Case Law Details
Belvedere Tower Condominium Association Vs. ITO (ITAT Delhi)
The issue under consideration is whether the Interest paid on security deposit obtained from the members of society is allowed as expense u/s 57(iii) of the Act?
ITAT states that, the AO has gone wrong in rejecting this contention of the assessee society. The assessee society has obtained the interest bearing maintenance security called IBMS from the flat owners and such security deposit has been deposited with the Bank on which interest has been earned. Thus, there is a direct nexus in earning interest on such fixed deposit with Bank and payment of interest on the security deposit to the flat owners. The interest expenditure has been incurred wholly and exclusively for earning such interest income on Bank deposit. As per the Apartment buyers agreement there is an obligation on every buyer to make security deposit and there is corresponding obligation on the society to pay interest on such deposit. Thus, the contention of the learned AR that this interest 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, ITAT are of the view that interest expenditure is to be set off against the interest income. Therefore, there is no prohibition in Section 57 (iii) under which deduction of interest is eligible to the assessee society. Accordingly, ITAT direct the AO to delete the addition made on account of the interest. In the result appeal of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order dated 29th December, 2017 passed by the CIT(A)-, Gurgaon, relating to Assessment Year 2014-15.
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