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TMI Blog2015 (9) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and after considering the submissions of the Counsel and the DR, the delay of one day in filing the appeal is hereby condoned and the appeals are accordingly admitted. 2. Briefly stated, assessee is a housing co-operative society and has claimed certain incomes as exempt on 'Principles of mutuality'. Assessing Officer (AO) however, did not agree and brought to tax the amount of Rs. 16,35,690/- in AY. 2007-08 and Rs. 9,25,475/- in AY. 2008-09 as transfer fee received. It was the contention of the AO that the transfer fee charged by the co-operative housing society on the Members transferring their plots was not a voluntary contribution and no mutuality among the Members existed, since there is no identity between contributors and partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n utilized for the common purposes such as maintenance of property, roads, and other facilities, etc. As per the Assessing Officer, the transfer fee charged by Co-operative Society on the members, who transfer their plots was not voluntary and there exists no mutuality, since there is no identity between the contributors and the participators, with the contributors going out and the participators coming into the club. However, the judicial decisions in this regard held that the. amounts collected / paid voluntarily or not would not make any difference to the principle of mutuality, as long as the same is governed by the bye-laws of the society, and the arrangements made under the bye-laws constitute a contract between the society and the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identity must be as a class of contributors and participants and it does not matter that the class may be diminished or increased by members going out or coming in. Similarly, it is not necessary that each member should contribute or each member should participate in the surplus and get back from the surplus what he has paid, as long as they have control over the surplus." Thus, based on the ratio of the decision and facts as applicable to the case, it is reasonable to hold that the members as contributors as well as participators, including the new members remain as a class and such class may increase with new members joining and diminishing with some other members going out, without affecting the principle of mutuality. Hence, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of 'Principles of mutuality' and therefore, the addition made by AO was upheld. Assessee is aggrieved and raised as many as 10 grounds on the issue. The grounds are more or less in the form of written submissions on the issue and the only issue being agitated is whether interest received from bank deposits/balances is covered by 'Principles of mutuality' or not? 5. After considering the rival contentions and detailed submissions made by the Ld. Counsel on the issue, we are of the opinion that the order of CIT(A) is to be upheld. His detailed order in para 6.3 is as under: "6.3 Perused the submissions of appellant, and the observations of the Assessing Officer. As could be noticed from the facts of the case, the appellant society has ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b runs as under:- "34. Reading the above observations, it is not possible to accept the contention of the counsel for the assessee that interest earned even from third parties would be exempt from the charge of income-tax, in all types of transactions. The ratio therein is that, if an incorporated entity is engaged in trade, the profit from it, even if they are transactions with members, would be taxable and the principle of mutuality would have no application. 35. The decision of this court was long prior to Bankipur Club Ltd. (1997 ) 226 ITR 97 (SC) and Chelmsford Club (2000) 243 ITR 89 (SC), and no reference was made therein to Royal Western India Turf Club. (1953) 24 ITR 551 (SC). As we have considered these cases in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be eligible for exemption from income tax. Accordingly, the additions of Rs. 19,02,097/- and Rs. 19,85,909/- made for A.Ys. 2007-08 and 2008-09, respectively, are upheld. Thus, this ground of appeal for both the year, treated as dismissed". 6. Since jurisdictional High Court has clearly held that interest received from third parties cannot be exempted under the 'Principles of mutuality', we reject assessee's contentions, as the interest earned is not from the Members but from the third person i.e., bank in which assessee's surplus funds are placed. Since the income received is from third party, we are of the opinion that 'Principles of mutuality' does not apply to the present facts. There is no merit in assessee's grounds. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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