No TDS from distribution of rental income earned by a society among its members.
Tax deducted at source (TDS) and Tax collection at source (TCS), as the very names imply aim at collection of revenue at the very source of income. It is essentially an indirect method of collecting tax which combines the concepts of “pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the tax payer, it distributes the incidence of tax and provides for a simple and convenient mode of payment.
This are the most commonly credited accounts in profit & loss account of any Co-operative Housing Society. They are credited under different heads namely Maintenance charges Municipal Taxes, Electricity Charges, Lift Maintenances Charges, Water Charges, vehicle rents on behalf of its member owning those vehicles etc.
It may be emphasized that the society merely acts as an agent who collects this charges on behalf of members & spends the same to meet the various joint expenses of the society. Any surplus generated due to these types of income is not chargeable to tax as it is exempt based on the ‘concept of Mutuality’. The basic principle of Mutuality is a mutual association arises when persons forming a group; associate together for a common object and contribute money for achieving that object and divide the surplus amongst them in the character. The cardinal requirement in case of mutual association is that “All the contributors to the common fund must be entitled to participate in the surplus & all the participators to the surplus must be contributors to the common trade. In other words there should be complete identity between the contributors and the participators.
Where assessee co-operative society having collected jeep rentals on behalf of its members owning those jeeps, remitted said amount to members, it being a welfare activity and there was no element of work contract involved, assessee was not required to deduct tax at source while making remittance in question.
