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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: DR. MANISH BORAD
order
: December 19th, 2022 ORDER
Per Manish Borad, Accountant Member:
The captioned appeals filed by the assessee pertaining to the Assessment Years (in short “AY”) 2014-15 & 2015-16 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short ld. “CIT(A)”] dated 28.07.2022.
Registry has informed that the appeals are time barred by 4 days. At the outset, ld. Counsel for the assessee submitted explaining the reasons for the delay in filing the appeals. After perusing the same, I find force in the reasons mentioned therein I.T.A. Nos.: 566 & 567/Kol/2022 Assessment Years: 2014-15 & 2015-16 Sunny Park Apartment Owners Association. and am satisfied that the assessee was prevented for reasonable cause in filing the instant appeals within statutory time limit. I, therefore, condone the delay and admit the appeals for adjudication. 3. The assessee is in appeal before the Tribunal raising the following grounds of appeal: Assessment Year 2014-15: “For that the learned Commissioner of Income Tax (Appeals) erred in Rs. 93,161/- to the income of the assessee by adding the interest earned from security deposit with Calcutta Electric Supply Corporation (CESC); such deposit was made by the assessee in conformity with the rules of the CESC for supply of electricity to Sunny Park Apartment; this deposit was not made with a view to deployment of idle funds; it was made in pursuance of one of the objects of the society and the interest earned was merely incidental; moreover, such interest was not received by the assessee but was adjusted with the amount due by the assessee for the payment of electricity charges; the income not being income earned from investment of surplus funds ought to be regarded as income arising in the course of fulfilment of the objects of the assessee and thus ought not to be treated as income from other sources and charged to tax.” Assessment Year 2015-16: “For that the learned Commissioner of Income Tax (Appeals) erred in Rs. 95,556/- to the income of the assessee by adding the interest earned from security deposit with Calcutta Electric Supply Corporation (CESC); such deposit was made by the assessee in conformity with the rules of the CESC for supply of electricity to Sunny Park Apartment; this deposit was not made with a view to deployment of idle funds; it was made in pursuance of one of the objects of the society and the interest earned was merely incidental; moreover, such interest was not received by the assessee but was adjusted with the amount due by the assessee for the payment of electricity charges; the income not being income earned from investment of surplus funds ought to be regarded as income arising in the course of fulfilment of the objects of the assessee and thus ought not to be treated as income from other sources and charged to tax.” .: 566 & 567/Kol/2022 Assessment Years: 2014-15 & 2015-16 Sunny Park Apartment Owners Association.
4. On perusal of the grounds, we notice that the common issue raised is that “whether principle of mutuality” applies on the interest earned on deposits of Rs. 93,161/- & Rs. 95,556/- with The Calcutta Electric Supply Corporation Limited (in short “CESC Ltd.”) for AYs 2014-15 & 2015-16 respectfully made for power connection.
5. At the outset, ld. Counsel for the assessee submitted that the assessee being an association for the residents of Sunny Park Apartment had to make deposit with CESC Ltd. for the purpose of power connection and since this deposit was necessary to carry out the object of the association, the principle of mutuality should be applied on the said sum.
6. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities.
7. I have heard rival contentions and perused the records placed before me. The issue in challenge before me relates to interest earned on deposit with CESC Ltd. of Rs. 93,161/- & Rs. 95,556/- for AYs 2014-15 & 2015-16 respectfully. Ld. Counsel for the assessee contended that it was mandatory for the association to deposit with CESC Ltd. for supply of power and therefore, principle of mutuality should be applied. On the other hand, we notice that ld. CIT(A) did not accept this contention holding that on the alleged sum, principle of mutuality will not apply and it is taxable under the head “income from other sources”.
8. I, however, on going through the submissions made by the ld. Counsel for the assessee as well as the decision of Coordinate Bench of Bangalore ITAT in the case of Manipal Centre Apartment Page 3 of 5 .: 566 & 567/Kol/2022 Assessment Years: 2014-15 & 2015-16 Sunny Park Apartment Owners Association. Owners Association vs. ACIT reported in [2014] 47 taxmann.com 308 (Bangalore-Trib.), am inclined to hold that as the assessee, an association of owners of Sunny Park Apartment is required to provide facilities and other amenities to the owners/occupants of the apartments and therefore, is required to make deposit with CESC Ltd. for availing electricity service connection. The interest earned on such deposit has a clear and direct nexus to the expenditure incurred in the form of electricity consumption charges and therefore, the same is allowable for set off against the expenditure and the principle of mutuality does apply on the alleged sum of interest earned on deposit with CESC Ltd.
9. Therefore, respectfully following the decision of the Coordinate Bench of Bangalore ITAT in the case of Manipal Centre Apartment Owners Association (supra) and considering the facts of the case, I am inclined to hold in favour of the assessee. Thus, the finding of ld. CIT(A) is reversed and the alleged addition of Rs. 93,161/- & Rs. 95,556/- for AYs 2014-15 & 2015-16 is deleted. Hence, grounds of appeal raised by the assessee are allowed.
10. In the result, both the appeals filed by the assessee are allowed. Kolkata, the 19th December, 2022. Sd/- [Manish Borad] Accountant Member Dated: 19.12.2022 Bidhan (P.S.) .: 566 & 567/Kol/2022 Assessment Years: 2014-15 & 2015-16 Sunny Park Apartment Owners Association. Copy of the order forwarded to:
1. Sunny Park Apartment Owners Association, 6, Sunny Park, Sunny Park Apartment Owners Association, West Bengal- 700 019.
2. ITO, Ward-30(3), Kolkata. 3. CIT(A)-National Faceless Appeal Centre (NFAC), Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.