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The Commissioner of Income Tax-21 Versus Shree Parleshwar Coop. Housing Society Ltd.

2016 (6) TMI 846 - BOMBAY HIGH COURT

Revenue receipt of society - collection by the assessee society as interest free loan from incoming members as a binding precondition for becoming a member - Held that:- The issue arising herein namely: loans taken from incoming members which have in fact been returned to the incoming members, cannot be treated as Income of the respondent assessee. This issue stands concluded against the Revenue and in favour of the respondent assessee by the decision of the Apex Court in the case of Siddheshwar .....

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mbers. It is an undisputed position that the four new members were members of the Society prior to the allotment of the tenaments to them and also before making their contribution. It is not the case of the Revenue that there is absence of complete identity of the contributors and participants of the Society. So far the second test is concerned viz. that the actions of the Society must be in furtherance of the object of the Society. This is also satisfied. This is so as it is not the case of the .....

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o. 1569 of 2007 - Dated:- 8-6-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Appellant : Mr. Suresh Kumar a/w N.A. Kazi a/w Ms. Samiksha Kanani For the Respondent : Mr. B.V. Jhaveri a/w Mr. S. Sriram ORDER P. C. 1. This appeal filed under Section 260A of the Income Tax Act, 1961 (the Act) by the Revenue challenges the order of the Income Tax Appellate Tribunal dated 9th May, 2006. The impugned common order is passed for the Assessment Years 1998-99 to 2001-02. 2. Although the Revenue has fi .....

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w for our consideration : (i) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that the collection of ₹ 2 lac by the assessee society as interest free loan, from incoming members as a binding precondition for becoming a member, are not revenue receipts ? (ii) Whether on the facts and circumstances of the case and in law, the Tribunal was right in not treating the income of ₹ 1.1 crores as Business Income arising from the sale of fou .....

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bers, cannot be treated as Income of the respondent assessee. Mr. Suresh Kumar, learned Counsel for the Revenue fairly states that this issue stands concluded against the Revenue and in favour of the respondent assessee by the decision of the Apex Court in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. Vs. Commissioner of IncomeTax, (2004), 270 ITR 1. (b) In view of the above, question No.(i) as formulated does not give rise to any substantial question of law. Thus, not entertained. 6. Re .....

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esulting in additional l00 sq.ft. to its members. None of the existing members came forward to seek allotment of the four additional tenaments which were to be constructed on exploitation of the unutilized FSI. (b) In 1998, four persons sought membership of the Society. The factual matrix of the events relating to the admission and contribution for the new four tenaments from the four new members of the society is summarized as under : Sr. No. Name of New Member Date of Applicatin by new members .....

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ciety. The four new members had after becoming members contributed to the Society in the aggregate an amount of ₹ 1.10 Crores. This resulted in allotment of four new tenaments constructed by the Society. However, the aforesaid contribution received from the four new members was not offered to tax by the respondent Society on the principle of mutuality. However, by an order dated 23rd March, 2004 the Assessing Officer did not accept assessee's contention in respect of mutuality and held .....

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position that all the four persons who were allotted the tenaments were the members of the Society at the time when they made contribution in the aggregate of ₹ 1.10 Crores and also when the four additional tenaments were alloted to them. The amounts paid by them would be covered under the concept of mutuality. This is so as a class contributors and the participants of the respondent Society are common. The Tribunal while allowing the Society's appeal inter alia placed reliance upon th .....

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s. This to conclude that the contribution received by the Society from its four new members would be covered by the concept of mutuality and not chargeable to tax. Thus allowing the appeal of the respondent Society. (f) Mr. Suresh Kumar, learned Counsel for the Revenue submits that the amounts received from the four new members for the additional tenaments constructed by the Society has to be treated as the income of the Society. It is submitted that if the test of mutuality has to be applied, t .....

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as been laid down by the decision of the Apex Court in Banglore Club Vs. Commissioner of Income Tax, 350 ITR, 509. The Apex Court has observed that the basis of not taxing surplus funds in the hands of an Assessee on the principle of Mutuality finds its origin in the concept of no man can make a profit of himself. The Apex Court in Banglore Club (supra) set out three tests to be satisfied as under before the principle of mutuality can be applied as under : (i) There must be a complete identity b .....

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