TaxTMI 
TaxTMI 
2023 (3) TMI 1166
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....Co-operative Housing Society Ltd, situated at 33 Monalisa, 3 Bomanji Petit Road, Near Parsee General Hospital, Maharashtra, Mumbai 400026, ("hereinafter referred to as "Appellant") against the Advance Ruling No. GST-ARA-30/2020-21/B-71 dated 31.05.2022, pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as "MAAR"). BRIEF FACTS OF THE CASE 3.1 M/s Monalisa Co-operative Housing Society Ltd (the 'Appellant') is a co-operative housing society registered under the Maharashtra Co-operative Housing Society Act (MCHS Act) having 48 Flats which provides services to its members and charges GST on maintenance charges recovered from its Members. 3.2 Appellant has submitted that when there is a transfer of a flat, the outgoing member makes a gratuitous & voluntary payment to the society. The same does not have any implications on outgoing formalities to be completed as per MCHS Act. The Appellant stated that the above contribution made is entirely voluntary and is not at all a consideration received in lieu of services provided by the Appellant. 3.3 The Appellant is also collecting funds from its members for future major repairs and renovation of the....
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....he co-operative housing society, for which amounts are collected, be taxable at all as it is for the members only? And if taxable, whether the same is taxable at the time of its collection or whether the same would be taxable on utilization of such funds? However, Question No. 1 raised in the application was withdrawn by the appellant during the course of the Preliminary Hearing and Question No. 3 raised in the application was withdrawn by the appellant during the course of the Final Hearing and therefore, both the questions were not taken up for discussion by the MAAR. 3.7 The MAAR, vide Order No. GST-ARA-30/2020-21/B-71 dated 31.05.2022, held in respect of the Question No. 2 asked by the Appellant, as under: 3.7.1 MAAR discussed that whether the appellant society can legally collect the so called gratuitous and voluntary donation from a transferor of a flat in the society. MAAR therefore referred to the 'Model Bye Laws of the Co-operative Housing Societies' in Maharashtra. Bye Law No 38 is very relevant in the present case and is therefore reproduced as under: Bye Laws No. 38 Notice of transfer of Shares and interest in the capital /property of the Soci....
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....nder any other pretext shall be recovered from transferor or transferee; (x) Submission of 'no objection' certificate, required under any law for the time being in force or order or sanction issued by the government, any financing agency or any other authority; (xi) The undertaking/declaration in compliance with the provisions of any law for the time being in force, in such form as is prescribed under these bye-laws. Note : The condition of Sr. No. (ix) above shall not apply to transfer of shares and interest of the transferor in the capital/property of the society to the member of his family or to his nominee or his heir/legal representative after his death and in case of mutual exchange off lats amongst the members. 3.7.2 In view of the above clause (ix), MAAR observed that, No additional amount towards donation or contribution to any other funds or under any other pretext shall be recovered from transferor or transferee by the housing society. 3.7.3 Further Model Bye law No. 7 of the Cooperative Housing Societies, pertaining to 'raising of Funds' by a housing society, states the various ways how funds can be raised by a Housing Society and clause....
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....nsaction and transfer of the share certificate in his name, the society enjoys a dominant position. Under such circumstances, the society demands payment of exorbitant amounts from the flat purchaser, under the garb of 'voluntary donations'. 3.7.7 Further, MAAR observed that in the instant case, the contributions are received from the outgoing members who have been members of the society in the past and, have received services from the society as envisaged under the GST Act. Thus, it can be said that, Payment from an outgoing member to a society is a payment made for the services rendered by society to the outgoing member during his stay as a member in society. As outgoing member is satisfied with the quality of services received by him and provided by society during his stay as a member in society. Hence, it is a consideration received to the society against satisfaction of the said member on supply of services received from the society. This is akin to the service charges levied by restaurants on which GST is collected. The restaurant collects GST on sale of food and many a times collect a percentage of the Bill amount as service charges (on which GST is levied) which are paid....
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....torised), whereas from the submissions of the appellant, the outgoing member has supposedly received the NOC on 11.02.2020 and the contribution made by the said member appears to be on 07.03.2020 (the Appellant has mentioned 07.03.2019 which appears to be an inadvertent error). Thus the Hon. Treasurer found it fit to make an Affidavit on 09.11.2021 i.e. more than one year after the subject application was filed and that too, after the date of the Preliminary hearing i.e 27.07.2021 during which: the Appellant was directed to produce details of income collected as mentioned in Q-2 together with vouchers and details as to what treatment to said income is given in the final accounts and in the income tax returns; the appellant was asked also to produce declaration or proof taken from such members to prove the fact that said contribution is voluntary and not binding on outgoing member; the appellant was further asked to produce details as to NOC or No dues certificate issued (or not issued) to such members who have made contribution. The Affidavit of the Treasurer of the Appellant Society was prepared and made only after these above observations were made by MAAR during the Preliminary ....
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....to show gratitude to the Appellant Society by way of making gratuitous/voluntary payments to the Society. MAAR has already mentioned above that such voluntary payments cannot be accepted by the Appellant Society from the Transferors/Transferee as per the Model Bye Laws. MAAR was of the opinion that the amounts are collected for smooth transfer of the flat from the Transferor to the Transferee. 3.7.13 MAAR further reiterated the observation made by Hon'ble Bombay High Court in the case of Alankar Sahkari Griha Rachana Sanstha Maryadit vs Atul Mahadev and another, mentioned above that, in a situation where a flat purchaser wants a smooth transaction and transfer of the share certificate in his name, the society enjoys a dominant position and under such circumstances, the society may demand payment of amounts from the flat purchaser, under the garb of 'voluntary donations'. 3.7.14 Finally, MAAR found that the contribution made by the outgoing member is nothing but consideration as per the definition of term "consideration" provided u/s 2 (31) of the CGST Act, 2017. 3.7.15 From the definition of 'consideration', it is clear that "consideration" includes - any payment made (in ....
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.... hoc amount is taken only from a specific member. When a member makes a "voluntary" contribution-the same is contributed by him to the society out of his own free will. It is not made against a "demand" by the society. It is open to a member to seek the transfer of a flat without making such voluntary contribution. Therefore, the contribution provided by any outgoing member cannot be said to be in lieu of the said resolutions. iv. Also it is well known under the Contract Act that "parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law." On receipt of such voluntary contributions, there is no promise by the society of performing any Service of any kind to the outgoing member. v. The entire argument that the contribution is received for any past service performed or in lieu of building betterment fund is devoid of logic. There is no proof to tie the consideration received to service provided by the Society to the outgoing member. Further, if that were to be the case, if a member who remains in the society perpetually....
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....ary evidence executed by the member at the time of issuing the cheque to the society states that it is being given voluntary. v. Transfer by society to Major Repairs Fund is an accounting entry and does not determine the nature of the transaction being voluntary. Even if assuming major repairs are to be carried out- there has to be a nexus between the person paying the monies and the beneficiary of the service. An outgoing member has paid the amount and when major repairs are carried out-the benefit will be to the existing members. Therefore, there is no benefit got to the member making the payment for which a supply is received by him. For this to be taxable as received as advance for services is true if the member giving is going to be getting the benefit and paying in advance. vi. We further want to quote the CESTAT Judgement of Karnataka Co-operative Milk Producers Federation Ltd. vs Commissioner of Central Excise [2022] 138 taxmann.com 486 (Bangalore - CESTAT) which states that "in case of an absence of a service provider and a service recipient relationship there cannot be any levy of service tax". Here the outgoing member is not a recipient of any service a....
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....er application will be processed. It is pertinent to note that his voluntary contribution has come to society after the said NOC was issued by the Society. If it was mandatory to make the said contribution, the NOC from the society would have stated that the amount was outstanding from the member prior to consideration of the transfer by the Committee. Therefore, the allegation by the ARA that in each case a contribution is sought by the society is unfounded and devoid of merit and complete contrary to the factual position so far as our society is concerned. vi. The above statements by the ARA authorities are followed by reference to Bombay HC Judgement of Alankari Sahakari Griha Sanstha Maryadit vs Atul Mahadev. The said case pertains to intention of the society for transfer of flats and position of the society in asking for voluntary pertains. We submit that the same has no relevance under GST since the issue in question is of applicability of GST to Voluntary Contributions and no where relates to the reference made in the Judgement. vii. The statement that voluntary contribution is akin to service charges paid in a restaurant mentioned by the authorities in Par....
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....eclared illegal in a court of law, the nature of the same does not change for the purpose of the transaction. iv. We hence submit that it is illogical in going into the legality of the transaction and further state that the same has no bearing in our case. JURISDICTIONAL OFFICER SUBMISIONS 6. The Jurisdictional Officer vide his letter dated 12.08.2022 have made the following submission: The claim of applicant that the receipt of gratuitous payment from an outgoing member for the time he has resided in the society cannot be taxable under the said CGST Act,2017 as there is no corresponding service being provided separately by the taxpayer society, is not tenable. As outgoing member has received the services provided by the society during his stay as a member in society, as he has satisfied with the services received by him, he has a gratitude towards society and accordingly he makes voluntary payment to the society. Hence, it is consideration received to the society against supply of services. Hence, taxable under the CGST Act-2017. Further, the Jurisdictional Officer vide his letter 28.2.2023 have also made the following submissions: Payment (Contribution)....
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....t and hence taxable under GST law. 9. As regards the aforesaid observations of the MAAR, the Appellant have contended that as per Sec 7 of the CGST Act, 2017, supply should be made for a consideration in the course or furtherance of business. A gratuitous payment by an outgoing member cannot be regarded as a consideration but rather in substance is a gift to the society as the member is paying on his own volition. The voluntary contribution is paid by the outgoing member on his own free will and only for the welfare of the society and society is free to use the fund in any manner as they require. Appellant further contended that the contribution does not pass the test given u/s 2(31) of the CGST Act which states that any consideration received should be in inducement of supply of services or goods. Since there is no supply of services or goods by the society, the entire contribution should not be subject to GST. 10. On perusal of the aforesaid contention of the Appellant vis-à-vis the impugned advance ruling of the MAAR, the moot issue before us is whether payment received from the outgoing member in the name of voluntary contribution is a consideration in response to ....