CIT vs. Jai Hind CHS Ltd (Bombay High Court)

DATE: (Date of pronouncement)
DATE: August 30, 2012 (Date of publication)

Click here to download the judgement (jai_hind_TDR_premium.pdf)

TDR Premium received by Co-op Hsg Society from its members is exempt on ground of “mutuality”

The assessee, a Co-operative Housing Society formed of plot owners, passed a resolution to the effect that if any member desired to avail of the benefit of Transferable Development Rights (TDR) for carrying out construction or additional construction on his plot, he should apply for a No Objection Certificate which would be granted on payment of a premium calculated at the rate of Rs.250 per sq.ft. The Society received a premium of Rs.18.75 lakhs from its members for this purpose and claimed that the receipt was not chargeable to tax on the grounds of mutuality. The AO rejected this plea on the ground that the TDR premium was in reality a “profit sharing arrangement of commercial nature” and was chargeable to tax. The CIT (A) & Tribunal upheld the assessee’s plea. On appeal by the department to the High Court, HELD dismissing the appeal:

In Mittal Court Premises Co-op Society 320 ITR 414 (Bom) it was held in the context of non-occupancy charges that the principle of mutuality would apply to a co-op society. The same principle applies to the TDR premium paid by a member to the Society of which he is a member as consideration for being permitted to make an additional utilization of FSI on the plot allotted by the Society. There is a complete mutuality between the Society and its members and the TDR premium is not chargeable to tax.

For the tax implications when the TDR is sold see Om Shanti. For the law on taxability in the hands of the Members see Ishverlal Manmohandas Kanakia, Hemandas J. Pariyani, Kushal K. Bangia & Article
One comment on “CIT vs. Jai Hind CHS Ltd (Bombay High Court)
  1. KIRAN WALJEE says:

    The society has paid tax (TDS) on accumulated transfer fee put unde FD. Since Co-Ops is exempt, being mutual association, from payment of I.T. can refund be claimed. If so under what provision.

    Thanking you

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