IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A.No.6361/Del/2015 A.Y. 2010-11 SWARN JAYANTI RAIL NAGAR FLAT JCIT, OWNERS ASSOCIATION VS. RANGE-1, A-1, SECTOR-50, AAYAKAR BHAWAN, NOIDA-201 307 A-2D, SECTOR-24, (PAN: AAMAS7936C) NOIDA (APPELLANT) (RESPONDENT) Assessee by : Sh. Arun Kundra, Adv. Department by : Sh. F.R. Meena, Sr. DR ORDER This appeal by Assessee is directed against Order dated 24.11.2015 of Ld. CIT(A)-I, New Delhi pertaining to assessment year 2010-11 on following grounds:- 1. Under facts and circumstances of case, and in law, learned Assessing Officer and also learned Commissioner of Income Tax (Appeals) -I committed injustice and grossly erred in disallowing exemption to Assessee in respect of not applying and adhering to following facts and principles: (i) Exemption uls 11 by virtue of registration u/s 12AA granted by CIT, Ghaziabad vide order NO.03/ 2007 - 08 w.e.f 24.04.2007 (enclosed as annexture 1A) . 1 (ii) Doctrine of Mutuality accepted by Hon'ble ITAT vide order NO.3708/2008 dated 31.08.2009 for assessment year 2004-05 (enclosed as annexture 1B). 2. learned Assessing Officer and also learned- ClT (A) grossly erred in adding to income of assessee, interest received from Bank, interest received on IT refund and interest. received from Cable Operator totaling Rs.18,18,599, simply because interest income was received from 3rd parties. 3. learned Assessing Officer and also learned CIT (A) grossly erred in not considering and thereby allowing expenses of Rs.28,70,532 which were in. nature of recurring, office and administrative expenses incurred in course of earning income. 4. appellant craves leave to add, alter, amend and modify any other ground of appeal before or at time of hearing. 2. brief facts of case are that return was filed on 26.7.2010 declaring income at Rs. NIL. return was processed u/s. 143(1). Thereafter case was selected under compulsory scrutiny. Notice u/s. 143(2) dated 15.9.2011 was issued and in compliance thereto Assessee s AR attended hearing from time to time and furnished details / replies as called for. Books of accounts were also produced, which were test-checked. Thereafter, AO completed assessment u/s. 143(3) of I.T. Act, 1961 on 14.2.2013 at 2 income of Rs. 18,18,600/- against returned income of Rs. NIL and made following additions:- - Interest income from bank Rs. 17,04,482/- - Interest income on Income Rs. 1,14,117/- Tax Return and cable operator receipts . 3. Against assessment order, assessee preferred appeal before Ld. CIT(A) who vide his impugned order dated 07.10.2015 has upheld action of AO and disposed of Appeal of assessee. 4. During hearing, Ld. Counsel of assessee stated that similar issue involved in present appeal being ground no. 1 and 2 has already been adjudicated and decided in favour of assessee by ITAT decision dated 31.8.2009 passed in ITA No. 3708/Del/2008 (AY 2004-05) in assessee s own case. 4.1 With regard to ground no. 3, Ld. Counsel of assessee has stated that Assessing Officer and CIT (A) grossly erred in not considering and thereby allowing expenses of Rs.28,70,532 which were in nature of recurring, office and administrative expenses incurred in course of earning income. He further stated that details of all expenses incurred during relevant previous year in course of earning income were filed, but they were not considered. 5. On contrary, Ld. DR relied upon orders of authorities below and requested that same may be upheld. 6. I have heard both parties and perused records especially impugned order and order of ITAT dated 31.8.2009 passed in ITA No. 3 3708/Del/2008 (AY 2004-05) in assessee s own case. I find that assessee has been granted exemption u/s. 11 by virtue of registration u/s. 12AA granted by CIT, Ghaziabad vide order No. 03/2007-08 w.e.f. 24.4.2007 and principle of Doctrine of Mutuality has been accepted by ITAT in its order dated 31.8.2009. Therefore, I find considerable cogency in contention of Assessee s AR that issue involved in ground nos. 1 and 2 are squarely covered by ITAT decision dated 31.8.2009, as aforesaid. For sake of clarity, I am reproducing relevant paragraph of Tribunal s order dated 31.8.2009 in assessee s own case, as aforesaid as under:- 4. We have considered rival submissions. Apropos facts as available shows that IRWO has collected one time maintenance fees from from members of Swarna Jayanthi Rail Nagar Flat Owners. After collecting one time maintenance fee IRWO along with assessee society jointly held one time maintenance fees in Fixed deposit with nationalized bank. interest from deposit has been used for purpose of meeting maintenance, expenditure in relation to housing complex of assessee society. Under these facts perusal of decision of Hon'ble High Court of Karnataka in case of Bangalore Club shows that Hon'ble High Court has considered decision of Hon'ble Supreme Court in case of Chelmsford Club reported in 243 ITR 89 (S.C.) and has held as follows 4 "In said judgment Division Bench has made it very clear that income earned from outside agency on interest or securities from bank would not be covered on principles of mutuality for claiming exemption from tax. This judgment squarely applies to facts of this case. On facts of this case and in light of legal principles it is clear to us that what has been done by club is nothing but what could have been done by customer of bank. principle of no man can trade with himself' is not available in respect of nationalized, bank holding fixed deposit on behalf of its customer. relationship is one of banker and customer." 5. Further, perusal of decision of Hon'ble Jurisdictional High Court of Delhi in case of All India Oriental Bank of Commerce Welfare Society 184 CTR 274 (Del) shows that Hon'ble Jurisdictional High Court of Delhi has also considered decision of Hon ble Supreme Court of India in case of Chelmsford Club referred to (supra) and in regard to identical issue held as follows. "A. Whether Tribunal was correct in excluding interest income on deposits made out of contributions from 5 members, deposits so made are not determined vis-a- vie member's contributions? B. Whether principle of mutuality applies to cases where interest earned on deposits made out of members contributions is not seggregable from interest earned from non-members contributions/ non- members contributions/ do nations/ ? C. Whether ratio of Supreme Court of India judgment in Chelmsford Club vs CIT (2000) 159 CTR (SC) 235: (2000) 243 ITR 89 (SC) applies to cases where income earned on deposits made out of members and non-members contributions/ donations/ subscriptions are not seggregable? D. Whether order of Tribunal is perverse in law "on facts"? 2. As is evident from format of questions, only issue raised by Revenue is as to whether interest income derived by respondent/ assessee on contributions made by members of welfare society is to be taxed in hands of society or not. Since in our view, issue raised by Revenue is legal and is no more res integra, we deem it unnecessary to state facts. Suffice it to note that while completing assessment on respondent assesee, co-operative society comprising of 6 employees of bank, AO had held that interest income earned by society on contributions received from members was not exempt on principle of mutuality. 3. issue with regard to concept and principle of mutuality has been elaborately examined by apex Court in Chelmsford vs. CIT (2000) 159 CTR (SC) 235: (2000) 243 ITR 89 (SC). Their Lordships have held that where number of persons combine together contribute to common fund for financing of some venture -or object and in this respect have no dealings or relations with any outside body, - then any surplus generated cannot in any sense be regarded as profits chargeable to tax. It has been observed that what is required to be seen is whether there is complete identity between contributors and participators. Once identity of contributor to fund is of recipients of funds; treatment of company, though incorporated as mere entity for convenience of members, in other words as instrument obtained to their mandate; and impossibility that contributors should derive profits from contributions made by themselves to fund which could only be expended or returned to themselves is established, doctrine of mutuality is established. 7 5. It is not Revenue's case that afore noted three conditions are not established in instant case. As matter of fact, before Tribunal ld. Departmental Representative had conceded that controversy sought to be raised again in this appeal, stands concluded against Revenue in Chelmsford Club vs CIT (supra). 6. As it is noted that issue has been held against assesee by Hon'ble High Court of Karnataka in case of Bangalore Club referred to (supra), but as issue had been held in favour of assesee by Hon 'ble Jurisdictional High Court of Delhi, respectfully following decision of Hon ble Jurisdictional High Court in case of All India Oriental Bank of Commerce Welfare Society referred to (supra), AO is directed to grant assessee exemption in respect of interest on bank F.D.Rs of Rs. 13,25,112/- by applying principle and doctrine of mutuality. As issue has been held in favour of assessee other contentions raised are not adjudicated upon. 7. In result appeal of assesee is allowed. 6.1 Respectfully following above precedent of ITAT in assessee s own case for assessment year 2004-05, issue no. 1 & 2 are decided in favour of assessee on similar lines. 8 7. With regard to ground no. 3 is concerned which is relating to not considering and thereby allowing expenses of Rs.28,70,532 by lower authorities, which were in nature of recurring, office and administrative expenses incurred in course of earning income. I find that both revenue authorities have not discussed this issue in their respective orders, therefore, ground no. 3 is remitted back to file of AO for fresh consideration, as per law, after giving adequate opportunity of being heard to assessee. 8. In result, Appeal of Assessee is allowed for statistical purposes. Order pronounced in Open Court on 13/10/2016. SD/- [H.S. SIDHU] SIDHU] JUDICIAL MEMBER Date 13/10/2016 SRBHATNAGAR Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 9 10 Swarn Jayanti Rail Nagar Flat Owners Association v. JCIT, Range-1, Noida