Loading judgment…
Facts
The assessee, a housing cooperative society, appealed against an order that treated surplus income of Rs. 10,18,128 as business income and disallowed a deduction of Rs. 5,50,370. The assessee argued for the principle of mutuality.
Held
The Tribunal noted that the ground regarding the principle of mutuality was raised for the first time and not considered by the lower authorities. The Tribunal restored this issue to the CIT(A) for adjudication.
Key Issues
Whether the surplus income earned from members of a housing cooperative society is taxable as business income, or if the principle of mutuality applies.
Sections Cited
250, 143(3), 80P, 80P(2)(d)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
This appeal filed by the assessee pertaining to the assessment year 2015-16 is directed against the order dated 24.02.2025 of the National Faceless Appeal Centre (NFAC), Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which inturn is arising out of the Assessment Order dated 30.06.2017 passed u/s.143(3) of the Act.
Assessee has raised following grounds of appeal :
1. On the facts and in the circumstances of case and law, lower authorities erred in treating the surplus arising out of income expenditure account, a sum of Rs. 10,18,128 as business income of the assesse society and further erred in not applying the principal of mutuality without appreciating the fact that appellant society is housing co-operative society.
2. On the facts and in the circumstances of case and law, lower authorities have erred in denying the deduction under section 80P (2)(d) for sum of Rs. 5,50,370/- without appreciating the fact that said sum is Regency Meadows Coop. Housing Limited received as an interest from other co-operative societies and appellant society is entitled for the deduction under section 80(P)(2)(d) of the IT Act 1961. Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.”
3. At the outset, Ld. Counsel for the assessee requested for not pressing Ground No.2 as the necessary relief has already been granted by ld.CIT(A) and this ground has been raised inadvertently. Accordingly, we dismiss this ground as ‘Not pressed’ and also held to be infructuous.
4. Apropos to Ground No.1, ld. Counsel for the assessee submitted that this is a legal issue based on the Principle of Mutuality for giving the benefit of mutuality against the total income of Rs.10,18,128/- earned from the Members of the society. He submitted that apart from the interest income, assessee receives the amount from Members towards Annual Maintenance Charges, Parking fees etc. and the expenditures are incurred for the Members towards Electricity, Security services, Garden maintenance, Lift maintenance, Gymnasium and Club House Expenses etc and therefore in light of judgment of Hon'ble Supreme Court in the case of ITO Vs. Venkatesh Premises Cooperative Society Ltd. (2018) 91 taxmann.com 137 (SC) assessee deserves relief of Rs.10,18,128/- being the income earned from the activity carried out by the assessee for its Members on the Principle of Mutuality.
On the other hand, Ld. Departmental Representative submitted that this is the second round of proceedings and stated that this issue has been raised for the first time before this Tribunal.
We have heard the rival contentions and perused the record placed before us. We observe that the assessee is a Cooperative Regency Meadows Coop. Housing Limited Housing Society and declared gross total income of Rs.15,65,984/- in the e-return for A.Y. 2015-16 filed on 10.02.2016 and after claiming deduction u/s.80P of the Act has shown total income of Rs.65,890/-. After the case been selected for Limited Scrutiny under CASS, assessment proceedings were carried out and ld. AO granted relief u/s.80P(2)(c) of the Act at only Rs.50,000/- and assessed the income at Rs.15,18,450/-. Thereafter, assessee preferred appeal before ld.CIT(A) but the only issue raised was against the disallowance of interest income of Rs.5,50,370/- which was claimed to have been earned from deposits with Cooperative Banks/Societies which is eligible for deduction u/s.80P(2)(d) of the Act. Ld. CIT(A) allowed the claim of deduction u/s.80P(2)(d) of the Act. Before us, Ld. Counsel for the assessee has raised a new legal ground on the Principle of Mutuality stating that the gross receipts of the society are from its Members and to the extent of the activity carried out for its Members and having incurred the expenditure for Members thereof, the surplus, if any, need not be taxed in view of Principle of Mutuality and in support placed reliance on the decision of Hon'ble Supreme Court in the case of Venkatesh Premises Cooperative Society Ltd. (supra).
It is not in dispute that assessee has raised this ground for the first time. It is also observed that in the Income and Expenditure Account assessee has made a provision of income-tax at Rs.3,25,000/- which shows that the present claim before us regarding the Principle of Mutuality was never in the mind of the assessee. Even in the return of income, deduction has been claimed u/s.80P but then ld. AO has curtailed it to deduction u/s.80P(2)(c) and further ld.CIT(A) gave benefit of deduction u/s.80P(2)(d). Since this is a legal ground raised for the first time and goes to the root cause of the issue and facts already available Regency Meadows Coop. Housing Limited on record, we admit the legal ground but since ld.CIT(A) had no occasion to deal with this legal issue, the same needs to be examined by ld.CIT(A) in the light of the facts of the case with regard to the receipt from the Members and the expenditure incurred against the same. We therefore restore this legal issue to the file of ld.CIT(A) for necessary adjudication and if required ld.CIT(A) may call for a remand report from the Jurisdictional Assessing Officer. Needless to say that ld.CIT(A) shall afford reasonable opportunity of hearing to the assessee and then decide in accordance with law. Ground No.1 raised by the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on this 16th day of June, 2025.