2009 (7) TMI 689 - HC - Income Tax

Taxability of non occupancy charges - contribution to common amenity fund/repairs and welfare fund being the first contribution made by the existing/new member Held that - on the principle of mutuality non occupancy charges are not taxable - The transferees were admitted as members of the society and flats were entered in their names only after the impugned payments were made to the assessee-society. It was also found that the amounts were paid in excess of the Government notification and consequently, the amount paid as transfer fees are exigible to tax.

Summary

Issues:
1. Transfer fee as contribution to common amenity fund/repairs and welfare fund.
2. Taxability of non-occupancy charges.

Transfer Fee Issue:
The judgment addresses the issue of transfer fee being considered as a contribution to common amenity fund/repairs and welfare fund. The Tribunal held that the transfer fee falls under the decision of Walkeshwar Triveni Co-operative Housing Society Ltd. case. It was noted that the transferees were not members at the time of payment, and the amounts exceeded government notifications, making them taxable. The judgment also discusses the objects of the societies involved, emphasizing the management and provision of amenities for members' benefit. The principle of mutuality was argued based on inter-member transactions, but the Tribunal found the transfer fee taxable due to excess payments beyond government limits.

Non-Occupancy Charges Issue:
Regarding non-occupancy charges, the Commissioner of Income-tax (Appeals) initially ruled them non-taxable, citing a government notification limiting such charges. However, the Tribunal found the charges collected exceeded the specified limits and rejected the application of an earlier notification. The judgment delves into the principle of mutuality in non-occupancy charges, emphasizing the purpose of increasing society funds for member benefits. It discusses the remand by the Tribunal and the applicability of the 10% limit on commercial societies. The judgment ultimately rules in favor of the assessee, concluding that the non-occupancy charges are non-taxable under the principle of mutuality, contrary to the Revenue's contentions.

This comprehensive analysis of the legal judgment covers the issues of transfer fee and non-occupancy charges, providing detailed insights into the Tribunal's findings, the application of government notifications, and the principle of mutuality in determining the taxability of these charges.