Sh. Sunil Kumar Gupta,(HUF), Amritsar. V. The Asstt. Commissioner of Income-tax, Amritsar.

ITA 432/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85895 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 01-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.432(ASR)/2014 ASSESSMENT YEAR:2002-03 PAN :AABHS5874D SH. SUNIL KUMAR GUPTA (HUF), VS. THE ASSTT. COMMR. OF INCOME TAX, 223, SHASTRI NAGAR, CIRCLE-II, AMRITSAR. AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. PADAM BAHL, CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING:03/02/2015 DATE OF PRONOUNCEMENT:11/02/2015 ORDER PER B..P.JAIN,AM: THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), AMRITSAR, DATED 21.04.2014 FOR THE ASSESSMENT YEAR 2002-03. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT WORTHY COMMISSIONER OF INCOME TAX (APPEALS ), AMRITSAR HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE A SSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-II, AMRITSAR IN TREATING THE MAINTENANCE CHARGES PAID BY THE TENANT TO THIRD PAR TY AND NOT TO THE APPELLANT SUB-LICENSEE AS PART OF ALV & IN UPHOLDIN G THE ADDITION OF RS.2,13,623/- OF RS.2,13,623/- MADE TO GROSS ALV. ITA NO.432(ASR)/2014 2 2. THAT BOTH THE COMMISSIONER OF INCOME TAX (APPEAL S), AMRITSAR & ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-II, AMRITSAR HAVE FAILED TO APPRECIATE THAT THE MAINTENANCE CHARGES W ERE PAID FOR AIR CONDITIONING, LIFT RUNNING & MAINTENANCE, SECURITY GUARDS, SWEEPERS SERVICES, COMMON LIGHTING & COMMON PASSAGES ETC., C OULD NOT BE TREATED TO RENT IN THE HANDS OF THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE AS ARISING FROM THE ORDER OF THE AO AT PAGES 1 TO 3 ARE REPRODUCED FOR THE SAKE OF CONVENIENCE A S UNDER: ADDITION ON ACCOUNT OF MAINTENANCE CHARGES PAID BY SUB-SUB LICENSEES THE BUILDING I.E. WORLD TRADE CENTRE, BARAKHAMBA RO AD, NEW DELHI IS MAINTAINED BY THE BUILDER BHARAT HOTELS LTD AND SOME FLATS IN IT ARE SUB-LICENSED TO SUNIL KUMAR GUPTA (HUF) I.E. THE AS SESSEE. THE SHARE OF SUNIL KUMAR GUPTA VARIES FROM FLAT TO FLAT. FLAT NO. AREA (SQ.FT) RENT (@ SQ.FT PER MONTH) MAINTENANCE CHARGES (@SQ.FT. PER MONTH) SHARE IN FLAT 412 367 40 RS.14.22 100% 415 627 111.5 RS.14.22 100% 516-C 745 VARIED DURING THE YEAR RS.15 30% SUNIL GUPTA (HUF) HAS FURTHER SUB SUB-LICENSED THE BUILDING TO VARIOUS PARTIES. AS PER THE AGREEMENT PARTIES ARE S UPPOSED TO PAY RENT TO THE ASSESSEE AND THE MAINTENANCE CHARGES TO BHAR AT HOTELS LTD. DIRECTLY. IN THE EVENT OF THE VACANCY THESE CHARGES ARE TO BE PAID BY THE ASSESSEE TO BHARAT HOTELS LTD. THUS, THE MAINTE NANCE CHARGES ARE THE LIABILITY OF THE ASSESSEE. THE SUB-LICENSE VIA THE SUB SUB-LICENSEE AGREEMENT HAS PASSED IT ON TO THE SUB SUBLICENSE. THE PERUSAL OF THE SUB-SUB LICENSEE AGREEMENT IN CA SE OF WORLD TRADE CENTRE, BARAKHAMBA, NEW DELHI PROPERTIES OWNE D BY THE ASSESSEE SHOWED THAT AS PER CLAUSE 1 (II)(B) IN ADD ITION TO THE MONTHLY RENT, MONTHLY AND PROPORTIONATELY FOR ANY PART OF T HE MONTH, ALL MAINTENANCE CHARGES PAYABLE TO THE BUILDERS, M/S. BHARAT HOTELS LIMITED, AS PER THEIR CURRENT BILLS IN RESPECT OF T HE DEMISED PREMISES. ITA NO.432(ASR)/2014 3 PRESENTLY THE MAINTENANCE CHARGES FIXED BY THE BUIL DERS ARE RS.14.22 (RUPEES FOURTEEN AND PAISA TWENTY TWO ONLY) PER SQ. FT. PER MONTH. ALL REASONABLE AND FUTURE ENHANCEMENTS, IF ANY, WILL AL SO BE TO THE SUB- SUB-LIECENCEE ACCOUNT. ANY ABNORMAL INCREASE WILL BE TO THE SUB- LICENCEE ACCOUNT. HOWEVER, ANY INCREASE IN MAINTEN ANCE CHARGES DUE TO INCREASE IN ELECTRICITY TARIFF BY N.D.M.C WOULD BE TO SUB-SUB- LICENCEE ACCOUNT. VIDE ORDER SHEET ENTRY DATED 1.2.05, THE COUNSEL OF THE ASSESSEE WAS ASKED WHY THE PAYMENT MADE BY THE TENANT OF WTC PRO PERTIES TOWARDS MAINTENANCE CHARGES BE NOT TREATED AS PART OF RENT. VIDE REPLY DATED 1.2.03, THE ASSESSEES COUNSEL REP LIED THAT WTC IS A FULLY AIR CONDITIONED COMPLEX HAVING MORE THAN 500 COMMERCIAL PREMISES AND VARIOUS SERVICES ARE PROVIDED BY THE B UILDERS. THESE SERVICES MAINLY CONSIST OF AIR CONDITIONING, LIFT RUNNING AND MAINTENANCE, SECURITY GUARDS SWEEPERS SERVICES AND PROVIDING LIGHT IN THE CORRIDORS AND COMMON PASSAGES. FOR THESE AND AN Y OTHER SUCH LIKE COMMON SERVICES THE BUILDERS RECOVERS FROM THE OCCUPANTS OF THE PREMISES THESE EXPENSES AND THERE ARE TERMED AS MA INTENANCE CHARGES.. RENT IS PAID BY THE TENANTS TO THE LAND LORD FOR THE USE OF THE PROPERTY WHEREAS THE MAINTENANCE CHARGES HAVE B EEN PAID BY THE OCCUPANTS OF THE PREMISES FOR THE FACILITIES AND VA RIOUS SERVICES PROVIDED BY A THIRD PARTY. SINCE NO SUCH SERVICES H AVE BEEN PROVIDED BY THE ASSESSEE AND NO PAYMENT FOR ANY SUCH SERVICE S HAVE BEEN RECEIVED FROM THE TENANTS, IT IS SUBMITTED THAT THE SE DO NOT FORM RENT RECEIPTS AND ARE NOT ASSESSABLE AS RENTAL INCOME. DURING THE COURSE OF HEARING ON 16.02.205, THE ASSE SSEES COUNSEL WAS AGAIN ASKED WHY THE MAINTENANCE CHARGES SHOULD NOT BE TREATED AS A PART OF RENT WHEN THE ASSESSEE IS CLAIMING A S TATUTORY DEDUCTION OF 30% U/S 24(A) OF THE INCOME-TAX ACT, 1961. THE C OUNSEL OF THE ASSESSEE VIDE HIS REPLY DATED 24.02.2005 FILED A PH OTOCOPY OF THE LETTER FROM ESTATE MANAGER CERTIFYING THAT MAINTEN ANCE AND ELECTRICAL CHARGES IN FACT FOR THE PERIOD APRI.01 TO MAR.02 HA VE BEEN RECEIVED FROM THE SUB-SUB-LICENCEE. THE ADDITION PROPOSED TO BE MADE ON ACCOUNT OF INCLUDING MAINTENANCE CHARGES @ RS.14.22 PER SQ. FT PER MONTH IN CASE OF FLATS 412 WTC AND FLAT 516-C WTC A ND RS.15/- PER SQ. FT. FOR FLAT NO.415 WTC, BARAKHAMBA ROAD, NEW D ELHI. THIS IS THE AMOUNT THAT A SUB-SUB LICENCEE PAY TO THE BUILD ER I.E. BHARAT ITA NO.432(ASR)/2014 4 HOTELS LIMITED DIRECTLY IN ADDITION TO THE RENT PAI D BY THE SUB-SUB LICENCEE ( I.E TENANT) TO THE SUB-LICENCEE I.E. THE ASSESSEE SUNIL GUPTA (HUF). ON 25.2.2005 THE COUNSEL OF THE ASSESSEE FIL ED A LETTER SUBMITTING THAT AS PER 263 ITR 143 THE SUPREME COUR T HAS HELD THAT RENT CHARGED IS A COMPOSITE AMOUNT AND CANNOT BE SE PARATED. IN OUR CASE, THE PROPERTY IS LET OUT AND RENT IS CHARGED F OR THE SAME SEPARATELY FROM THE MAINTENANCE CHARGES WHICH ARE P AID BY THE TENANTS DIRECTLY TO THE THIRD PARTY. THE TWO ARE NO T LINKED. THE CASE LAW SUBMITTED BY THE COUNSEL DOES NOT APPLY AS THE FACTS IN THE TWO CASES TOTALLY DIFFER. THESE MAINTENANCE CHARGES ARE PAID BY THE TENANTS I N RESPECT OF THE UNITS OF WHICH THE ASSESSEE IS THE OWNER. THUS BY T HE VERY NATURE OF THE PAYMENT IT IS THE LIABILITY OF THE ASSESSEE WHI CH THE TENANT IS DISCHARGING ON BEHALF OF THE OWNER AND HENCE IT IS PART OF THE RENT. THE DETAILS OF THE MAINTENANCE CHARGES ADDED TO REN T ARE AS BELOW: FLAT NO. AREA (SQ.FT) MAINTENANCE CHARGES (@SQ.FT PER MONTH) ADDITION AS PER SHARE IN FLAT 412 367 RS.14.22 RS.62625 415 627 RS.14.22 RS.38138 516C 745 RS.15 RS.112860 I AM SATISFIED THAT ON ACCOUNT OF THE FAILURE OF TH E ASSESSEE TO DECLARE TRUE AND CORRECT PARTICULARS OF INCOME PENALTY U/S 271(1)(C) SHOULD BE INITIATED FOR FURNISHING INACCURATE PARTICULARS AND PENALTY PROCEEDINGS ARE INITIATED SEPARATELY. 3. THE LD. CIT(A), CONFIRMED THE ACTION OF THE ASSE SSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. PADAM BAHL , CA ARGUED THAT THE RENT IS PAID BY THE TENANTS TO THE LANDLORD FOR THE USE OF THE PROPERTY WHEREAS THE MAINTENANCE CHARGES HAVE BEEN PAID BY T HE OCCUPANTS OF THE FLATS TO THE THIRD PARTY. IN THE PRESENT CASE, RENT HAS BEEN PAID BY THE SUB SUB- LICENSEES TO THE SUB-LICENSEE I.E. ASSESSEE FOR TH E USE OF THE PROPERTY WHEREAS ITA NO.432(ASR)/2014 5 THE MAINTENANCE CHARGES HAVE BEEN PAID BY THE SUB- SUB LICENSEES DIRECTLY TO M/S. BHARAT HOTELS LIMITED, THE BUILDER, WHO MAINTA INS THE BUILDING. THEREFORE, PAYING OF SUCH MAINTENANCE CHARGES WERE NOT THE LIABILITY OF THE ASSESSEE AND ACCORDINGLY THE SAME CANNOT BE TREATED AS RENTAL INCOME OF THE ASSESSEE. 5. THE LD. DR, MR. TARSEM LAL, ON THE OTHER HAND, R ELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS OF THE PRESENT CASE ARE THAT T HE ASSESSEE BEING THE SUB- LICENSEE HAS RENTED OUT THE VARIOUS PREMISES TO TH E SUB-SUB LICENCEES. THE ASSESSEE HAS DECLARED RENT SO RECEIVED AS INCOME FR OM HOUSE PROPERTY. THEREFORE, FOR THE PURPOSE OF TAXING THE INCOME, TH ERE IS NO DISPUTE THAT THE ASSESSEE HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY U/S 22 OF THE ACT. 7. NOW, WE HAVE TO SEE THE SCOPE OF THE TOTAL INCOM E U/S 23(1) OF THE ACT. THE ANNUAL VALUE OF ANY PROPERTY IS DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR OR WHERE THE PROPERTY SO LET, THE ACTUAL RENT RECEIVED OR RECEIV ABLE BY THE OWNER IN RESPECT THEREOF. THE WORD ACTUAL OCCURRING IN SECTION 23( 1)(B) IS IN CONTRA DISTINCTION TO THE HYPOTHETICAL RENT THAT MAY BE RE CEIVABLE BY THE OWNER. IT ITA NO.432(ASR)/2014 6 CANNOT BE CONSTRUED TO MEAN THAT THE RENT ACTUALLY COMING TO THE HANDS OF THE OWNER AFTER VARIOUS DEDUCTIONS. IF IT WERE SO, SECT ION 24 WOULD NOT HAVE BEEN THERE. WHILE DETERMINING THE ACTUAL VALUE UNDER SEC TION 23(1)(B), IT IS WRONG APPROACH TO SAY THAT THE PHYSICAL RECEIPT OF THE RE NT SHALL BE THE BASIS FOR COMPUTATION AND IT WOULD BE ERRONEOUS TO SAY THAT I N DETERMINING THE ACTUAL RENT RECEIVED OR RECEIVABLE, THE NET AMOUNT OF MONE Y RECEIVED OR RECEIVABLE BY THE ASSESSEE WOULD BE RELEVANT. 8. IN THE PRESENT CASE, THERE IS NO DISPUTE TO THE FACT IN CASE THE SUB-SUB LICENSEES WOULD HAVE NOT PAID THE MAINTENANCE CHARG ES TO M/S. BHARAT HOTELS LTD., THE BUILDER THEN THE MAINTENANCE CHARG ES WERE ESSENTIALLY THE LIABILITY OF THE ASSESSEE, THE SUB-LICENSEE AND NOT OF THE SUB-SUB LICENSEES. THEREFORE, THE MAINTENANCE CHARGES PAID BY THE SUB SUB-LICENSEE TO BHARAT HOTELS LTD., THE BUILDERS ARE PAID ON BEHALF OF THE SUB-LICENSEE - THE ASSESSEE, BECAUSE THE AGREEMENT OF RENT HAS BEEN MADE BETWEEN THE BUILDER, THE BHARAT HOTELS LTD WITH SUB-LICENSEE THE ASSESSEE. THEREFOR E, IF THE CHARGES ARE NOT PAID BY THE SUB SUB-LICENSEE THEN HE IS NOT LIABLE TO PAY THE AMOUNT TO THE BUILDERS, BHARAT HOTELS LTD. ACTUALLY, HE IS PAYING CHARGES FOR AND ON BEHALF OF THE SUB-LICENSEE THE ASSESSEE. ACCORDINGLY, THE SAID MAINTENANCE CHARGES ARE THE PART OF RENTAL INCOME AND ESSENTIALLY THE PART OF THE ANNUAL VALUE WHICH WOULD WHEN INCLUDED WITH PHYSICAL RECEIPT OF THE RENT, WILL BECOME ITA NO.432(ASR)/2014 7 THE ACTUAL RENT RECEIVED OR RECEIVABLE AS PER SECT ION 23(1)(B) OF THE ACT. THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 24 OF THE ACT TO REPAIRS AND MAINTENANCE WHICH THE AO HAS ALREADY ALLOWED. THE LD. CIT(A) HA S RIGHTLY CONFIRMED THE ACTION OF THE AO AND WE DO NOT FIND ANY INFIRMI TY IN HIS ORDER. THUS, BOTH THE GROUNDS OF THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.432(ASR)/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH FEBRUARY, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11TH FEBRUARY, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.SUNIL KUMAR GUPTA (HUF), 223 SHASTR I NAGAR, AMRITSAR. 2. THE ACIT CIRCLE II, AMRITSAR. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR. ITA NO.432(ASR)/2014 8