Per Agrawal - These are two appeals by the assessee relating to assessment years 1978-79 and 1979-80. There is a common issue in both the years and, therefore, these appeals are being decided by this common order. - (1.)
(2.) The assessee was a cooperative housing society registered under the Punjab Cooperative Societies Act. Return of income was filed showing nil income in both the years. The society allotted plots of land to its members. Certain charges were recovered from the members and from the receipts, the assessee-society was running a school called as Tagore Public School. A community centre as well as a hospital were also being constructed with the funds raised from the members. Separate accounts (profits and loss account as well as the balance-sheet) were maintained in respect of the receipts and expenditures of the society and in respect of the Tagore Public School. The accounting year ended on 30th June, in both the years. The assessee-society had received transfer fee of Rs. 1,34,000 in the assessment year 1978-79 and Rs. 1,48,400 in the next assessment year. The assessment for the year 1978-79 was finalised on an income of Rs. 1,34,625 and in the next assessment year at Rs. 1,52,150. The Assessing Officer treated the amount received by way of transfer fee as income in the hands of the society. The assessees plea was that the society had received transfer fee from its members for the purposes of certain charitable activities like running a school and operating a community centre. The society had also shown certain interest income as well as rental income. Interest income was exempted by the Assessing Officer under section 80P(2)(a)(i) of the Act. Admission fee was also not subjected to tax. Rental income as well as the amount of transfer fee were brought to tax. The Assessing Officer was of the view that the assessee-society was not an institution wholly or mainly for charitable purposes. It was further noted that the society had not been registered with the Commissioner of Income-tax under section 12A of the Income-tax Act. Therefore, section 11 as well as section 12 were also held to be not attracted. The assessee went in appeal but did not succeed.
(3.) THE Id. counsel for the assessee has submitted that the assessee-society had received transfer fee at the time of transfer of plots from one member to another. While receiving the transfer fee, a receipt was issued and the specific head under which it was to be treated as a donation was also mentioned. In the assessment year 1978-79 (from 1-7-1976 to 30-6-1977) the break up of the receipts by way of transfer fee is as under: judgement_4441_tlit0_19950.htm THE Id. counsel has, therefore, submitted that while receiving the transfer fee, the assessee-society had specifically shown it under the specific head to which the members had donated money. It is contended that the society was in the nature of a cooperative mutual society and whatever money was collected by way of transfer fee that was utilised to provide facilities to the residents and also for running the school, hospital and a community centre. THE income was earned solely for the benefit of the members of the society. Though the school was not restricted to the children of the members and was open to all, it would not affect the applicability of the principle of mutuality. THE assessee-society is said to be not carrying on any commercial or trading activity whatsoever. Transfer fee was charged from the members under resolution No. 3 passed by the managing committee of the society at the following rates :- judgement_4441_tlit0_19951.htm THEre were lesser rates in respect of transfers between father and son, husband and wife and brother and sister. THE ld. counsel has submitted that the amount collected by the society was utilised for carrying out the charitable objects of the society. THE members had paid the amount of transfer fee specifically for charitable purposes. Since the assessee-society was not doing any trading but was a mutual concern rendering various services to the members, there was no question of treating the receipt as taxable income. THE society was working for the advancement of the education and also for the benefit of the general public. As regards the receipt of the school, it is said to be exempt under section 10(22) of the Income-tax Act. THE ld. counsel has argued that principle of mutuality was applicable to the facts of the assessees case and, on that basis, the amount by way of transfer fee should be held to be eligible for being not taxed. No commercial activity is said to have been carried out by the assessee-society. THE society only rendered services for the mutual benefit of the members.;