2001 (10) TMI 1168 - AT - Income Tax

Summary

Issues:
- Whether the amounts received by the co-operative society are of capital or revenue nature.
- Whether the principle of mutuality applies to exempt the amounts received from taxation.

Analysis:
1. Nature of Receipts:
The appeals were against the orders of the CIT(A) and DCIT(A) regarding additions made by the Assessing Officer on transfer fees of office premises. The Assessing Officer treated the receipts as revenue income and taxed them based on court decisions. The assessee argued that the receipts were related to the capital account and exempt from tax as they were contributions to common amenities. The Assessing Officer rejected this claim, stating the payments were not voluntary but coerced. The CIT(A) upheld the Assessing Officer's decision based on the Bombay High Court's ruling. The Tribunal found that the amounts were received as per the society's bye-laws and not voluntarily, thus deciding in favor of the Department.

2. Principle of Mutuality:
The main issue was whether the principle of mutuality applied to exempt the amounts from taxation. The Tribunal examined if there was complete identity between contributors and participators in the common fund. Citing legal precedents, the Tribunal emphasized that for mutuality to apply, contributors must be entitled to participate in the surplus, and all participators must be contributors. In this case, the members transferring their flats/offices did not benefit from the amounts contributed to the society, indicating a lack of complete identity. Relying on previous Tribunal decisions, the Tribunal ruled in favor of the Department, stating that the principle of mutuality did not apply. The Tribunal dismissed the appeals based on these findings.

In conclusion, the Tribunal upheld the Assessing Officer's decision to treat the receipts as revenue income and rejected the application of the principle of mutuality to exempt the amounts from taxation. The judgment highlighted the importance of bye-laws governing the receipts and emphasized the need for complete identity between contributors and participators for mutuality to apply.