TaxTMI 
TaxTMI 
2010 (3) TMI 1083
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.... this, Revenue has raised two grounds, which read as under:- "ITA No.2133/Ahd/2006 (by the Revenue) 1. The ld. CIT(A) has erred in law and on facts in reducing the disallowance of expenses made by the Assessing Officer from ₹ 13,18,756 to ₹ 7,61,826. 2. The ld. CIT(A) has also erred in law and on facts in deleting the addition of ₹ 2,00,000/- being the transfer fee on transfer of plots." And that of assessee's CO three grounds are as under:- "CO No.262/Ahd/2006 (by the assessee) 1. The C.I.T. (Appeals)erred in not accepting the plea of the assessee that on the principle of mutuality, the assessee's income is not table at all. 2. In any case, the C.I.T (Appeals) erred in not giving the deduction of the total expenditure incurred by the assessee and in not holding that only the income of ₹ 4,02,182/-, which was the net surplus of income over expenditure could be considered for taxability. 3. The C.I.T. (Appeals) failed to appreciate that even the above surplus of ₹ 4,02,182/- will not be taxable because the income of the assessee by way of interest from Co-operative banks of ₹ 4,78,317/- which is exempt u/s.80P(ii) was more than ₹ 4,02....
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....uld be allowed. Further the water expenses of ₹ 1,56,650/- should be allowed as deduction. Similarly other expenses claimed by the appellant like advertisement expenses of ₹ 28,342/-, service tax of ₹ 16,998/-, staff medical expenses of ₹ 5,250/-, municipal tax of ₹ 77,036/-, audit fees of ₹ 5,000/-, legal fees of ₹ 64,000/-, 80% of Stationery and printing expenses of ₹ 13,865/-, insurance premium of ₹ 4,474/- depreciation on electrical fitting of ₹ 243/-, depreciation on dead stock and furniture of ₹ 22,287/- and depreciation on substation construction of ₹ 3,190/- should be allowed as deduction against the income from hiring of Sanskritik Hall and decorators and caterers commission. As regards the other source of income i.e. interest from banks, following the decision of Hon'ble ITAT, Ahmedabad in the case of M/s. Gulmarg Association cited by the Authorized Representative, and as per the segregation of expenses given by the Authorized Representative, as there is surplus of ₹ 10,870/-, the same is directed to be taxed income from other sources." 4. As regards to second issue of addition of ₹ 2 lak....
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....rectly charged for the maintenance expenses and not to earn interest as income. This observation is supported by the facts of this case that this income will not be given to the members even on dissolution of the association. Under the circumstances, we find that the lower authorities have not properly appreciated the facts of the case. The peculiar fact of the case is that the society has decided to collect one time found from members instead of periodical collection from the members and further decided that in the case of income falls short, the deficit will be collected from members. The above facts are summarized in figures for different years as under:- Gulmarg Association Total maintenance 94-95 95-96 96-97 97-98 98-99 Expenses 187162 199414 271402 357259 382095 Less: Interest 66268 65463 105868 122882 97250 Balance to be Contributed by members 120894 133951 165534 234377 284845 Ashima Estate 94-95 96-97 97-98 Total maintenance expenses 1,92,265 2,59,215 3,34,610 Less: interest 79,174 1,21,587 1,15,577 Balance to be contributed by members 1,13,091 1,37,628 1,37,628 From the above facts it is clear that the association assessee has Cre....
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....n 575 (Del) has discussed the appeal of revenue as no question of law survives, with the following observations: 'As is evident from the format of the questions, the only issue raised by the revenue is as to whether the interest income derived by the respondent/assessee on the contributions made by the members of the welfare society is to be taxed in the hands of the society or not. Since in our view, the issue raised by the revenue is legal and is no more res integra, we deem it unnecessary to state the facts. Suffice it to notice that while completing assessment on the respondent assessee, a cooperative society comprising of the employees of the Bank, the AO had held that the interest income earned by the society on the contributions received from the members was not exempt on the principle of mutuality. The issue with regard to the concept and principle for mutuality has been elaborately examined by the apex court in Cheimsford Club vs. CIT (2000) 159 CTR (SC) 235: (2000) 243 ITR 89 (SC). Their Lordships have held that where a number of persons combine together contribute to a common found for the financing of some venture or object and in this respect have no dealings or rela....
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....le Bombay High Court in the case of Sind Co-op. Housing Society & others v. ITO Ward-1(7), Pune in ITA No.931/Pun/2004 dated 17- 07-2009. We find that the Revenue could not distinguish the above decisions referred by Ld. Counsel for the assessee that of jurisdictional High Court in the case of Adarsh Co-operative Housing Society Ltd. (supra) and Hon'ble Bombay High Court in the case of Sind Co-op. Housing Society & Others (supra) and that also of this Tribunal in the case of Shree Yogeshwarnagar Co-op. Housing Society Ltd. v ACIT Circle-9 A'bd in ITA No.2129/Ahd/2005 dated 11-09-2009. We feel that the income earned by the society on account of interest, rent and other miscellaneous income from its members is exempt in view of the principle of mutuality. We find that the Hon'ble Bombay High Court held as under: "21. We may now deal with some other submissions advanced on behalf of the Revenue. It was contended that the class of members means, members such as permanent, temporary, honorary etc. This is based on the assumption that there can be different classes of members. In a Cooperative Housing Society there can be members and associate members. We have already quoted from the ju....
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....ure of trade, business or the like in which event the assessee then will have to pay tax on such profits. Charging of transfer fees as per by-laws has no element of trading or commerciality. There therefore, being no taint of commerciality, the question of earning profits would not arise when the housing society from the funds received applies the moneys towards maintenance of the society and providing the members with usual privileges, advantages and conveniences. 25. It was also contended that the case should be covered by section 28(3) of the Income Tax Act. Section 28(3) would have no application to the facts of the case as it deals with the income derived by the member from professional or similar association from the specific services performed for its members. A cooperative society has not similarity whatsoever with a professional association. In CIT V.s Apsara (Supra) the Calcutta High Court, there held that even if the case of member or professional association, general fees levied by the association on its members by way of entrance fees or periodical subscription or otherwise would not constitute business. Since, these are not related to any specific services rendered ....
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....e members. The participants and contributors are the members. The members may come in our go out. The fact that only some members from those who contributed may participate in the surplus, as held by the Supreme Court is irrelevant as long as the class is identifiable. This test is also satisfied in the case of a Housing cooperative society. (4) Do the members have the right to share in the surplus and do they have a right to deal with its surpluses. In terms of the bye laws, it is only the members who have a right to share in the surplus. Under the M.C.S. Act, no part of the funds, as provided in section 64 can be paid by way of bonus or dividend or otherwise distributed among its members except as provided therein. Under Section 67, there is a limit on the dividend to be paid on liquidation. Under section 110 of the M.C.S. Act. The surplus can only be dealt with in the manner provided therein which includes any member or devoted to objects provided by the bye-laws or be transferred to another society with similar object. Rule 90 of the Rules provide how the surplus is to be divided. The surplus then can be distributed in terms of the bye-laws to members and or by operation of ....