As per the Patna High Court only because enter into transaction with non member by Co-op Society cannot disallowed the principle amount

Last updated: 21 April 2012

Court :
Income Tax Appeallate Tribunal

Brief :
The facts of the case as per SOF filed by the assessee, are that the Appellant Association is a mutual organization registered under the Maharashtra Co-op. Housing Society Act, 1960, affiliated to the Mumbai District Co-op. Housing Federation Ltd., formed for the benefit of the members. The Appellant Association has collected life membership contribution from its members for creating the infrastructure such as acquiring fixed assets by way of constructing building, acquiring club equipment and other facilities for the exclusive use of the members. As per approved bye laws of the Association, the fund collected as aforesaid may be kept in banks as short term investments in form of FDRs etc. until used for the specified purposes. During the previous year relevant to assessment year 2004-05, the appellant has received interest from banks on FDRs etc. to the tune of Rs.18,03,588/-. The aforesaid Bank interest of Rs.18,03,588/- was claimed to have been expected under the principle of Mutuality by the Association while filing the return of income. The Bank interest so earned on the deposits may be used for meeting regular expenses such as salaries to employees and other legal and administrative expenses during the period when the Association does not become fully operational of its infrastructures and start getting inflows to meet its regular expenses (extracted partly).

Citation :
The Samarth Nagar Lokhanwal Complex CHS Association Ltd.,Garden No.5 Lokhandwala Complex,Nr. Rishi Tower, Andheri (W),Mumbai-400 053.PAN: AAAT6732D.Appellant Vs.Income-tax Officer-20(3)(4), Mumbai.Respondent