Mumbai ITAT: Principle of mutuality applicable and amounts not taxable even when a society receives moneys from specific members

New Maker Chamber IV Premises Co.Op.Soc. Ltd. v. ITO, on 01 February, 2011

I.T.A No.559/ Mum/2010

Assessment Year: 2006-07

Question/s before the Hon’ble Tribunal: “Whether or not the CIT(A) was justified in upholding that the contribution received towards common area facility of Rs. 4,00,000, contribution towards use of Dish antenna charges Rs.13,80,000 and contribution towards use of Terrace Garden charges Rs. 75,000, can be taxed in the hands of the assessee society and are not covered by the doctrine of mutuality?”

Relevant facts: During the course of assessment proceedings, the Assessing Officer noted that the assessee has received collection on account of use of common area facility –Rs. 4,00,000, use of Dish antenna charges- Rs.13,80,000 and Terrace Garden charges –Rs. 75,000. The AO was of the view that these receipts are taxable in the hands of the assessee society and the assessee has not offered the same for taxation.

Upholding the appeal of the assessee, the Hon’ble Tribunal held that:

Para 5: “The nominal charge is collected from the persons who actually used these services of the society to ensure that the related expenses are borne by only actual users of the related services. It is not even the case of the Assessing Officer that charges for these facilities are on the basis of market forces or affected by commercial consideration. These activities, in our humble understanding, do not have any element of commerciality. On these facts, it cannot be said that the element of mutual association is not retained even when charges are not recovered from all the members but only from the members who have actually used the related services, in view of the Hon’ble Supreme Court’s judgement in the case of CIT v. Banki Club, 226 ITR 97 (SC). The element of mutuality remains intact.”

The decision is available here.