TaxTMI 
TaxTMI 
1995 (7) TMI 114
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....School. The accounting year ended on 30th June, in both the years. The assessee-society had received transfer fee of Rs. 1,34,000 in the assessment year 1978-79 and Rs. 1,48,400 in the next assessment year. The assessment for the year 1978-79 was finalised on an income of Rs. 1,34,625 and in the next assessment year at Rs. 1,52,150. The Assessing Officer treated the amount received by way of transfer fee as income in the hands of the society. The assessee's plea was that the society had received transfer fee from its members for the purposes of certain charitable activities like running a school and operating a community centre. The society had also shown certain interest income as well as rental income. Interest income was exempted by the Assessing Officer under section 80P(2)(a)(i) of the Act. Admission fee was also not subjected to tax. Rental income as well as the amount of transfer fee were brought to tax. The Assessing Officer was of the view that the assessee-society was not an institution wholly or mainly for charitable purposes. It was further noted that the society had not been registered with the Commissioner of Income-tax under section 12A of the Income-tax Act. Therefo....
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....e was no question of treating the receipt as taxable income. The society was working for the advancement of the education and also for the benefit of the general public. As regards the receipt of the school, it is said to be exempt under section 10(22) of the Income-tax Act. The ld. counsel has argued that principle of mutuality was applicable to the facts of the assessee's case and, on that basis, the amount by way of transfer fee should be held to be eligible for being not taxed. No commercial activity is said to have been carried out by the assessee-society. The society only rendered services for the mutual benefit of the members. 5. The ld. D.R. has, in reply, contended that the receipt in the hands of the assessee-society was neither casual in nature nor voluntary. A fixed schedule had been drawn as per which the members transferring plots of land were required to pay transfer fee. Therefore, it was not a voluntary donation by the members. The amounts were received as a consideration for the transfer of land from one member to another. Our attention had been drawn to the Tribunal's order dated 2-9-1985 in ITA No. 270/84 relating to the subsequent assessment year 1980-81. It....
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.... CIT [1981] 127 ITR 264 (Mad.); (iii) CIT v. Bankipur Club Ltd [I 981] 129 ITR 787 (Pat.); (iv) CIT v. Madras Race Club [1976] 105 ITR 433 (Mad.); (v) CIT v. Delhi Gymkhana Club Ltd [1985] 155 ITR 373 (Delhi); (vi) Sports Club of Gujarat Ltd v. CIT [1988] 171 ITR 504 (Guj.); & (vii) CIT v. Trivandrum Club [1989] 177 ITR 550 (Ker.). The ld. counsel has submitted that when a club received certain amount from the members and provided facilities, the income in the hands of the club was not taxable on the doctrine of mutuality. It is stated that a club was a mutual concern and profits and gains of a club were not assessable as income. It has been held in Sports Club of Gujarat Ltd.'s case that the principle of mutuality can be confined to the transactions with members. The principle of mutuality is not destroyed by the presence of transactions which are non-mutual in character. The two activities can, in appropriate cases, be separated and the profits derived from non-members can be brought to tax. The ld. counsel has, on the strength of the said decision, submitted that in the case of the society also, the same principle of mutuality was attracted because the society ....
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....assessee-company were liable to be applied solely and exclusively for the promotion of the objects set out in the memorandum and no part of such income or property could be distributed amongst the members in any form. It was noted by the Hon'ble Supreme Court that the dominant or primary purpose of the assessee was to promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth etc. It was held that the dominant or primary purpose of the promotion of commerce and trade in art silk etc. was an object of public utility not involving the carrying on of any activity for profit within the meaning of section 2(15) of the Act. It was held that the company was entitled to exemption under section 11(1)(a) of the Act. A question relating to the receipt of transfer fee has been examined by the Calcutta High Court in the case of CIT v. Apsara Co-operative Housing Society Ltd. [1993] 204 ITR 662. In that case, the housing society provided residential apartments to its members and received a transfer fee for the transfer of flats. It was held that the members had formed themselves into a cooperative society for the purpose of having a cooperative housing society and there w....