M/S. ELDECO EDEN PARK APARTMENTS OWNERS WELFARE & MAINTENANCE ASSOCIATION,LUCKNOW vs. INCOME TAX OFFICER, WARD-3(5), LUCKNOW

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ITA 196/LKW/2020Status: DisposedITAT Lucknow07 July 2021AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal disagreed with the CIT(A)'s view on fresh claims before appellate authorities, referencing the Allahabad High Court's decision. However, as the mutuality issue was not adjudicated by the AO, the matter was remitted back for readjudication.

What were the facts?

The assessee, an apartment owners' association, claimed its income was not taxable due to the principle of mutuality. The Assessing Officer and CIT(A) rejected this claim, with the latter citing that fresh claims could only be made via revised returns.

What were the issues?

Whether the principle of mutuality applies to the assessee's income, and if appellate authorities can entertain fresh claims not made before the AO.

Which sections of the Income-tax Act were involved?

Section 2(24),Section 10(23C),Section 40(a)(iib)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘SMC’ LUCKNOW

Before: SHRI T.S. KAPOOR

For Appellant: Shri Subham Rastogi, CA
For Respondent: Shri Harish Gidwani, DR
Hearing: 03/06/2021Pronounced: 07/07/2021

Appellant by Shri Subham Rastogi, CA Respondent by Shri Harish Gidwani, DR Date of hearing 03/06/2021 Date of pronouncement 07/07/2021 O R D E R These are four appeals filed by the assessee against the separate order of ld. CIT(A) all dated 20.02.2020.

2.

At the outset, the ld.AR of the assessee invited my attention to petition for condonation of delay in filing the appeals and it was submitted that there is a slight delay of twenty two days in three appeals and thirty days delay in one appeal in ITA No. 202/Lkw/2020. It was submitted that due to lockdown in the country the delay has occurred as it was not possible for the assessee to visit the office of the counsel for preparation and submissions of appeals and further it was submitted that the office of the counsel was also closed, therefore, it was prayed that the delay in filing the appeals be condoned.

3.

The ld. DR of the Revenue had no objection to condonation of delay. Findings the reasons for delay in filing of appeals being beyond the control of assessee the delay in filing the appeals was condoned and the ld. AR was directed to proceed with his arguments.

4. The ld. AR, at the outset submitted that the assessee is registered under the Societies Registration Act and it is the association of Apartment’s owners of the buildings Eldeco Park Estate and its object are to provide for maintenance and repairs and replacement of common areas and facilities by contribution from the apartments owner and therefore there is no element of profit in the activities of the society and in fact principle of mutuality is applicable and hence the income of assessee is not taxable. It was submitted that due to improper advice the assessee had filed the returns declaring the surplus as taxable income and the Assessing Officer during the course of assessment proceedings also made certain disallowances on account of non deduction of TDS. The ld. AR submitted that once the principle of mutuality is applicable to the society, the assessee was not required to deduct tax at source as deduction of tax at source is applicable to the computation of income under the head profits and income from business. It was submitted that the issue of mutuality was taken before the ld. CIT(A) who did not allow the claim of assessee for mutuality by holding that Hon'ble Apex Court in the case of Goetze (India) Ltd. vs. CIT, (2006) 284 ITR 323 (SC) has held that no fresh claim can be made otherwise than through a revised return of income. The ld. AR of the assessee submitted that ld. CIT(A) has failed to appreciate that the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (Supra) deals with the powers of the Assessing Officer and nowhere it commented regarding the power of appellate authorities and reliance was placed on the judgment of the Hon'ble Allahabad High Court in the case of Smt. Raj Rani Gulati vs. Commissioner of Income Tax, 346 ITR 543 (Alld), wherein it has been held that appellate authorities can entertain a fresh claim. Therefore, it was prayed that the income of the assessee should be assessed as exempt keeping in view the concept of mutuality. It was further argued that the disallowances made by Assessing Officer and confirmed by the ld. CIT(A) on account of non deduction of TDS are also not justified as the assessee is not doing any business. Without prejudice it was argued that even if the disallowances are sustained the resulting increase in income will again result into exempt income being the total income exempt under the concept of mutuality.

4.

The ld. DR, on the other hand, heavily placed reliance on the orders of the authorities below and submitted that the concept of mutuality has not been examined by the Assessing Officer and therefore the ld. CIT(A) has rightly rejected the claim of the assessee.

5.

I have heard the rival submissions and have gone through the material placed on record. I find that the assessee had filed returns and has declared the surplus as taxable income in the income tax returns and during the assessment proceedings also the assessee did not raise the issue of concept of mutuality. The ld. CIT(A) has rejected this concept of mutuality by holding that fresh claim if any could have been made only through a revised return. We are not in agreement with the findings of ld. CIT(A) as the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT (Supra) was only with respect to fresh claim before the Assessing Officer and not before any appellate authority. The Hon'ble Allahabad High Court in the case of Smt. Raj Rani Gulati (Supra) after considering the judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (Supra) has held that failure to advert to the claim in the original return or the revised return could not restrain the appellate authorities of their power to consider the claim if relevant material was available on record and was otherwise tenable in law. However, since the assessee has raised a fundamental issue of concept of mutuality which is a mixed question of fact and law and which has not been adjudicated by the Assessing Officer, I deem it appropriate to remit the issue back to the office of Assessing Officer for readjudication, keeping in view the arguments of the assessee that its income is exempt due to concept of mutuality. The assessee will be at liberty to file any other material or documentary evidences to claim that the principle of mutuality is applicable to the society. The Assessing Officer will also readjudicate the issue of disallowances keeping in view his decision on the concept of mutuality and keeping in view the relevant provisions of law as are applicable to the assessee. In view of the above, the appeals filed by the assessee are allowed for statistical purposes.

6.

In the result, all the appeals filed by the assessee are allowed for statistical purposes.

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