2010 (10) TMI 1057

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....sessee, on merits after hearing the ld. DR . 3. Briefly stated facts of the case are that the assessee is a Co-operative Housing Society, filed return declaring total income at Rs.Nil. During the course of assessment proceeding, from the computation of income filed along with the return of income, it was interalia observed by the Assessing Officer that the assessee AOP received transfer fee of Rs. 5,81,000/- from incoming member Shri Subodh Sharma of plot No.28 and claimed as exempt on the principle of mutuality. However, the Assessing Officer was of the view that the amount of transfer fee charged Rs. 5,81,000/- is beyond the stipulated limit of Rs. 25,000/-, therefore, eventhough principles of mutuality may appear to have been fulfille....

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....aws. The Govt. has not amended the Maharashtra Co-operative Societies Act so far to give effect to the above mentioned recommendation, hence, cannot be made mandatory on the appellant. The taxability of an amount is dependent on the principles of law. Since principles cannot change or be dependent on the amount, the transfer fees are charged as per the bye-laws and the resolution. Therefore, principle of mutuality applies and the transfer fee is exempt from income tax. The reliance was also placed on the judgment of Hon'ble Jurisdictional High Court in Sind Co-operative Housing Society Vs. ITO since reported (2009) 317 ITR 47(Bom.). The ld. CIT(A) following the judgment of the Hon'ble Jurisdictional High Court supra, held that the a....

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....followed the judgment of Hon'ble Jurisdictional High Court in Sind Cooperative Housing Society (supra). 8. In the Sind Co-operative Housing Soc. (supra) it has been held as under (Placitum 44-46, page 62-63 of 317 ITR) : "Let us now apply the various tests which are to be considered for applying the principle of mutuality to a case of a cooperative housing society based on our earlier discussion. (1) Is there any commerciality involved. This has to be found from the bye-laws of the co-operative housing society. In the case of the co-operative housing society, admittedly, there is no commerciality involved. Once there is no commerciality involved the first test of profitability does not exist. The first requirement of mutuality ....

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....f 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 Maharashtra Cooperative Societies 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 thus can be distributed in terms of the bye-laws to members and/or by operation of law to another society having the same objective. In other words, yet another test of mutuality is satisfied. Once these tests are satisfied, in our opinion, ther....