TMI Blog1996 (11) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... le 14 of the Delhi Co-operative Societies Rules, 1973. The apartments were constructed and allotted by Army Welfare Housing Organisation (AWHO) (which itself is a society registered under the Societies Registration Act, 1860) to the original owners (Service Officers) on the basis of a break-up of cost depending upon the area of each flat and under different heads like "Apartment + Land and Lift", developmental costs, departmental charges, taxes and statutory payments and Community Centre building. While the residential complex, i.e., SVA consists of 10 blocks (A to J) having in all 422 residential units, one block, i.e., K-Block provides common facilities like a Club for the exclusive use of the residents, which is referred to as "The Institute" and shopping as also banking facilities for the residents. As far as K-Block is concerned, all the owners of residential flats were charged a uniform amount of Rs. 4,650 per owner. After the construction of the flats and allotment thereof to 422 owners and after they took possession of the flats, a Users Committee was set up to manage the affairs temporarily until the appellant-society itself was constituted in April 1985. The assessee towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the property jointly with specified fractional shares in depreciable assets. The Tribunal held that the assessee is not the owner and only the members of the Society are the owners of the flats. The Tribunal also rejected the contention of the Society that it was the owner of the entire complex and looking after maintenance of the complex amounted to carrying on of a business. The Tribunal accordingly rejected the assessee's claim for depreciation. The second ground against reopening was also held against the assessee. While the appeal of the assessee was dismissed, the Tribunal all the same in its order also observed as under :-- " It may be that the assessee being a Society, there is some mutuality. In the context of mutuality there might have been some collections made by the Society from the members as flat owners for the purpose of maintenance and administration of the complex. May be in the course of the performance of that function, some surplus was left and that surplus was brought to tax but if the assessee is a mutual Society where the contributors and the ultimate beneficiaries are one and the same and applying the famous and well established principle that no man ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to restrictions or limitations, if any, prescribed by the statutory provisions. TheHon'ble Courtconsidered its earlier decisions and in particulars the decision in Addl. CIT v. Gurjergravure P. Ltd. [1978] 111 ITR 1 (SC) and went on to observe that in the circumstances, the view of the larger Bench in Kanpur Coal Syndicate hold the field. 8. The Jute Corporation ofIndia, in their case, had not claimed deduction of liability to pay Purchase Tax under the provisions of the Bengal Raw Jute Taxation Act, 1941 at the assessment stage, but claimed such deduction at the appellate stage. The reason for failure to claim deduction at the original stage was because the company entertained a belief that it was not liable to pay Purchase Tax under the aforesaid Act. Under the circumstances the Hon'ble Supreme Court upheld the decision of the first appellate authority to entertain the additional ground. 9. Shri Eradi the learned counsel also invited our attention to Delhi High Court judgment in the case of Taylor Instrument Co. (India) Ltd. v. CIT [1992] 198 ITR 1/64 Taxman 129, wherein the Hon'ble Court at page 15 of the report expressed the view that " normally whenever no fresh eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fees, received by it from the members was not taxable as the income of the Society. Continuing with his submissions, Shri Eradi took as through bye-laws of the appellant-society and in particular, Bye-Laws Nos. 54 and 55 dealing with liquidation and which are provided as under :-- " 54. The society shall be wound up and dissolved only by the order of the Registrar under section 63 of Delhi Cooperative Societies Act of 1972 and Rules made thereunder. 55. After meeting all the liabilities including the paid-up share capital, the surplus assets, if any, shall not be divided among the members but shall be utilized towards any object or public utility determined by the General Meeting of the Society within three months of the date of the final liquidation approved by the Registrar, or the Registrar may, with the approval of the General Meeting of the Society place said surplus or deposit with the Delhi State Cooperative Bank Ltd., until such time a new society with similar conditions is registered when with the consent of the Registrar, such surplus may be credited, to the Reserve Fund of such new society or assign the said surplus either wholly or in part to an object or public u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid income. 12.5 In the case of the appellant, Rule 21 of the Memorandum of Association provides that in the event of dissolution surplus should not go to the members and it should be made over to Association with similar objects by a decision of 3/5th of the majority of the Association. Following the decision of Madras High Court in CIT v. Madras Race Club Ltd. [1976] 105 ITR 433 and the House of Lords in IRC v. Eccentric Club Ltd. [1925] 12 TC 657, the Andhra Pradesh High Court held that the participation envisaged in the principle of mutuality is not that the members should willy nilly take the surplus to themselves. Since the member could choose the organisation of similar object to which the surplus would go, they had as the owners of the surplus, right to dispose of the same in the manner they like. 12.6 In Adarsh Co-operative Housing Society Ltd.'s case, the position regarding disposal of surplus assets on liquidation was very similar to that of the assessee, as is evident from page 689 onwards of the Report. The Hon'ble High Court observed that though the surplus assets cannot be distributed amongst the members on winding up of the Society, the fact that they have the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned representatives of the parties. On the basis of decisions/judgments relied upon on behalf of the assessee as also keeping in view the objects and aims of the assessee, it is clear that the appellant-assessee fully satisfied the conditions for exemption on the principle of mutuality in regard to income covered by such principle. As already seen, out of its total receipts of Rs. 36,61,027 for the relevant previous year a sum of Rs. 18,43,777 represents contribution made by the members of the Society themselves and as such this amount is clearly exempt from tax on the principle of mutuality. We have also noticed that K-Block which provides common facilities has also been paid for by 422 members of the society at Rs. 4,650 per member, forming part of total cost of acquisition of the flats in each case. The Delhi Municipal Corporation has also taken the view that rateable value of K-Block would be calculated " on the basis of each flat by dividing such rateable value by 422 " being the number of residents "who are joint owners of K-Block property". This being so, the licence fee and electricity charges in respect of property being K-Block jointly owned by 422 residents, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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