Sind Co-op Housing Society vs. ITO (Bombay High Court)

DATE: (Date of pronouncement)
DATE: July 17, 2009 (Date of publication)

Click here to download the judgement (walkeshwar_sind_co-op_society_transfer_fees_mutuality.pdf)

Transfer Fees recd by Co-op Hsg Soc from incoming & outgoing members upto limits is exempt on the ground of mutuality

In Walkeshwar Triveni Co-op Hsg Society 88 ITD 159 (Mum) (SB), the Special Bench held that while transfer fees received from the transferor member was exempt from tax on the ground of mutuality, transfer fees received from the transferee member was not exempt from tax on the ground that at the time of payment, he was not a member of the society. In deciding cross appeals, HELD, partly reversing the judgement that:

(i) A Co-op housing society is a mutual association and satisfies all the tests of mutuality. There is no commerciality involved in it because its only activities are maintenance of its property and the subscription and or contributions received from its members can only be extended for this purpose. Further, the participants and contributors are identifiable and belong to the same class. The fact that only some members out of those who contributed may participate in the surplus is irrelevant as long as the class is identifiable.

(ii) Even transfer fees received from transferee members is exempt on the ground of mutuality because the fee can be appropriated only if the transferee is admitted to membership. If the transferee is not admitted, the moneys will have to be refunded.

(iii) However, if an amount is received more than what is chargeable under the Bye-laws or Government directions, the society is bound to repay the same and if it retains the same it will be in the nature of profit-making and that amount will be chargeable to tax.

The copy of the judgement now (19th July) available is a better copy. Please re-download if you downloaded earlier.