2013 (9) TMI 1094 - AT - Income Tax

Common amenities fund is not taxable on the principle of mutuality as decided by this Tribunal is the assessee s own case Receipt towards share premium and entrance fee from incoming members if the said amount is received for the purpose of utilising for the common amenities of the society then the same falls under the category of the contribution of common amenities fund and the concept of mutuality will be applicable. Accordingly, the AO to verify the same and then decide as per our observation.

Summary

Issues:
1. Taxability of amount received towards Common Amenities Fund, Share Premium, and Entrance Fee.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2004-05. The main issue raised was the taxability of the amount received towards Common Amenities Fund, Share Premium, and Entrance Fee. The appellant argued that the principles of mutuality as per the Maharashtra Co-operative Societies Act, 1960 should apply, making the receipts exempt from tax. The Tribunal noted that a similar issue had been decided in favor of the assessee in a previous year. The AO had treated the amounts received as taxable income, but the CIT(A) had deleted the transfer fee and confirmed the addition towards entrance fee and contribution to common amenities fund. The Tribunal, based on its previous decision, held that the amount towards the common amenities fund was not taxable under the principle of mutuality. However, it directed the AO to verify if the share premium and entrance fee were intended for common amenities before making a decision. Consequently, the appeal was partly allowed, with the Tribunal emphasizing the application of the concept of mutuality in determining the taxability of the receipts.