Taxation of housing society

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manoj v deshpande (Querist)
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29 June 2016 My query is whether Co-operative housing society can claim deduction of the maintenance expenses incurred for society property against the interest income received from nationalised bank in terms of Section 57(iii)

Saket Jain

Saket Jain (Expert)
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30 June 2016 No. As 57(iii) allowed only if expenditure incurred to earn that income. However you can claim exemption u/s 80P if interest earned from deposit with cooperative bank.

manoj v deshpande

manoj v deshpande (Querist)
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30 June 2016 My query itself says the interest is received from Nationalised bank and not cooperative bank.
I am trying to use the decision of Raj Kumari Agarwal vs. DCIT (ITAT Agra), I.T.A. No.: 176/Agra/2013 which state that "whether the expenditure is incurred for directly
contributing to the beginning of or triggering the source of income or whether the
expenditure is for protecting, and thus keeping alive, that source of income, in either
case it is expenditure incurred wholly and exclusively for the purpose of earning that
income"
Similarly Housing society is incurring the maintenance expenses by keeping the fixed deposit intact and earning interest thereon

Saket Jain

Saket Jain (Expert)
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01 July 2016 Manoj Ji, In my opinion there should be direct nexux between Expenditure and Income/ Source of Income. How maintenance expenses led to earn interest income? Normally interest is earned on surplus funds. It is debatable issue. Regards

manoj v deshpande

manoj v deshpande (Querist)
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01 July 2016 Sir,Agreed. Normally Housing Society is formed for taking care of maintenance & management of the Housing property. In our case Builder has collected Buil.75/- per Sq. Ft. from each member towards one time maintenance charges.This was handed over to the society on formation. society invested this amount with IDBI and was getting interest on it to be used for maintenance. Had the society withdrawn/broker the FDR for maintenance expenses,there would not have any interest income. As such society has incurred the expenses to protect the source of income.

Saket Jain

Saket Jain (Expert)
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01 July 2016 When builder paid money to society, it had the choice whether to keep the money as it is or invest in FD. In your case society invested in FD and out of interest it is paying maintenance. Whether you pay maintenance or don't pay you are going to earn income thus maintenance expense doesn't have direct nexus with Interest income. I hope I am able to convey my perspective clearly.

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