SC approves Principle of Mutuality for Housing Society

By Accommodation Times Bureau

In a recent order by Supreme Court, on dropping the claim of Income Tax Department on imposing of tax on several receipts collected by societies.  It gave a huge aid to cooperative societies.  The controversy goes around the notification which was issued under Maharashtra Cooperative Societies Act, 1960, section 79A.

The Notification which was issued of August, 2001, on based of it the Income Tax Authority argued that since these particulars societies have received maintenance/service charges in surplus of 10% of the non-occupancy charges, it was conflicting the law and therefore, the principle of mutuality fails.

The decision given by the authority was overruled by the Income Tax Tribunal that the decision given by the authority does not apply on commercial societies.

It further held that the transfer fee paid by the transferee member was eligible to tax as the transferee did not have the status of a member at the time of such payment and, therefore, the principles of mutuality did not apply.

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