M/s.Poornaprajna House Building Co-operative Society Ltd., Bangalore V. Income-Tax Officer, Bangalore

ITA 2025/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7343 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K BIJU J
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER IT A NO. 2025/BANG/2016 ASSESSMENT YEAR : 20 1 2 - 13 M/S. POORNAPRAJNA HOUSE BUILDING CO- OPERATIVE SOCIETY LTD., NO. 552, POORNAPRAJNA SUVARNA BHAVANA, 1 ST FLOOR, UTTARAHALLI KENGERI MAIN ROAD, POORNAPRAJNA NAGAR, BANGALORE 560 061. PAN: AACAP 8621P VS. THE INCOME TAX OFFICER, WARD 4(2)(2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI S. RAMASUBRAMANIAN, CA REVENUE BY : SHRI M.K. BIJU, J CIT(DR) DATE OF HEARING : 10 . 1 1 .201 7 DATE OF PRONOUNCEMENT : 15 .1 1 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A)-3, BANGALORE DATED 30.09.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN SO FAR IT IS PREJUDICIAL TO THE INTERE STS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE FINDING OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) THAT THE APPELLANT HAS NOT COMMENCED ITS REAL ESTAT E ACTIVITIES IS PERVERSE AS BEING CONTRARY TO MATERIALS ON RECORDS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAD NOT SET UP ITS BUSINESS. ITA NO. 2025/BANG/2016 PAGE 2 OF 4 4. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO DEDUC TION OF EXPENDITURE INCURRED ON THE GROUND THAT SUCH EXPENSES ARE CAPIT AL IN NATURE. 5. THAT THE LEARNED ASSESSING OFFICER OUGHT TO HAVE DETERMINED THE LOSS UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' AT RS. 15,25,829/- AND SET IT OFF AGAINST OTHER INCOME. 6. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE DEDUCTION U/S 80P(2)(C) (II) OF THE AC T. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'BLE INCOME TAX AP PELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF H EARING OF THIS APPEAL. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT AS P ER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. J AI HIND CHS LTD. AS REPORTED IN 349 ITR 541 (BOM), IT WAS HELD THAT IN VIEW OF THIS FACT THAT CONSIDERATION HAS FLOWED FROM THE MEMBERS OF THE SO CIETY TO THE SOCIETY WHICH IS A CO-OPERATIVE HOUSING SOCIETY AS CONSIDERATION FOR ALLOWING THE USE OF EXTRA FSI, THE PRINCIPLE OF MUTUALITY WOULD APPLY. HE SU BMITTED THAT IN THE PRESENT CASE, THE DISPUTE IS REGARDING EXPENSES CLAIMED BY THE ASSESSEE INCLUDING ADMINISTRATIVE EXPENSES IN RESPECT OF OFFICE MAINTE NANCE AND MANAGING DAY-TO- DAY AFFAIRS OF THE SOCIETY AND MAIN OBJECT OF THE S OCIETY IS TO PROVIDE HOUSING SITES TO ITS ELIGIBLE MEMBERS AND THIS IS THE OPINI ON OF THE AO THAT THE PRINCIPLE OF MUTUALITY FOR CARRYING OUT ITS BUSINESS ACTIVITI ES IS APPLICABLE AND THEREFORE, THE ASSESSEE SOCIETY IS OPERATING ON A NO PROFIT AN D NO LOSS BASIS AND IT IS ADMITTED FACT THAT IN THE PRESENT YEAR, THE ASSESSE E HAS NOT DECLARED ANY RECEIPT FROM THE SALE OF THE SITES IN THE PRESENT Y EAR. HE SUBMITTED THAT UNDER THESE FACTS, THIS JUDGMENT OF HONBLE BOMBAY HIGH C OURT IS APPLICABLE AND THE AOS OBJECTION IS CORRECT THAT THE EXPENSES ARE REQ UIRED TO BE CAPITALIZED AND THE SAME CANNOT BE ALLOWED IN THE PRESENT YEAR AS D EDUCTION. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH E PRESENT CASE, THE DISPUTE IS REGARDING THE ALLOWABILITY OF VARIOUS ADMINISTRATIV E EXPENSES INCURRED DURING THE PRESENT YEAR INCLUDING SALARY TO STAFF, RENT, ELECT RICITY AND PRINTING AND ITA NO. 2025/BANG/2016 PAGE 3 OF 4 STATIONERY ETC. AS PER THE CLAIM OF THE ASSESSEE B EFORE THE AO & CIT (A), THESE EXPENSES ARE INCURRED ONLY FOR OFFICE MAINTEN ANCE AND MANAGING THE DAY TO DAY AFFAIRS OF THE SOCIETY AND SINCE THESE EXPEN SES ARE NOT DIRECTLY ATTRIBUTABLE TO THE PROJECT, IT SHOULD BE CHARGED T O THE P & L ACCOUNT FOR THE PERIOD IN WHICH THE EXPENDITURE IS INCURRED. AS PE R THE AO, THE EXPENSES ARE NOT ALLOWABLE IN THE PRESENT YEAR AND THE SAME IS T O BE CAPITALIZED. AS PER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN T HE CASE OF CIT VS. JAI HIND CHS LTD. (SUPRA), THE CONSIDERATION FLOWING FR OM THE MEMBERS OF THE SOCIETY TO THE SOCIETY WHICH IS A CO-OPERATIVE HOUS ING SOCIETY IS GOVERNED BY PRINCIPLE OF MUTUALITY. IN THE PRESENT CASE, THIS IS NOT IN DISPUTE THAT THE ASSESSEE IS IN BUSINESS OF DEVELOPMENT OF PROPERTY FOR ITS MEMBERS AND THEREFORE, WHATEVER EXPENSES ARE INCURRED ON THIS A CCOUNT HAS BE ADJUSTED AGAINST THE REALIZATION ON SALE OF THOSE HOUSING PR OPERTY TO THE MEMBERS AND THERE CANNOT BE ANY INCOME OR LOSS ON THIS ACCOUNT BECAUSE BOTH THE EXPENSES AND RECEIPTS ARE GOVERNED BY THE PRINCIPAL OF MUTUA LITY. HENCE WE HOLD THAT THE EXPENSES CLAIMED BY THE ASSESSEE IN THE PRESENT YEA R IS NOT ALLOWABLE IN THE PRESENT YEAR AS REVENUE EXPENDITURE AND THE SAME SH OULD BE CAPITALIZED AND SHOULD BE ADJUSTED AGAINST THE RECEIPT FROM THE MEM BERS OF THE ASSESSEE SOCIETY IN THE YEAR WHEN SUCH RECEIPTS ARE THERE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH NOVEMBER, 2017. /MS/ ITA NO. 2025/BANG/2016 PAGE 4 OF 4 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.