2016 (8) TMI 1507 - AT - Income Tax

ITAT Rules in Favor of Assessee on Tax Issues: Exemptions for Contributions & Deductions Allowed

The ITAT allowed both appeals filed by the assessee, ruling in favor of the assessee on all tax-related issues. The ITAT confirmed that contributions ... Principle of mutuality - deduction under Section 80P(2)(d) of the Income Tax Act (deduction in respect of income of co-operative societies) - transfer fees incidental to sale of plot - non-occupancy / TDR-related contributions received from membersTransfer fees incidental to sale of plot - principle of mutuality - Taxability of contributions received from members as transfer fees incidental to sale of plot-whether exempt on the principle of mutuality. - HELD THAT: - The Tribunal held that contributions received from members as transfer fees fall within the objects and byelaws of the cooperative society and are applied for the common purposes and benefit of members. Relying on the reasoning in the co-ordinate Bench decision in Land End Co op. Housing Society Ltd. (accepted as matching facts), such receipts constitute mutual contributions and are not taxable income of the society. No contrary contention of Revenue was shown to warrant departure from that view, and the Assessing Officer and CIT(A)'s findings were not concurred with.Contributions received as transfer fees are exempt on the principle of mutuality; appeal allowed on this issue.Deduction under Section 80P(2)(d) of the Income Tax Act (deduction in respect of income of co-operative societies) - interest on investments with co-operative banks / societies - Allowability of deduction under Section 80P(2)(d) for interest/dividend income earned on investments with other co-operative societies/banks. - HELD THAT: - Applying the distinction between provisions dealing with cooperative societies carrying on banking/credit business (Section 80P(2)(a)(i)) and the separate grant of deduction for interest/dividend from investments with other cooperative societies under Section 80P(2)(d), the Tribunal accepted the co-ordinate Bench reasoning that Section 80P(2)(d) permits deduction of such interest/dividend where included in the gross total income. The decision in Totagar's (as considered by earlier authorities) does not preclude deduction under Section 80P(2)(d) for income from investments with other cooperative societies; hence the CIT(A) and Assessing Officer were directed to allow the deduction.Deduction under Section 80P(2)(d) is allowable for interest/dividend on investments with cooperative societies/banks; appeal allowed on this ground.Non-occupancy / TDR-related contributions received from members - principle of mutuality - Taxability of contributions received from a member on occasion of use of TDR (non-occupancy / TDR charges) - whether exempt under the principle of mutuality. - HELD THAT: - The Tribunal followed the decision in Land End Co op. Housing Society Ltd., observing that non-occupancy or TDR-related charges are levied under the society's byelaws, received from members for services/amenities for the collective benefit, and utilised for common purposes. Such contributions, being by members for mutual benefit and for fulfilling the society's objects, attract the principle of mutuality and are not taxable. Revenue did not produce distinguishing material to justify a different conclusion.Contributions on account of use of TDR / non-occupancy charges are exempt on the principle of mutuality; appeal allowed on this issue.Final Conclusion: Both appeals for A.Y. 2009-10 and A.Y. 2010-11 are allowed: contributions received from members as transfer fees and TDR/non-occupancy charges are held exempt by application of the principle of mutuality, and deduction under Section 80P(2)(d) in respect of interest/dividend on investments with cooperative societies/banks is allowed; the Assessing Officer is directed to give effect to these findings. Issues Involved:Confirmation of tax on contribution received from members, allowability of deduction u/s. 80P(2)(d), exemption of contribution received from TDR use, and non-occupancy charges.Confirmation of tax on contribution received from members:The appellant contested the decision to tax contributions received from members, arguing that it should be exempt under the Principle of Mutuality. The ITAT referred to a previous case where a similar issue was decided in favor of the assessee. The ITAT noted that under section 80P(2)(d), a cooperative society can claim a deduction for income derived from investments with other cooperative societies. The ITAT concluded that the contributions in question were exempt on the principles of mutuality and directed the Assessing Officer to allow the claim.Allowability of deduction u/s. 80P(2)(d):The ITAT analyzed the provisions of section 80P(2)(d) in detail and emphasized that a cooperative society can avail deduction under this section for income derived from investments with other cooperative societies. The ITAT relied on a Supreme Court decision to support the interpretation that such income should be included in the gross total income of the cooperative society. As the facts were similar to a previous case, the ITAT decided in favor of the assessee and directed the Assessing Officer to allow the deduction.Exemption of contribution received from TDR use:The issue of contributions received from members on the occasion of using Transfer of Development Rights (TDR) was also raised. Citing a previous case, the ITAT held that such contributions were exempt under the Principle of Mutuality. The ITAT referred to a High Court decision that contributions for mutual benefit were not taxable, as they were used for common purposes benefiting the members. Consequently, the ITAT directed the Assessing Officer to treat these contributions as exempt.Exemption of non-occupancy charges:The ITAT considered the issue of non-occupancy charges received from members who let out their flats. Referring to relevant case law, the ITAT concluded that such charges were not taxable as they were contributions for mutual benefit and used for common purposes of the society. The ITAT directed the Assessing Officer to delete the addition of non-occupancy charges based on the Principle of Mutuality.Conclusion:Both appeals filed by the assessee were allowed, with the ITAT deciding in favor of the assessee on all issues related to tax on contributions, deductions under section 80P(2)(d), and exemptions for contributions related to TDR use and non-occupancy charges. The ITAT directed the Assessing Officer to comply with the decisions and allow the claims made by the assessee.