Sobha Nagasandra Apartment Owners Welfare Association , Bangalore V. Deputy Commissioner of Income Tax Circle-6(2)(1), Bangalore

ITA 769/BANG/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0672 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 11-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM ITA No.769/Bang/2019: Asst.Year 2015-2016 M/s.Sobha Nagasandra Apartment Owners Welfare Association, Tumkur Road Nagasandra Bengaluru – 560 073. PAN : AAHAS6379J. v. The Deputy Commissioner of Income-tax, Circle 6(2)(1) Bangalore. (Appellant) (Respondent) Appellant by : Sri.H.V.Gowthamma, CA Respondent by : Sri.Ananda H., Addl.CIT-DR Date of Hearing : 29.12.2021 Date of Pronouncement : 03.01.2022 O R D E R Per George George K, JM This appeal at the instance of the assessee is directed against the CIT(A)’s order dated 21.01.2019. The relevant assessment year is 2015-2016. 2. The assessee has filed revised grounds, which read as follows:- “1. The learned Commissioner of Income Tax erred in confirming the order passed by learned Dy. Commissioner of Income Tax, Circle 6(2)(1), which is against the law and facts of the case. 2. The learned Commissioner of Income Tax ought to have appreciated the fact that the Appellant is a Member's Association formed by the residents of Sobha Nagasandra Apartment Owners Welfare Association, who has been collecting amount from various owners of the Apartment, situated for the purpose of maintenance of the entire assets of the Association in particular Lifts, Water Treatment Plant, ITA No.769/Bang/2019 M/s.Sobha Nagasandra Apartment Owners Welfare Association. 2 which is major assets of the Apartment Owners Welfare Association. 3. The learned Commissioner of Income Tax failed to understand that while determining monthly maintenance fee to be collected from the members of the Association, the amount received from the Bank out of the Fixed Deposits placed by the Association out of group collection, has been treated as income from other sources, and only net amount only is collected, and therefore the income from Bank account is also deemed to have been utilized for Members' expenses. 4. The learned Commissioner of Income Tax ought to have noticed that while collecting monthly maintenance fee from owners of the Flats, the amount of interest received Rs.91,72,153/ - deducted out of gross collection and the balance amount is collected from the owners of the Apartment. 5. The learned Commissioner of Income Tax ought to have considered that interest received from Bank should have been adjusted against the expenditure incurred for maintenance of the Apartment. 6. The learned Commissioner of Income Tax should not have taken reference of the judgment of Hon'ble Apex Court in the case of Bangalore Club Vs CIT, 350 ITR 509, which is entirely distinguishable from the fact of the present Association. 7. The learned Commissioner of Income Tax ought to have appreciated the fact that wear & tear in respect of assets like Lifts & Water Treatment Plant is also part & parcel of the assets of the Association and the depreciation is directly relatable to the maintenance of the Apartment and therefore the same is required to be allowed as deduction. 8. For the above and any other grounds that may be advanced at the time of hearing, the Appellant prays that the Appeal be allowed.” 3. Brief facts of the case are as follows: The assessee is an Apartment owners association. For the assessment year 2015-2016, the return of income was ITA No.769/Bang/2019 M/s.Sobha Nagasandra Apartment Owners Welfare Association. 3 filed declaring loss of Rs.77,32,874. The details of the return filed by the assessee are as follows:- (i) Income from house property Rs. 5,07,029 (ii) Income from `business’ Rs.82,39,903 ---------------- Loss declared in return of income Rs.77,32,874 ============ 4. The assessment was completed vide order dated 28.12.2017 u/s 143(3) of the I.T.Act determining the total income at Rs.97,04,552. The A.O. held that since the assessee was not doing any business, its claim of depreciation is not allowable. The A.O. observed that the assessee was an AOP and principle of mutuality is applicable to it. The A.O. brought to tax interest income of Rs.91,72,153 earned from deposits and also miscellaneous income of Rs.25,370. The income determined by the A.O. are as follows:- (i) Income from house property Rs. 5,07,029 (as declared) (ii) Income from other sources – (a) Interest on deposits Rs.91,72,153 (b) Miscellaneous income Rs. 25,370 ---------------- Rs.91,97,523 ---------------- Total income determined by the A.O. Rs.97,04,552 ============ 5. Aggrieved by the assessment order, the assessee preferred an appeal before the first appellate authority. The CIT(A) affirmed the assessment order and dismissed the appeal of the assessee. The CIT(A) held that assessee is ITA No.769/Bang/2019 M/s.Sobha Nagasandra Apartment Owners Welfare Association. 4 governed by the principle of mutuality. The CIT(A) further held that since the assessee is not carrying any business, the assessee is not entitled to depreciation claimed. The CIT(A) by relying on the judgment of the Hon’ble Apex Court in the case of Bangalore Club v. CIT reported in 350 ITR 509 held that interest income received on account of investment with banks is taxable under the head income from other sources. 6. Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The assessee along with the appeal memo has produced copy of the bye-laws of the assessee-society, computation of income and expenditure statement etc. The learned AR also produced minutes of the annual general body meeting of the association wherein the budget is considered and monthly maintenance charges are approved. In the resolution of the assessee-society, the details of the expenditure incurred and ratified for the maintenance of the flat are explained (such as office and administrative expenses, facility maintenance expenditure, housekeeping expenditure, security expenditure etc.). The learned AR submitted that the assessee has erred in claiming before the A.O. and the CIT(A) that it is not a society governed by the principle of mutuality. The learned AR submitted that the members of the association prepare the budget after considering the actual expenses incurred for the previous year. It was stated that in the process of preparing the budget, they considered all normal maintenance expenditure of the apartment and deducted the same from all the receipts ITA No.769/Bang/2019 M/s.Sobha Nagasandra Apartment Owners Welfare Association. 5 and the balance will be recovered from the members based on the square feet in occupation of each of the members. It was submitted that this fact was not brought to the notice of the A.O. nor the CIT(A). Therefore, it was prayed that the matter may be remanded to the A.O. in the interest of justice and equity. 7. The learned Departmental Representative strongly supported the orders of the Income Tax Authorities. 8. We have heard rival submissions and perused the material on record. The learned AR has fairly submitted that the claims made by the assessee before the Income Tax Authorities are wrong (such as the claim that the assessee is not a mutual society, the assessee is doing business and entitled to depreciation etc.). The learned AR’s submission is that the assessee while preparing the budget takes into account the actual expenditure incurred in the previous year and after reducing actual receipts for the previous year, balance would be recovered from the members based on the square feet in occupation of each member. The limited prayer of the learned AR is that since this fact was not brought to the notice of the A.O., the assessee may be given one more opportunity in the interest of justice and equity. The assessee has furnished the details of the expenditure incurred for the relevant financial year. We are of the view that one more opportunity is to be granted to the assessee for proper representation of its case. Therefore, the issue is restored to the A.O. The A.O. is directed to afford a reasonable ITA No.769/Bang/2019 M/s.Sobha Nagasandra Apartment Owners Welfare Association. 6 opportunity of hearing to the assessee before a decision is taken in the matter. 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on this 03 rd day of January, 2022. Sd/- (Chandra Poojari) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 03 rd January, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-6, Bengaluru. 4. The Pr.CIT-6, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore