TaxTMI 
TaxTMI 
2026 (7) TMI 1146
X X X X Extracts X X X X
X X X X Extracts X X X X
....-19. The assessee is aggrieved by the action of the CPC in bringing to tax the surplus arising from maintenance charges, property tax recoveries and other collections received from members of the society by disregarding the doctrine of mutuality and further levying fee under section 234F of the Act. The learned CIT(A) having affirmed the said action, the assessee is in further appeal before us. 2. The relevant facts, borne out from the record, are that the assessee is a co-operative premises society registered under the provisions of the Maharashtra Co-operative Societies Act. During the year under consideration, it had collected maintenance charges, property tax recoveries and other incidental charges from its members aggregating to Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 234F was also upheld. 5. Before us, the learned counsel for the assessee submitted that the very foundation of the impugned order is factually erroneous. He drew our attention to the audit report and audited financial statements placed in the paper book and submitted that the assessee had duly obtained audit under the Maharashtra Co-operative Societies Act on 18.07.2018. Accordingly, the due date applicable for filing the return was 31.10.2018 and since the return had admittedly been filed on 31.10.2018 itself, no fee under section 234F could have been levied. It was further submitted that the receipts in question represented maintenance charges, property tax recoveries and other contributions received from members of the so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accepted, the due date applicable for filing the return of income was 31.10.2018. The return having admittedly been filed on 31.10.2018 itself, there was no delay whatsoever in filing the return. Consequently, the levy of fee under section 234F is unsustainable and is directed to be deleted. 8. The principal issue requiring adjudication is whether the surplus arising from maintenance charges, property tax recoveries and other collections received from members of the society can be brought to tax or whether the same is exempt on the doctrine of mutuality. The undisputed facts emerging from record are that the receipts in question have been received exclusively from members of the society and have been utilized for maintenance, repairs, ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us represents only an augmentation of the common fund and continues to remain available for the benefit of the members. (iv) Maintenance charges, property related charges, transfer charges, non occupancy charges, common amenity fund contributions and similar collections made from members retain the character of mutual receipts so long as they are utilised for maintenance, repairs, infrastructure, amenities and other common purposes of the society. (v) The crucial test is not whether a receipt results in a surplus, but whether the receipt is generated from dealings amongst members for their common benefit and whether the identity between contributors and beneficiaries remains intact. (vi) Differential contributions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itute taxable income, and any surplus arising therefrom is merely an accretion to the common fund of the members. (xii) Thus, where contributions are received exclusively from members and are applied for the common benefit of those very members, the principle of mutuality excludes such receipts and the resultant surplus from the ambit of taxation. 10. The aforesaid principles make it abundantly clear that the focus of enquiry under the doctrine of mutuality is not on the quantum of surplus generated during the year but on the true character of the receipt itself. Once the receipts originate from members and are intended for the common benefit of those very members, the resultant surplus does not acquire an independent character ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ning the adjustment, has not recorded any finding demonstrating as to how the chain of mutuality stood broken in the assessee's case. There is no finding that the assessee dealt with outsiders, carried on any commercial activity, or applied the funds for any non mutual purpose. In the absence of any such finding, the mere existence of a surplus could never constitute a valid basis for denying the benefit of mutuality. The entire reasoning adopted by the authorities below proceeds on the assumption that once receipts exceed expenditure, the surplus automatically becomes taxable. Such an approach stands directly negated by the principles laid down by the Hon'ble Supreme Court. 13. In fact, in the very nature of a co-operative society, cont....