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11. The department rejected the above contention of the assessee on the following grounds :

(a) The assessing officer held that members could not be admitted for tenements under construction. Therefore, receipts prior to tenement becoming ready were not mutual in character.
(b) The assessing officer held that tenements were not allotted but were sold to members and, therefore concept of mutuality was never applicable to the impugned transactions.
(c) The assessing officer held that the extension project was not single integrated project but building four new tenements was construction project whereas building extra enclosures of verandahs for existing members was extension project. He.further held that construction activity as such was not the main object of the society and, therefore, it was non-mutual in character whereas the extension was mutual activity.

The assessee is aggrieved by all these findings of the Commissioner (Appeals) and is before

14. The learned counsel for the assessee has challenged all these findings of the Commissioner (Appeals). Shri B.K. Khare, learned counsel for the assessee, explained the provisions of rule 10 of Maharashtra Co-operative Society Rules, 1961, which classified various societies. It was contended that the assessee is a tenant co-partnership housing society and accordingly owns both land and building in freehold basis. It is, therefore, entitled to only allot the share to new or existing members. It cannot sell any of its construction segments either to members or outsiders. It has functioned under the discipline of the rule governing the society and, therefore, the concept of mutuality applies with all its force and no question of levy of tax either on part or whole of the construction project, which was exclusively for the benefit of the members - existing and new. Reliance was placed on the decision of Apex Court in Ramesh S. Shah AIR 1975 SC 147 (sic) and decision of Maharashtra State Co-operative Appellate court in the case of Adarsh Grih Nirman Sahakari Sansthan v. K.K. Londhe (1992) CTJ 453. The assessee has filed all the compilation including the rules and bye-laws of the society, the accounting details of its transaction and case laws relied on before the revenue authorities as well as before us.

"I find substance in the arguments made by the learned advocate for the appellant regarding furnishing indemnity bonds by the managing committee members of the housing societies and the fact that the society being open plot type tenant co-partnership society cannot sell the flat but can only allot the same to the members...."

19. The revenue cannot ignore all these and the nature of society and bring to tax revenue, which falls within the domain of the mutuality. The concept of mutuality is the very foundation of co-operative society. All these four new members have been claimed to be included into the society as per the provisions of Maharashtra State Co-operative Societies Act, 1960 and Rules, Bye-Laws enacted there under. It is also undisputed that project undertook certain additional facility to existing members and construction of four new tenements of a smaller size so as to utilize available FSI. As we have observed earlier, the plan of building was modified, according to the above, changes were made in existing site plan as per the relevant provisions of building bye-laws applicable to the property in question. The induction of new four members and modification of building plan for accommodating four new members along with some additional facilities to existing members were claimed to have been carried out within the four corners of building bye-laws applicable to the area. There is nothing on record to suggest that there was any violation of any provisions of Maharashtra Co-operative Societies Act, 1960 for inducting new members in the society. There is again nothing on record to suggest any violation of the relevant building bye-laws applicable to property in question regarding additional construction along with for four new in-comer and enhancing facility to existing members. The assessee society was entitled to avail unused/additional FSI as per law. Under this background, it is not justified on the part of revenue to treat one segment of this project pertaining to new four tenements as non-mutual business activity and addition of the same as business income from the said activity. Once the allotment of new four members is as per the provisions of Maharashtra Co-operative Society Rules, 1960, and Rules-Laws, Bye-Laws enacted there under, the income from the same should not be treated as business income.