2012 (9) TMI 997 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the taxability of voluntary contributions towards common amenities under the principle of mutuality.

Issue 1: Taxability of voluntary contributions

The appellant contested the taxability of Rs. 29,00,000 received as voluntary contributions towards common amenities, claiming it as exempt under the principle of mutuality. The Assessing Officer disallowed this amount, leading to an appeal before the Commissioner of Income Tax (Appeals) who upheld the disallowance.

Issue 2: Application of Principle of Mutuality

The appellant argued that the issue is settled in their favor based on the decision of the Hon'ble Jurisdictional High Court in the case of Sind Cooperative Housing Society vs ITO. They cited precedents where similar issues were decided in favor of the assessee by the Tribunal. On the contrary, the Departmental Representative contended that only amounts up to Rs. 25,000 are exempt under the principle of mutuality, as per a specific notification.

Judgment:

The Tribunal examined the relevant material and noted that a coordinate Bench had previously ruled in favor of the assessee in a similar case. Referring to the decision in the case of Sind Cooperative Housing Society vs. ITO, the Tribunal emphasized the absence of commerciality in the cooperative housing society's activities, meeting the requirements of mutuality. The Tribunal also highlighted that members had the right to share in the surplus, reinforcing the application of the principle of mutuality.

The Tribunal further referenced other cases where the principle of mutuality was upheld, leading to a consistent interpretation across different judgments. Ultimately, following the precedent set by the coordinate Bench and the principles of mutuality, the Tribunal decided in favor of the assessee, deleting the addition made by the Assessing Officer.

In conclusion, the appeal filed by the assessee was allowed, and the addition of Rs. 29,00,000 was deleted, affirming the tax exemption under the principle of mutuality.

Order pronounced in the open court on the 21st of Sept 2012.