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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee which is directed against the order of ld. CIT(A)-3, Bangalore dated 30.09.2016 for Assessment Year 2012-13.
The grounds raised
by the assessee are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.
2. The finding of the learned Commissioner of Income Tax (Appeals) that the appellant has not commenced its real estate activities is perverse as being contrary to materials on records.
3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the appellant had not set up its business.
Page 2 of 4 4. That the learned assessing officer erred in law and on facts in holding that the appellant is not entitled to deduction of expenditure incurred on the ground that such expenses are capital in nature.
5. That the learned assessing officer ought to have determined the loss under the head "Profits and gains of business or profession" at Rs. 15,25,829/- and set it off against other income.
That the learned assessing officer erred in law and on facts in not allowing the deduction u/s 80P(2)(c) (ii) of the Act. Each of the above grounds is without prejudice to one another and the appellant craves leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or otherwise modify one or more of the above grounds either before or at the time of hearing of this appeal.”
It was submitted by ld. AR of assessee that as per the judgment of Hon’ble Bombay High court rendered in the case of CIT Vs. Jai Hind CHS Ltd. as reported in 349 ITR 541 (Bom), it was held that in view of this fact that consideration has flowed from the members of the Society to the Society which is a Co-operative housing society as consideration for allowing the use of extra FSI, the principle of mutuality would apply. He submitted that in the present case, the dispute is regarding expenses claimed by the assessee including administrative expenses in respect of office maintenance and managing day-to- day affairs of the society and main object of the society is to provide housing sites to its eligible members and this is the opinion of the AO that the principle of mutuality for carrying out its business activities is applicable and therefore, the assessee society is operating on a no profit and no loss basis and it is admitted fact that in the present year, the assessee has not declared any receipt from the sale of the sites in the present year. He submitted that under these facts, this judgment of Hon’ble Bombay High Court is applicable and the AO’s objection is correct that the expenses are required to be capitalized and the same cannot be allowed in the present year as deduction. The ld. DR of revenue supported the orders of authorities below.
We have considered the rival submissions. In the present case, the dispute is regarding the allowability of various administrative expenses incurred during the present year including salary to staff, rent, electricity and Printing and Page 3 of 4 Stationery etc. As per the claim of the assessee before the AO & CIT (A), these expenses are incurred only for office maintenance and managing the day to day affairs of the society and since these expenses are not directly attributable to the project, it should be charged to the P & L account for the period in which the expenditure is incurred. As per the AO, the expenses are not allowable in the present year and the same is to be capitalized. As per the judgment of Hon’ble Bombay High Court rendered in the case of CIT Vs. Jai Hind CHS Ltd. (supra), the consideration flowing from the members of the society to the society which is a co-operative housing society is governed by principle of mutuality. In the present case, this is not in dispute that the assessee is in business of development of property for its members and therefore, whatever expenses are incurred on this account has be adjusted against the realization on sale of those housing property to the members and there cannot be any income or loss on this account because both the expenses and receipts are governed by the principal of mutuality. Hence we hold that the expenses claimed by the assessee in the present year is not allowable in the present year as revenue expenditure and the same should be capitalized and should be adjusted against the receipt from the members of the assessee society in the year when such receipts are there.
In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on the date mentioned on the caption page.