2016 (3) TMI 209 - AT - Income Tax

Principals of mutuality - Contribution by the members of a Group Housing Society - voluntary contribution by one of its member in lieu of transferring right to the exclusive use of the facilities by the society - Held that - As decided in assessee s own case for previous years the society has incurred expenditure in expanding the facilities and in carrying out eh repair works. There was shortage of funds that shortage was made good by the member. So that is only a question of reimbursement or compensating the expenditure. Therefore as far as the assessee society is concerned. It has not earned anything. So there is no question of any income at all. The society by itself does not have its own income. The expenditures are met by the contribution made by the members or member. Even if the member wants to have some extra facilities and the demand is supported by the remaining members the additional facilities can be erected only through the medium of co-operative society. A member of a housing society cannot incur any expenditure directly even though the expenditure was incurred for this personal benefit. The work has to be carried out through the office of the society. The society alone can undertake such work. Therefore, in fact even in a case where a personal benefit is given to amber by doing some work. The same work is done by the society for and on behalf of that member. Therefore, on this ground also there is no question of any income - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the voluntary contribution of Rs. 70,00,000/- by a member to a co-operative housing society for building repairs and renovation is covered within the principles of mutuality.

Detailed Analysis:

Issue 1: Whether the voluntary contribution is covered within the principles of mutuality.
The appeal by the revenue was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The revenue contended that the voluntary contribution of Rs. 70,00,000/- by a member in exchange for the exclusive use of society's assets/facilities was not covered under mutuality principles. The Assessing Officer (AO) added the amount to the society's income, alleging a lack of proof of mutuality. However, the CIT(A) disagreed, stating that the donation was indeed out of mutuality and referenced a previous case in favor of the assessee. The Tribunal examined the case law and found that the voluntary contribution for building repairs and renovations benefitted all society members, thus adhering to the principle of mutuality. The Tribunal highlighted that the funds were spent on common facilities and that there was no surplus or personal benefit involved. The Tribunal also noted the absence of any income element and concluded that the contribution was a reimbursement for society's expenditure, not constituting income for the society. The Tribunal, following the precedent and High Court decisions, dismissed the revenue's appeal, upholding the CIT(A)'s order.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision based on the principles of mutuality and past legal precedents.