M/s. Marvel Vivacity Condominium, Pune V. Income-tax Officer, Ward - 7(2), Pune

ITA 1373/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0819 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: NILESH KHANDELWAL
• Section: 143(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / ITA NO. 1 373 /P U N/201 8 / ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. MARVEL VIVACITY CONDOMINIUM, SHAH KHANDELWAL JAIN & ASSOCIATES, LEVEL 3, RIVERSIDE BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 . / APPELLANT PAN: A A BAM1517C VS. THE INCOME TAX OFFICER, WAD 7 ( 2 ) , PUNE . / RESPONDENT / APPELLANT BY : SHRI NILESH KHANDELWAL / RESPONDENT BY : SHRI M.K. VERMA / DATE OF HEARING : 12 . 0 3 .201 9 / DATE OF PRONOUNCEMENT: 27 . 0 3 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 8 , PUNE, DATED 0 2 . 0 5 .201 8 RELATING TO ASSESSMENT YEAR 20 1 3 - 1 4 AGAINST ORDER P ASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . ITA NO. 1373 /P U N/201 8 M/S. MARVEL VIVACITY CONDOMINIUM 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS OF THE LAW, IT BE HELD THAT THE LD. A .O. AND CIT(A) ERRED IN ASSESSING INTEREST INCOME FOR COMPUTATION OF TAX. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT IN THAT RESPECT. 2. WITHOUT PREJUDICE TO GROUND NO.1, ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS OF THE ACT, IT BE HELD THAT THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION OF EXPENSES INCURRED FOR EARNING INTEREST INCOME. THE DISALLOWANCE MADE BY THE LD. A.O. AND CIT(A) IS ERRONEOUS AND IMPROPER AND CONTRARY TO THE PROVISIONS OF THE ACT. THE INCOME ASSES SED BY THE LD. A.O AND UPHELD BY CIT(A) TO RS.7,77,330/ - BE REDUCED TO THE RETURNED INCOME OF RS.30,270/ - . IN THE ALTERNATIVE, THE APPELLANT BE ALLOWED SUBSTANTIAL RELIEF FROM THE DISALLOWANCE. 3. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) IN BRING ING INTEREST INCOME TO TAX. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS HOUSING SOCIETY AND OVERALL IT HAD SHOWN LOSS FROM ITS BUSINESS ACTIVITY. HOWEVER, OUT OF DEPOSITS RECEIVED FROM ITS MEMBERS, THE ASSESSEE HAD EARNED INTEREST ON FDRS WITH THE BANKS. THE CONTENTION OF ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT SINCE THERE WAS OVERALL LOSS AND THERE WAS TAXABLE INCOME IN THE HANDS OF ASSESSEE, THE INTEREST EARNED ON FDRS BE SET OFF AGAINST BUSINESS LOSSES. THE ASSESSING OFFICER HOWEVER , DID NOT AGREE WITH THE CLAIM OF ASSESSEE AND HELD THAT INTEREST RECEIVED FROM FDRS WAS NOT EXEMPT ON THE BASIS OF PRINCIPLE OF MUTUALITY AND WAS ADDED IN THE HANDS OF ASSESSEE. 5. THE CIT(A) HELD THAT INTEREST INCOME WAS NOT EXEMPT IN THE HANDS OF ASS ESSEE AND PRINCIPLE OF MUTUALITY WAS NOT APPLICABLE, IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION REPORTED IN 328 ITR 362 (BOM). ITA NO. 1373 /P U N/201 8 M/S. MARVEL VIVACITY CONDOMINIUM 3 6. THE ASSESSEE IS IN APPEA L AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. MARUTI EMP LOYEES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD. (2010) 320 ITR 254 (P&H), WHICH IS ALSO CASE OF HOUSING SOCIETY, WHEREIN THE HONBLE HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A) AND THE ORDER OF HONBLE BOMBAY HIGH COURT IN CIT VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION (SUPRA). 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REJOINDER POINTED OU T THAT THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT, WHERE BOTH THE INCOMES OF ASSESSEE WERE TAXABLE AND HENCE, THE DECISION. HE STRESSED THAT THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. MARUTI EMPLOYEES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD. (SUPRA). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHERE THE ASSESSEE HAS SHOWN OVERALL LOSS OF 11,22,908/ - AND IN SUCH CI RCUMSTANCES, WHETHER INTEREST EARNED ON FDRS OF 7,77,226/ - IS SEPARATELY ASSESSABLE IN THE HANDS OF ITA NO. 1373 /P U N/201 8 M/S. MARVEL VIVACITY CONDOMINIUM 4 ASSESSEE. IN CASES, WHERE THE ASSESSEE HAS NET SURPLUS FROM THE ACTIVITIES CARRIED ON BY IT AND HAD ALSO INTEREST INCOME ON FDRS, THEN IN SUCH CIRCUMSTAN CES, INTEREST INCOME IS TAXABLE IN THE HANDS OF ASSESSEE. SUCH IS THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. COMMON EFFLUENT TREATMENT PLANT (THANE BELAPUR) ASSOCIATION (SUPRA). HOWEVER, WHERE THE ASSESSEE HAS SHOWN EXCESS OF E XPENDITURE OVER INCOME I.E. WHERE THE EXPENDITURE IS MORE THAN RECEIPTS EARNED DURING THE YEAR, THEN IN SUCH CIRCUMSTANCES, THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. MARUTI EMPLOYEES CO - OPERATIVE HOUSE BUILDING SOCIETY LT D. (SUPRA) IS SQUARELY APPLICABLE. 11. THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. MARUTI EMPLOYEES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD. (SUPRA) HAS HELD AS UNDER: - HELD THAT, THERE WAS NO MERIT IN THE REVENUES CONTENTION THAT THE ACTIVITY OF MAINTENANCE WAS NOT COVERED UNDER THE OBJECTS AND REASONS OF THE RESPONDENT - ASSESSEE, WHICH WAS A REGISTERED CO - OPERATIVE SOCIETY AND AS SUCH EXPENSES INCURRED TOWARDS AN ACTIVITY BEYOND THE OBJECTS AND REASONS OF THE RESPONDENT - ASSESSEE WERE PER SE NO T PERMISSIBLE. THE RESPONDENT - ASSESSEE HAD DRAWN INCOME ON ACCOUNT OF INTEREST BASED ON DEPOSITS MADE BY THE MEMBERS OF THE RESPONDENT - ASSESSEE FOR MAINTENANCE OF THEIR HOUSES AND AS SUCH LIABILITY OF THE RESPONDENT - ASSESSEE TO PAY TAX ON THE SAME COULD N OT BE DOUBTED, BUT SINCE THE ACTIVITY ON WHICH THE AFORESAID INTEREST INCOME WAS EARNED BY THE RESPONDENT - ASSESSEE HAD PER SE SOME EXPENSES CONNECTED THEREWITH AS A MATTER OF OBLIGATION AT THE HANDS OF THE RESPONDENT - ASSESSEE TO ITS MEMBERS WHO HAD MADE DE POSITS, THE DEDUCTION TO THE RESPONDENT - ASSESSEE ON ACCOUNT OF EXPENSES INCURRED TOWARDS MAINTENANCE OF HOUSES WAS FULLY JUSTIFIED. 12. SINCE THE ASSESSEE BEFORE US IS HOUSING SOCIETY AND THE ISSUE BEFORE THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN CIT VS. MARUTI EMPLOYEES CO - OPERATIVE HOUSE BUILDING SOCIETY LTD. (SUPRA) WAS IN RESPECT OF HOUSING SOCIETY, APPLYING THE SAME PARITY OF REASONING, WE HOLD THAT INTEREST INCOME IS ITA NO. 1373 /P U N/201 8 M/S. MARVEL VIVACITY CONDOMINIUM 5 TO BE ADJUSTED AGAINST EXPENDITURE INCURRED BY THE ASSESSEE DURING THE YEAR AND THE INTEREST INCOME IS NOT SEPARATELY ASSESSABLE IN THE HANDS OF ASSESSEE . THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 13 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF MARCH , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH MARCH , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 8 , PUNE ; 4. THE PR. CIT - 4 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE