2014 (7) TMI 425 - AT - Income Tax

Allowability of 50% of service charges Held that - CIT(A) rightly of the view that the appellant is allowed 50% of service charges as expenditure incurred for earning the income - the 50% service charges is allowed as expenditure incurred for earning the income - Revenue could not bring any law or decision of any higher court contrary to the view taken by the Tribunal in the own case of the assessee there was no infirmity in the order of the CIT(A) while allowing the claim of the assessee at the rate of 50% of the service charges following the decision of the Tribunal Decided against Revenue. Transfer fees and repairs and maintenance fund received from buyers Held that - As decided in assessee s own case for the earlier assessment year, it has been held that, the assessee has received transfer fees from the incoming member of the society i.e. the buyer of the flats - payment made by the buyer is in the nature of transfer fees which is received on becoming the member of the society, hence as per principle of mutuality any receipt from member to society is not taxable - the transfer fees is accepted only on admission of the member to society - transfer fees are not taxable - CIT(A) has allowed the claim of the assessee - revenue could not bring before us any contrary law to the decision Decided against Revenue.

Summary

Issues involved:
- Disallowance of service charges as expenditure
- Taxability of transfer fees and contribution to repairs and maintenance fund
- Applicability of principles of mutuality

Issue 1: Disallowance of service charges as expenditure:
The Revenue filed four appeals against the CIT(A)'s orders for different assessment years. The assessee, a co-operative housing society, claimed expenditure incurred for service charges. The AO allowed only 1/19th of the service charges as expenditure, but the CIT(A) allowed 50% based on a previous ITAT order in the assessee's favor for a different assessment year. The Revenue's miscellaneous application to recall the ITAT order was dismissed. The Tribunal upheld the CIT(A)'s decision, stating no higher authority had set aside the ITAT order. The Tribunal found no infirmity in allowing the claim at 50% of service charges, as per the earlier ITAT decision.

Issue 2: Taxability of transfer fees and contribution to repairs and maintenance fund:
The second ground of appeal concerned the taxability of transfer fees and contributions received by the assessee from buyers. The CIT(A) allowed the claim based on a Tribunal decision in another case. The assessee argued that the transfer fees were not taxable as they were received from incoming members who later became society members, following the principle of mutuality. The CIT(A) accepted this argument, citing the Tribunal's decision in a similar case. The Tribunal upheld the CIT(A)'s decision, finding no contrary law presented by the Revenue.

Issue 3: Applicability of principles of mutuality:
The Tribunal dismissed the general grounds of appeal (Ground No.3 & 4) as they did not require adjudication. The Tribunal concluded that based on the findings in the first appeal, the subsequent appeals for other assessment years were also dismissed. Therefore, all four appeals by the Revenue were dismissed, upholding the decisions of the CIT(A) and applying the principle of mutuality in determining the taxability of certain receipts.

In conclusion, the Tribunal upheld the CIT(A)'s decisions in favor of the assessee regarding the allowance of service charges as expenditure and the non-taxability of transfer fees and contributions, based on the principle of mutuality and previous Tribunal decisions.