The Income Tax Department cannot charge tax on the transfer fees charged by cooperative housing societies during transfer of ownership.
Nor can they tax them on non-occupation charges collected.
Eleven cooperative housing societies (CHS) and cooperative societies (CS) had challenged the tax levied on the transfer fees and non-occupation fees.
The Bombay High Court said that the transfer fees charged by the CHS at the time of transfer of ownership does not amount to income or interest profit earned by the society.
A CHS is registered to look after a property, including the building. There is no trading or business activities.
“Admittedly there is no commerciality involved and there is no profiteering. Hence, there can be no tax on transfer fees,” said the high court.
In August 2001, a government notification put a cap of Rs 25,000 on transfer fees depending on the area.
Certain societies would accept donations and gifts from incoming members and take more than Rs 25,000 from them.