Belvedere Park Condominium Association Association , Gurgaon V. ITO, Ward- 1(3) , Gurgaon

ITA 1250/DEL/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2594 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.1250/Del/2018 Assessment Year: 2014-15 Belvedere Park Condominium Association Association, Sector Road 3rd, DLF City Phase-III, Gurgaon Vs. ITO-1(3), Gurgaon PAN :AAAAB3132F (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 29.12.2017 of learned Commissioner of Income-Tax (Appeals)-2, Gurgaon pertaining to assessment year 2014-15. 2. The grounds raised by the assessee concern addition of interest income amounting to Rs.23,67,508. Appellant by Shri Arvind Kumar, Adv. Respondent by Shri Om Parkash, Sr. DR Date of hearing 11.07.2022 Date of pronouncement 04.10.2022 2 ITA No.1250/Del./2018 3. Briefly, the facts are, the assessee is a resident welfare association (RWA) having status of association of persons (AOP) under the Income-Tax Act,1961. 4. For the assessment year under dispute, assessee filed its return of income on 10.11.2014 declaring income of Rs.4,48,100. 5. In course of assessment proceedings, while examining Form 26AS, the assessing officer could notice that the assessee had earned interest income of Rs.27,34,215 from various banks. Noticing that the assessee had not offered such income to tax, the assessing officer called upon the assessee to explain why it should not be brought to tax, as, such income earned from banks is not covered under the principles of mutuality. In response, it was submitted by the assessee that as per the apartment buyers agreement, each allottee member has to pay certain amount as security for payment of maintenance charges. It was submitted, such security deposits received from members carry interest. It was submitted that assessee, in turn, keeps the security deposits received from members in banks and earns interest. He submitted, the interest earned from banks is passed on to the members. Therefore, there is a direct nexus between the interest income and 3 ITA No.1250/Del./2018 interest expenditure, which is allowable under Section 57(iii) of the Act. The assessing officer, however, did not accept the pleading of the assessee and added back the interest income at the hands of the assessee. Learned Commissioner (Appeals) also sustained the addition. 6. Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in case of Belaire Condominium Association vs. ITO – ITA No.655/Del/2018 dated 25.04.2018. Further, he submitted, in assessee’s own case in assessment year 2016-17, learned first appellate authority, accepting assessee’s submission, has deleted identical addition made by the assessing officer. Learned Departmental Representative relied upon the observations of departmental authorities. 7. I have considered rival submission and perused the material available on record. 8. In my view, the issue is squarely covered by the decision of the Tribunal in case of Belaire Condominium Association vs. ITO (supra). While deciding identical issue, the Bench has held as under: 4 ITA No.1250/Del./2018 “10. We have considered the rival submission and perused the order passed by the lower authorities. There is no dispute to the fact that assessee is a registered society form with the basic object to provide for maintenance and repair of common arrears and facilities of the building to its members. There is no dispute about the maintenance charges being collected and utilised towards maintenance. The dispute is regarding the interest income earned by it on deposit with the Bank made out of the security deposit obtained from its members. The AO has held that the interest earned on it is not covered by the principle of mutuality after the judgment of the Supreme Court in the case of Bangalore Club (Supra). The alternative contention of the assessee that interest paid by it on such security deposit is to be set off against interest income earned on such deposit has also been rejected by the AO. After going through the facts of the case we are of the considered opinion that the AO has gone wrong in rejecting this contention of the assessee society. As rightly pointed out by the learned AR that the assessee society has obtained the interest bearing maintenance security called IBMS from the flat owners and such security deposit has been deposited with the Bank on which interest has been earned. Thus, there is a direct nexus in earning interest on such fixed deposit with Bank and payment of interest on the security deposit to the flat owners. The interest expenditure has been incurred wholly and exclusively for earning such interest income on Bank deposit. As per the Apartment buyers agreement there is an obligation on every buyer to make security deposit and there is corresponding obligation on the society to pay interest on such deposit. Thus, the contention of the learned AR that this interest expenditure has not been incurred to earn interest income is incorrect. The assessee society has paid interest each one after deducting tax at source. Thus, it is not a case of exemption on the principle of mutuality. Such interest paid by the assessee society is taxable in the hands of the Apartment owner. In view of these facts, we are of the view that interest expenditure is to be set off against the interest income. As regards the AO's contention that interest paid to member is not 5 ITA No.1250/Del./2018 eligible deduction in the case of AOP under Section 40 (ba), we have perused the said Section. This clause excludes registered society from its applicability. Accordingly, this clause will not be applicable to the assessee society. Moreover, as rightly contended by the learned AR Section 40 (ba) is applicable while computing business income. This clause is not applicable while computing income from other sources. There is no prohibition in Section 57 (iii) under which deduction of interest is eligible to the assessee society. 11. Accordingly, we direct the AO to delete the addition of Rs. 1,63,77,013 made on account of the interest.” 9. Facts being identical, respectfully following the aforesaid decision of the Tribunal, I delete the addition of Rs.23,67,508. 10. In the result, the appeal is allowed. Order pronounced in the open court on 04 th October, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 04 th October, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 6 ITA No.1250/Del./2018 Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 29.09.2022 2. Date on which the draft of order is placed before the Dictating Member: 30.09.2022 3. Date on which the draft of order is placed before the other Member: 4. Date on which the approved draft of order comes to the Sr. PS/PS: 06.10.2022 5. Date of which the fair order is placed before the Dictating Member for pronouncement: 30.10.2022 6. Date on which the final order received after having been singed/pronounced by the Members: 06.10.2022 7. Date on which the final order is uploaded on the website of ITAT: 06.10.2022 8. Date on which the file goes to the Bench Clerk 06.10.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for signature on the order: 11. Date of dispatch of order: