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Issues involved:
The issue involves the taxability of transfer fee received by a co-operative housing society under the Income-tax Act, 1961 for the assessment year 1984-85. Summary: The case involved a co-operative housing society that received a transfer fee for change of hands of flats. The Assessing Officer treated the receipts as taxable income, but the Commissioner of Income-tax and the Appellate Tribunal held that the transfer fee had an element of mutuality and was not taxable. The Revenue argued that the income should be taxed u/s 2(24)(vii) of the Income-tax Act, but the court found that the society was not engaged in business and the surplus mentioned in the Act did not apply. The court referred to precedents where mutual associations were found not liable to tax due to the principle of mutuality. It was established that the co-operative society, being a mutual concern, was not involved in profit-making and the transfer fee was for the benefit of its members. The court applied principles from previous judgments regarding clubs and mutual associations to conclude that the co-operative society's income from transfer fees was not taxable. In conclusion, the court ruled in favor of the assessee, stating that the transfer fee received by the co-operative housing society was not taxable income. The judgment was based on the principle of mutuality and the absence of profit element in the society's transactions. No costs were awarded in the case. This judgment highlights the application of the principle of mutuality in determining the taxability of income received by co-operative societies and mutual associations, emphasizing that where no profit motive is involved and the income benefits the contributors, it remains exempt from taxation.
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