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2015 (7) TMI 877 - HC - Income TaxTaxability of the receipts by a cooperative housing society from a portion of sale consideration received by its member at the time of transfer of the plot - Addition on account of premium account received for transfer of plots - Held that:- It could be seen that in various decisions, this Court as well as Bombay High Court consistently held that contribution made by the members to the general fund of the society in various forms would be governed by the principle of mutuality. Particularly, in case of premium collected by the society from its outgoing member from out of a portion of his profit, the principle of mutuality would apply and the receipt would not be taxable as income of the society. The Supreme Court in case of Chelmsford Club (2000 (3) TMI 4 - SUPREME Court , further held that surplus of a club which provided recreational and refreshment facilities etc. to its members and guests cannot be taxed on the principle of mutuality since such surplus would be used for maintenance and development of the club. Individual plots are allotted to its members who enjoy occupational right, but ownership of the land always remains with the society. On the plots of land so allotted, the member would be allowed to construct his residential unit. Upon transfer of the plot by a member, the society would collect 50% of the excess or popularly referred to as 'premium'. The fund so collected would be appropriated in the common fund of the society to be utilised as per the byelaws which envisage development of common facilities and expenditure for common amenities. A part of the surplus would be diverted to the reserve fund of the society. Surplus could also be utilised for waiver of the lease amount or for the health, education and social activities of the members. It can thus be seen that there is total identity of contributors of the fund and recipients from the fund. The contribution comes from the outgoing member in the form of a portion of the premium and it is utilised for the common facilities and amenities for the members of the society. Different modes of application of the funds make it clear that the funds would be expended for common amenities or for general benefit of the members; or be distributed amongst the members in the form of dividend or lease rent waiver. It can thus be seen that it is impossible for the contributors to derive profit from contribution made by themselves to a fund since such fund could only be expended or returned to them. Creation of the society was primarily for the convenience of the members to create a housing society where individual members could construct their residential units and common facilities and amenities could be provided by the society. It was essential thus that a combined activity is carried on by a group of persons who would be the members in the cooperative society. All the tests referred to in the Privy Council decision in case of The English & Scottish Joint Cooperative Wholesale Society Ltd. (1948 (4) TMI 2 - PRIVY COUNCIL ), stand fulfilled. Decided in favour of the assessee
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