VINASO INFOTECH & LEASING P.LTD, MUMBAI V. ITO 9(3)(3), MUMBAI

CO 171/MUM/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9113 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 01-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: NIMESH CHOTHANI IZRFKHZ DH LS
• Keywords: Business income; Tax effect
• Section: 148

Judgement Text

M/S VINASO INFOTECH & LEASING PVT. LTD . - 1 - VK;DJ VIHYH; VF/KDJ.K ,Q U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH FOOSD OEKZ] U;KF; D LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIVEK VARMA, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 4749/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 INCOME TAX OFFICER 9(3)-(3) 2 ND FLOOR, ROOM NO. 227, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. CUKE@ VS. M/S VINASO INFOTECH & LEASING PVT. LTD. 3/93, KHAR DHARSHAN SOCIETY, ABOVE IOB , LINK ROAD, KHAR (W) MUMBAI 400 052 . PAN:- AACCV0748B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI /CO NO. 171/MUM/2013 ARISING OUT OF ITA 4749/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 M/S VINASO INFOTECH & LEASING PVT. LTD. 3/93, KHAR DHARSHAN SOCIETY, ABOVE IOB , LINK ROAD, KHAR (W) MUMBAI 400 052. CUKE@ VS. INCOME TAX OFFICER 9(3)-(3) 2 ND FLOOR, ROOM NO. 227, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN:- AACCV0748B VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASESSEE BY SHRI NIMESH CHOTHANI IZR;FKHZ DH VKSJ LS @ REVENUE BY SMT. AMRITA MISRA VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 7.5.2012OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE DISPUTE S RAISED IN THESE APPEALS RELATE TO NATURE OF INCOME FROM MAINTENANCE CHARGES AND LEGAL VALIDITY OF REOPENING OF THE ASSESSMENT. LQUOKBZ DH RKJH[K @ DATE OF HEARING 30-10-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 30-10-2013 M/S VINASO INFOTECH & LEASING PVT. LTD . - 2 - 2. WE FIRST TAKE UP THE APPEAL OF THE DEPARTMENT IN ITA NO. 4749/MUM/2012. THE ONLY DISPUTE RAISED BY THE REVEN UE IN THIS APPEAL IS REGARDING NATURE OF INCOME FROM MAINTENANCE CHARGES . 2.1 THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR TH E RELEVANT YEAR HAD DECLARED RENT RECEIPT OF RS. 53,61,800/- INCOME FRO M WHICH HAD BEEN COMPUTED UNDER THE HEAD INCOME FROM HOUSE PROPERT Y. THE ASSESSEE HAD ALSO RECEIVED MAINTENANCE CHARGES OF RS. 10,51,333/ - AND AFTER DEDUCTING THE EXPENSES OF RS. 9,40,500/- INCURRED TOWARDS MAINTEN ANCE CHARGES IT HAD DECLARED THE BALANCE INCOME AS INCOME FROM BUSINESS . THE CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED IN THE ORIGINAL ASSESSME NT. SUBSEQUENTLY, HOWEVER THE ASSESSMENT WAS REOPENED BY ISSUING NOTI CE U/S 148 DATED 23.3.2011. IN THE RE-ASSESSMENT THE AO ALSO INCLUDE D THE MAINTENANCE CHARGES AS PART OF THE RENTAL INCOME AND ASSESSED T HE ENTIRE INCOME AS INCOME FROM HOUSE PROPERTY. THE TOTAL INCOME WAS TH US DETERMINED AT RS. 6,65,930/- IN PLACE OF RS. 1,02,200/- ORIGINALLY AS SESSED. 2.2 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT(A) THAT THE ASSESSEE HAD ENTERED INTO A SEPARATE AGREE MENT FOR PROVIDING VARIOUS AMENITIES TO THE TENANTS. THE MAINTENANCE INCLUDED: - (I) REPAIRS AND MAINTENANCE OF STAIRCASE, LOBBIES AND O THER COMMON AREAS; (II) MAINTENANCE OF ELEVATORS; (III) MAINTENANCE OF TERRACE AREA; (IV) MAINTENANCE OF ELECTRICAL, WATER SUPPLY AND FIREFIG HTING EQUIPMENT AND SYSTEMS INSTALLED IN THE BUILDING; (V) MAINTENANCE OF SEWAGE DRAIN. (VI) MAINTENANCE OF THE EXTERIOR OF THE BUILDING, COMPOU ND WALL, LANDING, GUTTER PIPES ETC. 2.3 THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS REQUIRED TO PERFORM THE ABOVE ADDITIONAL FUNCTIONS WHICH WERE IN ADDITION O F GIVING PREMISES ON RENT. THESE ACTIVITIES WERE ANCILLARY TO RENTING AND WERE NOT INTEGRAL PART OF RENT. ALTERNATIVELY IT WAS ALSO SUBMITTED THAT IN CASE TH E MAINTENANCE CHARGES ARE M/S VINASO INFOTECH & LEASING PVT. LTD . - 3 - TAKEN AS PART OF THE RENTAL INCOME, THE MAINTENANCE EXPENSES SHOULD BE DEDUCTED WHILE COMPUTING THE ANNUAL VALUE. 2.4 CIT (A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT MAINTENANCE AGREEMENT WAS AN INDEPENDENT CONTRACT. THE MAINTENANCE EXPENSES HAD NO CONNECTION WITH THE REPAIR OF BUILD ING LEASED OUT BUT WERE INCURRED ON DIFFERENT AND MULTIPLE ACTIVITIES BY WA Y OF PROVIDING FACILITIES AND SERVICES MENTIONED EARLIER. THERE WERE NO DISPUTES REGARDING GENUINENESS OF EXPENSES. HE REFERRED TO THE DECISION OF MUMBAI BEN CH OF TRIBUNAL IN CASE OF CIT VS. RUNWAL DEVELOPERS PVT. LTD (15 TAXMAN. COM1 96) IN WHICH THE TREATMENT OF INCOME FROM MAINTENANCE AS SEPARATE IN COME WAS UPHELD. CIT(A), THEREAFTER, ALLOWED THE CLAIM OF THE ASSESS EE, AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE TRIBUNAL. 2.5 BEFORE US, THE LEARNED AR FOR THE ASSESSEE SUBM ITTED THAT ONLY THE RENTAL INCOME FROM LETTING OUT OF BUILDING CAN BE A SSESSED AS HOUSE PROPERTY INCOME AND IN CASE SOME SERVICES HAD BEEN PROVIDED, INCOME FROM WHICH HAD TO BE ASSESSED SEPARATELY AS BUSINESS INCOME. LEARN ED AR PLACED RELIANCE ON THE JUDGMENT DATED 5-10-2011 OF HONBLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. RUNWAL DEVELOPERS PVT. LTD IN INCOME TAX AP PEAL NO. 4984 OF 2004, IN WHICH THE CLAIM REGARDING INCOME FROM MAINTENANC E CHARGES AS BUSINESS INCOME HAS BEEN UPHELD BY THE HONBLE HIGH COURT. L EARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF AO. 2.5 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING NATURE OF INCOME FROM MAINTENA NCE CHARGES RECEIVED BY THE ASSESSEE IN CONNECTION WITH LETTING OUT OF THE BUILDING. THE ASSESSEE HAD RECEIVED THE RENT OF RS. 53,61,800/- FROM LETTING O UT OF THE BUILDING WHICH HAD BEEN DECLARED AS INCOME FROM HOUSE PROPERTY. TH E ASSESSEE HAD ALSO ENTERED INTO A SEPARATE MAINTENANCE CONTRACT AS PER WHICH THE ASSESSEE WAS REQUIRED TO PROVIDE CERTAIN AMENITIES IN RELATION T O COMMON AREAS, ELEVATORS, TERRACE AND MAINTENANCE OF EQUIPMENTS ETC FOR WHICH SEPARATE PAYMENT HAD BEEN RECEIVED BY THE ASSESSEE AMOUNTING TO RS. 10,5 1,333/-. THE ASSESSEE HAD INCURRED MAINTENANCE CHARGES OF RS. 9,40,500/- AND AFTER DEDUCING THE M/S VINASO INFOTECH & LEASING PVT. LTD . - 4 - SAME FROM MAINTENANCE INCOME, THE NET INCOME HAD BE EN OFFERED AS BUSINESS INCOME. AO IN THE ORIGINAL ASSESSMENT HAD ACCEPTED THE CLAIM OF THE ASSESSEE BUT SUBSEQUENTLY RE-OPENED THE ASSESSMENT AND IN TH E RE-ASSESSMENT INCOME FROM MAINTENANCE CHARGES HAD BEEN CONSIDERED AS PAR T OF THE RENTAL INCOME, WHICH HAD BEEN ASSESSED AS HOUSE PROPERTY INCOME AN D CLAIM OF MAINTENANCE CHARGES HAD BEEN DULY ALLOWED AS BEING INCLUDED IN THE STATUTORY 30% DEDUCTION ALREADY ALLOWED. CIT (A) HA S HOWEVER ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THE INCOME FROM MAINTENANCE CHARGES IS INDEPENDENT OF THE LETTING OUT OF THE BUILDING. 5.1 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECT S OF THE MATTER AND THE PROVISIONS OF LAW. THE INCOME UNDER THE HEAD HOUSE PROPERTY IS REQUIRED TO BE COMPUTED IN RESPECT OF THE RENTAL INCOME FROM TH E BONAFIDE LETTING OUT OF THE BUILDING. IN CASE THE ASSESSEE HAS PROVIDED ANY SERVICES IN RELATION TO LETTING OUT OF THE BUILDING INCOME FROM SUCH SERVIC ES HAS TO BE CONSIDERED AS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES D EPENDING UPON THE FACTS OF THE CASE. IN CASE, THE OWNER GETS COMPOSITE RENT FROM THE PROPERTY AS WELL AS THE SERVICES RENDERED, SUCH COMPOSITE RENT HAS T O BE SPLIT UP AND THE AMOUNT WHICH IS ATTRIBUTABLE TO THE PROPERTY SHOULD BE ASSESSED AS HOUSE PROPERTY INCOME. THIS VIEW IS SUPPORTED BY THE JUDG MENT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF KANAK INVESTMENTS PVT. LTD. ( 95 ITR 491). THE SAME VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIO NAL HIGH COURT RECENTLY VIDE JUDGMENT DATED 9-10/2011 IN CASE OF CIT VS. RU NWAL DEVELOPERS PVT. LTD (SUPRA). IN THAT CASE ALSO THE ASSESSEE WHO WAS RUN NING A MALL HAD LEASED PART OF IT AND THE REMAINING PART HAD BEEN SOLD OUT . THE ASSESSEE HAD BEEN COLLECTING MAINTENANCE FROM LESSEE AS WELL AS FROM THE PERSONS TO WHOM PREMISES WERE SOLD TOWARDS PROMOTION AND UPKEEP OF THE MALL. THE MAINTENANCE CHARGES COLLECTED RELATED TO OPEN AREA/ COMMON AREA, REPAIR AND MAINTENANCE OF EQUIPMENT, LAND, ATRIUM, FIREFIGHTIN G EQUIPMENTS, TRANSFORMERS, AIR CONDITIONER PLANTS, WATER TANK AN D OTHER SERVICES SUCH AS COST OF SECURITY SERVICES, HOUSE KEEPING ETC. THE H IGH COURT UPHELD THE CLAIM OF THE ASSESSEE THAT INCOME FROM THE MAINTENANCE CH ARGES HAS TO BE ASSESSED AS BUSINESS INCOME. FOLLOWING THE ABOVE JUDGMENTS, WE HOLD THAT INCOME FROM MAINTENANCE CHARGES HAS TO BE ASSESSED AS BUSI NESS INCOME. WE, M/S VINASO INFOTECH & LEASING PVT. LTD . - 5 - THEREFORE, SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE AND THE SAME IS, THEREFORE, UPHELD. 3. NOW WE TAKE UP THE CO NO. 171/MUM/2012. IN THIS CROSS OBJECTION THE ASSESSEE HAS SUPPORTED THE ORDER OF CIT(A) ON THE G ROUND THAT APPEAL FILED BY THE REVENUE WAS NOT MAINTAINABLE EVEN OTHERWISE AS THE TAX EFFECT WAS BELOW THE PRESCRIBED LIMIT. IN ADDITION THE ORDER OF CIT( A) HAS ALSO BEEN SUPPORTED ON THE GROUND THAT REOPENING OF THE ASSESSMENT ITSE LF WAS BAD IN LAW. HOWEVER AT THE TIME OF HEARING OF THE APPEAL THE LE ARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOT PRESSING THE GR OUNDS RAISED IN THE CROSS OBJECTION, IN CASE THE JUDGMENT WENT IN FAVOUR OF T HE ASSESSEE ON MERIT. 3.1 SINCE ON MERIT WE HAVE DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENUE, WE DO NOT CONS IDER IT NECESSARY TO GO INTO THE ISSUE RAISED IN THE CROSS OBJECTION AND AC CORDINGLY DISMISS THE CROSS OBJECTION HAVING BECOME INFRUCTUOUS. 4. IN THE RESULT APPEAL OF THE REVENUE AS WELL AS T HE CROSS OBJECTION RAISED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED ON 30-10-2013 SD/- SD/- (VIVEK VARMA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 30-10-2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI