2016 (6) TMI 1046 - HC - Income Tax

Principle of mutuality - Transfer fee received from outgoing member of co-operative society - whether is not taxable on the basis of concept of mutuality? - it was contended that, the amounts credited to the common amenity fund was payable prior to the transfer of the premium to the society, thus covered by the principle of mutuality - Held that - Though the revenue seeks to contend that contribution to Common Amenity Fund is transfer fees and the Assessing Officer in his order added the amount to the respondent-assessee s income on the ground that it is contribution received from members towards Common Amenity Fund, to our mind, the issue stands concluded in favour of the respondent-assessee and against the revenue by the decision of this Court in Darbhanga Mansion CHS Ltd 2014 (12) TMI 1112 - BOMBAY HIGH COURT

Summary

Issues:
Challenge to order under Section 260-A of the Income Tax Act, 1961 by the appellant against the Income Tax Appellate Tribunal's decision for Assessment Years 2001-02, 2002-03, 2004-05, 2005-06, 2006-07, and 2007-08.

Analysis:
1. The primary issue in this case is whether the 'transfer fee' received from outgoing members of the society is taxable based on the concept of mutuality. The Tribunal considered this issue for all six appeals collectively due to identical issues, except for the quantum involved.

2. The respondent, representing the assessee-society, relied on the decision in Commissioner of Income Tax Vs. Darbhanga Mansion Co-operative Housing Society Ltd., where it was held in favor of the society against the revenue. The respondent argued that the transfer fees received should not be taxable as per the principle of mutuality, which was supported by various decisions.

3. The Assessing Officer added the transfer fees received from outgoing members to the total income of the assessee, disregarding the principle of mutuality. However, the CIT (A) and the Tribunal ruled in favor of the assessee, stating that the contributions made to the Common Amenity Fund were transfer charges covered by the principle of mutuality.

4. The appellant contended that the contributions to the Common Amenity Fund were transfer fees, not covered by the principle of mutuality, citing bye law 3.5 of the society's bye laws. The appellant argued that unlike the Darbhanga Mansion case, the contributions were specifically for the transfer of flats, making them transfer fees.

5. The Court examined the facts and previous decisions, including Darbhanga Mansion case, where a similar issue was considered. The Court concluded that the contributions to the Common Amenity Fund were indeed covered by the principle of mutuality, as ruled in the Darbhanga Mansion case, and dismissed the appeals.

6. A reference was made to a previous case involving transfer fees, where a different conclusion was reached due to specific circumstances not present in the current case. The Court emphasized that the issue at hand was already settled by the Darbhanga Mansion case, and no substantial question of law arose.

7. Ultimately, the Court dismissed all six appeals, upholding the decision that the transfer fees received from outgoing members were not taxable based on the principle of mutuality. No costs were awarded in the case.