Facts

The assessing officer held that receipt of non-occupancy charges by the society from its members, to the extent that it was beyond 10% of the service charges/ maintenance charges permissible under the notification dated 09.08.2001, stands excluded from the principle of mutuality and was taxable. The order was upheld  by the Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal held that the notification dated 09.08.2001 was applicable to co-operative housing societies only and did not apply to a premises society. It further held that the transfer fee paid by the transferee member was exigible to tax as the transferee    did not have the status of a member at the time of such payment and, therefore,   the principles of mutuality did not apply. The High Court set aside the finding   that payment by the transferee member was taxable while upholding taxability of the receipt beyond that specified in the governmentnotification.

Issue

whether certain receipts by co-operative societies, from its members i.e. non- occupancy charges, transfer charges, common amenity fund charges and certain other charges, are exempt from income tax based on the doctrine of mutuality.

View:  The Court did not find any reason to take a view different from that taken   by the High Court, that the notification dated 09.08.2001 is applicable only to co-operative housing societies and has no application to a premises society which consists of non-residential premises.

Held

Dismissing the appeal of the revenue the Court held that; Receipts by Co-operative society from its members i.e.. Non-occupancy charges, transfer charges common amenity fund charges and other charges are exempt from income-tax Act based    on the principle of mutuality. The notification dated 9, 2001 issued under section 79A of the Maharashtra Co-operative Societies Act, 1960 is applicable

only to co-operative housing societies and has no application to premises society which consist of non-residential premises. (CA Nos. 2706 of 2018 dt. 12-3-2018)

Editorial: From the judgement of Bombay High Court in ITO v. Venkatesh Premises Co-operative Society Ltd (ITA No 680 of 2009 dt. 11-1-2010)

Mittal Court Premises Co-operative Society Ltd. v. ITO (2010) 320 ITR 414 (Bom.) (HC), and CIT v. Shree Parleshwar Co-op-Housing Society Ltd (2017) 10 ITR-OL 202 (Bom.) (HC) is affirmed.

CIT v. Bankipur Club Ltd. (1997) 226 ITR 97 (SC), Chemsford Club v. CIT (2000) 243 ITR 89 (SC), CIT v. Cawnpore Club Ltd. (2004) 140 Taxman 378/184 Taxation 205 (SC)/Chelmsford Club v. CIT (2000) 243 ITR 89/109 Taxman 215/159 CTR 235 (SC)

Refer: Yum! Restaurants (Marketing) Pvt Ltd v. CIT (2020) 116  taxmann.com 374 (SC); (2020) 424 ITR 630/189DTR 1/313 CTR 37/116 taxmann.com 374 (SC)

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