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Taxability and filing of return

16 August 2019

There is an apartment owners association, which is registered.

The purpose of the Association is to provide common service to the flat owners by collecting maintenance charges and there is no objective to earn any income otherwise.

The Association does not collect any GST as the maintenance charge is within the limit of GST applicability.

Ther association earns interest income from banks, which is below Rs.2,50,000. There is no other taxable income.

Please answer my following doubts:

1. Should the Association be treated as AOP or BOI for tax purposes?

2. Is there any tax liability when the taxable income is below Rs.2,50,000 (as applicable for individuals)? If so,, how much?

3. If no tax liability is applicable, is it mandatory to file ITR?

S Kalyanasundaram

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9 Replies

pd23071997 (None) (388 Points)
Replied 16 August 2019

If association registered, then under which act?

Any statutory audit applicable under the act?

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 16 August 2019

1. It is important in here to see the nature and objective of the formation of such association. Generally speaking, Owners association will be formed for the purpose of safeguarding the interest of house owners and they call come together for that common purpose. Though profit is not the primary motive but earning profits are not written off either. Going by this explanation we can say it is an Association Of Person (AOP).
2. Body of Individuals (BOI) is nothing but individuals coming together to earn a profit. They may or may not have a common objective. From this explanation, we can say Owners association cannot be a BOI.
3. With respect to filing a Return of Income (ROI), any person income below the basic exemption limit is not required to file ROI during the year as per sec 139(1). The person also includes AOP.
4. In your case, Apartment owners association will be considered as AOP and if the income is below the basic exemption limit of Rs. 2.5 lakhs there is no need to file ROI during the year.
Please correct me if the above solution has an alternative view.

S Kalyanasundaram (Faculty) (87 Points)
Replied 16 August 2019

Thanks for your interest.

How this is relevant? Is the taxabiity different for registered and unregistered associations? Is the taxability different based on applicability of statutory audit?

S Kalyanasundaram (Faculty) (87 Points)
Replied 16 August 2019

Thank you Mr Suresh Thiaygarajan.

S Kalyanasundaram

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 16 August 2019

1. "Person" as per sec 2(31) includes "Association of a person" whether incorporated or not. So it will not make much of a difference even if it not registered.
2. There will not be a statutory audit under income tax act. Only audits are carried out as per Tax rules under sec 44AB and it is called as Tax Audits.
3. In your case, Owners Association income is below Rs. 2.5 lakhs and in that case, there is no need for carrying out any audits or to file ROI. However, if you wish to file ROI showing the income earned it can be done.
Please correct me if the above interpretation has an alternative view.

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S Kalyanasundaram (Faculty) (87 Points)
Replied 16 August 2019

Thank you again Mr Suresh Thiyagarajan.

Regards.

S Kalyanasundaram

1 Like

Kapadia Pravin (17259 Points)
Replied 16 August 2019

if registered under Co- operative society Act then Audit is mandatory. Also it will be considered as Society and you have to file return compulsorily.