2006 (3) TMI 258 - AT - Income Tax

Summary

Issues:
Assessment of income from other sources, Exemption under mutuality principle, Registration status of Co-operative Society, Application of section 80P(d) for deduction.

Assessment of Income from Other Sources:
The appeals were filed against the order confirming the assessment of the assessee's income from other sources. The assessee claimed the income earned from its members as exempt from tax under the principles of mutuality. The Assessing Officer treated the assessee as an AOP and denied the claim for deduction under section 80P(d) of the Act. The ld. CIT(A) also did not agree with the assessee's contention, relying on the decision of the Hon'ble Supreme Court in a specific case.

Exemption under Mutuality Principle:
The assessee contended that the income accrued on FDR was exempt based on the principles of mutuality due to complete identity between contributors and participators of the fund. The Tribunal considered the factual position where the money received was from registered member co-operative banks, no dealing with non-members occurred, and the income earned was distributed among members. The Tribunal analyzed the concept of mutuality based on legal precedents and held that the income earned by the assessee was exempt on the concept of mutuality for the relevant assessment years.

Registration Status of Co-operative Society:
The Tribunal examined whether the assessee acquired the status of a Co-operative Society under the UP Co-operative Societies Act, 1965, before the registration certificate was granted. The assessee's contention was that the society came into existence on the date of application for registration, but the Tribunal rejected this plea as the registration was subject to obtaining a license from the RBI for banking activities, which had not been granted.

Application of Section 80P(d) for Deduction:
The assessee also argued for deduction under section 80P(2)(d) of the Act, claiming that income earned from 3-10-1997 to 31-3-1998 was exempt. The Tribunal allowed the ground taken by the assessee for all three assessment years, holding that the income was exempt under the concept of mutuality and section 80P(2)(d) for the relevant period.

In conclusion, the Tribunal allowed all the appeals filed by the assessee against the assessment of income from other sources, recognizing the exemption under the mutuality principle and section 80P(d) for the specified period.