1

Whether a co-operative housing society is liable to income tax and required to file its Income tax return ?

Ans :- Yes

Co-operative housing society is liable to income tax and it is mandatory to obtain PAN No and file regular return of income in ITR-5 as status- AOP every year before 30th Sept and should also obtain TAN for TDS payments if applicable.

INCOME TAX ON HOUSING SOCIETIES

2

What are the consequences and penalty for not filing income tax returns?Ans:- Non filing of return of income attracts penalty of Rs. 5,000/- u/s. 271F

If the society has taxable income then not only income tax but interest and penalty also is attracted.

Non filing of income tax return

3

Under the Income tax, Status of the Co-OP Hsg. Soc. will be Association of Persons ( AOP) Ex: XXXAJ1234P

Rates as well as slabs for income tax . Upto Rs. 10,000/- 10% Between 10,000 and 20,000 Rs. 1000/- +20% in

excess of 10,000 Income exceeding Rs. 20,000 Rs. 3000/-

+ 30% in excess of 20,000

Status and Tax Rates for F.Y. 16-17

4

From financial year 2015-16 co-operative Banks are required to deduct income tax on the deposits kept by the shareholder members, which was earlier not required to do so.

Advise:- Hence to avoid TDS being deducted society

should have PAN otherwise TDS rate applicable will be 20%

TDS made applicable

5

A co-operative society is a voluntary association democratically owned and controlled for the benefit of members to pursue economic activities. Co-operative housing societies in our country are playing a very special and prominent role in catering to the housing needs of our people. The society is a voluntary association, created for mutual help without profit motive, no tax is being charged on the income of such society on the concept of mutuality.

Concept of mutuality

6

A co-operative housing society is a mutual concern and income of any mutual concern, except those covered under Section 2(24)(vii) of the Income Tax Act, is outside the purview of the levy of income-tax.

Chelmsford Club Ltd. Vs. CIT [2000] 243 ITR 89 (SC). DIT Vs. All India Oriental Bank of Commerce Welfare

Society [2003]130 Taxman 575(Del.). CIT Vs. Apsara Co-operative Housing Society Ltd.[1993] 204

ITR 662 (Cal.) Walkeshwar Triveni Co-op. Hsg. Society Ltd. Vs. ITO [2003]

80 TTJ 673 (Mumbai) (SB)

Concept of mutuality

7

Yes :- Any rental income from the set up of mobile tower on the society premises is taxable under the head “Income from house property”.

However, the society will get standard deduction of 30% of rent/compensation received u/s. 24(a)

Taxability of mobile tower rent

8

No :- Transfer premium collected from the member is not taxable up to the limits prescribed in the buy-laws under the concept of mutuality.

Transfer Premium is collected by the co-operative housing societies from their members for Transfer of flats and the current limit for such transfer premium as set by the 79(A) directives under MSC Act,1960 and as per Bye laws is Rs.25,000/- maximum.

Taxability of transfer premium

9

Taxability of Transfer premium of Rs.25,000/- and any other collection over and above this amount in the form of donations or contributions to various other the funds etc. is always a subject matter of dispute since the Income Tax Department wants to tax on excess amount collected over and above Rs. 25,000/-.

Bombay HC Judgment in case of CIT V/s. Darbhanga Mansion CHS Ltd. transfer premium in excess of Rs. 25,000/- is not taxable. (Debatable issue in courts)

Taxability of transfer premium

10

Bank Interest income derived by the co-operative society on deposits made out of contributions from members of the society,was held not taxable in the hands of the society.

However, Sec. 80P(2)(d) any income by way of interest or dividend derived by the co-op society from its investments with any other co-operative society, the whole of such income is deductible. (Co-Operative Bank is a co-op society engaged in banking)

Taxability of Bank Interest

11

If society is having commercial parking space and parking charges are collected from outsiders, the same are taxable as income.

If the society collects non-occupancy charges the same are not taxable on the concept of mutuality. ( Mittal Court Premises Co-op Soc. Ltd. V/s. ITO Bombay High Court).

Corpus or capital receipt on redevelopment or sale of TDR is not taxable as capital gains since there is no cost of acquisition. ( Bombay High Court in the case of ITO V/s. Sambhaji Nagar CHS Ltd. )

Taxability of parking charges, non occupancy charges and corpus etc.s

12

Threshold limits for TDS on the following payments made :-

1. Salaries u/s. 192 up to Rs. 3,00,000/-p.a. per employee

2. Labour Contracts payments or Works contracts including AMCs u/s. 194C upto Rs. 1,00,000/- aggregate for the year per payee.

3. Brokerage / Commission paid to agents u/s. 194 H upto Rs. 15,000/- per payee @ 5%

4. Rent / Compensation paid u/s. 194 I upto Rs. 1,80,000/- p.a. per payee

5. Professional or Technical Fees paid u/s. 194 J upto Rs. 30,000/- per payee

TDS required to be deducted

13

SECTION TYPE OF PAYMENT Threshold limit UP TO

Change in rates

192 Salaries Rs. 3,00,000/-PA per

employee

NO Change

194 C Labour Contracts payments or Works contracts including AMCs

upto Rs. 50,000/- per payment or 1,00,000/-

aggregate P.A.

NO Change

194 H Brokerage / Commission paid to agents

Rs. 15,000/- per payee

TDS has been reduced from 10% to 5%

194 J Professional and technical fees paid

Upto Rs. 30,000/- P.A.

TDS has been reduced from

10% to 5%

Exemption for TDS on the following payments

14

Income tax notice to Non-Filers

15

CONTACT DETAILS:HITESH SHAH & ASSOCIATES CHARTERED ACCOUNTANTS

208, 2ND FLOOR, PLOT NO : 26,SHALIMAR MIRACLE, NEAR SARADAR PATEL HALL, OPP. CITI CENTRE, ABOVE McDONALD,

JAWAHAR NAGAR, GOREGAON (WEST), MUMBAI-400062.

TEL : 9821140636 / 28745501 / 28744782 Email:- ca.hsa1988@gmail.com