What did the Tribunal hold?

The ITAT noted that the CIT(A) had not adjudicated the issue of Rs. 13 lakhs received from non-members and also found the CIT(A)'s order regarding exhibition income unclear. Therefore, both issues were set aside and restored to the CIT(A) for fresh adjudication.

The assessee, an association, received membership fees, including Rs. 13 lakhs from non-members, which the AO treated as taxable income. The AO also disallowed certain expenses claimed against exhibition income, increasing the taxable business income.

What were the issues?

Whether membership fees from non-members are taxable and whether expenses related to exhibitions were correctly disallowed.

Confederation of Real Estate… vs CIT | ITAT Bangalore 2020

Income Tax Appellate Tribunal, BANGALORE BENCHES : “B”, BANGALORE

Before: SHRI B.R.BASKARAN & SHRI PAVAN KUMAR GADALE

For Appellant: Shri Mukesh P Shet, CA

For Respondent: Shri Priyadarshini Misra, JCIT

O R D E R

PER B.R.BASKARAN, ACCOUNTANT MEMBER :

The assessee has filed this appeal challenging the order dated 02-09-2016 passed by ld.CIT(A)-1, Bangalore and it relates to assessment year 2012-13.

The grounds of appeal urged by the assessee read as under; “1.The order passed u/s 250 of the CIT(A), Bangalore did not delete the wrong addition by the AO of the membership fees received from members Rs.13.00 lakhs treating it as collection from non-members.

Page 2 of 5 2. The ld. CIT(A), Bangalore failed to allow the claim to tax at normal rate of tax instead of MMR as assessed by the AO. 3. The ld. CIT(A), Bangalore failed to allow the claim for deduction from the income of Reality Exhibition in proportion to members contribution from the income from reality Exhibition to the extent of Rs.1,23,03,772/- on the principle of mutuality. 4. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal”.

The facts relating to the case are stated in brief. The assessee is an association of persons. It filed its return of income for the year under consideration on 04-07-2013 declaring a taxable income of Rs.29,59,962/- under the head ‘income from business’. During the course of assessment proceedings, the AO noticed that the assessee has received a sum of Rs.38.60 lakhs as membership fee and claimed the same as exempt under the “Principle of mutuality”. The AO noticed that the above said membership fee also included a sum of Rs.13.00 lakhs received from non-members. The names of such non-members are listed in the assessment order. Accordingly, the AO held that the “Principle of mutuality” will not apply to the fees received from non-members. Accordingly, the assessing officer assessed the above said amount of Rs.13.00 lakhs as income of the assessee.

The AO also noticed that the assessee has conducted exhibitions of “real estate projects”. During the year under consideration the exhibitions have been conducted in Bangalore

Page 3 of 5 and Dubai. The cumulative income (gross receipts less expenses relating to exhibitions) from both the events worked out to Rs.1,29,74,413/-. The AO noticed that the assessee has claimed expenses not relating to exhibitions also, against the above said net income received on conducting exhibitions. The AO took the view that the other expenditure claimed by the assessee actually relate to membership fee, which has been claimed as exempt under the “Principle of mutuality”. Accordingly, he held that the assessee is not entitled to claim those expenses against exhibition income. Accordingly he disallowed the claim of all other expenses and computed the business income at Rs.1,29,74,413/-, as against the amount of Rs.29,59,960/- declared by the assessee.

The assessee challenged both the additions by filing appeal before the ld.CIT(A). The ld. CIT(A) did not adjudicate the ground relating to addition of Rs.13.00 lakhs, i.e., the fees received from non-members.

With regard to the addition of Rs.1,29,74,413/-, the ld. CIT(A) adjudicated the same as under: “4.It is submitted by the appellant that in their own case (earlier name of the organization was the Karnataka Ownership Apartment Promoters Association, 4/3, Barton Centre, 84, MG Road, Bangalore-560 001) in for the assessment year 2006-07 (sic. The ITAT) has ruled in their favour on the same issue. The Hon’ble ITAT had observed that “we hold that proportionate expenditure

Page 4 of 5 for earning Rs.49,76,291/- received from non-member is to be deducted and the net amount alone should be brought to tax. Hence, ground no(iii) mentioned above is allowed”. Accordingly, the proportionate expenditure for earning, received from non-members is to be deducted and the net amount alone is to be brought to tax”.

Though, ld. CIT(A) has mentioned that the appeal has been allowed, yet the assessee has filed this appeal before the Tribunal on the grounds mentioned above.

We have heard the parties and perused the records. Admittedly, the ld. CIT(A) did not adjudicate the ground relating to the addition of Rs.13.00 lakhs pertaining to fee received from non- members. Accordingly we set aside this ground to the file of Ld CIT(A) for adjudicating the same.

With regard to the addition of Rs.1,29,74,413/- it is the submission of the ld. AR that the order passed by the ld. CIT(A) is not clear in as much as the ld.CIT(A) has given a general direction without having regard to the factual aspects of ‘receipts and expenditure’ relating to exhibitions presented before him. It is the plea of the ld. AR that a clear cut direction from ld. CIT(A) in this regard would be helpful to both the assessee and the AO.

We have heard the ld. DR on this issue. Having regard to the submissions made by ld. AR, we are of the view that this issue is also required to be restored to the file of the ld. CIT(A) for Page 5 of 5 adjudicating it afresh after affording adequate opportunity of being heard to the assessee. We therefore, set aside the order passed by the ld. CIT(A) on this issue and restore the same to the file of ld. CIT(A) for adjudicating it afresh.

10.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced on

CONFEDERATION OF REAL ESTATE DEVELOPERS ASSOCIATION,BANGALORE vs. COMMISSIONER OF INCOME TAX, BANGALORE

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