TMI Blog2018 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... after deducting tax at source. Thus, it is not a case of exemption on the principle of mutuality. Such interest paid by the assessee society is taxable in the hands of the Apartment owner. Interest expenditure is to be set off against the interest income. As regards the AO’s contention that interest paid to member is not eligible deduction in the case of AOP under Section 40 (ba), we have perused the said Section. This clause excludes registered society from its applicability. Accordingly, this clause will not be applicable to the assessee society. Moreover, as rightly contended by the learned AR Section 40 (ba) is applicable while computing business income. This clause is not applicable while computing income from other sources. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in not adjudicating the alternative contention of the assessee that even if the interest income is considered taxable, then the interest paid back to the members is to be allowed as deduction under section 57(iii) of the Act. 2. The brief facts of case are that the assessee filed return of income on 29.09.2016 declaring an income of ₹ 10,91,660/- . The case was selected for scrutiny and statutory notices were issued to the assessee. The assessee is a Resident Welfare Association (RWA) and registered as AOP under Income Tax Act Society is collecting the Maintenance Charges from his member and utilizing the amount for society expenses like security Expenses, Housekeeping Expense, Horticulture Expenses and Others expenses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which the society earns interest. The interest so earned is utilized to make payment of interest on the security deposit to the flat owners. 5. During the year under consideration the society earned interest from banks and such interest was paid to the flat owners after deduction tax at source. The details of interest received as under :- Belaire Condominium Association IBMS interest received from bank for F.Y. 2013-14 Interest Received during the F.Y. 2013-14 From ICICI Bank on FD 61,15,418/- From Kotak Mah. Bank on FD 99,83,136/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR submitted that the addition made by the assessing officer and sustained by the CIT(A) is unjustified. He drew our attention to the paper book page no. 42 which is Apartment buyers agreement Under clause h it has been provided that each allottee shall pay an amount as security for the payment of the maintenance charges. Such security shall carry interest as per applicable rates on fixed deposit accepted by the State Bank of India. On the basis of this, it was further contended that the security deposit is a liability and it carries obligation to pay interest on such deposit liability and it carries an obligation to pay interest on such deposit and assessee society has earned interest on this security deposit kept with the Bank. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book page 2 and paid taxes thereon. 9. On the other hand the ld. DR relied on the order of the lower authorities and further submitted that the assessee society is not entitled to claim deduction of the interest expenditure in view of the judgment of the Supreme Court in the case of Bangalore Club ( Supra). Further, interest expenditure cannot be allowed as the same has not been incurred for earning the interest income. 10. We have considered the rival submission and perused the order passed by the lower authorities. There is no dispute to the fact that assessee is a registered society form with the basic object to provide for maintenance and repair of common arrears and facilities of the building to its members. There is no dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est expenditure has not been incurred to earn interest income is incorrect. The assessee society has paid interest each one after deducting tax at source. Thus, it is not a case of exemption on the principle of mutuality. Such interest paid by the assessee society is taxable in the hands of the Apartment owner. In view of these facts, we are of the view that interest expenditure is to be set off against the interest income. As regards the AO s contention that interest paid to member is not eligible deduction in the case of AOP under Section 40 (ba), we have perused the said Section. This clause excludes registered society from its applicability. Accordingly, this clause will not be applicable to the assessee society. Moreover, as rightly co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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