Income: Mutuality: A. Y. 2005-06: TDR premium paid by members to housing co-operative society for utilising extra FSI is exempt in the hands of society on the principle of mutuality:

The assessee is a co-operative housing society formed of plot owners, who had obtained a lease of land from the Maharashtra Housing Board. The society in turn entered into sub-lease agreements with its members. The society passed a resolution by which it resolved that if any member desires to avail of the benefit of TDR for carrying out construction on his/her plot, the member should apply for a no objection certificate which would be granted on the payment of a premium calculated at Rs. 250 per sq. ft. In the previous year relevant to the A. Y. 2005-06, the assessee society received a premium of Rs. 18.75 lakh from four members of the society. The Assessing Officer rejected the claim of the assessee society that the premium amount is governed by the principle of mutuality and accordingly is not chargeable to tax and added the said amount of Rs. 18.75 lakh to the total income. The Tribunal allowed the assessee’s claim and deleted the addition.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) The principle of mutuality would clearly apply to a situation as to the present. The TDR premium is a payment made by a member to the society of which he is a member, as a consideration for being permitted to make an additional utilization of FSI on the plot allotted by the co-operative housing society.

ii) The society which looks after the infrastructure, requires the payment of the premium in order to defray the additional burden that may be cast as a result of the utilisation of the FSI. The point however is that there is a complete mutuality between the co-operative housing society and its members. The principles of mutuality would apply. Hence no substantial question of law arises.”