B/F
http://vswaminathan-swamilook.blogspot.in/2017/11/principle-of-mutuality-v-tax-eemption.html
A Supplement (More / to focus on the feedback- input):
The learned Advocate cum ‘expert on GST’, has to be appreciated in having made quite an extraordinarily painstaking attempt,- by going to town so to say,- to explain the several provisions of the extant service tax law, so also of the new GST Code more so, in the light of the stance taken/ continued to be taken by the Revenue, circulars issued , etc. In his endeavor, he has covered the various types of entities, apart from so called typical type of housing societies, by whatever name called, /RWAs, formed and managed by the members themselves, through elected/selected representatives among selves; and, wholly and exclusively for managing the in-house affairs. In fact, most of such housing societies/ RWAs are formed and administered, not out of individual volition, but rather under compulsion; and in accordance /compliance with the mandates of the special state laws,- for instance, in Karnataka, as per the KAOA (in short)and the Rules framed there under. It is in these circumstances, and further, having regard to the particular intricate implications of the said special laws, the view being strongly canvassed for, and fought for, for tax exemption, both under the erstwhile law and the GST Code, founded on the well accepted and established “principle of mutuality’. With this aspect requiring special focus on, it could, in one’s long standing conviction, be very validly urged, and pursued; and needs to be so done, right to the finish.
There is no going saying that, such a hope could be expected to eventually fructify, provided the matter is addressed to the judiciary, on all fours, by formulating the propositions eminently, with honest home work.
http://vswaminathan-swamilook.blogspot.in/2017/11/principle-of-mutuality-v-tax-eemption.html
A Supplement (More / to focus on the feedback- input):
srinivasan says:
It should be taken per flat. Mr A
will have 2 memberships Number for the two flats, and as a member of a flat it
is only less than Rs5000.
This point
additionally raised may have to be independently looked into, having regard to
the applicable regulations, mainly governing ‘urban development’ and of the
local state and other authorities. Offhand, as remembered, whether it is
permissible for a single person- for that matter, even his ‘family’ members can
purchase and hold more than one Flat in building complex, has always been a
matter of grave doubt; may be, theoretically. Further, if scouted around, one
may find instances in which tax issues have arisen and taken up for judicial
adjudication; in particular, two Flats , as per approved Plan, have been , with
no legal authorization, been converted into a composite one, but with different
door numbers.
Incidentally,
for a since Updated / modified Post, with additional Input, -on the main topic
of ‘mutuality concept’ brought out in the earlier comments herein, suggest to
look up – https://www.facebook.com/swaminathanv3/posts/1445208175555464
RIDER
The learned author’s study and his
viewpoints shared may have been clear-cut and be of useful guidance, had he
confined himself to the ongoing controversies only in so far as those relate to
housing societies/ RWAs as indicated in the topic title itself. For, to repeat,
then alone the distinct nature/true color of the controversy could have been
better highlighted.
OFFHAND
The learned Advocate cum ‘expert on GST’, has to be appreciated in having made quite an extraordinarily painstaking attempt,- by going to town so to say,- to explain the several provisions of the extant service tax law, so also of the new GST Code more so, in the light of the stance taken/ continued to be taken by the Revenue, circulars issued , etc. In his endeavor, he has covered the various types of entities, apart from so called typical type of housing societies, by whatever name called, /RWAs, formed and managed by the members themselves, through elected/selected representatives among selves; and, wholly and exclusively for managing the in-house affairs. In fact, most of such housing societies/ RWAs are formed and administered, not out of individual volition, but rather under compulsion; and in accordance /compliance with the mandates of the special state laws,- for instance, in Karnataka, as per the KAOA (in short)and the Rules framed there under. It is in these circumstances, and further, having regard to the particular intricate implications of the said special laws, the view being strongly canvassed for, and fought for, for tax exemption, both under the erstwhile law and the GST Code, founded on the well accepted and established “principle of mutuality’. With this aspect requiring special focus on, it could, in one’s long standing conviction, be very validly urged, and pursued; and needs to be so done, right to the finish.
TO make it explicit, -in so far as
the ongoing debate pertains to housing complexes and its owners/residents
-members,- what needs to be consciously noted and appreciated is that such
persons or entities as constituted by them stand apart from, and are totally
different from the rest of the cases bunched and discussed herein.
Of course, as prophesied by the
learned author, in his wisdom, having regard to the simple fact that all
attempts thus far made to dissuade the Revenue from pursuing its wrongful
stance have met with no success, a righteous settlement of the dispute could
only be expected to come in the form of a favorable judicial verdict.
There is no going saying that, such a hope could be expected to eventually fructify, provided the matter is addressed to the judiciary, on all fours, by formulating the propositions eminently, with honest home work.
Invite duly equipped Experts, in
practice, tuned to the same wave length, to Edit / add value to the ongoing
fight for a favorable settlement of the subject dispute; which, in one’s
conviction, is nothing but on a non-issue, so to dub!
TAIL Note: The feedback input,
available in plenty, in public domain, should, it is believed, be of great help
in such an earnest and honest endeavor !
Apart from the limit per person, of
Rs 5000,if remember right and not mistaken, the law provides for tax exemption,
on the basis of total per entity. Suggest to, if so minded, wade through, the
host of material in public domain, if need clarity on the point of doubt raised
but in a different vein!
Q
Income Tax for Apartment Owners Associations
Are Apartment Owners’ Associations
in India liable to pay Income tax? Which income categories are taxable and
which are exempt? Do they need to file tax returns every year? These are a
must-know for every Association Treasurer. Here is an article compiled from
reliable sources*, that wishes to be of help.
Income Tax laws and the “Concept of
Mutuality”
Apartment Owners Associations are
categorised as Associations of Persons (AOP) under the Income Tax Law.
The governing concept for applying
income tax laws to the Association of Persons is the “Concept of Mutuality”.
This concept means that the contributors to a fund and the beneficiaries of the
fund – are identical. This in turn implies that there is no scope for
individual profits or gains. Any surplus generated in this fund – which is
income over expenditure – is held by the association for future utilization to
the benefit of the contributors. Complete tax exemption is given to
funds/surplus funds to which the “Concept of Mutuality” applies.
So, what is taxable and what is not?
Income NOT subject to tax:
Contribution from Members
Maintenance Charges, Electricity
charges, Penalties, Interest charged on outstanding Maintenance Charges etc. –
are the typical contribution by members of the Association. The association
merely works as an agent that collects these charges and uses them for various
common expenses. Any surplus during a fiscal year is carried forward to the
next fiscal year, with no tax implications.
Interest earned from Co-operative
Banks
If any investment is made in
co-operative banks, the interest earned from such investment qualifies for
deduction @ 100% under section 80P(d)
Dividend
If the Dividend income is received
from Indian Companies, the dividend is fully exempt under section u/s 10 (34).
Dividend received from Co-operative Banks qualifies for exemption under 80P(d)
is therefore 100% deductible.
Rentals received from members for
utilizing facilities
If common facilities such as
community hall, open spaces, terrace etc., are rented out to members for a
fees, the income is not taxable, thanks to “Concept of Mutuality”
Income subject to tax:
Interest earned on Investments in
banks other than co-operative banks.
Any interest earned from banks which
are not co-operative banks
Rental Income from Advertisement
Hoardings
This is fully taxable under the head
Business Income / Income from other sources. However expenses which can be
directly attributable to earning of this income can be claimed against this
income on a proportionate basis. Here the payer is responsible to deduct TDS
from the payments made to the association.
Rental from Mobile / Cable Towers
etc
Rental from mobile & Cable
Towers is taxable under the head Income from House Property; considering the
same it is eligible for standard deduction u/s 24 (a) @ 30 % of the rent. Also
if the association has taken loan to build the tower structure, a proportionate
deduction can be claimed for interest paid on borrowed capital.
Rentals from use of open Spaces /
Terrace – received from non members
“Concept of Mutuality” does not
apply to this Rental and it is fully taxable under the head Income from House
Property & may qualify for deductions mentioned in point 3 above.
To conclude, it is a must for
associations to get PAN registered in the name of the association and file
Income Tax Returns regularly. Even if an association does not have taxable
income due to deduction available (e.g., investments only in co-operative
banks), it is necessary for the society to prove this, which is possible only
with a Income Tax return filing.
Sources: Our thanks to CAclubindia,
The Hindu andeleminds.
Are Apartment Owners Associations in
India liable to pay Income Tax? Which income categories are taxable and which
are exempt? Do they need to file tax returns every year? These are a must-know
for every Association Treasurer. Here is an article
compiled from various sources*, that wishes to be of help.
Income Tax laws and the “Concept of Mutuality”
Apartment Owners
Associations are categorised as Associations of Persons (AOP) under the Income
Tax Law.
The governing concept for applying
income tax laws to the Association of Persons is the “Concept of Mutuality”.
This concept means that the contributors to a fund and the beneficiaries of the
fund – are identical. This in turn implies that there is no scope for
individual profits or gains. Any surplus generated in this fund – which is
income over expenditure – is held by the association for future utilization to
the benefit of the contributors. Complete tax exemption is given to
funds/surplus funds to which the “Concept of Mutuality” applies.
So, what is taxable and what is not?
Income NOT subject to tax
…………………………
UQ
Itatonline
Case law on
mutuality
ITO vs. Gymkhana Club (ITAT
Chandigarh)
OFFHAND
The ITAT has taken the view in favour of taxpayer, after considering , among others, the cited SC Judgment at length and in proper light.
The ITAT has taken the view in favour of taxpayer, after considering , among others, the cited SC Judgment at length and in proper light.
As such, in
cases such as a ‘CHS’, or any other entity, formed and constituted exclusively
by the members of a building complex, and collections made by themselves for
own in-house purposes, so also interest on surplus placed in bank deposits, it
could be strongly urged, with eventual success, be eligible for tax exemption,
on the ground of ‘mutuality’.
And, may
have to be done so, both against any attempt at levy of ‘service tax’ / GST,
and of income-tax as well.
For
viewpoints likewise canvassed even before, refer the comment posted on this
website wprt the Report of above referred SC Judgment.
(May be CONTD.)
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