RAJMATA JIJABAI CO-OP HSG. SOC. LTD,MUMBAI vs. ITO WD 15(1)(3), MUMBAI

Since all these appeals pertain to the same assessee involving common issues and are arising out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. However, in order to understand the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the appeal in ITA no. 6615/Mum./2011, for assessment year 2004–05.

Revised grounds of appeal raised by the assessee are as under:–

Assessee has also raised following additional grounds of appeal.

As could be seen in grounds no.1 and 2 of additional grounds, assessee has raised a legal issue challenging the validity of proceedings initiated under section 147 of the Act. Grounds no.3 and 4 of the additional grounds are on the issue of the proper head under which the income received from installation of radio equipment is to be assessed and if it is to be assessed under income from house property, whether the statutory deduction while computing income under such head should be allowed to the assessee. As the issues raised in the additional ground can be decided on the basis of material already on record and do not require investigation into new facts, we are inclined

Grounds no.1 and 2 of the additional ground are in relation to validity of initiation of assessment under section 147 of the Act.

Brief facts are, assessee a co–operative society filed its return of income on 13th September 2004, for the impugned assessment year declaring total income of ` 88,643. It is admitted fact, the return of income of the assessee was processed under section 143(1) and there was no regular assessment. Subsequently, the Assessing Officer being of the view that assessee has claimed deduction of certain amounts on the principles of mutuality which according to the Assessing Officer are not allowable re–opened the assessment under section 147 of the Act. The details of such income are as under:–

In response to query raised by the Assessing Officer during the assessment proceedings, it was submitted by the assessee that the amounts were received from the members, hence, not taxable. The Assessing Officer, however, was not convinced with the explanation of the assessee. He observed, for applying the principles of mutuality a

The learned Commissioner (Appeals), after considering the submissions of the assessee held that as far as amount of ` 10,71,400 received from telecom companies for installation of the radio equipment, the same has to be treated as income from house property. As far as receipts from car parking charges and transfer fees are concerned, the learned Commissioner (Appeals) observing that such receipts are covered under the concept of mutuality directed the Assessing Officer to delete such addition. As far as the interest income is concerned, the learned Commissioner (Appeals) upheld the order of the Assessing Officer that they have to be assessed under the head “Income From Other Sources”. The learned Commissioner (Appeals) also deleted the additions made on account of disallowance of provisions and bad debt written–off.

The learned Authorised Representative challenging the validity of proceedings initiated under section 147 of the Act submitted, the Assessing Officer has re–opened the assessment for the reason that certain income to be exempt under section 80P by applying the principles of mutuality are actually taxable. He submitted, while computing income of the assessee, the Assessing Officer has not

The learned Departmental Representative on the other hand submitted that the Assessing Officer has also added incomes escapement of which resulted in re–opening of assessment under section 147 of the Act. Therefore, the allegation of the assessee that the Assessing Officer has not assessed those income on the basis of which assessment was re–opened is without any basis.

We have considered the submissions of the parties and perused the material available on record. As could be seen from the assessment order as well as other materials on record, during the relevant previous year, assessee had received the following amounts. “Table–A” 1. BPL ` 4,38,900 2. MTNL ` 3,60,000 3. HUGHES (TATA TELE) ` 2,72,500 ` 10,71,400

It is the claim of the assessee that the amount received from leasing out space for installation of radio equipment at ` 10,71,400 was offered as income. However, amount received towards car parking charges, interest on dues, transfer fees, building repair funds, etc., were not offered as income as they are covered under the principles of mutuality. However, it is evident from the assessment order, the Assessing Officer rejecting the aforesaid claim of the assessee, had treated all these receipts as income of the assessee and added back the amount while computing the total income along with other additions made separately. Thus, the allegation of the assessee that the Assessing Officer has not added the escaped income for assessing which the assessment was re–opened, is factual incorrect and is not borne out from the materials on record. Therefore, we are unable to accept the submissions of the learned Authorised Representative. Accordingly, additional grounds no.1 and 2 are dismissed.

The issue raised in additional grounds no.3 and 4 corresponding to ground no.1 of revised ground are on the issue of proper head under which the income of ` 10,71,400 is to be assessed and

Learned Authorised Representative submitted, in assessee’s own case for assessment year 2007–08, the Tribunal vide order dated 19th March 2014, in ITA no.52/Mum./2013, had upheld the order of the learned Commissioner (Appeals) in directing the Assessing Officer to treat the income received from telecom companies for installation of their equipment in assessee’s premise as income from house property. He submitted, if the income is to be assessed under the head “Income From House Property”, the deductions allowable under sections 23 and 24 of the Act should be allowed to the assessee.

Learned Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee has

In ground no.2 of the revised grounds, assessee has challenged the disallowance of deduction claimed on the principles of mutuality towards interest from members amounting to ` 24,128.

Learned Authorised Representative submitted, these interests were earned from members of the society, hence, are covered under the principles of mutuality.

Learned Departmental Representative on the other hand relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).

Having heard the parties, we are of the view, if the department is not disputing the fact that the interest of ` 24,128 is earned from members of the society, then it cannot be treated as income of the assessee, since, it is covered under the principles of mutuality. Accordingly, we delete the addition. Ground no.2, of the revised grounds is allowed.

In grounds no.3 and 4 of the revised grounds, assessee has challenged the addition of interest received on fixed deposit in banks and interest on savings bank account amounting to ` 68,356 and ` 12,080 respectively.

Learned Authorised Representative submitted before us as the assessee’s case is covered under section 80P(2)(d), the interest income is not taxable.

Learned Departmental Representative on the other hand supported the observations of the Assessing Officer and the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. The specific submissions of the learned Authorised Representative before us is, the assessee’s case is covered by the provisions of section 80P(2)(d) of the Act. On a perusal of the aforesaid provisions, it is evident that only interest or dividend earned by co–operative society from its investments in any other co– operative society is exempt. When a query was made to the learned Authorised Representative, whether the investments on which the assessee had earned interest income are with another co–operative society, learned Authorised Representative fairly answered in the negative. Thus, in our view, the provisions of section 80P(2)(d) are not applicable to the assessee. It is necessary to observe the Assessing Officer has allowed deduction to the assessee under section 80P(2)(c) for an amount of ` 50,000 as is allowable to the assessee. Therefore, in our view, the grievance of the assessee does not survive. Accordingly, grounds no.3 and 4 of the revised grounds are dismissed.

In the result, assessee’s appeal is partly allowed.

Grounds no.1 and 2 of additional ground is identical to additional grounds no.1 and 2 of ITA no.6615/Mum./2011. In view of our decision contained in Para–14, we dismiss these grounds.

Ground no.3 and 4 of additional ground corresponding to ground no.1 of revised ground are in respect of proper head under which the receipts from leasing out space to telecom companies for installing their equipment is to be assessed. These grounds are identical to additional ground no.3 and 4 and revised ground no.1 of ITA no.6615/Mum./2011. In view of our decision in Para–18 of the order, we direct the Assessing Officer to compute the income from radio equipment charges under the head “Income From House Property” and thereafter allowed deduction in terms of section 23 and 24 of the Act,

Ground no.2, is on interest due received from members.

This ground is similar to revised ground no.2 of ITA no.6615/Mum./2011. Consistent with the view taken in Para–22, we allow this ground.

Ground no.3, assessee has challenged addition of ` 1,200 received towards misc. income.

We have considered the submissions of the parties and perused the material available on record. As could be seen from the income and expenditure account of the year under consideration, the assessee had received misc. income of ` 1,200 from its members. The Assessing Officer has added it to the income of the assessee by rejecting claim of mutuality. The learned Commissioner (Appeals) has also confirmed the addition. In our view, when there is no dispute to the fact that the assessee had received this misc. income from its members it has to be held that it is covered under principles of mutuality, hence, not taxable. Ground no.3 is allowed.

Grounds no.4 and 5 of revised ground are similar to grounds no.3 and 4 of revised ground of ITA no.6615/Mum./2011. In terms of our findings in Para–26 of this order, we dismiss these grounds.

In the result, appeal is partly allowed.

Additional grounds no.1 and 2 are similar to additional grounds no.1 and 2 of ITA no.6615/Mum./2011. Following our decision in Para– 14 in ITA no.6615/Mum./2011, we dismiss these grounds.

Additional grounds no.3 and 4 corresponding to revised ground no.1 is in relation to income received from installation of radio

In the result, appeal stands partly allowed.

Additional grounds no.1 and 2 are similar to additional grounds no.1 and 2 of ITA no.6615/Mum./2011. Consistent with our view expressed in Para–14 of this order, we dismiss these grounds.

Additional grounds no.3 and 4 corresponding to revised ground no.1 are identical to additional grounds no.3 and 4 and revised ground no.1 of ITA no.6615/Mum./2011. Consistent with the view expressed in Para–14, we direct the Assessing Officer to compute the income from radio equipment charges under the head “House Property” and thereafter allow deduction under sections 23 and 24 of the Act. These grounds are allowed.

Revised ground no.2 is similar to revised grounds no.3 and 4 of ITA no.6615/Mum./2011. Following our decision in Para–26 of this order, we dismiss this ground.

In the result, appeal stands partly allowed. Order pronounced in the open Court on 16.12.2016