M/S. ANKUR GRAND OWNERS ASSOCIATION,CHENNAI vs. ITO, NCW-10(1), CHENNAI

The assessee has raised the following grounds of appeal:- (a) The Order of the Learned Addl. /Joint Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case. (b) For that the Learned Additional/Joint commissioner of Income Tax (Appeals) has erred in law and on facts by failing to apply

The brief facts of the case are that the assessee is a flat residents welfare association. The assessee filed its return of Income for the A.Y. 2017- 18 on 03.11.2017 admitting Nil Total Income. The return of income was processed u/s. 143(1) of the Act. Subsequently the case was selected for limited scrutiny under CASS for verification of issue (i) Deduction against income from other sources and statutory notices were issued. The assessee filed the Income and Expenditure account for the financial year 2016-17 of the association showing the net loss of Rs.3,48,510/-, comprising of income of Rs.7,88,673/- on account of interest earned. However, the AO passed an order u/s.143(3) of the Act dated 17.10.2019 by bringing interest income of Rs.7,88,673/- to tax under ‘Income from other Sources’ by rejecting the expenditure claimed against such receipts u/s.57(iii) of the Act as the concept of mutuality.

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC.

The ld.AR for the assessee submitted that assessee has not claimed any deductions on account of concept of mutuality and the total collections of the association during the year was Rs.22,95,973/- against a total expenditure

Per contra the ld.DR supported the orders of the lower authorities.

We have heard both the parties perused the material available on record, gone through the orders of the lower authorities. Admittedly the assessee is a Flat Owners Association registered under Tamil Nadu Societies Registration Act 1975. The assessee has filed its return of income regularly since its inception. We find that the assessee has incurred net loss during the year to tune of Rs.3,48,510/- after considering the interest receipt from the bank to the tune of Rs.7,88,673/-. Further, the association has collected the contributions from the members to the tune of Rs.15,07,300/- along with the interest income of Rs.7,88,673/- totaling to Rs.22,95,973/- and incurred total expenditure of Rs.26,44,483/- resulting in net loss of Rs.3,48,510/- during the assessment year 2017-18. Since the assessee has not earned any surplus during the impugned assessment year even after considering the interest receipt of Rs.7,88,673/-, we are of the view that the lower authorities have erred considering the interest income separately as income from other

In the result, the appeal filed by the assessee is allowed.