Contribution of members of cooperative housing society
As per Section 2(24)vii of the Income Tax Act, 1961 tax liability arises only if the co-operative society is engaged in business. The assessee society which only provides residential apartments to the members of the society, it is the members who had formed themselves into the co-operative society and there was no question of any profit element in such an association or in having a transfer fees, where a mutual concern like assessee’s receives any income, the surplus which goes back to those who contributed the said income, it is not liable to tax because the income remains in reality the income of the contributors.
The transfer fees charged by the assessee co-operative society from its members who sold their plots was not a voluntary contribution but was the cost for effecting the charge, further, identity between the contributors and particpators did not exist the contributors went out after executing the transfer, in his place, a new person would enter.
In the absence of any evidence to show that transfer fees received by assessee co-operative housing society from its members were utilized for purpose other than benefit of members, transfer fee was not taxable on principle of mutuality.
In the case of the assessee, the only receipts from the members have been proportionate contribution towards maintenance charges etc. and no member has been paid any amount by way of income, it fully satisfy the conditions for exemption on the principle of mutuality in regard to income covered by such principle and as such is clearly exempt from tax.