2012 (9) TMI 35 - AT - Income Tax

Co-operative Housing society - rental income from allowing the use of terrace area for placing the communication towers by telecommunication companies - Income from house property vs Income from other sources - Held that - Letting out of the terrace erection of antenna and income derived from letting out has to be taxed as income from house property and not as income from other sources and accordingly deduction to be provided u/s 24 - Decided in favor of assessee Taxability of Transfer Charges and Repair Fund received from members - assessee contended that as per bye laws, there was an agreement by which the charges was paid by the transferee and it was in the nature of admission fee which could be appropriated, only on the transferee being admitted - contribution to common amenity fund/repairs and welfare fund being the first contribution made by the existing/new member was not taxable - reliance placed on Mittal Court Premises Chs. Ltd (2009 (7) TMI 689 - BOMBAY HIGH COURT) - Held that - Applicability of principle enumerated in aforesaid judgment to the facts of the case depends upon the comparison of bye-laws of both the societies. As this aspect has not been looked into, we want to remit back the matter to the file of the A.O. Taxability of income from sale of scrap, garage rent and car parking - assessee contended non-taxability on ground of Principles of mutuality - Held that - Amount in question is covered by principles of mutuality. If amount is used for the benefit of the members of the Society, it is entitled to have benefit of principle of mutuality - Decided in favor of assessee

Issues Involved:
1. Classification of income from renting out a portion of the building.
2. Admissibility of additional grounds of appeal regarding rental income.
3. Taxability of transfer fee and repair fund charges.
4. Disallowance of excess expenses incurred in maintaining the society.
5. Taxability of income from sale of scrap, garage rent, and car parking.

Detailed Analysis:

1. Classification of Income from Renting Out a Portion of the Building:
The appellant challenged the CIT(A)'s decision that treated the income from renting out a portion of the building as "income from other sources" instead of "income from house property," thereby denying the deduction under Section 24(a) of the I.T. Act. The appellant received compensation of Rs. 12,28,237 for allowing the use of its terrace area for communication towers. The A.O. and CIT(A) classified this as "income from other sources," but the appellant argued it should be considered "income from house property" based on previous ITAT decisions and the Bombay High Court ruling in similar cases. The Tribunal, following the jurisdictional High Court's binding judgment, directed the A.O. to assess the income under "income from house property," allowing the appellant's appeal on this ground.

2. Admissibility of Additional Grounds of Appeal Regarding Rental Income:
The appellant raised an additional ground, arguing the rental income should fall under the principles of mutuality and not be liable for taxes. However, this ground was not admitted by the CIT(A) as it did not emanate from the facts on record during the assessment proceedings. Consequently, this ground was dismissed.

3. Taxability of Transfer Fee and Repair Fund Charges:
The A.O. treated the transfer fee and repair fund charges amounting to Rs. 3,25,000 as "income from business or profession," arguing that these amounts were collected in violation of the society's bye-laws and with a profit motive, thus not covered by the principles of mutuality. The CIT(A) upheld this view. However, the appellant cited the Bombay High Court's decision in the case of Mittal Court Premises CHS Ltd., which allowed such collections under mutuality principles. The Tribunal remitted the matter back to the A.O. to compare the bye-laws of both societies and decide the issue in light of the High Court's principles.

4. Disallowance of Excess Expenses Incurred in Maintaining the Society:
The appellant claimed an expenditure of Rs. 20.54 lakhs, which was disallowed by the A.O. and CIT(A). The Tribunal found that the bifurcation of this amount was not properly worked out and that the CIT(A) had passed a non-speaking order. Therefore, the Tribunal restored the matter back to the A.O. for fresh consideration.

5. Taxability of Income from Sale of Scrap, Garage Rent, and Car Parking:
The A.O. added Rs. 1.33 lakhs to the income, treating it as "income from other sources." The appellant argued that these receipts were from members and used for their benefit, thus covered by the principles of mutuality. The Tribunal agreed, stating that if the scrap sale proceeds, garage rent, and car parking charges were used for the benefit of the society members, they should be exempt from taxation under mutuality principles. The Tribunal reversed the CIT(A)'s decision and allowed the appeal on this ground.

Conclusion:
The appeal was partly allowed. The Tribunal directed the A.O. to assess the rental income under "income from house property," remitted the issue of transfer fee and repair fund charges for fresh consideration, restored the matter of excess expenses for proper bifurcation, and allowed the claim regarding income from sale of scrap, garage rent, and car parking under mutuality principles.

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