Short Overview : Where amenities available in leased building, were part and parcel of the building, the amenities charges would fall under the head “Income from house property” even though there were two separate agreements i.e. one for leave and licence and other for amenities.
Assessee declared rental income from leased building including amenity charges received vide two separate agreements under the head “Income from house property”. AO was of the view that the amenity charges would fall under the head “Income from other sources” as the income arising from separate agreement for services was in the nature of income from the other sources.
It is held that It was found that the amenities available in the building were RCC frame structure, marvel/granite in common areas, lobbies, two elevators, CCTV in common areas, water supply, electricity, etc. If the nature of such amenities was analyzed, those were clearly part and parcel of the building. Further, the agreement of leave and licence and other for amenities was composite one and one could not be enforced without the other. Further, both the agreements were the basic agreements and were integral part to use of licence premises and their uses co-extensive/co-terminous, therefore, both the agreements could not be segregated, and hence, the charges for amenities were rightly declared under the head |Income from house property|.
Decision: In assessee’s favour.
Referred: Shambhu Investment (P) Ltd. v. CIT (2003) 263 ITR 143 (SC) : 2003 TaxPub(DT) 0948 (SC).
IN THE ITAT, MUMBAI BENCH
MAHAVIR SINGH, V.P. & MANJUNATHA G, A.M.
Nirmala Zaverchand Shah v. Dy. CIT
ITA No. 241/Mum/2019
17 June, 2020
Appellant by: Dinkle Hariya, Authorised Representative
Respondent by: Samanta Mullamudi, Departmental Representative
Mahavir Singh, V.P.
This appeal of assessee is arising out of the order of the Commissioner (Appeals))-58, Mumbai, (in short Commissioner (Appeals)), in ITA No. Commissioner (Appeals)-58, Mumbai/10340/2017-18, dated 3-12-2013. The assessment was framed by the Income Tax Officer, Ward 13(2), Mumbai (in short ACIT/Income Tax Officer/Assessing officer) for the assessment year 2011-12 vide Order, dated 23-10-2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the order of Commissioner (Appeals) upholding the action of the assessing officer in treating amenity charges amounting to Rs. 13,35,534 as income from other sources instead of income from house property. For this assessee has raised the following ground No. 1 :–
“1. On the facts and in circumstances of the case and in law, the Commissioner (Appeals)-58, Mumbai (“the Commissioner (Appeals)”) erred in upholding the action of the Deputy Commissioner Officer-13(2), Mumbai (“the learned A.O.”) in treating Amenity charges of Rs. 13,53,534 as Income from other Sources instead Income from House Property.
1.2 He failed to appreciate the fact that both the agreements of leave and license and amenities are composite and dependent on each other.
1.3. He failed to appreciate and erred in not following the Appellant’s own case for the assessment year 2009-10 given by jurisdictional Hon’ble Tribunal.
1.4 The Appellant prays that said Income received under be treated as Income from House Property.”
The other grounds raised as ground no. 2 by the assessee is without prejudice to ground No. 1. Hence, we will deal with the first ground first.
3. Brief facts are that the assessee is an individual and her main source of income is from lease property plus amenities and interest from bank, PPF and other loan debtors. During the course of assessment proceedings, assessing officer noted that the gross rent (Annual Value) of the leased property is at Rs. 33,08,372 including the amenity charges received amounting to Rs. 13,35,534. The assessee has computed this gross rent including amenity charges under the head income from house property. The assessing officer required the assessee vide show cause notice as to why this amount of Rs. 13,35,534 being amenity charges should not be taxed as income from other sources instead of assessee’s claim that it is income from house property. The assessing officer noted that the contention of the assessee is not true as regards to claim of two licenses because her intention then would have been only one license agreement. For this, assessing officer noted that the amenities are mostly common but not only the portion of the assessee’s property. He further noted that the assessee by not entering into agreement cannot claim the right of the licensor and further the law stipulates that all leave and licenses agreement should be duly stamped and registered. According to assessing officer, there is a loss of revenue on this score also. The assessing officer finally noted that to claim this standard deduction, the assessee is disclosing this income under the head income from house property instead of income from other sources. Accordingly, he assessed this amenity charges under the head income from other sources as against declared by assessee under the head income from house property.
Aggrieved assessee carried the matter before Commissioner (Appeals).
4. The Commissioner (Appeals) also confirmed the action of the assessing officer and also noted that the facts from earlier years, as decided by Tribunal, are different and distinguishable. The Commissioner (Appeals) particularly recorded this fact in Para 18 of his order which read as under :–
“18. In view of foregoing discussion, I uphold the decision of assessing officer to treat the income arising from separate agreement for services as income from the other sources. Accordingly, issues raised directly in grounds of appeal stands dismissed. My decision has come after duly analyzing relevant clauses of the agreements concerned, after considering the fact that on rental value part covered by amenities agreement Municipal property tax is not paid which by itself takes it out of section 23, the arrangement and claims is artificial aimed at evading both Central and State Tax and after analysis of judicial decisions including 2 cited by appellant and one by assessing officer. These facts were not presented before Hon. ITAT while dealing with decision in ITA No. 2012/2015, dated 29-11-2016 and ITA No. 6733, 6854/Mum/2011 and ITA No. 3851,4760/Mum/2012 all, dated 24-6-2016 and on new material and facts, new view is taken.”
Aggrieved, assessee came in appeal before Tribunal.
5. Now before us, the learned commissioner of the assessee Miss. Dinkle Hariya first of all argued that this issue is squarely covered by Tribunals decision in assessee’s own case and she filed copy of Tribunal order for assessment year 2002-03 in ITA No. 6880/Mum/2013 vide Order, dated 5-11-2015. She also argued that there is no distinguishing feature as the agreements are same as in earlier years and are continuing agreements and there is no distinction as such. She filed this copy of order in the official mail ID provided in ITAT’s Website Notice Board i.e. https://www.itat.gov.in/page/content/Notice-Board. On the other hand, the learned Departmental Representative Miss. Samanta Mullamudi, she pointed out from the assessment order that once the amenity charges were included in the consolidated rent agreement, the same would have increased this stamp duty payments which is not paid and moreover, it would be difficult to work out the proportion of common area, other common facilities and hence, entering into two separate agreements, the assessee has indulged in colorable device to avoid substantial tax liability by claiming deduction under section 54 of the Act. She stated that the Commissioner (Appeals) has already noted the distinguishable fact of the present year and what was before ITAT in earlier as the case law referred by the assessee.
6. We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, the assessee has declared the rental income of Rs. 33,08,372 including the amenity charges received vide two separate agreements. The amenities provided by the assessee by these two separate agreements are detailed out by the assessing officer in assessment order in Para 7 and the relevant read as under :–
“(a) RCC Frame Structure- Common Area Specification.
(b) Marble/Granite/Granamite in Common Areas, LObboies etc.
(c) Kotah on Staircase.
(d) 2 Otis Elevator.
(e) Control Room- CCTV in common areas.
(f) Water supply-underground/Basement.”
7. We noted that the Tribunal in assessee’s own case has considered this issue for assessment year 2002-03 in ITA No. 6880/Mum/2013 vide Order, dated 5-11-2015 considered this issue as amenity charges and held that the same falls under income from house property and not income from other sources. The Tribunal gave its finding at Para 2.3 as under :–
“2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the learned respective counsel, if kept in juxtaposition and analyzed, we note that the amenities available in the building was RCC Frame Structure, Marvel/granite in the common areas, lobbies, etc, Kotah in staircases, two elevators, control room: CCTV in common areas, water supply, electricity, AHU Room and Fire Control System. If the nature of these amenities are analyzed, these are clearly part and partial of the building. Both the agreements of leave and licence and other for amenities are composite one and one cannot be enforced without the other. These are the basic agreement and are integral part to use of licence premises and their uses coextensive/coterminous, therefore, these cannot be segregated, thus, the charges for amenities were rightly held to be income from house property, thus, the claimed deduction is also allowable, therefore, we affirm the stand of the learned Commissioner (Appeals).”
8. Even otherwise, then issue is absolutely covered by the decision of Hon’ble Supreme Court in the case of Shambhu investment (P) Ltd. v. CIT (2003) 263 ITR 143 (SC) : 2003 TaxPub(DT) 0948 (SC). Accordingly, we accept the income declared by assessee under the head income from other sources as against assessed by assessing officer under the head income from house property. Hence, we direct the assessing officer to consider this income under the head income from house property and not income from other sources. The orders of lower authorities are reversed on this ground and the appeal of the assessee is allowed.
9. In the Result, the appeal of the assessee is allowed.