Summary
The Supreme Court applied mutuality to the societies’ member-related transfer, non-occupancy and amenity receipts used for common maintenance and welfare. A transferee’s payment retained only after admission to membership did not become commercial income merely because it was tendered earlier. Different contribution levels and common-fund surplus did not by themselves defeat mutuality. Regulatory objections to excessive charges were distinct from income-tax treatment. Revenue appeals were dismissed and the assessee society’s appeal allowed.
Issues
- Whether the member-related receipts and surplus satisfied the doctrine of mutuality.
- Whether timing of transferee payment or differential contributions introduced commerciality.
- Whether charges exceeding a State notification necessarily became taxable income.
Held
- Mutuality rests on identity between contributors and participators in a common fund maintained for their common benefit. The receipts here were indisputably devoted to maintenance, repairs, infrastructure and amenities for members. A surplus retained for those purposes did not itself constitute profit from commercial dealings. The judgment did not exempt unrelated business income merely because the recipient was a cooperative society. (¶¶ 14, 15, 16, 17, 18, 19, 25)
- Transfer charges paid partly by a proposed transferee were appropriated only after admission and returned if admission failed. On those facts, earlier tender did not defeat mutuality. Non-occupancy and common-amenity charges likewise served the member class. Differential contributions by old and new members did not alone make receipts commercial; the additional-construction example involved prior induction, occupancy allotment by lots and continuing society ownership. (¶¶ 19, 20)
- A member’s challenge to an excessive levy under cooperative law was a different cause of action from the tax issue. The 9 August 2001 notification applied to cooperative housing societies rather than non-residential premises societies. With common-benefit use undisputed, the asserted regulatory limits did not support the Revenue’s tax claim in these appeals. (¶¶ 21, 22, 23, 24, 26)
Result
All Revenue appeals dismissed; assessee society’s Civil Appeal 1180 of 2015 allowed.