Owners' Association and tax liabilities
Question: We are an Apartments Owners' Association and it is a registered society under the Registration of Society's Act 1975. The income of the Association includes
(1) Maintenance charges collected from its members
(2) Rental income from out of leasing a part of common areas and facilities, and
(3) Interest income from surplus invested in fixed deposits in banks.
The above is used only for the maintenance and development of the Association. Surplus if any, is also used for the purposes of the Association. Our Association (Society) is one functioning on the principle of mutuality.
We submit our Income Tax return on the basis of AOP of mutual concerns. But our rental income and interest incomes are charged to income tax as income from "House Property" and Income from "Other Sources" respectively.
We feel it is not correct. Our view is that since the business of our Association is not of a commercial/trading character, and is operating on the principle of mutuality, our rental income and interest incomes also are outside the purview of income tax. Please clarify.
P. Srinivasan, President, SPL - Uma Apartment Owners Association
Mr. T. M. Aaditiyaa, replies:
In order to be taxable for Income from House Property, the assessee should be the owner of the property (Section 22 of the Income tax Act, 1961) The association may not be the owner in an apartment.
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