Search Results For: mutuality


ITO vs. Gymkhana Club (ITAT Chandigarh)

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DATE: September 26, 2017 (Date of pronouncement)
DATE: November 15, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Principles of mutuality: Entire law on whether a club whose membership is also open to the persons from the public and whose management is looked after by officials of HUDA is eligible to claim the benefits of "mutuality" explained in the light of Banglore Club 350 ITR 509 (SC) and other judgements

There can not be said to be straight jacket formula to say that in every a mutual concern the members must be entitled to a share in the surplus. In the aforesaid case laws as discussed by the Hon’ble Supreme Court in Banglore Club’s case (supra), if the scheme or the mechanism of functioning of a mutual organization is so devised that a taint of commerciality is involved, the income of the organization can be subjected to tax. As observed by the hon’ble supreme court, it is difficult and vexed question as to at what point of time the relationship of mutually ends and that of trading begins. Since the affairs of the assessee trust are controlled by the serving officers of HUDA, hence it has to pass through greater scrutiny as the chances of it crossing the thin line between the mutuality and commerciality are very high

The Citizens Cooperative Society Ltd vs. ACIT (Supreme Court)

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DATE: August 8, 2017 (Date of pronouncement)
DATE: August 16, 2017 (Date of publication)
AY: -
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CITATION:
S. 80P Test of Mutuality: An assessee cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members if it has carved out a category called ‘nominal members’. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in the real sense. Most of the business of the assessee was with this category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found that the depositors and borrowers are quite distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society

It is pointed out by the Assessing Officer that the assessee is catering to two distinct categories of people. The first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of ‘nominal members’. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that the depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society. It is also found that the appellant is engaged in the activity of granting loans to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Co-operative Societies Act

G. S. Homes & Hotels P. Ltd vs. CIT (Supreme Court)

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DATE: August 9, 2016 (Date of pronouncement)
DATE: September 21, 2016 (Date of publication)
AY: 1996-97
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CITATION:
Refundable deposits received by a housing company for allotment of flats and future maintenance is business income. However, share capital received for allotment of flats is a capital receipt and not income. The principles of mutuality does not apply to such transactions

The Karnataka High Court held, following Shree Nirmal Commercial vs. CIT 193 ITR 694 (Bom) and 213 ITR 361 (FB), that share capital and refundable deposits received by a housing company from its shareholders in consideration of allotting area to them is assessable as business profits. It was also held that the principles of mutuality are not applicable. It was also held that deposits received from the shareholders for future maintenance is assessable as business income. On appeal to the Supreme Court HELD

Hatkesh Co.op. Housing Society Ltd vs. ACIT (Bombay High Court)

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DATE: August 22, 2016 (Date of pronouncement)
DATE: September 5, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Order of the Tribunal in refusing to follow judgement of the co-ordinate bench in the assessee’s own case (holding that transfer fees and TDR premium received by a cooperative society is not taxable on principles of mutuality) without giving reasons is not justified and is breach of principles of judicial discipline

We are of the view that when an identical issue, which had earlier arisen before the Coordinate Bench of the Tribunal on identical facts and a view has been taken on the issue then judicial discipline would demand that a subsequent bench of the Tribunal hearing the same issue should follow the view taken by its earlier Coordinate Bench. No doubt this discipline is subject to the well settled exceptions of the earlier order being passed per incurim or sub silentio or in the meantime, there has been any change in law, either statutory or by virtue of judicial pronouncement. If the earlier order does not fall within the exception which affects its binding character before a coordinate bench of the Tribunal, then it has to follow it. However, if the Tribunal has a view different then the view taken by its Coordinate Bench on an identical issue, then the order taking such a different view must record its reasons as to why it does not follow the earlier order of the Tribunal on an identical issue, which could only be on one of the well settled exceptions which affect the binding nature of the earlier order. It could also depart from the earlier view of the Tribunal if there is difference in facts from the earlier order of Coordinate Bench but the same must be recorded in the order. The impugned order is blissfully silent about the reason why it chooses to ignore the earlier decision of the Tribunal rendered after consideration of Sind Co. Op. Hsg. Society (supra), and take a view contrary to that taken by its earlier Coordinate Bench

CIT vs. Air Cargo Agents Association Of India (Bombay High Court)

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DATE: March 31, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Concept of mutuality in the light of Bangalore Club 350 ITR 509 (SC) explained

The contributions made by the members to the assessee cannot be a subject matter of tax merely because the part of its excess of income over expenditure is invested in mutual funds. It is also not the case of the Revenue that the dividend received from mutual funds have not been offered to tax by the assessee. The concept of Mutual concerns not being subject to tax is based on the principle of no man can profit out of itself. Therefore the test to be satisfied before an association can be classified as a Mutual concern are complete identity between the members i.e. contributors and the participants, the action of the mutual concern must be in furtherance of its objectives and there must be no scope of profiteering by the contributors from a fund. These tests have in fact been reiterated in Bangalore Club v/s. CIT 350 ITR 509 (SC)

Hatkesh Co-op. Hsg. Society Ltd vs. ACIT (ITAT Mumbai)

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DATE: March 9, 2016 (Date of pronouncement)
DATE: March 29, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Mutuality - TDR Premium

The learned CIT(A) relied on ITAT order for A.Y. 2006-07 (ITA No. 499/M/2011) & A.Y. 2007-08 (ITA No. 500/M/2011) and held that TDR Premium received by Society from its members was not covered by principle of Mutuality. The Tribunal for A.Y. 2008-09 reversed the order of Learned CIT(A) and held that TDR premium will be covered by the principle of mutuality. Hence, ITAT order for A.Y. 2006-07 (ITA No. 499/M/2011) and A.Y. 2007-08 (ITA No. 500/M/2011) in case of Hatkesh Co-op. Hsg. Society is no longer good law.

Koramangala Club vs. ITO (Karnataka High Court)

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DATE: February 26, 2016 (Date of pronouncement)
DATE: March 2, 2016 (Date of publication)
AY: -
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CITATION:
S. 44AB/ 271B: Belief that a mutual association like a club is not liable for tax audit is a bona fide one and constitutes reasonable cause u/s 273B

Under the general law relating to mutual concerns, the surplus accruing to a mutual concern cannot be regarded as income, profits or gains for the purpose of the Act (s.4), and where the contributors are to receive back a part of their own contributions, the complete identity between the contributors and recipients negatives the idea of any profit, for no man can make profit out of himself. Therefore, a mutual concern can carry on an activity with its members, though the surplus arising from such activity is not taxable income or profit. The principle of mutuality has also been accepted in the case of a voluntary organization, which receives contributions from its members. The assessee’s contention that Section 44AB of the Act is not applicable to a club being a mutual concern is supported by several judgements

CIT vs. Darbhanga Mansion CHS Ltd (Bombay High Court)

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DATE: December 18, 2014 (Date of pronouncement)
DATE: December 22, 2014 (Date of publication)
AY: 2005-06
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CITATION:
Transfer Fees recd by Co-op Hsg Soc from incoming & outgoing members (even in excess of limits) is exempt on the ground of mutuality

The assessee, a Co-operative Housing Society, received a sum of Rs.39,68,000 on account of transfer of flat and garage and credited it to ‘general amenities fund’ as well as ‘repair fund’. The assessee claimed that the said receipt is exempted

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