A two-Member bench of the Income Tax Appellate Tribunal (ITAT), Bangalore has held that the amount collected towards corpus fund cannot be treated as perquisites under section 28 of the Income Tax Act, 1961.
The assessee collected amounts towards ‘maintenance corpus funds’ at the time of sale of sites and these amounts remained as corpus funds with assessee for regular maintenance of the project till the site owners association is formed. The corpus fund has to be transferred to the Association of site owners when it is formed. Accordingly,assessee collected Rs.1,89,42,000 during the FY 2013-14 relevant to AY 2014-15. The corpus fund was invested in mutual fund and same was not utilized for business of the assessee.
The AO treated the same as perquisites under section 28 as there was no existing liability to the assessee. On appeal, the CIT(A) deleted the addition for want of evidence. The department approached the Tribunal on appeal.
The Tribunal bench comprising Shri Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Memberobserved that the amount collected towards corpus fund was lying with assessee and it is not perquisites in the hands of the assesseeso as to apply the provisions of section 28(iv) of the Act.
“There is no cessation of liability and it is shown as outstanding liability in the books of account. Being so, the CIT(Appeals) rightly deleted the same. We do not find any infirmity in his order and the same is confirmed. The revenue’s appeal is dismissed,” the Tribunal said.
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