ITO, Gurgaon V. M/s Oakwood Estate Condominium, Gurgaon

ITA 5846/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53300 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: N O N E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH E DELHI ] BEFORE SHRI I. P. BANSAL, JM & SHRI K. D. RANJAN, AM I. T. APPEAL NO. 5846 (DEL) OF 2010. ASSESSMENT YEAR : 2007-08. THE INCOME-TAX OFFICER, M/S. OAKWOOD ESTATE CONDOMINIUM, W A R D : 2 (1), VS. D L F C I T Y, PHASE IV, G U R G A O N. G U R G A O N . P A N / G I R NO. AAA JO 0033 B. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : N O N E; DEPARTMENT BY : SHRI R. S. NEGI, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS), PANCHKULA. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IS RE PRODUCED AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.17,09,960/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST RECEIV ED FROM BANK EVEN THOUGH THE INTEREST INCOME EARNED FROM THIRD PARTY I.E. FR OM NON MEMBERS AND IS IN CONTRARY TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SPORTS CLUB OF GUJARAT LTD. VS. CIT 171 ITR 504, RA JPATH CLUBLTD. VS. CIT 211 ITR 379 (GUJARAT) & AMAR SINGH CLUB VS. UNION O F INDIA 229 CTR 447 (J & K) WHEREIN IT WAS HELD THAT INCOME FROM INTERE ST WAS NOT THE RESULT OF MUTUAL ACTIVITY AND AS SUCH EXIGIBLE TO INCOME TAX. 2 I. T. APPEAL NO. 5846 (DEL) OF 2010 . 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.17,09,960/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST REC EIVED FROM BANK I.E. NON-MEMBER. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IS A N ASSOCIATION OF MEMBERS OF OAKWOOD STATE CONDOMINIUM AND DERIVES INCOME AS CONTRIBUTIONS FRO M MEMBERS, INTEREST ON DEPOSIT WITH BANKS, INTEREST ON INTEREST BEARING MONEY, SECURITY DEPOSI TS FROM MEMBERS, VISITOR PARKING INCOME, ELEVATOR USAGE CHARGES ETC. THE ASSESSEE HAD CLAIM ED ITS INCOME EXEMPT ON THE PRINCIPLE OF MUTUALITY. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAD EARNED INTEREST ON DEPOSITS WITH THE B ANKS. THE INCOME HAS BEEN EARNED FROM THIRD PARTY I.E. NON-MEMBER. THEREFORE, THE PRINCIPLE OF MUTUALITY WAS NOT APPLICABLE TO THE INTEREST INCOME EARNED FROM DEPOSITS WITH THE BANKS. THE AS SESSING OFFICER ACCORDINGLY ADDED THE AMOUNT OF RS.17,09,960/-. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE CONSTRUCTION OF CONDOMINIUM IN THE BUILDING OAKWOOD ESTATE WAS UNDERTAKEN BY DLF U NDER BUYER AGREEMENT ENTERED INTO WITH EACH BUYER AND DLF. AT THE TIME OF PURCHASE OF CON DOMINIUM EACH BUYER HAD PAID INTEREST- BEARING MAINTENANCE DEPOSIT TO DLF UNDER THE BUYER AGREEMENT. AS PER THE TERMS OF BUYERS AGREEMENT SUCH A MAINTENANCE DEPOSIT WAS NON-REFUND ABLE DEPOSIT AND THUS A BUYER HAVING ONCE BOUGHT THE PROPERTY WOULD NOT GET THE DEPOSIT REFUN D, EVEN IF HE SELLS THE CONDOMINIUM AND SUCH DEPOSIT WILL CONTINUE TO REMAIN WITH THE SOCIETY AS A CORPUS FUND. INITIALLY, THE MAINTENANCE OF THE BUILDING OAKWOOD ESTATE WAS LOOKED AFTER BY D LF. HOWEVER, SUBSEQUENT TO THE FORMATION OF THE SOCIETY THE MAINTENANCE OF CONDOMINIUM WAS T AKEN UP BY THE SOCIETY AND THE ENTIRE AMOUNT OF INTEREST-HEARING SECURITY MAINTENANCE DEP OSIT OF RS.2 CRORES WAS TRANSFERRED TO THE SOCIETY AS CORPUS FOR CARRYING OUT MAINTENANCE WORK OF THE SOCIETY. THE CORPUS FUND OF THE SOCIETY RECEIVED ON TRANSFER WAS DEPOSITED IN FIXED DEPOSIT IN A SCHEDULED BANK AND INTEREST WAS EARNED ON SUCH FIXED DEPOSIT. THE INTEREST EARNED WAS, HOWEVER, PROPORTIONATELY CREDITED TO THE ACCOUNT OF EACH OF THE MEMBER AND THE SAME WAS ADJU STED ON ACCOUNT OF ACTUAL MAINTENANCE CHARGES TO BE BORNE BY THE OWNER OF THE CONDOMINIUM . IT WAS ALSO SUBMITTED THAT THE SOCIETY WAS REQUIRED TO CARRY OUT ROAD REPAIRS AND OTHER REPAIR WORKS AND THE MAINTENANCE CHARGES RECEIVED FROM THE MEMBERS WOULD NOT BE SUFFICIENT TO COVER T HOSE EXPENSES. THEREFORE, SOCIETY PASSED A RESOLUTION IN 2006-07 WHEREBY IT WAS DECIDED THAT T HE INTEREST RECEIVED ON FDRS WOULD NOT BE 3 I. T. APPEAL NO. 5846 (DEL) OF 2010 . CREDITED TO EACH MEMBERS ACCOUNT, BUT WOULD BE CRED ITED TO A SPECIAL RESERVE ACCOUNT CALLED RENEWAL AND REPLACEMENT ACCOUNT FUND. IT WAS, TH EREFORE, SUBMITTED THAT THE INTEREST RECEIVED BY THE SOCIETY WAS ON BEHALF OF THE MEMBERS AND WAS EXEMPT ON THE PRINCIPLE OF MUTUALITY. THE LD. CIT (APPEALS) EXAMINED THE CONTENTION OF THE AS SESSEE. HE OBSERVED THAT THE PRINCIPLE OF MUTUALITY DID NOT BREAK SIMPLY BECAUSE INTEREST HAD BEEN EARNED FROM THE BANK. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF CHELMSFORD CLUB 243 ITR 89 (SC) WHEREIN IT HAS BEEN HELD THAT THE INTEREST INC OME EARNED BY THE SOCIETY ON CONTRIBUTIONS MADE BY THE MEMBERS OF WELFARE SOCIETY WILL NOT BE TAXABLE IN THE HANDS OF THE ASSESSEE. THE LD. CIT (APPEALS) RELYING ON DECISION OF HONBLE SUPREM E COURT AND OTHER DECISIONS HELD THAT INTEREST OF RS.17,09,960/- COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE. HE, ACCORDINGLY, DELETED THE ADDITION. 5. BEFORE US WHEN THE CASE CAME UP FOR HEARING, NON E ATTENDED ON BEHALF OF THE ASSESSEE. HAVING REGARD TO THE ISSUE INVOLVED, THE ISSUE IS D ECIDED AFTER HEARING THE LD. SR. DR. 6. WE HAVE HEARD THE LD. SR. DR. WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DELHI GYMKH ANA LTD. 10 TAXMAN.COM 114 DEL., WHEREIN IT HAS BEEN HELD THAT INCOME EARNED BY THE SOCIETY IN THE FORM OF INTEREST BY KEEPING THE FUNDS GENERATED FROM THE MEMBERS IN THE BANK, WILL NOT BE TREATED AS INCOME LIABLE FOR TAX. SINCE THE ISSUE IS COVERED BY THE DECISION OF HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI GYMKHANA CLUB, WE DO NOT FIND ANY INFIRMITY I N THE ORDER PASSED BY THE LD. CIT (APPEALS) DELETING THE ADDITION ON ACCOUNT OF INTEREST RECEIV ED FROM DEPOSITS WITH THE BANK. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 09 TH DECEMBER, 2011. SD/- SD/- [ I. P. BANSAL ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09 TH DECEMBER, 2011 . * MEHTA * 4 I. T. APPEAL NO. 5846 (DEL) OF 2010 . COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. SR. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.