Law:

Section:

Section 4 of the Income-tax Act, 1961 - Mutual concern - Assessable as - Assessment year 2001-02 - Assessee was a co-operative housing society - Primary activity of assessee-society was to collect money from members for construction of flats/houses and, subsequently, allot same to them - It claimed exemption on principle of mutuality - Assessing Officer held that a co-operative group society was not exempt from income derived from other than construction activities and, therefore, equalization charges from new members, maintenance fund and entry fee from power of attorney holders, interest on delayed payments and interest from banks on FDRs were taxable - Assessing Officer also treated construction and sale of certain shops in society complex as 'commercial activity' and treated difference between sale price and construction cost as short-term capital gains - He treated amount spent on purchase of dustbins and benches for garden as capital in nature and added same to income of assessee - On appeal, Commissioner (Appeals) upheld order of Assessing Officer - On second appeal, Tribunal held that principle of mutuality applied and deleted addition made by Assessing Officer - As regards capitalization of cost of purchase of dustbins and benches, Assessing Officer was directed to grant depreciation on capitalized amount as it was a capital expenditure - Whether, on facts, Tribunal had taken correct decision - Held, yes FACTS The assessee was a co-operative housing society. The primary activity of the assessee-society was to collect money from members for construction of flats/houses and, subsequently, allot the same to them. It claimed exemption of income on the principles of mutuality. The Assessing Officer held that a co-operative group society is neither exempt from filing its return nor from income derived from other than construction activities and, therefore, equalization charges from new members, maintenance fund and entry fee from power of attorney holders, interest on delayed payments and interest from banks on FDRs were taxable. Apart from that, the Assessing Officer took note of the fact that the assessee had sold six shops during the relevant assessment…

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