A service tax tribunal in Mumbai has ruled housing societies do not have to pay service tax on maintenance charges collected from their members. The decision of the Customs, Excise and Service Tax Appellate Tribunal came in a case involving Tahnee Heights, a housing society on Nepean Sea Road, and Mittal Tower at Nariman Point that houses several offices.
Some months ago [ Tags: Co-op Housing Societies, cooperative, mumbai, taxmen Unreasoning taxmen after Co-op Housing Societies Posted on 07 December 2013 by akshaykumar] we analyzed how greedy CBDT tried in vain to bring the transfer fee receipts under tax net in nearly a contempt of Bombay High Court ruling (Sind Coop. Hsg. Society v. ITO ITA NO. 931 OF 2004 JULY 17, 2009) that cooperative society and its members are not two separate persons so far as mutual financial transactions were concerned. Mutuality Principle has been discussed at length in that judgment.
The decision means a flat -owner or owner of a commercial premises in a housing society registered under the Maharashtra Co-operative Societies Act will have to pay less as maintenance charges for the service remaining the same. What housing societies do is a sort of Self service with a few elected representatives managing the affairs who are themselves recipients of the identical services. The housing society will not be required to impose service tax (currently 12.36%) against maintenance charges collected from its members.
Typically , in some housing societies in Mumbai, the resident welfare association (RWA) formed from among members of the society caters to the administrative needs of the society . Maintenance charges are collected for purposes like water charges, electricity for common areas (lifts, stairways, lobbies), security , lift maintenance or repairs, and maintenance of common areas.Most of these charges that are collected are in the nature of reimbursement by members to their collective body exclusively formed of the members only.
However, service tax authorities insisted housing societies pay up on the charges collected from its members. In tony areas or in luxury housing societies with a club house, gym or swimming pool, monthly maintenance charges can be steep, even amounting to more than Rs 1 lakh per flat per anum.
In the case, Tahnee Heights, which collected charges for maintenance, repairs and beautification, and Mittal Tower that raised expenses from its members towards water and security charges and repairs, paid service tax on the department’s “persuasion“. Later they filed refund claims, which were rejected. Consequently appeals were filed with the CESTAT.
“The CESTAT decision is the first of its kind for the western zone. The tribunal, based on decisions of other jurisdictions, accepted the principle of mutuality–the society provided services to itself which could not be subject to service tax. However, finality will be reached only once the Supreme Court adjudges on a similar matter pending before it,
Services provided by the Committees to members of the Society are also subject matter of complaints before the District Consumer dispute forums in the State. The members aggrieved of deficiency in service like not attending to internal leakages
Tags | CHS, cooperative, housing, Mr. Manohar Ghansharamani,mumbai, senior citizen
Deficiency in service by the housing society posted on 24 July 2014 by Rohit Gupta
Do the term service by housing societies to members connote T/WCEO different things under different statutes? Looks to be so. Is there a possibility of higher courts reversing the decsion of CESTAT in cases of Tahnee Heights, and Mittal Tower or will it distinguish the concept of services viewed by the Consumer forum as different from commercial aspects which service tax necessarily denotes. Services fees being reimbursement of actual services rendered by housing societies are services like security, cleanliness, gardening, running the lift etc and these are not provided by the Society but the Committee arranges for members and for themselves from out of common funds.
When a member faces leakage problems persistently it is deficiency in the management quality per se and it is the management who is negligent and deficient and it is in fact the management that should hold themselves responsible and no the Society for the Society includes the aggrieved member also, it is in this context the following paragraph has relevance to the entire issue of deficiency in service by the housing societies. This para is reproduced for the convenience of readers:
The least explored dimension:
The housing societies are service providers to its members but the expression “voluntary service” cannot be associated with the Society. Members pay maintenance charges which the Committee decides. Voluntary service is by the Committee and largely the Hon. Secretary and not by the Society. In this case it is the Committee or the Chairman and the Hon. Secretary who are in fact found “guilty of deficiency in service for not paying attention to a severe leakage problem in his flat” which was their duty under the Bye Laws. For the members office bearers are the Society for the Society includes them also. They would not point fingers at themselves.