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TMI Blog2024 (8) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ne head of income, set off of the said losses are allowed as provided under Chapter VI for Set off or Set off and carried forward of losses in the manner so provided under the said chapter. The assessee has declared income with respect to its activities as Housing Society for maintaining the residential society under the head Income from other sources , and there is a deficit from the said source of income to the tune of Rs. 13,86,671/- (if rental income as well interest income are not considered). The said rental income and interest income are also offered to tax by the assessee and sought to be taxed by Revenue, under the head income from other sources . We not find any bar in Section 70 and 71 as also other sections under Chapter VI dealing with Set off or Set off and carried forward for set off of the said loss against income from rent as well interest income earned by the assessee. Assessee income from collection of maintenance charges from its members is not chargeable to tax keeping in view the concept of mutuality as no body can make profits by dealing with itself and hence on the same analogy losses are to be ignored, as the said collection of maintenance charges are appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - PUNJAB HARYANA HIGH COURT] which supports the stand of the assessee. - Shri Ramit Kochar, Accountant Member For the Assessee : Shri Mohit Balani, A.R. For the Revenue : Smt. Trupti Patel, Sr. D.R. ORDER This appeal in ITA No. 177/Ahd/2023 for assessment year 2017-18 is filed by the assessee before Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad, which has arisen from the appellate order dated 17-01-2023 in DIN Order No. ITBA/NFAC/S/250/2022-23/1048850676(1) passed by ld. Commissioner of Income-tax(Appeals), NFAC, New Delhi u/s 250 of the Income-tax Act, 1961, which in turn has arisen from the assessment order dated 06-12-2019 passed by learned Assessing Officer u/s. 143(3) of the Income-tax Act, 1961(Order No. ITBA/AST/S/143(3)/2019- 20/1021837174(1)). 2. The grounds of appeal raised by the assessee in Memo of Appeal filed with the ITAT, Ahmedabad Bench, Ahmedabad, reads as under:- 1 The learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in making an addition of Rs. 14,60,191/- in relation to the expenses claimed by the Appellant against the income that it earned u/s 57 of the Act. 2 Alternatively and without prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income earned by the assessee has been shown under the head income from Other Sources u/s. 56, and as per Section 57 of the 1961 Act, deduction of only those expenses were allowable which are directly linked to the earning of the said income. The A.O. observed that in the case of the assessee no expenditure was expended wholly and exclusively for the purpose of earning such income and therefore these expenses are not allowable against the said interest income. 3.2. The A.O. issued show cause notice to the assessee why the interest income of Rs. 14,60,191/- earned from FD, rent income, interest from member, Saving Interest and Torrent interest income should not be treated as income from other sources and should not be brought to tax, without allowing any expenditure, since no expenditure claimed was incurred wholly and exclusively for earning the interest income. The assessee submitted that the similar issue arose in assessment year 2013-14, and Ld. CIT(A) has fully allowed the appeal and entire addition made by the A.O. was deleted by ld. CIT(A). The AO also observed that Hon ble CIT(A)-3, Ahmedabad has decided appeal in the favour of department on similar issue in the case of Pari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses claimed u/s. 57 of the Act by the assessee to the extent of Rs. 14,60,191/- which stood added by the AO to the total income of the assessee. 4. Aggrieved, the assessee filed first appeal with ld. CIT(A), who dismissed the appeal of the assessee by holding as under: 6.5. I have carefully considered the submissions of the appellant and also the copy of the appellate order passed by the CIT Appeals in the appellant's own case for the earlier year. At the outset, it is to be stated here that each assessment year is separate by itself and the full facts have to be analyzed before reaching conclusions. The statute provides that against the income chargeable under head 'Income from other sources the deduction on account of expenditure, not being in the nature of capital expenditure, laid out or expended wholly or exclusively for the purpose of making or earning such income is deductible. In other words, the assessee has to establish its claim of expenditure within parameters laid out or expended wholly and exclusively for the purpose of making or earning such income . It is well settled that the assessee must have incurred expenditure for the purpose of earning income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 57(iii) while computing said income -Revenue authorities rejected assessee's claim-Whether eligibility for deduction under section 57 (iii) arises only if expenditure has been laid out wholly and exclusively for purpose of earning income which is chargeable under said head 'income from other sources' Held, yes Whether since assessee failed to establish nexus between expenditure incurred under various heads including depreciation and had also failed to justify apportionment of expenditure to earning of interest income, its claim was rightly rejected by authorities below - Held, yes [Paras 32 and 35][In favour of revenue] 6.8 The facts of the appellant's case is squarely covered with the facts of the case decided by ITAT Pune Bench. Keeping in view the aforesaid decision and also the findings given in the assessment order with elaborate reasons, I hold that the appellant is not eligible to claim deductions under section 57 of the Act. Accordingly, the disallowance made in the assessment is confirmed, 7. In the result, the appeal is dismissed. 5. Still aggrieved, the assessee has now filed second appeal with the Tribunal, and the Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Hon ble Karnataka High Court in the case of Totgars Co-Operative Sale Society Ltd. v. ITO (2015) 58 taxmann.com 35(Kar.) , and it was submitted that the assessee is eligible for deduction u/s. 57 of the Act against the interest on deposit etc. received by the assessee. Thus, it was submitted that the assessee is to be allowed to set off interest/rental income and maintenance income etc. against the maintenance expenses of the society incurred under different heads. It was submitted that these maintenance expenses incurred for maintaining the society is for the benefit of the members of the society. The assessee submitted that either these expenses are to be allowed u/s 57 or Section 37 of the 1961 Act. Reference was also drawn to provisions related to set off and carried forward of losess including Section 70 and 71 of the 1961 Act The Ld. Sr. D.R. relied upon the decision of the Ld. CIT(A). 6. I have considered the contentions of both the parties and perused the material on record. I have observed that the assessee is a Co-operative Housing Society engaged in maintaining and upkeep of Residential Housing Society consisting of 80 residential flats constructed by it for its Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of flat in the society, paid parking in the society etc. from members/tenants, and the said funds so generated are utilized for meeting common maintenance expenses of the housing society. The assessee has claimed that it collected interest free deposits of Rs. 50,000/- from each of its members with a view to keep regular maintenance charges being recovered from its members on the lower side, which interest free deposits were claimed by to be invested as FDR with banks for earning of interest income to be utilized for meeting common maintenance expenses of the society. The assessee has also tenanted its common terrace area to Hutch(now Vodafone) on which rent income(net) of Rs. 10,62,390/- were received. As per audited Income and expenditure account(placed on record in file), the assessee after considering all the receipts including rental and interest income, earned net surplus of Rs. 73,520/-. The assessee claimed deduction u/s 80P(2)(c)(ii) of Rs. 50,000/- and offered balance amount of Rs. 23,520/- for taxation. If the other incomes by way of rental and interest income are excluded, there is a deficit of Rs. 13,86,671/- being excess of common expenses incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and interest income are also offered to tax by the assessee and sought to be taxed by Revenue, under the head income from other sources . I do not find any bar in Section 70 and 71 as also other sections under Chapter VI dealing with Set off or Set off and carried forward for set off of the said loss of Rs. 13,86,671/- against income from rent as well interest income earned by the assessee. It could be said that the assessee income from collection of maintenance charges from its members is not chargeable to tax keeping in view the concept of mutuality as no body can make profits by dealing with itself and hence on the same analogy losses are to be ignored, as the said collection of maintenance charges are applied towards the incurring of maintenance expenses for the upkeep/maintenance of the housing society which is for the benefit of the members of the housing society and there is a direct correlation between participant and the contributors. So far its collection from members of maintenance charges falling short of incurring of expenses for maintaining the housing society is concerned, there is a deficit of Rs. 13,86,671/- w.r.t. this source of income. In the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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