ITO, Gurgaon v. M/s. Princeton Estate Condominium Association, New Delhi

ITA 3993/DEL/2009 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 399320114 RSA 2009
Assessee PAN AAATP7951K
Bench Delhi
Appeal Number ITA 3993/DEL/2009
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant ITO, Gurgaon
Respondent M/s. Princeton Estate Condominium Association, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 28-01-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2006-2007
Appeal Filed On 29-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH F BENCH F BENCH F BENCH F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO. 3993/DEL/2009 3993/DEL/2009 3993/DEL/2009 3993/DEL/2009 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006 - -- - 07 0707 07 INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER WARD WARD WARD WARD- -- -4 4 4 4 GURGAON. GURGAON. GURGAON. GURGAON. VS. VS. VS. VS. M/S PRINCETON M/S PRINCETON M/S PRINCETON M/S PRINCETON ESTATE CONDOMINIUM ESTATE CONDOMINIUM ESTATE CONDOMINIUM ESTATE CONDOMINIUM ASSOCIATION ASSOCIATION ASSOCIATION ASSOCIATION DLF CITY PHASE DLF CITY PHASE DLF CITY PHASE DLF CITY PHASE- -- -V V V V GURGAON. GURGAON. GURGAON. GURGAON. PAN NO. PAN NO. PAN NO. PAN NO.AAATP7951K. AAATP7951K. AAATP7951K. AAATP7951K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K.LAL SR.DR. RESPONDENT BY : SHRI VED JAIN CA. ORDER ORDER ORDER ORDER PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI J J J JM : M : M : M : THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 1 7.7.2009 PASSED BY LEARNED CIT(A) IN THE MATTER OF AN ASSESS MENT MADE BY THE AO U/S 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT) FOR THE AY 2006- 07. 2. VARIOUS GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELE TING THE ADDITION OF RS.30 20 413/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF PROFIT SHOWN AS PER INCOME AND EXPEND ITURE ACCOUNT EVEN THOUGH THE CONCEPT OF MUTUALITY DID NO T APPLY TO THE ASSESSEE AND THE PROFITS EARNED FROM I TS ACTIVITIES WERE LIABLE TO INCOME TAX AND THE VARIOU S CONTRIBUTIONS PAID BY THE TENANTS WERE NOT FROM MEM BERS OF THE ASSOCIATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELE TING THE ADDITION OF RS.8 89 756/- MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF EXPENDITURE ON ACCOUNT OF INCOME TAX PAI D FOR THE ASSTT. YEAR 2003-04 EVEN THOUGH IT WAS NOT AN ITA-3993/DEL/2009 2 ALLOWABLE EXPENDITURE AND CONCEPT OF MUTUALITY DID NOT APPLY TO THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELE TING THE ADDITION OF RS.1 52 768/- MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF EXCESS DEPRECIATION CLAIMED EVEN THOUGH THE CONCEPT OF MUTUALITY DID NOT APPLY TO THE ASSESSEE. 3. THE AFORESAID ADDITIONS MENTIONED IN THE GROUNDS OF APPEAL WERE MADE BY THE AO ON THE GROUND THAT THE CONCEPT OF MU TUALITY DID NOT APPLY TO THE ASSESSEES CASE. 4. THE ASSESSEE IS A RESIDENT WELFARE ASSOCIATION O F THE RESIDENTS OF PRINCETON ESTATE DLF CITY PHASE-V GURGAON. IT F ILED ITS RETURN OF INCOME DECLARING AN INCOME OF `1 25 380/-. THE CAS E WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) WERE DULY ISSUED AS SERVED UPON THE ASSESSEE. THE ASSESSEE ASSOCIATION CLAIMED ITSELF TO BE A MUTUAL CONCERN BY VIRTUE OF WHICH THE ASSESSEE CLAIMED THA T ITS INCOME WAS NOT TAXABLE. THIS CLAIM OF THE ASSESSEE HAS BEEN R EJECTED BY THE AO FOR THE FOLLOWING REASONS:- THUS IT IS CONCLUDED THAT THE ASSESSEE IS NOT A M UTUAL CONCERN FOR THE FOLLOWING REASONS: (I) THE DOCUMENTS EVIDENCING ITS CREATION AND INTE R ALIA THE RELEVANT CLAUSES REPRODUCED HERE ABOVE REFLECT A PROFIT EARNING MOTIVE. (II) THE BENEFITS OF ITS ACTIVITIES ARE AVAILABLE T O NON- MEMBERS ALSO. (THE ONUS OF PROVING THAT NO TENANTS OCCUPIED THE APARTMENTS RESTS WITH THE ASSOCIATION) . (III) THE JUDGMENT QUOTED BY THE ASSESSEE IN ITS DE FENSE ITSELF DOES NOT ALLOW INVOKING OF PRINCIPLE OF MUT UALITY IT TRADING ACTIVITY EXISTS OR IF THE ACTIVITIES ARE T AINTED WITH COMMERCIALITY WHEREAS THE RELEVANT OBJECTS INDICAT E COMMERCIAL INTENT. ITA-3993/DEL/2009 3 5. THE AO THEREFORE ADDED THE PROFIT OF `30 20 41 3/- AS PER INCOME AND EXPENDITURE ACCOUNT TO THE INCOME OF THE ASSESS EE. THE AO ALSO DISALLOWED THE SUM OF `8 89 756/- ON ACCOUNT OF INC OME TAX DEMAND PAID BY THE ASSOCIATION. THE AO ALSO DISALLOWED TH E DEPRECIATION TO THE EXTENT OF `1 52 768/-. THE AO THUS DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT `41 88 320/-. 6. BEING AGGRIEVED THE ASSESSEE PREFERRED APPEAL B EFORE THE LEARNED CIT(A). AFTER HEARING THE ASSESSEE AND CON SIDERING THE ASSESSMENT ORDER PASSED BY THE AO AND THE FACTS OF THE CASE THE CIT(A) HELD THAT THE BENEFIT OF MUTUALITY CLAIMED B Y THE ASSESSEE IS NOT LIABLE TO BE REJECTED. THE CIT(A) THEREFORE HELD THAT THE SURPLUS OF `30 20 413/- IS NOT TAXABLE. THE LEARNED CIT(A) AL SO HELD THAT SINCE THE SURPLUS IS NOT TAXABLE THE INCREASED SURPLUS COMES TO DISALLOWANCE OF `8 89 756/- ON ACCOUNT OF INCOME TAX AND FBT PAID B Y THE ASSESSEE WAS ALSO NOT BE TAXABLE. THE CIT(A) FURTHER HELD T HAT CHARGING DEPRECIATION ON 100% OF THE COST OR NOT CHARGING DE PRECIATION AT ALL WOULD NOT MAKE ANY DIFFERENCE BECAUSE ULTIMATELY T HE SURPLUS REMAINING IN THE ASSESSEES HANDS WILL NOT BE TAXAB LE. THE CIT(A) THEREFORE DELETED ALL THE ADDITIONS MADE BY THE AO . FOR THE SAKE OF READY REFERENCE OPERATING PART OF THE CIT(A)S ORD ER IS REPRODUCED BELOW:- 5. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER PASSED BY THE AO AND THE WRITTEN SUBMISSIONS AND TH E ARGUMENTS OF THE APPELLANT. I HAVE ALSO CAREFULLY GONE THROUGH THE DECISION OF THE SUPREME COURT IN BANKIP UR CLUB CASE. THE AO HAS HELD THAT THE APPELLANT IS N OT A MUTUAL CONCERN BASICALLY FOR TWO REASONS FIRSTLY AS PER THE MEMORANDUM AND BYLAWS OF THE APPELLANT IT IS WORKIN G WITH PROFIT MOTIVE AND SECONDLY THE APPELLANT IS EA RNING INCOME FROM TENANTS WHO ARE NON MEMBERS. THE AO HA S MISINTERPRETED CLAUSES (II) AND (IV) OF THE AIMS AN D OBJECTS OF THE APPELLANT AND HAS IGNORED CLAUSES (I) AND (I II). THE OVERALL READING OF THE AIMS AND OBJECTS WILL MAKE I T CLEAR ITA-3993/DEL/2009 4 THAT THE MAIN OBJECT IS TO MAINTAIN THE COMPLEX AND NOT TO EARN INTEREST FROM THE BANKS. THE ARGUMENT OF THE APPELLANT THAT THE SOCIETY IS NOT WORKING FOR PROFI T MOTIVE BUT INVESTS ONLY SURPLUS FUNDS NOT REQUIRED FOR IMM EDIATE USE FOR EARNING INTEREST AND THE INTEREST INCOME IS NOT EVEN 5% OF THE TOTAL INCOME OF THE SOCIETY AND HENCE IS NOT THE CHIEF OBJECTIVE HAS FORCE. CLAUSE (II) OF THE AIMS AND OBJECTS SAYS TO INVEST OR DEPOSIT MONEYS AND DOES NOT SAY THAT THIS IS THE MAIN MOTIVE. IT CAN NOT BE SAID T HAT WHATEVER SURPLUS IS AVAILABLE WITH THE APPELLANT TH AT CAN NOT BE DEPOSITED OR INVESTED TO GET SOME RETURNS. THERE IS NO POINT IN KEEPING THE MONEY IDLE. BY INVESTING S URPLUS MONEY DOMINANT PURPOSE IS NOT LOST. SIMILARLY CLA USE (IV) PROVIDES FOR RENTING OUT SUITABLE PORTION OF THE CO MMON AREA TO OUTSIDERS FOR COMMERCIAL PURPOSES. THE OBJ ECTIVE AGAIN IS TO SUPPLEMENT THE CONTRIBUTIONS RECEIVED F ROM THE MEMBERS. THE INCOME EARNED FROM THIRD MEMBERS LIES OUTSIDE THE CONCEPT OF MUTUALITY AND IS TAXABLE. E ARNING A PART OF THE INCOME FROM THE THIRD MEMBERS WHICH IS TAXABLE DOES NOT MEAN THAT THE APPELLANT IS TOTALLY DEPRIVED OF THE PRINCIPLE OF MUTUALITY. IN CASE OF A MUTUAL CONCERN WHICH RECEIVES CONTRIBUTIONS FROM MEMBERS A ND ALSO EARNS INCOME FROM THIRD MEMBERS ONLY THE INCO ME EARNED FROM THIRD MEMBERS IS TAXABLE AND THE CONTRIBUTIONS MADE BY THE MEMBERS FALL WITHIN THE C ONCEPT OF MUTUALITY. THE DOMINANT PURPOSE OF THE APPELLAN T IS TO MAINTAIN THE COMMON AREAS AND TO PROVIDE FACILITIES TO THE MEMBERS FOR WHICH CONTRIBUTIONS ARE RECEIVED FROM T HEM. THERE IS NOTHING WRONG IN EARNING SOME INCOME FROM DEPOSIT OF MONEYS AND ALSO BY RENTING OUT COMMON AR EAS TO THIRD PERSONS THE ONLY THING BEING THAT THIS IN COME WILL BE TAXABLE. THE WHOLE OF THE RECEIPTS OF THE APPEL LANT DO NOT BECOME TAXABLE. ONLY THOSE INCOMES WHICH ARE OUTSIDE THE CONCEPT OF MUTUALITY CAN BE TAXED. SIM ILARLY THE CONTRIBUTIONS RECEIVED BY THE APPELLANT FROM TE NANTS FALL WITHIN THE CONCEPT OF MUTUALITY SINCE THE TENA NTS STEP IN THE SHOES OF THE OWNERS AND ARE ENTITLED TO ALL THE COMMON FACILITIES SINCE THEY ARE RESIDING THERE. F OR AVAILING THE COMMON FACILITY THE TENANTS HAVE TO MA KE CONTRIBUTIONS LIKE THE OWNERS. THERE IS NOTHING WR ONG IN THE CONTRIBUTIONS MADE BY THE TENANTS. THESE CONTRIBUTIONS CAN NOT BE TREATED AS INCOME FROM THI RD PERSONS. THE CONTRIBUTIONS FROM TENANTS ALSO FALL WITHIN THE CONCEPT OF MUTUALITY AND ARE NOT TAXABLE. THE AO H AS NOT APPRECIATED THE WORKING OF THE APPELLANT AND APPLIC ATION OF CONCEPT OF MUTUALITY. I FIND FORCE IN ARGUMENTS OF THE APPELLANT THAT THE APPELLANT IS NOT WORKING WITH A PROFIT ITA-3993/DEL/2009 5 MOTIVE AND IT HAS BEEN FORMED TO SATISFY THE REQUIR EMENT OF HARYANA APARTMENT OWNERSHIP ACT 1983. MOREOVER DEALING WITH NON MEMBERS DOES NOT RESULT IN LOSS OF MUTUALITY IF THE TRANSACTIONS WITH NON MEMBERS CAN BE ISOLATED. FURTHER THE ARGUMENTS OF THE APPELLANT T HAT THERE IS COMPLETE IDENTITY BETWEEN CONTRIBUTORS AND PARTI CIPATORS AND HENCE THE APPELLANT FALLS IN THE CONCEPT OF MUT UALITY HAS FORCE. THE AO HAS WRONGLY DENIED THE BENEFIT O F MUTUALITY TO THE APPELLANT. THE AO CAN TAX THE INC OME WHICH HAS BEEN EARNED FROM NON MEMBERS. THE BENEFI T OF MUTUALITY CANNOT BE COMPLETELY WITHDRAWN. THE ORDE R OF THE AO DENYING THE BENEFIT OF MUTUALITY TO THE APPE LLANT CAN NOT BE UPHELD. THE APPELLANT IS ENTITLED TO TH E MUTUALITY AS FAR AS CONTRIBUTION FROM THE MEMBERS I S CONCERNED. THE ADDITION OF RS.30 20 413/- MADE BY THE AO IS THEREFORE ORDERED TO BE DELETED. 6. THE AO HAS MADE ADDITION OF RS.8 89 756/- ON ACCOUNT OF INCOME TAX AND FBT PAID BY THE APPELLANT BY TREATING THE SAME AS NON ALLOWABLE EXPENDITURE. I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT THAT SINCE THE APPELLANT FALLS IN THE CONCEPT OF MUTUALITY THERE I S NO QUESTION OF CLAIMING ANY EXPENDITURE AND NO EXPENDI TURE IN RELATION TO INCOME TAX & FBT HAS BEEN CLAIMED BY THE APPELLANT. BY DISALLOWING THE INCOME TAX & FBT TH E RESULT WOULD BE THAT THE SURPLUS OF CONTRIBUTIONS WILL INC REASE BY THE SAME AMOUNT. SINCE THE SURPLUS IS COVERED BY THE CONCEPT OF MUTUALITY AND IS NOT TAXABLE INCREASING THE SAME BY DISALLOWING THIS EXPENDITURE WILL NOT MAKE ANY DIFFERENCE SINCE THE INCREASED SURPLUS IS ALSO NOT TAXABLE. THE ADDITION OF RS.8 89 756/- MADE BY THE AO IS ORD ERED TO BE DELETED. 7. THE AO FINALLY MADE ADDITION OF RS.1 52 768/- ON ACCOUNT OF DEPRECIATION CLAIMED AT HIGHER RATE BY T HE APPELLANT. HERE ALSO I AGREE WITH THE ARGUMENTS OF THE APPELLANT THAT CHARGING DEPRECIATION AT 100% OF THE COST OR NOT CHARGING DEPRECIATION AT ALL MAKES NO DIFFERENC E TO THE TAXABLE INCOME OF THE APPELLANT. CLAIMING HIGHER R ATE OF DEPRECIATION REDUCES THE SURPLUS AND NOT CLAIMING DEPRECIATION AT ALL WILL INCREASE THE SURPLUS. IN BOTH THE SITUATIONS THE SURPLUS IS NOT TAXABLE SINCE THE APP ELLANT IS COVERED BY THE CONCEPT OF MUTUALITY. THE ADDITION OF RS.1 52 768/- MADE BY THE AO IS ORDERED TO BE DELET ED. 7. HENCE THE DEPARTMENT IS IN APPEAL BEFORE US. ITA-3993/DEL/2009 6 8. IN THE COURSE OF HEARING OF THE APPEAL THE LEAR NED COUNSEL FOR THE ASSESSEE POINTED OUT THAT IDENTICAL ISSUE HAD C OME UP FOR CONSIDERATION BEFORE THE ITAT DELHI BENCH I IN TH E CASE OF WELLINGTON ESTATE CONDOMINIUM ASSOCIATION VS. ITO IN ITA NO.28 46/DEL/2007 WHERE THE TRIBUNAL VIDE ORDER DATED 16.10.2009 HAS TAKEN A VIEW THAT THE IDENTICAL ASSOCIATION IS ENTITLED TO A BENEFIT OF MUTUALITY AND ITS SURPLUS IS NOT TAXABLE. THE COPY OF THIS ORDER WAS PROVIDED BY THE LEARNED COUNSEL FOR THE ASSESSEE TO THE LEARNED DR WHO AFTER GOING THROUGH THE ORDER FAIRLY SUBMITTED THAT THE ISSUE I NVOLVED IN WELLINGTON ESTATE CONDOMINIUM ASSOCIATION IS IDENTICAL TO THAT OF THE ASSESSEES CASE. WE THEREFORE RESPECTFULLY FOLLOWING THE DE CISION OF COORDINATE BENCH IN THE CASE OF WELLINGTON ESTATE CONDOMINIUM ASSOCIATION UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9. FOR THE SAKE OF CLARITY THE RELEVANT PORTION OF TRIBUNALS ORDER IN THE CASE OF WELLINGTON ESTATE CONDOMINIUM ASSOCIATI ON IS REPRODUCED HERE AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD AND HAVE G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD.AR OF THE ASSESSE E. WE FIND THAT CLAUSE NO.18(B) OF THE BYE LAWS OF THE AS SESSEE IS REGARDING WINDING UP OR DISSOLUTION OF THE SOCIETY AS PER WHICH ANY SURPLUS REMAINING AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES SHALL NOT BE PAID TO OR DISTRIBUTE D AMONG THE MEMBERS OF THE SOCIETY BUT SHALL BE GIVEN OR TRANSF ERRED TO SOME OTHER INSTITUTION HAVING OBJECTS SIMILAR TO TH E OBJECTS OF THE SOCIETY TO BE DETERMINED BY THE MEMBERS OF S OCIETY AT THE TIME OF DISSOLUTION. WE FIND THAT THIS CLAU SE IS SIMILAR TO CLAUSE NO.(XXIV) REFERRED TO BY THE TRIB UNAL IN THE CASE OF SCOPE (SUPRA). THIS ASPECT OF THE MATTER H AS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE I N THAT CASE BY FOLLOWING THE JUDGMENT OF HONBLE APEX COUR T RENDERED IN THE CASE OF BANKIPUR CLUB (SUPRA) AND H ENCE FOR THIS REASON IN THE PRESENT CASE ALSO WE ARE O F THE ITA-3993/DEL/2009 7 CONSIDERED OPINION THAT THE CLAIM OF THE ASSESSEE REGARDING MUTUALITY CANNOT BE REJECTED ON THE BASIS OF THIS CLAUSE IN THE BE LAWS. REGARDING OTHER REASONING G IVEN BY LD.CIT(A) THAT THERE IS NO IDENTITY BETWEEN THE CON TRIBUTORS AND PARTICIPATORS IN VIEW OF CLAUSE 2 & 4 OF THE BY E LAWS AS PER WHICH THE ASSESSEE COULD INVEST OR DEPOSIT MONE Y AND COULD LET OUT SUITABLE PORTION OF COMMON AREAS TO O UTSIDERS FOR COMMERCIAL PURPOSES AND TO ACCUMULATE THE COMMO N PROFIT FOR BUILDING UP RESERVE FUND. THIS ASPECT H AS ALSO BEEN DEALT BY THE TRIBUNAL IN THE CASE OF SCOPE (SU PRA). IN THAT CASE ALSO INTEREST INCOME WAS EARNED FROM SUR PLUS FUNDS AND RENTAL INCOME WAS RECEIVED FROM NON MEMBE RS ALSO. REGARDING INTEREST INCOME IT WAS HELD BY TH E TRIBUNAL THAT THIS ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERE D IN THE CASE OF ALL INDIA ORIENTAL BANKING COMMERCE OF WELFARE SOCIETY REPORTED 184 CTR 274 IN WHICH IT HAS BEEN H ELD THAT PRINCIPLE OF MUTUALITY APPLIES TO INTEREST INC OME RECEIVED FROM THE DEPOSITS MADE OUT OF CONTRIBUTION BY THE MEMBERS. REGARDING RENTAL INCOME FROM NON MEMBERS IT WAS HELD THAT SUCH INCOME IS NOT ENTITLED FOR EXEMP TION AS PER THE JUDGMENT OF HONBLE KERALA HIGH COURT IN TH E CASE OF TRIVENDRAM CLUB (2006-TIOL-130) AND IT WAS HELD THAT RENTAL INCOME FROM NON MEMBERS COULD BE TAXABLE BUT ONLY AFTER EXCLUDING THE EXPENSES INCURRED IN RELATION T O EARNING OF THE SAID RENTAL INCOME. HENCE WE FIND THAT FOR THIS REASON ALSO IT WAS NOT HELD THAT THE ASSESSEE SOCI ETY IS NOT A MUTUAL CONCERN AND ONLY RENTAL INCOME WAS DIRECTE D TO BE TAXED. IN THE PRESENT CASE WE FIND THAT THERE IS NO RENTAL INCOME RECEIVED BY THE ASSESSEE BECAUSE WE F IND THAT AS PER THE INCOME AND EXPENDITURE ACCOUNT APPE ARING ON PAGE NO.4 OF THE PAPER BOOK THERE IS NO RENTAL INCOME RECEIVED BY THE ASSESSEE. REGARDING THIS ALLEGATIO N THAT WHEN THE FLATS ARE RENTED OUT MAINTENANCE CHARGES ARE RECEIVED BY THE ASSESSEE FROM NON MEMBERS WE ARE OF THE CONSIDERED OPINION THAT THE LIABILITY OF PAYMEN T OF MAINTENANCE AND OTHER CHARGES IS OF THE MEMBER I.E. THE OWNER AND EVEN IF THE SAME IS PAID TO THE SOCIETY B Y THE TENANT OF THE MEMBERS IT CANNOT BE SAID THAT THE S OCIETY IS RECEIVING THE SAME FROM NON MEMBERS BECAUSE IN CASE OF DEFAULT THE ASSESSEE CAN COLLECT THE SAME FROM MEM BERS ONLY AND NOT FROM THE TENANTS. AS PER CLAUSE 4(B) OF THE BYE LAWS ALL THE OWNERS ARE OBLIGED TO PAY MONTHLY ASSESSMENT IMPOSED BY THE ASSOCIATION TO MEET ALL EXPENSES RELATING TO WELLINGTON ESTATE CONDOMINIUM WHICH MAY INCLUDE AN INSURANCE PREMIUM FOR A POLICY TO RE COVER REPAIR AND RECONSTRUCTION WORK IN CERTAIN AREAS. W E ARE OF ITA-3993/DEL/2009 8 THE CONSIDERED OPINION THAT EVEN IF SUCH PAYMENTS A RE MADE BY THE TENANTS OF THE MEMBERS IT HAS TO BE CONSIDERED AS RECEIVED FROM THE MEMBERS BECAUSE IT IS A LIABILITY OF THE MEMBER TO PAY SUCH AMOUNTS TO THE ASSESSEE ASSOCIATION AND EVEN IF THE SAME IS PAID B Y THE TENANTS THE TENANTS ARE PAYING ONLY ON BEHALF OF T HE MEMBERS OF SOCIETY. WE FEEL THAT FOR THIS REASON IT CANNOT BE HELD THAT THE ASSESSEE IS NOT A MUTUAL CONCERN. UNDER THESE FACTS WE FEEL THAT THE ASSESSEE HAS TO BE AS SESSED AS MUTUAL CONCERN AND HENCE THE RECEIPTS FROM MEMBE RS CANNOT BE ASSESSED AS INCOME IN THE HANDS OF THE ASSESSEE. INCOME FROM INTEREST ON FIXED DEPOSIT WI TH BANK OF RS.26 182/- IS ALREADY OFFERED TO TAX BY THE ASS ESSEE AS PER THE COMPUTATION OF INCOME AVAILABLE ON PAGE NO. 2 OF THE PAPER BOOK. HENCE WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND DIRECT THE ASSESSING OFFI CER TO ASSESS THE INCOME OF THE ASSESSEE AS PER RETURN OF INCOME FILED BY THE ASSESSEE. 6. SINCE WE HAVE ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS GOVERNED BY THE PRINCIPLE OF M UTUALITY AND THE SURPLUS IS NOT LIABLE TO TAX OTHER ISSUES RAISED BY THE ASSESSEE SUCH AS DISALLOWANCE OF DEPRECIATION A ND ADDITION OF INTEREST ON IBMS RS.26 148/- ETC. DO NO T CALL FOR ANY SEPARATE ADJUDICATION. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011. SD/- SD/- (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA ) )) ) (C.L.SETHI (C.L.SETHI (C.L.SETHI (C.L.SETHI ) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 28.01.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR ITA-3993/DEL/2009 9