M/s Brigade Plaza Unit Owner's Association , Bangalore V. Income Tax Officer Ward-5(2)(3), Bangalore

ITA 2466/BANG/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0778 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 30-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: T S VENKATESH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 2466 /BANG/201 8 ASSESSMENT YEAR : 20 1 5 - 1 6 M/S. BRIGADE PLAZA UNIT OWNERS ASSOCIATION, BRIGADE PLAZA, NO. 71/1, S C ROAD, ANANDARAO CIRCLE, BANGALORE 560 009. PAN: AAAAB5335L VS. THE INCOME TAX OFFICER, WARD 5 (2) (3), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI T.S. VENKATESH, ADVOCATE RE VENUE BY : SHRI VIMAL ANAND, ADDL. CIT (DR) DATE OF HEARING : 2 7 . 0 9 .2018 DATE OF PRONOUNCEMENT : 05 . 1 0.2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-5, BANGALORE DATED 29.06.2018 FOR ASSESS MENT YEAR 2015-16. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1) THE ORDER OF THE LEARNED CIT (APPEALS) IN SO FAR AS IT UPHOLDS THE NON APPLICABILITY OF THE DOCTRINE OF MUTUALITY TO T HE INCOME STREAMS OF THE ASSESSEE, IS OPPOSED TO LAW, THE FACTS AND CIRC UMSTANCES OF THE CASE 2) THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN REJ ECTING ASSESSEE'S APPEAL, IN SPITE OF THE CASE LAWS RELIED UPON BY TH E ASSESSING OFFICER BEING DISTINGUISHED ON FACTS &CIRCUMSTANCES 3) THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN REJ ECTING ASSESSEE'S APPEAL, DESPITE THE APPLICABLE CASE LAWS OF THE H'B LE JURISDICTIONAL HIGH COURT AND ALSO OF ANOTHER HI)LE HIGH COURT CIT ED AND RELIED UPON BY THE ASSESSEE ITA NO. 2466/BANG/2018 PAGE 2 OF 6 4) ON FACTS OF THE CASE, THE ORDER OF THE LEARNED C IT(APPEALS) REJECTING THE SUBMISSION OF THE ASSESSEE AND UPHOLD ING THE ACTION OF THE AO, IS NOT SUSTAINABLE WHEN NO REASON FOR SUCH ACTION IS EVIDENT FROM THE ORDER, OTHER THAN TO STATE THAT 'THERE ARE A CATENA OF JUDGMENTS FROM VARIOUS HIGH COURTS' AND 'THE DECISI ON [OF THE LEARNED CIT(A)] FINDS SUPPORT FROM THE DECISIONS RELIED UPO N BY THE AO' 5) ON FACTS OF THE CASE, THE ORDER OF DISMISSAL OF THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED AS IT IS NOT A SPEAKI NG ORDER ON A GROUND OF APPEAL RELATING TO THE AO'S FINDING THAT PERSONA L EXPENSE U/S 58(10)(A)(I) HAS BEEN INCURRED, WHEN IN FACT THE EX PENSE INCURRED IS THAT DESCRIBED IN SECTION 57(III) OF THE ACT 6) ON FACTS OF THE CASE, THE ORDER OF DISMISSAL OF THE LEARNED C1T(APPEALS) IS NOT JUSTIFIED WHEN HE IS DIRECTING THE AO TO VERIFY THE EXPENSE AND ALLOW THE SAME AGAINST VARIOUS INCOME S TREAMS 7) ON FACTS OF THE CASE, THE ORDER OF DISMISSAL OF THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED, AS GROSS INCOME BROU GHT TO TAX WITHOUT ALLOWING ANY EXPENSE, IS UPHELD, WHILE THE MANDATE OF THE LAW IS TO TAX NET INCOME ONLY. 8) FOR THESE AND ANY OTHER GROUND WHICH MAY BE URGE D AT THE TIME OF HEARING, SUBJECT TO THE PERMISSION OF THE H'BLE APP ELLATE TRIBUNAL, THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED 3. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LD . AR OF ASSESSEE THAT ONLY GROUND NO. 1 OF THE APPEAL IS REQUIRED TO BE DECIDE D AND THE OTHERS GROUNDS ARE NOT PRESSED. ACCORDINGLY, THE REMAINING GROUNDS AR E REJECTED AS NOT PRESSED. 4. REGARDING GROUND NO. 1 OF THE APPEAL, HE SUBMITT ED THAT AS PER PARA 5.3 OF THE ORDER OF CIT(A), THIS IS HELD BY CIT(A) THAT THE IN COMES RECEIVED FROM PAY & PARK CHARGES, RENT FROM VODAFONE TOWER, INTEREST FR OM FIXED DEPOSIT, RENT FROM BSNL TOWER AND RENT FROM IDEA TOWER ARE INCIDENTAL RECEIPTS IN ORDER TO FURTHERING OF THE OBJECTIVES OF DOMINANT PURPOSE OF THE ASSESSEE AOP AND IT WAS ALSO HELD BY HIM THAT THESE INCOMES ARE NOT GOV ERNED BY THE CONCEPT OF MUTUALITY. HE FURTHER POINTED OUT THAT WHILE HOLDI NG SO, THE CIT(A) HAS ALSO STATED THAT VARIOUS DECISIONS RELIED UPON BY THE AO ARE SUPPORTING HIM IN TAKING THIS VIEW. REGARDING THOSE DECISIONS WHICH ARE REL IED UPON BY THE AO, HE DRAWN MY ATTENTION TO PARA NO. 2.4 ON PAGE NO. 4 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE MAIN JUDGEMENT ON WHICH THE RELI ANCE HAS BEEN PLACED BY THE AO IS THE JUDGEMENT OF HONBLE APEX COURT RENDE RED IN THE CASE OF BANGALORE CLUB VS. CIT AS REPORTED IN 350 ITR 509. HE SUBMITTED THAT IN THE FACTS OF PRESENT CASE, THIS JUDGMENT IS NOT APPLICA BLE BECAUSE IN THAT CASE, THE ITA NO. 2466/BANG/2018 PAGE 3 OF 6 ASSESSEE SOUGHT AN EXEMPTION FROM PAYMENT OF INCOME TAX ON T HE INTEREST EARNED ON THE FIXED DEPOSITS KEPT WITH CERTAIN BANK S, WHICH WERE CORPORATE MEMBERS OF THE ASSESSEE, ON THE BASIS OF DOCTRINE O F MUTUALITY. HE POINTED OUT THAT AS PER PARA NO. 3 OF THIS JUDGMENT, IT IS NOTED THAT THE ASSESSEE IN THAT CASE HAS PAID TAXES ON THE INTEREST EARNED ON FIXED DEPOSIT KEPT WITH NON-MEMBER BANKS AND EXEMPTION WAS CLAIMED ONLY IN RESPECT OF FIXED DEPOSIT KEPT WITH THOSE BANKS WHICH WERE CORPORATE MEMBERS OF THE ASSESSEE ON THE BASIS OF DOCTRINE OF MUTUALITY. HE SUBMITTED THAT IN VIEW OF THIS FACTUAL DIFFERENCE, THIS JUDGMENT OF HONBLE A PEX COURT IS NOT APPLICABLE IN THE FACTS OF PRESENT CASE. RELIANCE WAS PLACED BY HIM ON A JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS. DCIT AS REPORTED IN 308 ITR 202 AND MY ATTENTION WAS DRAWN TO PARA NOS. 4.1, 15 AND 16 OF THIS JUDGEMENT AND IT WAS SUBMITTED THAT IT WAS HELD BY HON'BLE KARNATAKA HIG H COURT IN THIS CASE THAT IF THE CONTRIBUTORS TO THE COMMON FUND ARE ALSO THE PARTICIPATORS IN THE SURPLUS THEN DOCTRINE OF MUTUALITY IS APPLICABLE. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELO W. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I TAKE NOTE OF THE FACTS IN THE PRESENT CASE. IN PARA NO. 2 OF THE ASSESSMENT ORDER, IT IS NOTED BY THE AO THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS. 21,4 5,804/- BEING THE SURPLUS INCOME AFTER DEDUCTING PERSONAL EXPENSES DECLARED U NDER THE HEAD INCOME FROM OTHER SOURCES. THE AO HAS NOTED THE NATURE OF THOSE INCOMES WHICH ARE 1) PAY & PARK CHARGES -RS. 1,63,940/-, 2) RENT FROM VODAFONE TOWER RS. 3,41,055/-, 3) INTEREST FROM FIXED DEPOSIT RS. 11 ,15,666/-, 4) RENT FROM BSNL TOWER RS. 18,555/- AND 5) RENT FROM IDEA TOWER RS. 5,75,059/- TOTAL RS. 22,14,270/-. HENCE IT IS SEEN THAT THESE INCOMES A RE EARNED BY THE ASSESSEE FROM OUTSIDERS WHO ARE NOT THE MEMBERS OF THE ASSES SEE AOP AND HENCE, NEITHER CONTRIBUTOR NOR PARTICIPATOR IN PROFIT. IN THE LIGHT OF THESE FACTS, NOW I EXAMINE THE APPLICABILITY OF THE JUDGEMENT OF HONB LE APEX COURT RENDERED IN THE CASE OF BANGALORE CLUB VS. CIT (SUPRA) WHICH IS FOLLOWED BY THE AUTHORITIES BELOW AND ALSO THE JUDGEMENT OF HON'BLE KARNATAKA H IGH COURT RENDERED IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS. D CIT (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSE SSEE IN THE COURSE OF ITA NO. 2466/BANG/2018 PAGE 4 OF 6 ARGUMENTS BEFORE ME. REGARDING THE APPLICABILITY O F JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BANGALORE CLUB VS. CIT (SUPRA), I FIND THAT IN THIS CASE, AS PER THE FACTS NOTED BY HONBLE APE X COURT IN PARA 3 OF THE JUDGEMENT, IT WAS NOTED THAT THE ASSESSEE SOUGHT EX EMPTION FROM PAYMENT OF INCOME TAX ON THE INTEREST EARNED ON THE FIXED DEPO SIT WITH CERTAIN BANKS WHICH WERE CORPORATE MEMBERS OF THE ASSESSEE ON THE BASIS OF DOCTRINE OF MUTUALITY. BUT TAX WAS PAID ON THE INTEREST EARNED ON FIXED DEPOSIT KEPT WITH NON-MEMBER BANKS. IT IS SEEN THAT EVEN IN RESPECT OF INCOME ON FIXED DEPOSIT KEPT WITH THOSE BANKS WHICH WERE CORPORATE MEMBERS OF THE ASSESSEE, IT WAS HELD BY HONBLE APEX COURT THAT SUCH INTEREST INCOM E IS NOT GOVERNED BY THE DOCTRINE OF MUTUALITY. IN MY CONSIDERED OPINION, A S PER THIS JUDGEMENT, THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVE RED AGAINST THE ASSESSEE BECAUSE IN THE PRESENT CASE ALSO, THE INCOMES IN QU ESTION ARE UNDISPUTEDLY EARNED BY ASSESSEE FROM NON-MEMBERS AND SUCH EARNIN G OF INCOME IS NOT IN THE COURSE OF PROVIDING CERTAIN FACILITIES BY THE A SSESSEE TO ITS MEMBERS. 6. NOW I EXAMINE THE APPLICABILITY OF THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS. DCIT (SUPRA) ON WHICH RELIANCE HAS BEEN PL ACED BY LD. AR OF ASSESSEE. AS PER THE FACTS NOTED IN PARA 5 OF THIS JUDGMENT, IT IS NOTED THAT CONTRIBUTIONS FROM THE MEMBERS ARE USED FOR LENDING LOANS TO THE MEMBERS AND IN TURN COLLECT INTEREST FROM THE MEMBERS AND A S SUCH, THE INCOME IS EXEMPTED FROM TAX ON THE PRINCIPLE OF DOCTRINE OF M UTUALITY IN TERMS OF SECTION 4 OF THE INCOME TAX ACT AND IN ADDITION TO THAT, THIS WAS ALSO CLAIMED IN THAT CASE THAT THE FUNDS COLLECTED BY TH E ASSESSEE ARE USED TO PROVIDE MONETARY ASSISTANCE TO ITS MEMBERS WERE KEP T IN THE BANK NOT WITH THE PRIMARY OBJECT OF EARNING INTEREST, BUT TO KEEP IT IN THE SAFE CUSTODY AND IT WAS CLAIMED THAT SUCH INTEREST INCOME EARNED FRO M BANK IS ALSO ULTIMATELY USED FOR THE ULTIMATE BENEFIT OF THE MEMBERS. HENC E IT IS SEEN THAT AS PER THE FACTS OF THAT CASE, THE FUND WAS CONTRIBUTED BY THE MEMBERS FOR PROVIDING FINANCIAL ASSISTANCE TO THE MEMBERS AND O NLY SURPLUS FUND WHICH WERE NOT REQUIRED FOR THE TIME BEING WERE KEPT IN T HE BANK FOR SAFE CUSTODY MAINLY AND NOT FOR EARNING INTEREST INCOME. IN THE PRESENT CASE, THE FACTS ARE TOTALLY DIFFERENT. THE INCOME IN DISPUTE IN TH E PRESENT CASE ARE 1) PAY & ITA NO. 2466/BANG/2018 PAGE 5 OF 6 PARK CHARGES, 2) RENT FROM VODAFONE TOWER, 3) RENT FROM BSNL TOWER, 4) RENT FROM IDEA TOWER AND 5) INTEREST ON FIXED DEPOS IT. THE FIRST FOUR INCOMES I.E. PAY & PARK CHARGES AND RENT FROM VODAF ONE, BSNL AND IDEA TOWERS CANNOT BE CONSIDERED TO BE COVERED BY DOCTRI NE OF MUTUALITY. REGARDING INTEREST ON FIXED DEPOSIT ALSO, THIS IS N OT THE CLAIM OF THE ASSESSEE THAT THE FUND WHICH WAS USED FOR EARNING S UCH INTEREST INCOME ON FIXED DEPOSIT WAS MAINLY FOR THE PURPOSE OF PROVIDI NG FINANCIAL ASSISTANCE TO THE MEMBERS AND ONLY SURPLUS FUND KEPT WITH BANK FOR SAFE CUSTODY AND NOT FOR EARNING INTEREST INCOME AND EARNING OF INTE REST INCOME IS INCIDENTAL. HENCE IN THE FACTS OF PRESENT CASE, THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT IS ALSO NOT APPLICABLE. HENCE IN MY CON SIDERED OPINION THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS. DCIT (SU PRA) IS NOT APPLICABLE IN THE FACTS OF PRESENT CASE. 7. IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT THE JU DGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BANGALORE CLUB VS. CIT (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE AND AS PER THIS JUDG EMENT OF HONBLE APEX COURT, THE ISSUE IS COVERED AGAINST THE ASSESSEE AN D THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CANARA BANK GOLDEN JUBILEE STAFF WELFARE FUND VS. DCIT (SUPRA) IS NOT APPLICAB LE IN THE PRESENT CASE AND HENCE, BY RESPECTFULLY FOLLOWING THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BANGALORE CLUB VS. CIT (SUPRA), I DECLINE TO INTERF ERE IN THE ORDER OF CIT(A). 8. 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/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 05 TH OCTOBER, 2018. /MS/ ITA NO. 2466/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.