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TMI Blog2010 (7) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... s is discernible is that the assessee filed the return of income for assessment year 2001-2002 on 7th February, 2003 declaring a loss of Rs.5,48,075/-. The case was selected for scrutiny and accordingly notices were issued under Sections 143(2) and 142(1). The assessee, a cooperative society, produced the books of accounts, the bank passbooks, the bills and vouchers and such other documents as required by the assessing officer. The assessing officer on the basis of a report submitted by the DDIT Unit-I, Delhi and the information gathered by the auditors of the assessee society proceeded to finalise the assessment. 3. Before the assessing officer the assessee claimed exemption on the principles of mutuality. The assessing officer referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer that the difference between the sale price and the construction price is to be treated as income as short term capital gains of the assessee for the assessment year 2001-2002. The amount spent on purchase of dustbins for the garden maintenance was treated as capital nature and assessed as the same. As far as the receipt of interest is concerned, the assessing officer came to hold that for the relevant assessment year the assessee had shown interest receivable from the members and not being incorporated in account and as the assessee was following the mercantile system, it was treated as income. Being of this view, the assessing officer added Rs.27,13,797/- towards income and deducted Rs.50,000/- under Section 80P. In addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he society. No sanction letter from the Municipal Corporation of Delhi was furnished to validate such construction of shops within the complex of the society and there was a profit motive for which considerations had been duly received and, therefore, with the transfer of capital assets within the meaning of Section 2(47)(v) of the Act, short term capital gain was consequent within the meaning of Section 45 of the Act and, therefore, the addition by the assessing officer cannot be faulted; that the purchase of the dustbins and the purchase of benches having been identified as capital expenses by the auditors the finding of the assessing officer treating the said expenses as capital in nature cannot be faulted; that the amount receivable fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the power of attorney holders are in direct relation with the members of the society and the funds are also collected from the members of the society and the shops having been constructed within the premises of the society having been approved by the concerned government authority it could be irresistibly concluded that the shops were constructed to cater to the needs of the members of the society only and no outside customer is allowed in the complex of the society and there has been necessary sanction for construction of such buildings, therefore, principles of mutuality would also get attracted to the same; that as regards the issue of interest the principles of mutuality would also apply as it is receivable from the members of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the society. 7. To appreciate the submissions raised by learned counsel for the revenue, we have carefully perused the order passed by the forums below. In this connection, we may refer with profit to the decision in Director of Income Tax (Exemptions) v. All India Oriental Bank of Commerce Welfare Society, (2003) 184 CTR (Delhi) 274, wherein a Division Bench of this Court posed the question whether the judgment rendered by the apex Court in Chelmsford Club v. Commissioner of Income Tax, (2000) 243 ITR 89 would apply where the income earned on deposits made out of members and non-members contributions, donation and subscriptions are seggregable or not and dealing with the said question, answered the issue as follows: "3. The issue with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , needless to say, cannot be said to have changed. As regards the activities of the society, the tribunal has held that the bye laws clearly and categorically stipulate that the assessee-society is entitled to do all such things which are incidental or conducive to attain any or all of the other objects. The clauses in the bye laws clearly exposit that it is for the development and construction of residential houses, flats for the members to provide the members necessary common amenities and facilities as may be found practicable by the DDA and the Municipal Corporation of Delhi and such other authorities and, therefore, the society, to cater to the needs of the members, have constructed the shops and no outside consumers are allowed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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