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 Supreme Court
The Supreme Court in the case of ITO v. Venkatesh Premises Co-operative Society Ltd. (2018) 402 ITR 670/163 DTR 465/301 CTR 514/254 Taxman 313 (SC) held that as per S.4 of Income Tax Act: Charge of income-tax – Mutuality – Receipts by Co-operative society form 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
Facts
According to the assessing officer, non-occupancy fees collected by the society from its members that exceeded 10% of the service fees or maintenance fees allowed by the notice of 09.08.2001 are not subject to the principle of mutuality and are, as a result, taxable. This is because the 10% threshold was exceeded by the number of service fees or maintenance fees allowed by the notice. The Commissioner of Income Tax gave his approval of the decision (Appeals). The statement that was made on September 8th, 2001 only pertained to cooperative housing societies, hence the Income Tax Appellate Tribunal found that the 09.08.2001 announcement did not apply to premises societies. It was also found that the transferee member’s payment of the transfer fee was subject to taxation. This was because the transferee did not have the status of a member at the time that the payment was made, which rendered the mutuality principles inapplicable. The finding that the transferee member’s contribution was taxable was overturned by the High Court, but the taxability of the receipt was maintained even though it exceeded what was permitted by the government notice.
Issue
Whether or whether the concept of mutuality may be used to justify excluding from income tax certain collections made by co-operative societies from the members of such societies, such as non-occupancy expenses, transfer charges, common amenity fund charges, and some other charges.
View
The Court did not find any reason to take a view that was different from that taken by the High Court, which was that the notification dated 09.08.2001 is only applicable to cooperative housing societies and has no application to a premises society that consists of non-residential premises. The High Court’s view was that the notification was only applicable to cooperative housing societies. The Court did not find any reason to take a view that was different from that taken by the High Court. This is because the Court did not see any grounds for adopting a viewpoint that was distinct from the one held by the High Court.
Held
Receiving by a Co-operative society from its members, such as non-occupancy expenses, transfer charges, common amenity fund charges, and other charges are exempt from the income-tax Act based on the principle of mutuality, the Court said, rejecting the appeal of the revenue agency. The notification that was issued on September 9, 2001, under Section 79A of the Maharashtra Co-operative Societies Act, 1960 only applies to co-operative housing societies; it does not apply to premises societies that are comprised of non-residential premises. The notification was issued under the authority of the Maharashtra Co-operative Societies Act, 1960. On September 9, 2001, this notice was sent to those affected.
Judgement Reviewed by Jay Kumar Gupta