2016 (2) TMI 620 - AT - Income Tax

Addition on account of non-occupancy charges - Held that - The charges are received at the prescribed rates as per the byelaws of the society and are spent for the common purposes of the society for the benefit of the members. In the case of Mittal Court Premises Co-operative Society Ltd. v/s Income Tax Officer 2009 (7) TMI 689 - BOMBAY HIGH COURT held that the bye-laws themselves provided for non-occupation charges. The contribution, therefore, was by the members for the purpose of mutual benefit. The object of the contribution was the purpose of increasing the society s funds, which could be used for fulfilling the objects of the society. The object of the society was to provide service, amenities and facilities to its members. In these circumstances, the principle of mutuality would apply and therefore non-occupancy charges were not taxable. In our opinion the case of the assessee case is squarely covered by the aforesaid decision. We, therefore, respectfully following the decision of the Juridictional High Court delete the addition - Decided in favour of assessee Rejection of claim of the assessee u/s 80(P)(2)(d) - interest on deposits with other Coop. Societies being Coop. Banks. - Held that - Honble Supreme Court in the case of Totagar s Co-operative Sale Society Ltd.(2010 (2) TMI 3 - SUPREME COURT ) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of ₹ 14,88,107/- in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A) - Decided in favour of assessee

Summary

Issues Involved:
1. Addition on account of Transfer Fees.
2. Addition on account of Non-Occupancy Charges.
3. Disallowance of deduction u/s 80P(2)(d) for interest earned from co-operative banks.
4. Addition on account of Car Parking Charges and Temporary Car Parking Charges.

Detailed Analysis:

1. Addition on Account of Transfer Fees:
The assessee, a co-operative society, received Rs. 11,00,000 as transfer fees, which was credited to the Common Amenities Fund. The Assessing Officer (AO) added this amount to the income of the assessee, stating it was not covered by the principle of mutuality. The CIT(A) confirmed this addition, citing that the amount exceeded the prescribed government notification. However, the Tribunal noted that similar issues had been decided in favor of the assessee in previous cases, including ITA No.6866/Mum/2007 for AY 2004-05 and the Jurisdictional High Court's decision in CIT v/s Darbhanga Mansion CHS Ltd. Following these precedents, the Tribunal deleted the addition of Rs. 11,00,000, directing the AO accordingly.

2. Addition on Account of Non-Occupancy Charges:
The society received Rs. 6,04,500 as non-occupancy charges from members who let out their flats. The AO added this amount to the income, arguing it was not charged as per government notification and was collected with a profit motive, thus not covered by mutuality. The Tribunal, referencing the Bombay High Court's decision in Mittal Court Premises Co-operative Society Ltd. v/s Income Tax Officer, held that non-occupancy charges, as per the society's byelaws, were for mutual benefit and thus not taxable. Consequently, the Tribunal deleted the addition of Rs. 6,04,500, directing the AO accordingly.

3. Disallowance of Deduction u/s 80P(2)(d) for Interest Earned from Co-operative Banks:
The assessee claimed a deduction of Rs. 14,88,107 u/s 80P(2)(d) for interest earned from deposits with co-operative banks. The AO allowed this deduction, but the CIT(A) disallowed it, enhancing the assessment based on the Tribunal's decision in Shiv Samrudhi Co-operative Housing Society and the Supreme Court's decision in Totagar's Co-operative Sale Society Ltd. The Tribunal, however, differentiated between the provisions of section 80P(2)(a)(i) and 80P(2)(d), noting that the latter allows deductions for interest and dividends from investments with other co-operative societies, regardless of the income head. Citing the Himachal Pradesh High Court's decision in CIT Vs. Kangra Co-operative Bank Ltd., the Tribunal allowed the deduction of Rs. 14,88,107, reversing the CIT(A)'s order and directing the AO accordingly.

4. Addition on Account of Car Parking Charges and Temporary Car Parking Charges:
The CIT(A) made an addition of Rs. 2,06,400 for car parking charges and Rs. 37,290 for temporary car parking charges, arguing these receipts were not covered under the concept of mutuality. The Tribunal did not provide a detailed analysis of this issue in the provided text, but it can be inferred that similar principles of mutuality would apply as in the other issues.

Conclusion:
The Tribunal allowed the assessee's appeal, deleting the additions on account of transfer fees and non-occupancy charges, and allowing the deduction u/s 80P(2)(d) for interest earned from co-operative banks. The AO was directed to make the necessary adjustments accordingly. The judgment emphasized the principles of mutuality and the specific provisions of section 80P(2)(d) in favor of the assessee.