Mutuality protects transfer premium received by a cooperative housing society for member-benefit purposes.

A cooperative housing society's transfer premium received from an outgoing member was treated as exempt under mutuality because the collection was made under the bye-laws, pooled for common amenities, development and other member-benefit purposes, and involved complete identity between contributors and beneficiaries. The existence of a possible surplus distribution on winding up did not defeat mutuality, since the funds remained dedicated to members during the society's operation and there was no scope for external profiteering. Earlier decisions supporting mutuality in similar housing-society receipts were affirmed as the correct position, while contrary authorities were distinguished on their facts.

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Issues: Whether the premium received by a cooperative housing society from its outgoing member on transfer of a plot is taxable as income, or is exempt under the principle of mutuality.

Analysis: The receipts were collected from members under the society's byelaws and were required to be used for common amenities, development activities, reserve fund, and other member-related purposes. The essential features of mutuality were found to exist because the contributors to the fund and the persons benefiting from it belonged to the same class of members. The fact that the surplus could also be dealt with on winding up under the Gujarat Cooperative Societies Act did not destroy mutuality, since during the existence of the society the funds remained dedicated to member benefit and there was no scope for external profiteering. The earlier Gujarat and Bombay decisions supporting mutuality in similar housing-society receipts were held to state the correct law, while the contrary cases relied on by the Revenue were distinguished on their facts.

Conclusion: The premium collected on transfer of plots was not taxable in the hands of the cooperative housing society, as the doctrine of mutuality applied.

Ratio Decidendi: Where a cooperative housing society collects transfer premium from a member under its byelaws and the amount is pooled for common facilities or other member benefits, with complete identity of contributors and beneficiaries and no scope for outside profiteering, the receipt is governed by mutuality and is not income taxable under the Act.

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