2010 (11) TMI 968 - AT - Income Tax

Summary

Issues involved: Appeal by revenue against deletion of addition on account of contribution towards common amenities fund and transfer fees based on principle of mutuality.

Summary:

Issue 1: Contribution towards common amenities fund and transfer fees - Principle of mutuality

The assessee, a housing co-operative society, received voluntary contributions and transfer fees. The revenue contended that these receipts were taxable income, rejecting the principle of mutuality. However, the CIT(A) relied on the decision of the Hon'ble Bombay High Court in similar cases and held that the receipts were not income under the principle of mutuality. The revenue appealed to the Tribunal.

Issue 2: Application of principle of mutuality

Referring to the case of Sind Co-operative Housing Society, the Tribunal highlighted that the principle of mutuality applies when all contributors to a common fund are entitled to participate in the surplus, ensuring complete identity between contributors and participators. The Hon'ble High Court held that transfer fees received by co-operative societies were not taxable under mutuality principle, as long as the funds were used for maintenance and benefits of the society members without any commercial element.

Issue 3: Precedents supporting principle of mutuality

The Tribunal cited cases like Su Prabhat Co-operative Housing Society Ltd. and Shyam Co-operative Housing Society Ltd., where the principle of mutuality was upheld. The Bombay High Court's decision in Mittal Court Premises Co-op Society further emphasized that even if charges exceeded government limits, mutuality principle still applied, as long as the excess amount was refunded to members.

Based on the above precedents and legal interpretations, the Tribunal found no merit in the revenue's appeal and dismissed it, affirming the application of the principle of mutuality in the case of the housing co-operative society.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the decision that the contributions towards common amenities fund and transfer fees were not taxable income under the principle of mutuality.