DLF Office Developers, New Delhi V. ACIT, New Delhi

ITA 3355/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1254 (ITAT-DELHI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 27-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: R K KAPOOR C AS
• Keywords: Business income; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.3355/DEL/2009 ASSESSMENT YEAR : 2004-05 M/S DLF OFFICE DEVELOPERS, DLF CENTRE, (9 TH FLOOR), SANSAD MARG, NEW DELHI 110 001. PAN NO.AACFD0364L. VS. ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-31(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADEEP DINODIA AND SHRI R.K.KAPOOR, CAS. RESPONDENT BY : SHRI MANISH GUPTA, DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 29.5.2009 FOR THE AY 2004-05. 2. THE SOLITARY ISSUE TAKEN BY THE ASSESSEE PERTAIN S TO CIT(A)S ACTION IN CONFIRMING THE ADDITION TO ALV BY TREATING THE MAIN TENANCE CHARGES PAID BY TENANTS TO THIRD PARTY AS PART OF RENT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE FIRM WAS FORMED IN AY 1999-2000 TO CA RRY OUT THE BUSINESS OF DEVELOPING AND DEALING IN REAL ESTATE, CONSTRUCTION OF COMMERCIAL BUILDINGS AND LETTING THEM OUT OR SELLING THEM. WITH THESE OBJEC TS, THE ASSESSEE FIRM CONSTRUCTED A MULTI-STORIED BUILDING VIZ. GREATWAY BUILDING AT QUTAB ENCLAVE AND LET OUT THE SAID BUILDING TO VARIOUS TENANTS AND INCOME THEREFR OM HAS BEEN OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THIS INCOME WAS ASSESSED AS SUCH FROM YEAR TO YEAR. IN THE COURSE OF SCRUTI NY ASSESSMENT U/S 143(3) FOR THE ITA-3355/D/2009 2 YEAR UNDER CONSIDERATION, THE AO OBSERVED THAT SERV ICE CHARGES WERE PAID BY THE TENANTS TO A THIRD PARTY ON ACCOUNT OF MAINTENANCE OF COMMON FACILITIES AREA ETC. THE AO STATED THAT THE AMOUNT PAID BY TENANT TO THE THIRD PARTY IS NOTHING BUT A PART OF RENT PAYABLE TO ASSESSEE AND THE SAME SHOUL D BE ADDED TO THE RENT RECEIVED BY THE ASSESSEE. ACCORDINGLY, AN ADDITION WAS MADE IN THE ALV OF THE ASSESSEE. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACT ION OF THE AO AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUND T HAT IN RESPECT OF BUILDING LET OUT, THE TENANTS WERE MAKING PAYMENT ON ACCOUNT OF COMMON FACILITIES BEING PROVIDED BY OUTSIDE AGENCY. RENT WAS RECEIVED BY T HE ASSESSEE AS AN OWNER, BUT THE SERVICE CHARGES IN RESPECT OF COMMON FACILITIES WERE DIRECTLY PAID TO THE SERVICE PROVIDER AND THE SAME WERE INCLUDED BY SUCH SERVICE PROVIDER AS ITS BUSINESS INCOME AND OFFERED TO THE DEPARTMENT AND T HE SAME WERE DULY ACCEPTED BY THE DEPARTMENT IN THEIR ASSESSMENTS. CONTENTION OF THE AO WAS THAT SINCE COMMON FACILITIES WERE PROVIDED BY ASSOCIATE CONCER N OF THE ASSESSEE, PAYMENT FOR THE SAME SHOULD HAVE BEEN ADDED IN THE INCOME OF TH E ASSESSEE BEING A PART OF THE RENT. UNDER THE PROVISIONS OF SECTION 23(1), IT IS THE ANNUAL LETTING VALUE WHICH IS CHARGEABLE TO TAX AS INCOME FROM HOUSE PROPERTY. S ECTION 23(1) READS AS UNDER:- 23.(1) FOR THE PURPOSE OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE- (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING ITA-3355/D/2009 3 TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVA BLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE. 5. IT IS CRYSTAL CLEAR FROM THE PLAIN READING OF SE CTION 23(1) THAT IT IS ONLY THE RENT RECEIVED OR RECEIVABLE WHICH IS LIABLE TO BE T AXED AND NOT ANYTHING ELSE. THE ASSESSEE FIRM WAS NOT CHARGING ANY MAINTENANCE CHAR GES FROM THE TENANTS NOR ANY SERVICES WERE PROVIDED BY THE ASSESSEE TO THE TENAN TS FOR THOSE SERVICES. THE SERVICE PROVIDER M/S DLF SERVICES LTD. WAS DOING TH E JOB AND CHARGING THE SAME FROM THE TENANTS IN TERMS OF THE LEASE DEED BETWEEN THE ASSESSEE FIRM AND TENANTS. RELEVANT CLAUSE IN THE LEASE AGREEMENT ONLY PROVIDE D THE MODALITIES REGARDING THE MAINTENANCE SERVICES AND THE SAME WERE BEING CHARGE D. WE HAVE CAREFULLY GONE THROUGH THE RELEVANT CLAUSE IN THE LEASE DEED, WHER EIN CLAUSE FOR MAINTENANCE STIPULATED AS UNDER:- IT IS CLARIFIED THAT AT PRESENT VARIOUS SERVICES, FACILITIES AND CIVIC AMENITIES IN DLF CITY WHERE DEMISED PREMISES/SAID P LOT/SAID BUILDING ARE LOCATED ARE BEING MAINTAINED BY DLF SE RVICE LIMITED (HEREIN AFTER REFERRED TO AS DSL). THE MAINTENANCE SERVICES TO BE PROVIDED BY DSL ARE MORE APPROPRIATELY DETAILED IN ANNEXURE-IV THEREOF AND CHARGES FOR SUCH MAINTENANCE SERVICES A RE PAYABLE AT 1.2 TIMES OF THE ACTUAL EXPENSES WHICH IS PRESENTLY EST IMATED AT RS.11/- PER SQ.FT. OF SUPER AREA PER MONTH OF DSL OR ANY OT HER NOMINEE (S)/ASSIGNEE(S) OF DLF UNIVERSAL LIMITED WITH EFFEC T FROM THE RENT COMMENCEMENT DATE IN ACCORDANCE WITH THE TERMS OF T HIS LEASE DEED. 6. IT IS CRYSTAL CLEAR FROM THE ABOVE CLAUSE THAT A SSESSEE FIRM WAS NEITHER PROVIDING ANY MAINTENANCE SERVICES NOR RECEIVING AN Y CHARGES FOR THE SAME, ACCORDINGLY THERE IS NO REASON FOR ENHANCING THE AL V OF THE ASSESSEE FIRM BY THE AMOUNT OF MAINTENANCE CHARGES PAID BY THE TENANTS D IRECTLY TO THE THIRD PARTY. WE DO NOT FIND ANY COLLUSIVE NATURE OF TRANSACTION TO AVOID TAXATION OF SUCH INCOME, WHICH HAS UNDISPUTEDLY BEEN LIABLE TO TAX IN THE HA NDS OF THE SERVICE PROVIDER M/S DLF SERVICES LTD. WHICH IS AN INDEPENDENT SEPARATE COMPANY CARRYING ON THE ITA-3355/D/2009 4 BUSINESS OF RENDERING COMMON MAINTENANCE SERVICES. WE ALSO FOUND THAT ASSESSEE HAS NEITHER ANY DOMAIN OVER THE RECOVERY OF MAINTEN ANCE CHARGES NOR HAS ANY ROLE IN THE BUSINESS ACTIVITIES OF M/S DLF SERVICES LTD. THE MAIN INCOME OF M/S DLF SERVICES LTD. CONSISTS OF MAINTENANCE CHARGES WHICH IT RECEIVES FROM OWNERS/TENANTS OF BUILDING AND FOR WHICH IT RENDERS VARIOUS COMMON SERVICES. THE DEPARTMENT HAS CONSISTENTLY ACCEPTED THE MODALITIES FOR TAXING SUCH RENTAL INCOME IN THE HANDS OF THE ASSESSEE AND THE PAYMENT MADE F OR COMMON SERVICES IN THE HANDS OF THE SERVICE PROVIDER M/S DLF SERVICES LTD. IN THE PAST ALSO. RETURNED INCOME OF THE ASSESSEE UNDER THE SAME LEASE DEED HA S BEEN ASSESSED WITHOUT ANY SUCH ADDITION IN THE PAST, THEREFORE EVEN AS PER TH E PRINCIPLE OF CONSISTENCY, SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES, THERE IS NO REASON TO DEVIATE FROM THE CONCLUSIONS DRAWN IN EARLIER YEARS. 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR ENHANCING THE ALV BY THE AMOUNT OF SERVICE CHARGES PAID BY THE TENANTS TO A THIRD PARTY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2009. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.11.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-3355/D/2009 5