2008 (12) TMI 229 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of the principle of mutuality to the contribution of Rs. 10 lakhs.
2. Taxability of contributions of Rs. 24 lakhs being transfer fee received.
3. Allowability of claim of expenditure of Rs. 24,45,846.
4. Taxability of TDR premium received by the society.

Detailed Analysis:

1. Applicability of the Principle of Mutuality to the Contribution of Rs. 10 Lakhs:

The assessee claimed exemption for Rs. 10 lakhs received as damages from Mr. Manojkumar Goswami, arguing it was under the principle of mutuality since the payment was made by members of the society. The AO rejected this claim because the revised return was filed outside the prescribed time limit under Section 139(5) of the IT Act. Further, the AO noted that the payment was made by M/s Oberoi Construction Ltd. on behalf of Mr. and Mrs. Goswami, who are not members, thus falling outside the principle of mutuality. The CIT(A) supported this view, stating that no confirmation was provided from M/s Oberoi Construction Ltd. to show the payment was made on behalf of Mr. and Mrs. Goswami. The Tribunal upheld this decision, emphasizing that mutuality requires complete identity between contributors and participators, which was not satisfied as the payment was made by a third party.

2. Taxability of Contributions of Rs. 24 Lakhs Being Transfer Fee Received:

The assessee received Rs. 24 lakhs as transfer fees from Mr. Sunil Damania and Mr. Ramesh Goenka. The AO taxed this amount, referencing the Special Bench decision in Walkeshwar Triveni Co-operative Housing Society Ltd. vs. ITO, which held that the principle of mutuality does not apply to transferees. The CIT(A) agreed, noting that the transfer fee is a revenue receipt and taxable. The Tribunal confirmed this, stating that the transfer fee from transferees does not fulfill the test of mutuality and is exigible to tax.

3. Allowability of Claim of Expenditure of Rs. 24,45,846:

The assessee claimed Rs. 24,45,846 as expenditure for providing better services and maintaining the society's status. The AO disallowed this, noting no nexus between the expenses and the income. The CIT(A) upheld the disallowance, stating the expenses were not incurred for earning taxable income but for providing amenities to members. The Tribunal remitted the matter back to the AO to determine the nature of the expenditure and allow expenses incurred for maintaining the society's status, excluding those for providing amenities to members.

4. Taxability of TDR Premium Received by the Society:

The Revenue appealed against the CIT(A)'s decision that TDR premium received by the society is not taxable under the principle of mutuality. The Tribunal noted that the TDR premium was paid by members desiring to utilize extra FSI, a facility available only to existing members. Citing previous Tribunal decisions, the Tribunal held that such receipts from existing members are governed by the principle of mutuality and are not taxable. The appeal by the Revenue was dismissed.

Conclusion:

The Tribunal upheld the CIT(A)'s decisions on the principle of mutuality, transfer fees, and TDR premium, while remitting the issue of allowable expenditure back to the AO for further examination. The appeal by the assessee was partly allowed, and the appeal by the Revenue was dismissed.