ITO ward-1(3), New Delhi V. Corporate Greens Condominium Association, Haryana

ITA 8603/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4001 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 03-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS

Judgement Text

1 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER I.T.A. No. 8603/DEL/2019 (A.Y 2016-17) Income Tax Officer, Ward : 1 (3) Gurgaon, Haryana (APPELLANT) Vs. M/s. Corporate Greens Condominium Association, DLF, Corporate Greens, Sector: 74A, Gurgaon, Haryana – 122 001. PAN No. AACAC0110G (RESPONDENT) ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the Revenue against the order dated 20/08/2019 of the ld. Commissioner of Income Tax (Appeals)–1, Gurgaon [hereinafter referred to CIT (Appeals)] for Assessment Year 2016-17. Assessee by : Shri Manuj Sabharwal, Advocate; Department by: Shri Sumit Kumar Verma, Sr. D. R.; Date of Hearing 20.09.2022 Date of Pronouncement 23.09.2022 2 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium 2. The Revenue has raised the following ground of appeal:- a. Whether the Ld. CIT (A) was justified in deleting the addition of Rs. 3,73,02,450/- on account of interest earned on IBMS( Interest bearing maintenance security) ignoring the facts that the same issue is squarely covered by the decision of Hon’ble Apex Court in the case of Bangalore Club Vs CIT(2013) 35 ITR 509 which is in favour of Revenue . b. Whether the Ld. CIT (A) correctly justified the principal of mutuality in this case in view of the ratio of concept of mutuality as laid down by the Hon’ble Apex court in the case of Bangalore Club Vs CIT(2013) 35 ITR 509. c. That the appellant craves for the permission to add, delete or amend grounds of appeal before or at the time of hearing of appeal.” 3. Brief facts of the case are that, the assessee filed its return by declaring an income of Rs. 26,78,577/-. The Ld. A.O. noted that the assessee has received total interest of Rs. 3,89,02,546/- on Interest Bearing Maintaining Security (IBMS). Out of the said amount Rs. 16 lakhs was received as interest on interest and the remaining amount of Rs. 3,73,02,450/- was received as interest on IBMS. The said amount of Rs. 3,73,02,450/-was claimed as exempt and not offered for taxation. The Ld. A.O has asked the assessee to explain why the said amount may not be taxed and the assessee contended that the said amount was received as interest on IBMS and the same is not taxable in view of decision of the Tribunal in the case of Belaire Condominium Association in ITA No.655/De/2018. While passing the assessment order, the Ld. A.O observed that the said decision of the Tribunal in the case of Belaire Condominium Association (supra) has been challenged by the Revenue before 3 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium the Hon'ble High Court, further the Ld. A.O held that the interest earned from the bank IBMS by the assessee society is liable to tax under the head “Income from other sources”. Accordingly, an amount of Rs. 3,73,02,450/- has been added to the return income of the assessee and passed the assessment order on 25/12/2018 by computing the total income of the assessee at Rs. 3,99,81,030/- as against the return income of Rs. 26,78,580/-. 4. Aggrieved by the assessment order dated 25/12/2018, the assessee has preferred an Appeal before the CIT(A). The Ld.CIT(A) vide order dated 20/08/2019 by relying on the judgment of the Coordinate Bench of the Tribunal in the case of Belaire Condominium Association Vs. ITO, ITA No. 655/del/2018 dated 25/04/2018 allowed the appeal filed by the assessee by deleting the addition made by the A.O. 5. Aggrieved by the order of the Ld.CIT(A) dated 20/08/2019, the assessee has preferred the present Appeal on the grounds mentioned above. 6. We have heard the parties, perused the material on record and gave our thoughtful consideration. 7. It is found that the assessee has received a total receipt of Rs. 3,89,02,450/- as interest on IBMS Security, out of the said amount a sum of Rs. 3,73,02,450/- has been received as IBMS and Rs. 16,00,000/- has been received as interest on IBMS interest. The assessee has offered amount of Rs. 16,00,000/- for taxation, whereas interest at Rs. 3,73,02,450/- has not been offered for taxation on the plea that the said interest amount has to be distributed to its members proportionately after deduction of TDS at applicable rate. The Ld. A.O was the opinion that deduction of the TDS on distributed interest income amongst members does not absolve the society/assessee from its taxation obligation. Therefore, held that interest earned from banks on IBMS by the assessee society is liable to be taxed under the head of ‘income 4 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium from other sources’. The Ld. CIT(A) has allowed the appeal of the assessee by relying on the order of the Coordinate Bench in the case of Belaire Condominium Association (supra). 8. The moot question remains for consideration in the present appeal as to whether the interest received by the assessee on IBMS is taxable or not?. The said issue has been considered by the Coordinate Bench of the Tribunal in the case of Belaire Condominium Association Vs. ITO in ITA No. 655/Del/2018 wherein the Coordinate Bench of the Tribunal vide order dated 25/04/2018 has held as under:- “10. We have considered the rival submission and perused the order passed by the lower authorities. There is no dispute to the fact that assessee is a registered society form with the basic object to provide for maintenance and repair of common arrears and facilities of the building to its members. There is no dispute about the maintenance charges being collected and utilised towards maintenance. The dispute is regarding the interest income earned by it on deposit with the Bank made out of the security deposit obtained from its members. The AO has held that the interest earned on it is not covered by the principle of mutuality after the judgment of the Supreme Court in the case of Bangalore Club (Supra). The alternative contention of the assessee that interest paid by it on such security deposit is to be set off against interest income earned on such deposit has also been rejected by the AO. After going through the facts of the case we are of the considered opinion that the AO has gone wrong in rejecting this contention of the assessee society. As rightly pointed out by the learned AR that the assessee society has obtained the interest bearing maintenance security called IBMS from the flat owners and such security deposit has been deposited with the Bank on which interest has been earned. Thus, 5 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium there is a direct nexus in earning interest on such fixed deposit with Bank and payment of interest on the security deposit to the flat owners. The interest expenditure has been incurred wholly and exclusively for earning such interest income on Bank deposit. As per the Apartment buyers agreement there is an obligation on every buyer to make security deposit and there is corresponding obligation on the society to pay interest on such deposit. Thus, the contention of the learned AR that this interest expenditure has not been incurred to earn interest income is incorrect. The assessee society has paid interest each one after deducting tax at source. Thus, it is not a case of exemption on the principle of mutuality. Such interest paid by the assessee society is taxable in the hands of the Apartment owner. In view of these facts, we are of the view that interest expenditure is to be set off against the interest income. As regards the AO's contention that interest paid to member is not eligible deduction in the case of AOP under Section 40 (ba), we have perused the said Section. This clause excludes registered society from its applicability. Accordingly, this clause will not be applicable to the assessee society. Moreover, as rightly contended by the learned AR Section 40 (ba) is applicable while computing business income. This clause is not applicable while computing income from other sources. There is no prohibition in Section 57 (iii) under which deduction of interest is eligible to the assessee society. 11. Accordingly, we direct the AO to delete the addition of Rs. 1,63,77,013 made on account of the interest. In the result appeal of the assessee is allowed.” 9. The Coordinate Bench while deciding the issue has also considered the judgment of Hon'ble Supreme Court in the case of Bangalore Club Vs. CIT 6 ITA No. 8603/Del/2019 ITO Vs. Corporate Greens Condominium (2013) 35, ITR 509. By respectfully following the order of the Coordinate Bench in the case of Belaire Condominium Association (supra), we do not find any merit in the Grounds of Appeal of the Revenue. Accordingly, Grounds of Appeal No. 1 to 3 of the Revenue are dismissed. 10. In the result, the Appeal filed by the Revenue is dismissed. Order pronounced in the open court on : 23/09/2022 . Sd/- Sd/- ( SHAMIM YAHYA ) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 23/09/2022 *R.N* Sr PS Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI