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TMI Blog2006 (5) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... y is that it owns both land and building either on leasehold or freehold basis and on construction of tenements they are allotted to its members. The society in this case constructed 198 flats from 1954 till 1956 and allotted them to members, who, among others, have right to transfer their right of membership and other attended privileges. 4. During these assessment years the assessee society collected interest- free loans from the incoming members. The Assessing Officer was of the view that the loans so taken are really not refundable and consequently represented income in its hand, liable to be taxed. The case of the assessee is that the Assessing Officer did not properly appreciate the true nature of the transaction. The loans in question are all repayable sums. In fact, all the loans were eventually repaid and in respect of one such loan, it was repaid even before the re-opening of assessment under section 147 of the Act. Other loans have been repaid over a period of five years. The assessee before us contends that the department did not properly appreciate that the loans in question were only in the nature of loan and do not have the character of income or any traces of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall was being used for the activities of the members. It was also let out as marriage hall to outsiders on specific charges. The assessee society offered to tax the entire income received for such use from year to year. The society was left with some unutilized FSI and the same were utilized for constructing four new tenements as also for enclosing the verandahs by the existing tenements. It was decided to build four new tenements, which were to be allotted to four new members. Choice was given to the existing members but none of them came forward. The funds required for the project were to be provided by the member allottees of the new tenements as also by utilizing the funds available with the society through the contributions over the years or otherwise from the existing members. Plans were submitted and were ultimately approved by the Municipal Corporation of Greater Mumbai and the construction commenced in the year 1997-98. New members were duly admitted in 1998-99 and the entire project namely, building four new tenements and enclosing the verandahs of the existing 198 tenements was completed in the year 2001 and the extra area to the existing members and the new tenements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no surplus at all as it was as a composite combined project, which resulted into a net deficit, as stated earlier. Members of the society would not have approved the project of building four new tenements without assuring them of enclosing the verandahs, which will give them additional space admeasuring roughly 100 sq. ft. So it was contended that when the additional cost of enclosure of verandahs to the 198 existing tenements is considered, there is no surplus. Without preju-dice, it was also the contention of the assessee that the surplus, if any, is not liable to be taxed in the hands of the society on grounds of principle of mutuality in its transactions with its members - existing as also the new members. There is complete identity of the contributors and the beneficiary to the total project viewed as a whole. 11. The department rejected the above contention of the assessee on the following grounds : ( a )The Assessing Officer held that members could not be admitted for tenements under construction. Therefore, receipts prior to tenement becoming ready were not mutual in character. ( b )The Assessing Officer held that tenements were not allotted but were sold to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building in freehold basis. It is, therefore, entitled to only allot the share to new or existing members. It cannot sell any of its construction segments either to members or outsiders. It has functioned under the discipline of the rule governing the society and, therefore, the concept of mutuality applies with all its force and no question of levy of tax either on part or whole of the construction project, which was exclusively for the benefit of the members - existing and new. Reliance was placed on the decision of Apex Court in Ramesh S. Shah AIR 1975 SC 147 ( sic ) and decision of Maharashtra State Co-operative Appellate Court in the case of Adarsh Grih Nirman Sahakari Sansthan v. K.K. Londhe [1992] CTJ 453. The assessee has filed all the compilation including the rules and bye-laws of the society, the accounting details of its transaction and case laws relied on before the revenue authorities as well as before us. 15. The learned Departmental Representative, on the other hand, pointed out that the Assessing Officer and the learned CIT(A) have given detailed reasons in support of the departmental stand on each of the disputed issues. He heavily relied upon these and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of society and bring to tax revenue, which falls within the domain of the mutuality. The concept of mutuality is the very foundation of co-operative society. All these four new members have been claimed to be included into the society as per the provisions of Maharashtra State Co-operative Societies Act, 1960 and Rules, Bye-Laws enacted thereunder. It is also undisputed that project undertook certain additional facility to existing members and construction of four new tenements of a smaller size so as to utilize available FSI. As we have observed earlier, the plan of building was modified, according to the above, changes were made in existing site plan as per the relevant provisions of building bye-laws applicable to the property in question. The induction of new four members and modification of building plan for accommodating four new members along with some additional facilities to existing members were claimed to have been carried out within the four corners of building bye-laws applicable to the area. There is nothing on record to suggest that there was any violation of any provisions of Maharashtra Co-operative Societies Act, 1960 for inducting new members in the society. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of them to the four new members or with the admission of four new members to its fold. Obviously, a member who joined in 1954 to this society has paid much less when compared to a member who joined subsequently say in 1998. That does not make any difference to the nature of the society or its transactions with such members, any less mutual A might have joined a mutual society by paying a paltry sum and B might have jointed much later by paying astronomical sums as entrance fee, but that by itself will not result the society losing its mutual tag on the ground of inequality in contribution from members for the project. The revenue should have treated the entire activity of providing verandahs to the existing 198 members who occupies the existing tenements and the construction of the four new tenements, which are allotted to four new members as one single project, contribution for project coming from the utilization of the funds available with the society through the past contributions of its existing members and also the funds made available by the new members for membership in the society acquired much later in point of time than the existing members. 22. In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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