2016 (8) TMI 1507 - AT - Income Tax

Contribution received from members incidental to sale of plot Transfer Fees - exemption on the Principle of Mutuality - Allowability of deduction u/s.80P(2)(d) - contribution received by the Society from a member on the occasion of the use of TDR by the member and which was exempt on the Principle of Mutuality - HELD THAT - Issue decided in favour of assessee as relying on case Land End Cooperative Housing Society 2016 (2) TMI 620 - ITAT MUMBAI

Summary

Issues Involved:
Confirmation of tax on contribution received from members, allowability of deduction u/s. 80P(2)(d), exemption of contribution received from TDR use, and non-occupancy charges.

Confirmation of tax on contribution received from members:
The appellant contested the decision to tax contributions received from members, arguing that it should be exempt under the Principle of Mutuality. The ITAT referred to a previous case where a similar issue was decided in favor of the assessee. The ITAT noted that under section 80P(2)(d), a cooperative society can claim a deduction for income derived from investments with other cooperative societies. The ITAT concluded that the contributions in question were exempt on the principles of mutuality and directed the Assessing Officer to allow the claim.

Allowability of deduction u/s. 80P(2)(d):
The ITAT analyzed the provisions of section 80P(2)(d) in detail and emphasized that a cooperative society can avail deduction under this section for income derived from investments with other cooperative societies. The ITAT relied on a Supreme Court decision to support the interpretation that such income should be included in the gross total income of the cooperative society. As the facts were similar to a previous case, the ITAT decided in favor of the assessee and directed the Assessing Officer to allow the deduction.

Exemption of contribution received from TDR use:
The issue of contributions received from members on the occasion of using Transfer of Development Rights (TDR) was also raised. Citing a previous case, the ITAT held that such contributions were exempt under the Principle of Mutuality. The ITAT referred to a High Court decision that contributions for mutual benefit were not taxable, as they were used for common purposes benefiting the members. Consequently, the ITAT directed the Assessing Officer to treat these contributions as exempt.

Exemption of non-occupancy charges:
The ITAT considered the issue of non-occupancy charges received from members who let out their flats. Referring to relevant case law, the ITAT concluded that such charges were not taxable as they were contributions for mutual benefit and used for common purposes of the society. The ITAT directed the Assessing Officer to delete the addition of non-occupancy charges based on the Principle of Mutuality.

Conclusion:
Both appeals filed by the assessee were allowed, with the ITAT deciding in favor of the assessee on all issues related to tax on contributions, deductions under section 80P(2)(d), and exemptions for contributions related to TDR use and non-occupancy charges. The ITAT directed the Assessing Officer to comply with the decisions and allow the claims made by the assessee.