2022 (10) TMI 294

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..... very 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 per .....

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..... . Noticing that the assessee had not offered such income to tax, the assessing officer called upon the assessee to explain why it should not be brought to tax, as, such income earned from banks is not covered under the principles of mutuality. In response, it was submitted by the assessee that as per the apartment buyers agreement, each allottee member has to pay certain amount as security for payment of maintenance charges. It was submitted, such security deposits received from members carry interest. It was submitted that assessee, in turn, keeps the security deposits received from members in banks and earns interest. He submitted, the interest earned from banks is passed on to the members. Therefore, there is a direct nexus between the i .....

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..... 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 obtai .....

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