Mutuality in co-operative housing society collections excludes service tax on member contributions for common expenses.

An incorporated co-operative housing society collecting pre-determined contributions from members for common maintenance and allied expenses is not a distinct person from its members for service tax purposes. Under Section 65B(44), a taxable service requires activity by one person for another for consideration, and Explanation 3(a) applies only to an unincorporated association or body of persons and its members. Because the society is a body corporate and the collections are made on the basis of mutuality for common benefit, the intra-member receipts do not amount to taxable service. Service tax paid on such collections is therefore refundable.

---

---

Issues: Whether an incorporated co-operative housing society collecting contributions from its members for common expenses is a distinct person from its members so as to attract service tax on the basis of Explanation 3(a) to Section 65B(44) of the Finance Act, 1994, and whether the service tax paid on such collections was refundable.

Analysis: Under the pre-01.07.2012 regime, taxable club or association service required a service provider and service receiver, and the levy was based on the existence of a service rendered for consideration. Under the post-01.07.2012 negative list regime, Section 65B(44) continued to require an activity by one person for another for consideration, and Explanation 3(a) treated only an unincorporated association or body of persons and its member as distinct persons. A co-operative housing society registered under Section 36 of the Maharashtra Co-operative Societies Act, 1960 becomes a body corporate, and the contributions collected from members are pre-determined charges for common purposes under the bye-laws. The collections are for mutual benefit and do not create a transaction between two separate persons in the nature of service provider and service recipient. The principle of mutuality therefore applies, and the society is not covered by Explanation 3(a).

Conclusion: The society's collections from members did not constitute taxable service, and the service tax paid thereon was refundable.

Ratio Decidendi: An incorporated co-operative housing society collecting members' contributions for common maintenance and allied expenses is not an unincorporated association or body of persons distinct from its members for service tax purposes, and the principle of mutuality excludes such intra-member collections from the ambit of taxable service.

---