NEW UDYOG MANDIR PREMISES COOPERATIVE SOC.LTD., MUMBAI V. ITO ,15 (1)(3), MUMBAI

ITA 4609/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7188 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B: MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SHRI R.S. PADVEKAR (JM) ITA NO. 4609/MUM/2008 (ASSTT. YEAR : 2005-06) NEW UDYOG MANDIR PREMISES APPELLANT CO-OPERATIVE SOCIETY LIMITED, NEW UDYOG MANDIT PREMISES CHSL., 7, MOGUL LANE, NEAR JOHNSON & JOHNSON, MAHIM (W), MUMBAI 400 016 PAN : AAAAN2358R V/S. INCOME TAX OFFICER, 15(1)(3) RESPONDENT 1 ST FLOOR, MATRU MANDIR, GRANT ROAD, MUMBAI APPELLANT BY : SHRI. VIJAY MEHTA RESPONDENT BY : S/SHRI S.S. RANA/ PRABHAT JHA/ PEEYUSH JAIN (D.R) : O R D E R : PER R.S. PADVEKAR, J.M THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE IMPUGNED ORDER OF THE LD CIT(A)- XV, MUMBAI DATED 10.4.2008 FOR THE A.Y. 2005-06. 2. THE FOLLOWING TWO GROUNDS REMAINED FOR OUR ADJUD ICATION AS GROUND NO.3 IS NOT PRESSED BY THE LD COUNSEL. 1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) XV, MUMBAI ERRED IN COMPUTING THE EX CESS TRANSFER PREMIUM COLLECTED FROM MEMBERS OF SOCIETY ABOVE RS. 25000/- FOR THE YEAR UNDER CONSIDERATION. ITA NO. 4609/MUM/2008 2 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N THE LAW THE LEARNED CIT(A)-XV, MUMBAI ERRED IN COMPUTING TAXABL E INCOME ON ACCOUNT OF INTEREST ON RS. 6,28,123/- ON LATE PAYME NT OF THEIR OUTSTANDING DUES @ 21% FOR THE YEAR UNDER CONSIDER ATION. 3. THE ASSESSEE HAS ALSO FILED APPLICATION WITH PRAYER TO ADMIT FOLLOWING ADDITIONAL GROUND WHICH READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF ADMISSION FEE OF RS. 9,00,000/- HOLDING THAT THE SAME IS NOT COVERED UNDER THE PRINCIPLES OF MUTUALITY. 4. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE A.O MADE THE DISALLOWANCE OF TRANSFER FEE OF RS. 1.50 LACS AND ADMISSION FEE OF RS. 9 LAKHS AND MADE ADDITION TO THE INCOME OF THE ASSESSEE SOC IETY. OUT OF THE SAID ADDITION, THE LD CIT(A) HAS ALLOWED THE TRANSFER FEE TO THE EXTENT OF RS.75,000/- AND CONFIRMED THE REMAINING ADDITIONS. WHILE TAKING THE ORIGINAL GROUND IN THE APPEAL, THE ADDITION SUSTAINED ON AC COUNT OF TRANSFER FEES HAS BEEN CHALLENGED BY GROUND NO. 1, BUT IN FACT, THE A SSESSEE WAS DESIRING TO CHALLENGE BOTH THE ADDITIONS I.E. ADDITION ON ACCOU NT OF TRANSFER FEE AS WELL AS ADMISSION FEE. IT IS ARGUED THAT BOTH THE AUTHORITI ES, THE A.O AS WELL AS THE CIT(A), HAS TERMED THE TRANSFER AND THE ADMISSION F EE AS THE TRANSFER FEE. IN FACT, GROUND NO. 1 IS IN RESPECT OF BOTH THE ADDITI ON BY WAY OF ABUNDANT PRECAUTION, PRESENT ADDITIONAL GROUND IS TAKEN. T HE LD COUNSEL ALSO RELIED ON THE FOLLOWING PRECEDENTS : I) NATIONAL THERMAL POWER CORPORATION V/S. CIT, 22 9 ITR 383(SC) II) JUTE CORPORATION OF INDIA LTD. V/S. CIT, 187 I TR 688 (SC) III) AHMEDABAD ELECTRICITY CO. LTD. V/S. CIT, 199 ITR 351 (BOM) ITA NO. 4609/MUM/2008 3 5. WE HAVE ALSO HEARD THE LD. D.R. IN OUR OPINION, THE GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL GROUND AND IN FACT, I T IS THE PART OF ORIGINAL GROUND NO. 1. WE, THEREFORE, ADMIT THE SAME. 6. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. THE ASSESSEE IS AN INDUSTRIAL CO-OPERATIVE SOCIETY. THE ASSESSEE FIL ED THE RETURN OF INCOME FOR THE A.Y. 2005-06 DECLARING THE TOTAL INCOME AT RS. NIL. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED U/S. 143(3) DETERMINING THE TOTAL INCOME AT RS. 16,52,357/-. T WO MAJOR ADDITIONS WERE MADE BY THE A.O, WHICH WERE IN RESPECT OF THE TRANS FER FEE OF RS. 10,50,000/- AND INTEREST ON ARREARS OF RS. 6,28,123/-. SO FAR AS THE ADDITION OF THE TRANSFER FEE IS CONCERNED, THE ASSESSEE HAS TAKEN OVER M/S. KAMAN WALLA CHAMBERS UNITS W.E.F. 1.10.2004 AND COLLECTED RS. 9 ,00,000/- AS A MEMBERSHIP FEES FROM THE MEMBERS OF KAMAN WALLA CHA MBERS. THE ASSESSEE ALSO COLLECTED RS. 1,50,000/- FROM EXISTING MEMBERS AT THE TIME OF SELLING/TRANSFERRING THEIR UNITS. THE A.O HAS NOTE D THAT THE TRANSFER FEE WAS COLLECTED IN RESPECT OF GALLAS A 206, 108 AND 109 AND THE PURCHASER AS WELL AS THE SELLER HAVE PAID RS. 25,000/- EACH. THE A.O WAS OF THE OPINION THAT THE TRANSFER FEE OF RS. 1,50,000/- IS TO BE ADDED TO TH E TOTAL INCOME OF THE ASSESSEE AS THE SAME IS OUTSIDE THE PRINCIPLES OF M UTUALITY. THE A.O HAS OBSERVED THAT THE CARDINAL REQUIREMENT FOR MUTUALIT Y IS THAT A CONTRIBUTOR TO COMMON FUND MUST BE ENTITLED TO PARTICIPATE IN THE SURPLUS OF COMMON FUND AND FOR THE SAID DOCTRINE TO APPLY, IT IS SINE QUA NON THAT THERE SHOULD BE COMPLETE IDENTITY OF THE CONTRIBUTORS AS WELL AS PA RTICIPANTS. THE A.O. MADE THE ADDITION IN RESPECT OF ENTIRE AMOUNT OF RS.1,50 ,000/- AS IN HIS OPINION, THE SAID AMOUNT IS NOT COVERED UNDER THE PRINCIPLES OF MUTUALITY. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOW THE ISSUE OF TA XABILITY OF THE TRANSFER FEE IS NOW COVERED BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY V/S. ITO, 317 ITR 47 (BOM). IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY (SUPRA), THE SUBSTANTIAL QUESTION FRAMED BY THEIR LORDSHIPS WAS WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE ANY PART OF THE TRANSFER FEE RECEIVED BY THE A SSESSEE SOCIETY WHETHER FROM OUTGOING OR INCOMING MEMBERS IS NOT ALLOWABLE TO TAX ON THE GROUND OF MUTUALITY. ITA NO. 4609/MUM/2008 4 7. THE HONBLE HIGH COURT AFTER REFERRING TO THE P LETHORA OF DECISIONS ON THIS ISSUE AND EXPLAINING THE CONCEPT OF MUTUALITY IN THE BACKDROP OF LEGAL PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT I N THE CASE OF CIT V/S. BANKIPUR CLUB LTD., 226 ITR 97, HELD AS UNDER :- 44. LET US NOW APPLY THE VARIOUS TESTS WHICH ARE TO BE CONSIDERED FOR APPLYING THE PRINCIPLE OF MUTUALITY TO A CASE OF A CO-OPERATIVE HOUSING SOCIETY BASED ON OUR EARLIER DISCUSSION. (1) IS THERE ANY COMMERCIALITY INVOLVED.THIS HAS T O BE FOUND FROM THE BYE- LAWS OF THE CO-OPERATIVE HOUSING SOCIETY. IN CASE O F THE CO-OPERATIVE HOUSING SOCIETY, ADMITTEDLY THERE IS NO COMMERCIALITY INVOL VED. ONCE THERE IS NO COMMERCIALITY INVOLVED THE FIRST TEST OF PROFITABIL ITY DOES NOT EXIST. THE FIRST REQUIREMENT OF MUTUALITY IS THEREFORE, MET. (2) FROM THE MONEYS RECEIVED ARE THE SERVICES OFFER ED IN THE NATURE OF PROFIT SHARING OR PRIVILEGES, ADVANTAGES AND CONVENIENCES. IN CASE OF A CO-OPERATIVE HOUSING SOCIETY, THE ONLY ACTIVITIES WHICH IT CAN CARRY OUT IN TERMS OF ITS BYE-LAWS ARE BASICALLY MA INTENANCE OF ITS PROPERTY WHICH INCLUDES BUILDING OR BUILDINGS. THE SUBSCRIPT ION AND OR CONTRIBUTIONS RECEIVED BY THE MEMBERS CAN ONLY BE EXPENDED FOR TH E PURPOSES OF MAINTENANCE AND PROVIDING OTHER PRIVILEGES, ADVANTA GES AND CONVENIENCES TO ITS MEMBERS IN TERMS OF ITS BYE-LAWS. ANOTHER TE ST OF MUTUALITY IS THUS SATISFIED. (3) ARE THE PARTICIPANTS AND CONTRIBUTORS IDENTIFIA BLE AND BELONG TO THE SAME CLASS IN THE CASE OF CO-OPERATIVE HOUSING SOCIETY. THE CLASS OF MEMBERS ARE CLEARLY IDENTIFIABLE. MEMB ERS ARE ORDINARY MEMBERS OR ASSOCIATE MEMBERS. THE PARTICIPANTS AND CONTRIBUTERS ARE THE MEMBERS. THE MEMBERS MAY COME IN OR GO OUT. THE FAC T THAT ONLY SOME MEMBERS FROM THOSE WHO CONTRIBUTED MAY PARTICIPATE IN THE SURPLUS, AS HELD BY THE SUPREME COURT IS IRRELEVANT AS LONG AS THE C LASS IS IDENTIFIABLE. THIS TEST IS ALSO SATISFIED IN THE CASE OF A HOUSING CO- OPERATIVE SOCIETY. (4) DO THE MEMBERS HAVE THE RIGHT TO SHARE IN THE S URPLUS AND DO THEY HAVE A RIGHT TO DEAL WITH ITS SURPLUSES. IN TERMS OF THE BYE -LAWS IT IS ONLY THE MEMBERS WH O HAVE A RIGHT TO SHARE IN THE SURPLUS. UNDER THE MCS ACT, NO PART OF THE FUND S, AS PROVIDED IN SECTION 64 CAN BE PAID BY WAY OF BONUS OR DIVIDEND OR OTHER WISE DISTRIBUTED AMONG ITS MEMBERS EXCEPT AS PROVIDED THEREIN. UNDER SECTI ON 67, THERE IS A LIMIT ON THE DIVIDEND TO BE PAID ON LIQUIDATION. UNDER SECTI ON 110 OF THE MCS ACT. THE SURPLUS CAN ONLY BE DEALT WITH IN THE MANNER PR OVIDED THEREIN WHICH INCLUDES ANY MEMBER OR DEVOTED TO OBJECTS PROVIDED BY THE BYE-LAWS OR BE TRANSFERRED TO ANOTHER SOCIETY WITH SIMILAR OBJECT. RULE 90 OF THE RULES PROVIDES HOW THE SURPLUS IS TO BE DIVIDED. THE SURP LUS THEN CAN BE DISTRIBUTED IN TERMS OF THE BYE-LAWS TO MEMBERS AND OR BY OPERATION OF LAW ITA NO. 4609/MUM/2008 5 TO ANOTHER SOCIETY HAVING THE SAME OBJECTIVE. IN OT HER WORDS YET ANOTHER TEST OF MUTUALITY IS SATISFIED. 45 . ONCE THESE TESTS ARE SATISFIED, IN OUR OPINION, TH ERE CAN BE NO DOUBT THAT THE PRINCIPLE OF MUTUALITY WILL APPLY TO A CO-OPERA TIVE HOUSING SOCIETY WHICH HAS ITS PREDOMINANT ACTIVITY, THE MAINTENANCE OF TH E PROPERTY OF THE SOCIETY WHICH INCLUDES ITS BUILDING OR BUILDINGS AND AS LON G AS THERE IS NO TAINT OF COMMERCIALITY, TRADE OR BUSINESS. 8. IN THE CASE OF MITTAL COURT PREMISES CO-OPERATI VE SOCIETY LTD., V/S. ITO, 320 ITR 414, THE HONBLE HIGH COURT HAS AGAIN CONSIDERED THE SAME ISSUE AND HELD AS UNDER : ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANTS/PET ITIONERS ARE BASED ON THE PRINCIPLES OF MUTUALITY WHICH WE HAVE ADVERT ED TO IN THE OTHER APPEALS. IT IS, THEREFORE, SUBMITTED THAT BECAUSE OF MUTUAL RELATIONSHIP OF THE MEMBERS OF THE CO-OPERATIVE HOUSING SOCIETY INTER SE, NEITHER THE SOCIETY NOR THE MEMBERS CAN MAKE PROFITS FROM A MONGST THEMSELVES IN TRANSACTIONS RELATING TO THE SOCIETY. CONSIDERING THE OBJECTS OF THE SOCIETY, THE SOCIETY IS NOT CARRYING ON ANY TRADE, OCCUPATION OR BUSINESS. IN THE CASE OF TENANT CO-O PERATIVE HOUSING SOCIETY, IT IS POINTED OUT THAT THE BUILDING IS OWN ED BY THE SOCIETY BY THE SOCIETY AND THE MEMBERS OCCUPYING FLATS IN THE SAID SOCIETY ARE ONLY TENANTS WHO HAVE LIMITED RIGHT TO OCCUPY THE PREMIS ES SUBJECT TO THE CHARGES PAYABLE BY THEM BUT DETERMINED BY THE SOCIE TY. IT IS CONTENDED THAT THE PRINCIPLE OF MUTUALITY HAS BEEN DENIED MAINLY ON THE GROUND THAT THE CONTRIBUTION IS FROM THE INCOMING M EMBERS AND NOT OUTGOING MEMBERS. IT IS POINTED OUT THAT RELYING O N THE OBSERVATIONS IN WALKESHWAR TRIVENI CO-OPERATIVE HOUSING SOCIETY LTD . [2004] 267 ITR (AT) 86 (BOM) THAT THE SPECIAL BENCH ARRIVED AT THE CONCLUSION THAT THE CONTRIBUTION BY WAY OF TRANSFER FEE BY THE MEMBERS, THE PRINCIPLE OF MUTUALITY WOULD APPLY HOWEVER, NOT APPLIED IN THE C ASE OF INCOMING MEMBERS. WE HAVE REFERRED TO THE BYE-LAWS OF BOTH THE MITTAL COURT PREMISES CO-OPERATIVE SOCIETY LTD. AND MAKER CHAMBE RS-III PREMISES CO-OPERATIVE SOCIETY LTD. THE BYE-LAWS ARE NOTHING BUT THE CONTRACT BETWEEN THE SOCIETY AND THE MEMBER. UNDER THESE BY E-LAWS, IT IS THE ITA NO. 4609/MUM/2008 6 MEMBER WHO HAS TO MAKE THE PAYMENT. ANY INTER SE A RRANGEMENT BETWEEN THE INCOMING MEMBERS AND THE TRANSFEREE IS IRRELEVANT IN SO FAR AS THE SOCIETY IS CONCERNED. THERE IS AN AGREEMENT BY WHICH THE AMOUNT IS PAID BY THE TRANSFEREE. IN SO FAR AS THE SOCIETY IS CONCERNED, EVEN IF RECEIPT IS ISSUED IN THE NAME OF TRANSFEREE IT IS IN THE NATURE OF ADMISSION FEE WHICH COULD BE APPROPRIATED, ONLY ON THE TRANSFEREE BEING ADMITTED. MERELY BECAUSE THE AMOUNT MAY BE A PPROPRIATED EARLIER, IT WILL NOT LOSE THE CHARACTER OF THE AMOU NT BEING PAID BY A MEMBER. IN THESE CIRCUMSTANCES, THE IDENTITY OF THE CONTRIBUTOR AND BENEFICIARY BEING SATISFIED AND CONSIDERING THE PRO VISIONS OF MAHARASHTRA CO-OPERATIVE SOCIETIES ACT AND RULES FR AMED THEREUNDER, SURPLUS CAN BE DISPOSED OF IN FAVOUR OF THE MEMBERS ONLY OR FOR THE OBJECTS FOR WHICH THEY MAY SPECIFY. AS HELD BY US IN INCOME-TAX APPEAL NO. 931 OF 204 THE SAME REASONING WILL APPLY TO THE APPELLANTS/PETITIONERS BEFORE US. IN THESE CIRCUMS TANCES, QUESTION (A) AS FRAMED HAS TO BE ANSWERED IN THE NEGATIVE IN FAV OUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. IN RESPECT OF RESTRICTING THE DEDUCTION TO RS. 2 5,000/-, WE FIND THAT THE NOTIFICATION ISSUED BY THE GOVERNMENT OF MAHARASHT RA IS ONLY APPLICABLE IN RESPECT OF THE HOUSING RESIDENTIAL SOCIETY AND THE SAID LEGAL POSITION HAS BEEN DISCUSSED BY THE HONBLE HIGH COURT IN THE CASE OF MITTAL COURT PREMISES CO- OPERATIVE SOCIETY LTD.( SUPRA ) AND HELD AS UNDER : IN INCOME-TAX APPEAL NO. 931 OF 2004 ALONG WITH O THER APPEALS WHICH WE HAVE DECIDED BY THE SEPARATE JUDGMENT TODA Y, WE HAVE SET OUT THE VARIOUS FACTS AND CONSEQUENTLY, THE GOVERN MENT NOTIFICATIONS INVOLVED AS ALSO THE PROVISIONS OF THE ACT AND THE RULES AND AS SUCH, IT IS NOT NECESSARY TO REFER TO THEM ONCE AGAIN. SUFF ICE IT TO SAY THAT THE NOTIFICATION ISSUED BY THE STATE OF MAHARASHTRA PU TTING RESTRICTIONS ON THE AMOUNT OF TRANSFER FEE WHEN THE MEMBER DESIRES TO TRANSFER HIS SHARES OR OCCUPANCY RIGHTS ARE ONLY IN RESPECT OF H OUSING RESIDENTIAL SOCIETIES. IN THE INSTANT CASE, THE APPELLANTS BEFO RE US ARE NOT HOUSING RESIDENTIAL SOCIETIES AND CONSEQUENTLY, THOSE NOTIF ICATIONS WOULD NOT BE ITA NO. 4609/MUM/2008 7 APPLICABLE. HAVING SAID THAT, WE MAY NOTE AGAIN TH AT AS AN ILLUSTRATION IN SO FAR AS MAKER CHAMBERS ARE CONCERNED, THE MAI N OBJECT IS TO MANAGE, MAINTAIN AND ADMINISTER THE PROPERTY OF THE SOCIETY ; TO UNDERTAKE AND PROVIDE AMENITIES AND FACILITIES FOR THE BENEFIT OF ITS MEMBERS OF PUBLIC BENEFIT ON HIS OWN ACCOUNT OR JOI NTLY WITH THE CO- OPERATIVE INSTITUTIONS, SOCIAL, CULTURAL OR RECREAT IONAL ACTIVITIES. SIMILARLY UNDER BYE-LAW B.1.1.(B) AND (C), SIMILAR ARE THE OB JECTS OF MITTAL THE COURT PREMISES CO-OPERATIVE SOCIETY LTD. 10. WE ARE, THEREFORE, OF THE CONSIDERED OPINION TH AT THE ENTIRE AMOUNT IN RESPECT OF THE TRANSFER OF THE GALAS AS WELL AS TH E ADMISSION FEE CANNOT FORM THE PART OF THE TOTAL INCOME OF THE ASSESSEE ON THE PRINCIPLES OF MUTUALITY. WE, THEREFORE, DIRECT THE A.O TO DELETE THE ENTIRE AMO UNT SUSTAINED BY THE CIT(A) TOWARDS TRANSFER FEES INCLUDING THE AMOUNT COLLECTE D OF RS. 9,00,000/- AS TRANSFER FEE FROM THE MEMBERS WHO JOINED THE ASSESS EE SOCIETY. ACCORDINGLY, GROUND NO. 1 AND ADDITIONAL GROUND IS ALLOWED. 11. THE NEXT ISSUE IS THE ADDITION OF RS. 6,28,123/ - ON ACCOUNT OF INTEREST ON LATE PAYMENT OF OUTSTANDING DUES. 12. THE ASSESSEE SOCIETY HAS RECEIVED INTEREST ON T HE ARREARS AMOUNTING TO RS. 6,28,123/-. THE ASSESSEE EXPLAINED THAT THE I NTEREST WAS RECEIVED FROM MEMBERS TOWARDS LATE PAYMENT/NON-PAYMENT OF THEIR D UES ON SPECIFIED DATE. THE INTEREST WAS CHARGED AT THE RATE OF 21% PER ANN UM AS PER THE BYE-LAWS OF THE ASSESSEE SOCIETY. THE A.O WAS OF THE OPINION TH AT THE INTEREST HAS BEEN CHARGED TO ONLY THOSE MEMBERS WHO WERE DEFAULTERS AND DELAYED THE PAYMENTS OF MAINTENANCE CHARGES WHICH OTHERWISE DO NOT CONSTITUTE REGULAR CONTRIBUTION FROM ALL THE MEMBERS AND DO NOT PASS TO THE TEST OF MUTUALITY. THE A.O ALSO RELIED ON DECISION OF THE ITAT, MUMBAI IN THE CASE OF REGENT CHAMBERS PREMISES CO-OP SOC. LTD. V/S. ITO, 82 ITD 13. ITA NO. 4609/MUM/2008 8 13. WE HAVE HEARD THE PARTIES. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PRINCIPLES LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY IN RESPECT OF TRANSFER AND ADMISSION FEES IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY ( SUPRA ) AND MITTAL COURT PREMISES CO-OPERATIVE SOCIETY LT D. ( SUPRA ) ARE ALSO APPLICABLE TO THE INTEREST RECOVERED FROM THE DEFAULTER MEMBERS. THE LD. COUNSEL ALSO RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V/S. GOVINDA CHOUDHURY AND SONS ( 203 I TR 881) TO CANVASS THE PROPOSITION THAT INTEREST INCOME HAS DIRECT NEXUS W ITH THE FEES COLLECTED FROM THE MEMBERS. IN OUR OPINION, THE PRINCIPLES OF MUT UALITY ARE APPLICABLE TO THE INTEREST RECOVERED BY THE ASSESSEE SOCIETY FROM IT S OWN MEMBERS. ULTIMATELY, THERE IS NO COMMERCIALITY INVOLVED IN THE ACTIVITI ES OF THE ASSESSEE SOCIETY AND HENCE, THE FIRST REQUIREMENT OF THE MUTUALITY IS FU LFILLED. THE NEXT QUESTION IS WHETHER THE PARTICIPANT AND CONTRIBUTORS ARE IDENTI FIABLE AND BELONG TO THE SAME CLASS IN THE CASE OF CO-OPERATIVE HOUSING SOCI ETY LTD. IN THIS CASE, THE DEFAULTERS ARE THE MEMBERS OF THE CO-OPERATIVE HOU SING SOCIETY AND HENCE, IT IS A SAME CLASS OF THE MEMBERS. MOREOVER, THE INTE REST COLLECTED BY THE SOCIETY IS A VERY COMPENSATORY IN NATURE AND IT HA S DIRECT NEXUS WITH THE DUES RECOVERABLE FROM THE MEMBERS. WE ARE, THEREFO RE, OF THE OPINION THAT THE TEST SLAID DOWN BY THE HONBLE HIGH COURT OF BO MBAY IN THE CASE OF SIND CO-OPERATIVE HOUSING SOCIETY ( SUPRA ) ARE APPLICABLE AND HENCE, THE INTEREST RECEIVED/RECOVERED FROM THE DEFAULTING MEMBERS CANN OT BE INCLUDED IN THE TOTAL INCOME OF THE SOCIETY. WE, THEREFORE, DIRECT THE A.O TO DELETE THE SAME AND ACCORDINGLY, GROUND NO. 2 IS ALLOWED. 14. THE LD COUNSEL SUBMITTED THAT CONSIDERING THE S MALL AMOUNT OF THE CLAIM, GROUND NO. 3 IS NOT PRESSED. AS GROUND NO. 3 IS NOT PRESSED, THE SAME IS DISMISSED AS NOT PRESSED. ITA NO. 4609/MUM/2008 9 15. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF MARCH , 2010. SD/- SD/- (R.S. SYAL) (R.S. PADVEKAR) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, ON THIS 30TH DAY OF MARCH, 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- XV, MUMBAI 4.THE CIT- CITY-15, MUMBAI 5.THE DR, B BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. ITA NO. 4609/MUM/2008 10 US DATE INITIALS 1. DRAFT DICTATED ON 23/3/10 --------------- SR.P.S . 2. DRAFT PLACED BEFORE AUTHORITY 24/30/3/10 ------ -------- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----