The Income Tax Appellate Tribunal, Ahmedabad held that the building association can claim expenditure against interest income.
The bench found that objectives of the association are to look after the member’s common property and to organize social and cultural activities.
The tribunal noted that the assessee has sources of income by various ways like, maintenance, contribution from members, interest on Fixed Deposits, Interest on savings bank account, Rental income, lift charges etc.
The bench said that these incomes are being utilized for the purpose of common welfare of the association and as per the objectives of the association for payment of water expenses, consultancy fee, repairs and maintenance, generator repairs, foundation expenses, general meeting expenses, telephone expenses, security expenses, salary expenses, printing and stationary expenses.Therefore, all these expenses are done by the assessee- association out of its income, as per the objectives mentioned in the memorandum of association. Nobody is taking personal benefit out of association income.
Therefore, based on this factual position, the bench noted that assessee-association is a non-trading in nature and running on mutual concept.
It was noted that the assessing officer has misinterpreted the facts of the assessee association. It is settled principle of law that no man can make a profit out of himself.
It was observed that the assessee- association did not claim any expenditure for earning interest income from fixed deposits and saving bank account rather the assessee-association applied its interest income for the purposes which were mentioned in object clause of its Memorandum of Association.
The tribunal noted that since it is a non-trading association and running on mutual concept, hence the assessee is entitled to claim the expenses against the interest income, therefore based on the facts and circumstances, as narrated above, the tribunal deleted the addition for both the assessment years.
Facts
The main grievance of the assessee is that CIT(A) has erred in facts and in law in disallowing expenditure claimed u/s 57(iii) of the Income Tax Act, 1961, against interest on fixed deposits being assessed under income from other sources.
The assessee has incurred expenses based on mutual concept and said expenses has indirect nexus and are for maintaining and preserving the source as well as assets of the assessee society/Association.
Case Information
Case Name: Dhananjay Satellite Members Association v/s The ITO
Judicial Level & Location : ITAT AHMEDABAD
Case Number : ITA Nos.12/AHD/2019& 1503/AHD/2019
Date of Decision : 22/04/2022
Decision in favor of: Appellant
Members: Dr. Arjun Lal Saini, Accountant Member And T.R. Senthil Kumar, Judicial Member
Counsel for Petitioner : Shri A. P. Nanavaty, AR
Counsel for Respondent : Shri R. R. Makwana, Sr. DR