, the amount so received by the assessee is a revenue receipt. So the issue whether the amount received is of capital nature or of revenue nature, the same has been decided by the Hon'ble Bombay High Court in the above case in the favour of the department. Now, the only issue remains for consideration is whether the amount paid is exempted on the grounds of mutuality as contended by the learned counsel. The cardinal requirement in the case of mutuality is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund. In other words, there must be complete identity between the contributors and the participators. If all the participators to the common fund are also contributors and their identities are established, then the test of mutuality is satisfied. In the case of CIT v. Kumbakonam Mutual Benefit Fund (1964) 53 ITR 241 (SC) the Hon'ble Apex Court held that "The essence of mutuality lies in the return of what one has contributed to a common fund, and unless there was such complete identity between the contributors and the participators in a common fund, the principle of mutuality and exemption on that ground would not be attracted." In the present case, the members who are transferring their flats/office do not get any benefit out of the amounts which they have contributed to the society. Therefore, there is no complete identity between the contributors and the participators in a common fund. Therefore, the principle of mutuality do not apply to the facts of the present case. In the case of CIT v. Bombay Oilseeds & Oil Exchange Ltd. (1993) 202 ITR 198 (Bom), the Hon'ble Bombay High Court held that "The cardinal principle to apply the test of mutuality is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus fund must be contributors to the common fund. In other words, there must be complete identity between the contributors and the participators. The question whether all the members were contributors or not is a question of fact which has to be decided in each case by the authorities concerned." In the present case, the contributors to the common fund of the society are not entitled to participate in the surplus because all such contributors make these payments only when their flats/offices are transferred. Therefore, the question of contributors to the common fund must be entitled to participate in the surplus does not arise. This issue is squarely covered with the decision of the Tribunal in the case of Oval Shivshanti Bhuvan Co-op. Housing Society Ltd. (supra) and Presidency Co-op. Housing Society Ltd. (supra) wherein the Tribunal has decided the issue in favour of the department. The Tribunal cases relied upon by the learned counsel have been taken into consideration by the Tribunal while passing the orders in the above said cases. In view of the discussion above and also following the precedent, we decide this issue in favour of the department.
4. We have carefully considered the submissions made by the rival parties. We have also gone through the decisions of the Tribunal relied upon by the learned counsel and the learned Departmental Representative. The first issue for consideration is whether the amount received is of capital nature or the same is a revenue receipt. The society is receiving these amounts from the members who are transferring their flats/office as per the bye-laws of the society. Therefore, the contention of the learned counsel that these payments are being made by the members voluntarily is without any substance. The amounts are being received as per the bye-laws of the society and the question of any voluntary payment does not arise. Bombay High Court in the case of CIT v. Presidency Co-op. Housing Society Ltd. & Ors. (supra) has held that where the co-op. housing society granting leases to its members and there is an agreement between the society and its members that on transfer of lease, the member would pay a portion of the excess receipt to the society, the amount so received by the assessee is a revenue receipt. So the issue whether the amount received is of capital nature or of revenue nature, the same has been decided by the Hon'ble Bombay High Court in the above case in the favour of the department. Now, the only issue remains for consideration is whether the amount paid is exempted on the grounds of mutuality as contended by the learned counsel. The cardinal requirement in the case of mutuality is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund. In other words, there must be complete identity between the contributors and the participators. If all the participators to the common fund are also contributors and their identities are established, then the test of mutuality is satisfied. In the case of CIT v. Kumbakonam Mutual Benefit Fund (1964) 53 ITR 241 (SC) the Hon'ble Apex Court held that "The essence of mutuality lies in the return of what one has contributed to a common fund, and unless there was such complete identity between the contributors and the participators in a common fund, the principle of mutuality and exemption on that ground would not be attracted." In the present case, the members who are transferring their flats/office do not get any benefit out of the amounts which they have contributed to the society. Therefore, there is no complete identity between the contributors and the participators in a common fund. Therefore, the principle of mutuality do not apply to the facts of the present case. In the case of CIT v. Bombay Oilseeds & Oil Exchange Ltd. (1993) 202 ITR 198 (Bom), the Hon'ble Bombay High Court held that "The cardinal principle to apply the test of mutuality is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus fund must be contributors to the common fund. In other words, there must be complete identity between the contributors and the participators. The question whether all the members were contributors or not is a question of fact which has to be decided in each case by the authorities concerned." In the present case, the contributors to the common fund of the society are not entitled to participate in the surplus because all such contributors make these payments only when their flats/offices are transferred. Therefore, the question of contributors to the common fund must be entitled to participate in the surplus does not arise. This issue is squarely covered with the decision of the Tribunal in the case of Oval Shivshanti Bhuvan Co-op. Housing Society Ltd. (supra) and Presidency Co-op. Housing Society Ltd. (supra) wherein the Tribunal has decided the issue in favour of the department. The Tribunal cases relied upon by the learned counsel have been taken into consideration by the Tribunal while passing the orders in the above said cases. In view of the discussion above and also following the precedent, we decide this issue in favour of the department.
5. In the result, the appeals are dismissed.
5. In the result, the appeals are dismissed.