HIGH COURT OF GUJARAT
CIT V/s. Manekbaug Co-operative Housing Society Ltd.
Tax Appeal Nos. 1847 & 1848 of 2010
Date of Pronouncement – May 7, 2012
JUDGMENT
Bhaskar Bhattacharya Actg. CJ.
These Appeals under Section 260A of the Income Tax Act, 1961 [“the Act”] are at the instance of the Revenue and are directed against order dated March 5, 2010 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “B”, Ahmedabad [“the Tribunal”] in ITA No. 2133/Ahd/2006 and C.O. No. 262/Ahd/2006 in respect of the Assessment Year 2003-04 by which the Tribunal dismissed the appeal preferred by the Revenue and allowed the Cross-Objection filed by the assessee.
2. Being dissatisfied, the Revenue has come up with these appeals.
3. In Tax Appeal No.1847 of 2010, the Revenue has put forward the following questions for determination:
“(i) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in confirming the order of the Appellate Commissioner in deleting the disallowance of expenses to the tune of Rs. 5,56,430/- claimed by the assessee as expenses made by the Assessing Officer?
(ii) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in deleting the addition of Rs. 2 lakhs made by the Assessing Officer on account of transfer fee by transfer of plot received by the assessee?”
4. On the other hand, in Tax Appeal No. 1848 of 2010, the Revenue has raised the following question:
“Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in deleting the disallowance of expenses to the tune of Rs. 7,61,826/- claimed by the assessee as expenses, made by the Assessing Officer?”
5. The facts giving rise to filing of these Appeals may be summed up thus:
5.1 The respondent filed its return on March 30, 2004 for the Assessment Year 2003-04 declaring total income of Rs. Nil along with statutory audit report. The said return of income was processed under Section 143[1] of the Act accepting the total income returned by the assessee.
5.2 The assessee is a Co-operative Housing Society and derives income for hiring of hall, catering services, commission etc. The assessee had shown gross receipts of Rs. 21,56,766/- against which, it had shown net income of Rs. 4,02,182/-.
5.3 In response to the notice under Section 142[1] of the Act, the assessee furnished the required detailed information, which was verified and examined on test-check basis.
5.4 During the course of the assessment proceedings, the authorized representative of the assessee vide his letter dated December 29, 2005 claimed that the income derived by the assessee should be taken as “income from business” instead of “income from other sources” as shown by the assessee in its return of income. It was further contended that the Assessing Officer was required to draw the attention of the assessee to the lawful relief or deduction although the assessee did not claim the same.
5.5 Vide show cause notice dated March 6, 2006, the assessee was asked to explain why all the expenses claimed by it should be disallowed as it was deriving income from “other sources”. It was further asked to show cause that why the expenses claimed by the assessee should not be disallowed and added to the total income of the assessee.
5.6 Vide letter dated March 17, 2006, the authorized representative of the assessee filed written submissions which is as under:-
“That by the mistake the income is shown under the head income from other sources. In fact the income is income from business and profession. In my earlier submission I have already requested to consider the income under the head business income and secondly on the ground of principles of mutuality all expenses claimed be allowed in toto.
So far as transfer fees income i.e. premium on transfer of plot is concerned I have given my submission earlier that premium on transfer paid by the transferor and in past Hon’ble ITAT Ahmedabad had also deleted additions on account of transfer premium and also Hon’ble Gujarat High Court has also decided the case of Adarsh Coop Society in favour of the society that premium on transfer is not taxable income.”
5.7 The Assessing Officer, by his order dated March 24, 2006 passed an order under Section 143[3] of the Act by which he held that the income of the assessee should be treated to be under the head “income from other sources” which had been rightly offered by the assessee in its return of income and consequently, all the expenses debited in its income and expenditure account cannot be said to be incurred for earning “income from other sources”. The Assessing Officer was of the view that only expenses which can be considered allowable under Section 57[iii] of the Act for earning income from other sources are as follows:
