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2017 (12) TMI 657 - AT - Income TaxAddition on account of transfer fees and premium received from members on utilization of Transfer of Development Rights - concept of mutuality - Held that - Issue relating to taxability of the amount of trans charges is squarely covered in favour of the assessee by the decision of Hon ble Bombay High Court in assessee s own case for the previous years wherein the decision of the Tribunal holding that voluntary contribution received by the assessee society from its members as transfer charges is not liable to tax on the basis of principle of mutuality was upheld by the Hon ble Bombay High Court 2011 (7) TMI 1306 - BOMBAY HIGH COURT following its earlier decision rendered in the case of Sind Co-operative Housing Society vs. ITO 2009 (7) TMI 15 - BOMBAY HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made by AO on account of transfer fees. 2. Deletion of addition made on account of premium received by the assessee from its members on the utilization of Transfer of Development Rights (TDR). Issue-Wise Detailed Analysis: 1. Deletion of Addition Made by AO on Account of Transfer Fees: The Revenue's grievance pertains to the deletion of an addition of ?7,64,271/- made by the Assessing Officer (AO) on account of transfer fees received by the assessee, a Cooperative Housing Society, from its members. The assessee society initially offered this receipt as income in its original return filed on 31st October 2007. However, during the assessment proceedings, the assessee filed a revised computation claiming the receipt as exempt based on the Principle of Mutuality. The AO did not accept this revised claim and assessed the income as per the original return. The Commissioner of Income Tax (Appeals) [CIT(A)] initially confirmed the AO's action, but the Tribunal restored the matter back to the CIT(A) for fresh consideration. In the second round, the CIT(A) allowed the assessee's claim, observing that the contributions were from members and were exempt under the Principle of Mutuality. The CIT(A) relied on the Bombay High Court's ruling in the case of Sindh Co-operative Housing Society vs. ITO, which held that the principle of mutuality applies to cooperative housing societies, and such receipts are exempt from tax. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in favor of the assessee by the Bombay High Court's decision in the assessee's own case for earlier years. The Tribunal dismissed the Revenue's appeal, affirming that the transfer fees received from members are not taxable based on the principle of mutuality. 2. Deletion of Addition Made on Account of Premium Received by Assessee from Its Members on Utilization of Transfer of Development Rights (TDR): The second issue involves the deletion of an addition of ?26,80,203/- made by the AO on account of premium received from members for the utilization of TDR. The assessee claimed that this receipt was also exempt under the Principle of Mutuality. The CIT(A) upheld the assessee's contention, noting that the contributions were from members and were incidental to the use of TDR on their respective plots. The CIT(A) referenced various decisions, including those of the Bombay High Court and the Tribunal, which supported the exemption of such receipts under the principle of mutuality. The Tribunal, in its analysis, cited the Bombay High Court's decision in the case of Sindh Cooperative Housing Society Limited, which outlined the tests for mutuality, including the absence of commerciality, identifiable class of members, and the right of members to share in the surplus. The Tribunal found that these tests were satisfied in the assessee's case and upheld the CIT(A)'s order, directing the AO to delete the addition of ?34,44,474/- on account of TDR and transfer fees. The Tribunal concluded that the CIT(A)'s detailed findings were not controverted by the Revenue with any positive material, and thus, there was no reason to interfere with the CIT(A)'s order. Consequently, the Revenue's appeal was dismissed. Conclusion: The Tribunal's judgment comprehensively addressed the issues of transfer fees and TDR premium, affirming that both were exempt from tax under the Principle of Mutuality. The Tribunal relied on precedents from the Bombay High Court and previous Tribunal decisions, ensuring that the assessee's receipts from members were not taxable. The Revenue's appeal was dismissed, and the CIT(A)'s order was upheld.
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