SC on Taxability of Receipts by housing co­-operative societies from Members

ITO Vs. Venkatesh Premises Co-op Society Ltd (Supreme Court of India)

A common question of law arises for consideration in this batch of appeals, whether certain receipts by co­operative 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.

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 co­operative 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 tax ability of the receipt beyond that specified in the government notification.