Non-trading association running on mutual concept eligible to claim expenses against interest income
Case Law Details
Dhananjay Satellite Members Association Vs ITO (ITAT Ahmedabad)
We note that assessee is registered as a non-trading organization, and the registration certificate is placed at page nos. 1, 2 and 3 of the assessee`s paper book. The assessee submitted before us, memorandum of association of the trust, which is placed at page no.4 to 20 of the paper book, wherein we find that objectives of the association are to look after the member’s common property and to organize social and cultural activities. The Learned Counsel for the assessee submitted before us, Income and Expenditure Account, Balance Sheet along with schedules, of the association for assessment years 2015-16 and 2017-18. We have gone through the Profit and Loss Account and Balance Sheet submitted by the Ld. Counsel and noticed that assessee has sources of income by various ways like, maintenance, contribution from members, interest on Fixed Deposits, Interest on savings bank account, Rental income, lift charges etc. These incomes are being utilized for the purpose of common welfare of the association and as per the objectives of the association for payment of water expenses, consultancy fee, repairs and maintenance, generator repairs, foundation expenses, general meeting expenses, telephone expenses, security expenses, salary expenses, printing and stationary expenses. Therefore, all these expenses are done by the assessee- association out of its income, as per the objectives mentioned in the memorandum of association. Nobody is taking personal benefit out of association income. Therefore, based on this factual position, we note that assessee-association is a non-trading in nature and running on mutual concept.
We note that assessing officer has misinterpreted the facts of the assessee-association. It is settled principle of law that no man can make a profit out of himself. We observe that assessee- association did not claim any expenditure for earning interest income from fixed deposits and saving bank account rather the assessee-association applied its interest income for the purposes which were mentioned in object clause of its Memorandum of Association. Thus, the assessee has utilized the interest income for payment of water expenses, repairs, maintenance, salary and telephone expenses etc. Therefore, we note that interest income received by assessee-association, were utilized for various expenses, which were within the objectives of the assessee. We note that since it is a non-trading association and running on mutual concept, hence assessee is entitled to claim the expenses against the interest income.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Captioned two appeals filed by the assessee, pertaining to the Assessment Years (AY) 2015-16 and 2016-17, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-3, Ahmedabad [in short “ld. CIT(A)”], which in turn arise out of separate assessment orders passed by the Assessing officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the ‘Act’].
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INSTANT: There is a more than apparent mix-up of sorts; in that, those observations on the grounds of which the conclusion has been reached by the itat are absurd and seemingly make NO SENSE by any thinking or logic. !!- Anyone to disagree !?
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Is that not a sad commentary that none of those who have viewed the itat order have thus far shied away from realising that the ‘doctrine of mutuality’, the common law principle has been even at this late hour failed to be known ?!