2011 (10) TMI 643 - AT - Income Tax

Summary

Issues involved: Taxability of transfer fees, taxability of non-refundable security deposits, taxability of nominee occupancy charges, taxability of interest income.

Taxability of transfer fees:
The appellant, a company, collected transfer fees from shareholders at the time of transferring flats to intending purchasers. The Assessing Officer held that the concept of mutuality does not apply to companies and rejected the claim for exemption. The Commissioner (Appeals) granted relief to the appellant. The Tribunal, citing previous orders and the judgment of the Jurisdictional High Court, held that transfer fees received by the appellant, being a mutual concern, are not taxable under the principle of mutuality. Therefore, the Revenue's appeal was dismissed.

Taxability of non-refundable security deposits:
The issue of non-refundable security deposits collected by the appellant for allowing repairs to flats was also considered. The Tribunal noted that these deposits were collected from members, applying the principles of mutuality, and therefore cannot be taxed. Consequently, the Revenue's appeal was dismissed.

Taxability of nominee occupancy charges:
The appellant received nominee occupancy charges from members, which were added to the total income. The appellant contended that these charges are exempt under mutuality. The Tribunal, following its previous orders and the judgment of the Jurisdictional High Court, held that nominee occupancy charges are exempt from taxation on the principles of mutuality. Therefore, this ground of the appellant was allowed.

Taxability of interest income:
The appellant's interest income on fixed deposits with banks and other sources was added to the total income. The appellant claimed exemption based on mutuality. However, the Tribunal, in line with the Jurisdictional High Court's decision, held that this interest income was taxable as it did not possess the character of mutuality. As a result, the appellant's appeal was partly allowed.

In conclusion, the Revenue's appeal was dismissed, and the appellant's appeal was partly allowed based on the considerations of mutuality in each issue.