RAJENDRA R. CHATURVEDI, MUMBAI V. DCIT CC 2(3), MUMBAI

ITA 5546/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8740 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 08-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: LATA PARULEKAR
• Keywords: Business income; Business expenditure; Salary income
• Section: 142(1)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5546/MUM/2015 ASSESSMENT YEAR: 2011-12 SHRI RAJENDRA R. CHATURVEDI, 4 TH FLOOR, SHREEPATI ARCADE, PREMISES NO.1 & 2, AUGUST KRANTI MARG, NANA CHOWK, MUMBAI-400036 / VS. THE DCIT, CENTRAL CIRCLE-2(3), ROOM NO.803, 8 TH FLOOR, OLD C.G.O. ANNX. BLDG. MUMBAI-400020 ( !' # /ASSESSEE) ( $ / REVENUE) PAN. NO. ACZPC5041Q $% & # ' / DAT E OF HEARING : 31/10/2017 & # ' / DATE OF ORDER: 02/11/2017 !' # ! / ASSESSEE BY MS. LATA PARULEKAR $ ! / REVENUE BY SHRI SAURABH DESHPANDE-DR ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS IN APPEAL, CHALLENGING THE IMPUGNED ORDER DATED 30/09/2015 OF THE LD. FIRST APPELLATE A UTHORITY, MUMBAI. THE ONLY GROUND RAISED BY THE ASSESSEE PERT AINS TO TREATMENT OF SERVICE CHARGES RECEIVED FROM M/S ARCI L AS INCOME FROM OTHER SOURCES, THEREBY, DISALLOWING C LAIMED DEDUCTION U/S 24(A) OF THE INCOME TAX ACT, 1961 (HE REINAFTER THE ACT). 2. DURING HEARING, THE CRUX OF ARGUMENT ADVANCED BY MS. LALTA PERULKAR, LD. COUNSEL FOR THE ASSESSEE , IS THAT THE INCOME MAY TREATED AS INCOME FROM HOUSE PROPERT Y. RELIANCE WAS PLACED UPON THE DECISION OF THE TRIBUN AL IN THE CASE OF STAR GOLD PRIVATE LIMITED VS DCIT (2017) 85 TAXMAN.COM 167 (MUM. ITAT), ORDER DATED 30/06/2017. OUR ATTENTION WAS INVITED TO THE AGREEMENT BETWEEN THE PARTIES, AVAILABLE IN THE PAPER BOOK. ON THE OTHE R HAND, THE LD. DR, SHRI SAURABH DESHPANDE, DEFENDED THE IMPUGNED ORDER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 3 ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER OF THE TRIBUNAL DATED 30/0 6/2017 FOR READY REFERENCE AND ANALYSIS:- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-9, MUMBAI DATE D 17- 11-2014 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY, ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS FACIL ITIES AND INFRASTRUCTURE FOR BUSINESS, FILED ITS RETURN OF IN COME FOR THE ASSESSMENT YEAR 2011-12 ON 16-08-2011 DECLARING TOT AL INCOME AT RS.89,14,061 WHICH WAS SUBSEQUENTLY REVISED ON 2 1-02- 2012 ITA NO.351/MUM/2015 DECLARING TOTAL INCOME AT RS.1,59,63,771. THE CASE HAS BEEN SELECTED FOR SCRU TINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUE D. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED R ELEVANT DETAILS, AS CALLED FOR. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE IS OW NER OF PROPERTY SITUATED AT PLOT NO.63, STREET NO.13, MIDC , ANDHERI (E), MUMBAI-400 093 CONSISTING OF 1ST & 2ND FLOOR H AVING TOTAL BUILT UP AREA OF 18,954 SQ.FT. AND AFORESAID PROPERTY WAS LEASED TO M/S FULLERTON INDIA CREDIT COMPANY LTD UN DER A LEASE AGREEMENT DATED 09-01-2008. THE ASSESSEE HAS ENTERED INTO TWO LEASE AGREEMENTS, ONE FOR LEASING OF PREMI SES AND ANOTHER FOR PROVIDING AMENITIES TO THE BUILDING. TH E ASSESSEE HAS TREATED RENTAL RECEIPTS UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' WHEREAS COMPENSATION RECEIVED TOWARDS PRO VIDING AMENITIES HAS BEEN CONSIDERED UNDER THE HEAD 'INCOM E FROM BUSINESS'. THEREFORE, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY COMPENSATION RECEIVED ON AMENITIES SHOWN UND ER THE HEAD 'BUSINESS INCOME' SHOULD NOT BE TAXED UNDER 'I NCOME FROM HOUSE PROPERTY'. IN REPLY, ASSESSEE SUBMITTED THAT IT HAS ENTERED INTO LEAVE & LICENCE AGREEMENT WITH THE TEN ANT FOR THE SAID BUILDING ALONG WITH FURNITURE AND OTHER FACILI TIES INCLUDING CAR PARKING, BENEFIT OF SANITARY FITTINGS, WATER SU PPLY, ADDITIONAL ELECTRICITY SUPPLY FOR WHICH SEPARATE AG REEMENT HAS BEEN ENTERED INTO, WHICH HAS BEEN ITA NO.351/MUM/20 15 CONSIDERED UNDER THE HEAD 'INCOME FROM BUSINESS'. T HE ASSESSEE FURTHER SUBMITTED THAT IT WAS ALSO PROVIDI NG FACILITIES SUCH AS SECURITY SERVICES, MAINTENANCE OF BUILDING, PANTRY SERVICES, ETC. HENCE, THE ASSESSEE WAS SHOWN BUSINE SS INCOME FOR COMPENSATION RECEIVED TOWARDS PROVIDING AMENITI ES AFTER CLAIMING EXPENDITURE. ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 4 3. THE AO, AFTER CONSIDERING EXPLANATIONS OF THE AS SESSEE OBSERVED THAT THE WORDINGS AND EXPRESSIONS USED IN THE AMENITIES' AGREEMENT POINTED OUT THAT RECEIPTS FROM THE USE OF AMENITIES WERE IN THE NATURE OF 'INCOME FROM HOUSE PROPERTY' ONLY. THE AO FURTHER OBSERVED THAT THE AMENITIES PR OVIDED BY THE ASSESSEE WERE PART AND PARCEL OF THE PREMISES L ET OUT AND NO SEPARATE SERVICES WERE RENDERED BY THE ASSESSEE IN ANY MANNER AS CONTENDED. THE ASSESSEE MERELY SPLIT RENT AGREEMENT INTO TWO PARTS TO MAKE IT CONVENIENT SO T HAT IT CAN OFFER ONE PART AS 'INCOME FROM HOUSE PROPERTY' AND THE OTHER PART AS 'INCOME FROM BUSINESS' SO AS TO CLAIM EXPEN DITURE. ONCE THE LICENSOR HAS LEASED THE PREMISES, THE LICE NSEE IS AUTOMATICALLY ENTITLED TO USE THOSE FACILITIES. MER E SPLITTING UP OF RENT INTO TWO PARTS DOES NOT MEAN THAT INCOME FR OM AMENITY CHARGES IS NOT FROM LETTING OUT OF THE PROPERTY. TH E AO, AFTER ANALYZING THE AGREEMENTS ENTERED INTO BY THE ASSESS EE OBSERVED THAT THE SO- CALLED AMENITIES PROVIDED TO THE ASSESSEE IS IN THE NATURE OF INSEPARABLE FACILITIES ATTACHED WITH THE PREMISES WHICH CANNOT BE CONSIDERED AS A SEPARATE I TA NO.351/MUM/2015 ACTIVITY OF BUSINESS SO AS TO CLAIM THE SAID INCOME UNDER THE HEAD, 'INCOME FROM BUSINESS'. THE AO FURTHER OBSERVED THAT IT WAS PERTINENT TO MENTION T HAT THE LICENSEE HAS DEDUCTED TAX AT SOURCE ON THE ENTIRE A MOUNT INCLUDING THE COMPENSATION PAID TO THE ASSESSEE U/S 194-I AS 'RENT'; THEREFORE, TACITLY ACCEPTING THAT ALL THE R ECEIPTS RELATING TO THE SAID PROPERTY ARE IN THE NATURE OF HOUSE PRO PERTY INCOME. ACCORDINGLY, THE AO TREATED RECEIPTS FROM A MENITY CHARGES AS PART OF RENTAL INCOME AND ASSESSED THE S AME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. INSOFAR AS EXPENDITURE CLAIMED AGAINST COMPENSATION CHARGES, T HE AO OBSERVED THAT SINCE ASSESSEE HAS NO OTHER BUSINESS ACTIVITY AND IS ONLY EARNING INCOME FROM HOUSE PROPERTY, THE CLA IM OF BUSINESS EXPENDITURE INCLUSIVE OF INTEREST WAS TO B E DISALLOWED; HOWEVER, THE ASSESSEE WAS ALLOWED STAND ARD DEDUCTION AS PER SECTION 24 ON COMPENSATION RECEIPT . 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESS EE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SEC TION 23 OF THE INCOME-TAX ACT, 1961, THE ANNUAL LETTING VALUE OF THE PREMISES IS THE AMOUNT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR OR THE ACTUAL RENT RECEIVED OR RECEIVABLE, WHICHEVER IS MO RE. THEREFORE, FOR COMPUTATION OF ANNUAL VALUE, ONLY TH E RENTAL INCOME HAS TO BE ITA NO.351/MUM/2015 CONSIDERED AND NOT THE SERVICE CHARGES FOR PROVIDING EXTRA FACILITIES AND SERVICES. THE ASSESSEE, REFERRING TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS NATIONAL STORAGE PVT LT D (1967) 66 ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 5 ITR 596 (SC) SUBMITTED BEFORE CIT(A) THAT INCOME DE RIVED FROM RENDERING SERVICES IN ADDITION TO LETTING OUT OF THE PROPERTY WAS INCOME DERIVED FROM CARRYING ON AN ADV ENTURE IN THE NATURE OF TRADE, THEREFORE, COMPENSATION RECEIV ED FROM THE TENANT FOR PROVIDING ADDITIONAL SERVICES, WHICH ARE NOT CONNECTED TO THE LETTING OUT OF PREMISES HAS BEEN R IGHTLY ASSESSED UNDER THE HEAD, 'INCOME FROM BUSINESS'. TH E AO, WITHOUT APPRECIATING THE FACTS, HAS SIMPLY CONSIDER ED AMENITY CHARGES UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' , WHICH IS INCORRECT. IN SUPPORT OF ITS ARGUMENTS, THE ASSE SSEE RELIED UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN T HE CASE OF CIT VS CHENNAI PROPERTIES & INVESTMENTS LTD (200 8) 303 ITR 33 (MAD). 5. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMI SSIONS OF THE ASSESSEE OBSERVED THAT THE GROUND WAS COVERED B Y HIS EARLIER DECISION IN ASSESSEE'S OWN CASE FOR AY 2008- 09 WHEREIN AT PARAGRAPH 5.1 OF THE ORDER IT WAS HELD THAT AMEN ITY CHARGES RECEIVED FROM PROVIDING FACILITIES WAS ASSESSABLE U NDER THE HEAD, 'INCOME FROM HOUSE PROPERTY'. SINCE THE FACTS ARE ALMOST IDENTICAL FOR THE YEAR UNDER CONSIDERATION, HE HELD THAT THE ENTIRE INCOME FROM AMENITY CHARGES IS TAXABLE U NDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. INSOFAR AS ITA NO.351/MUM/2015 DISALLOWANCE OF EXPENDITURE IS CONC ERNED, THE CIT(A) OBSERVED THAT INTEREST WAS ALLOWED TO AS SESSEE IN ASSESSMENT YEARS 2009-10 & 2010-11; HOWEVER, WITHOU T ANY CONVINCING REASONS, THE AO HAS NOT ALLOWED INTEREST DURING THE YEAR UNDER CONSIDERATION BESIDES NOTICING THAT ON P ERUSAL OF BALANCE-SHEET OF THE ASSESSEE, THE AMOUNT OF THE BO RROWED CAPITAL ALMOST MATCHED WITH THE ASSETS, I.E. THE BU ILDING WHICH HAS BEEN UTILISED HAS YIELDED INCOME FROM HOUSE PRO PERTY MEANING THEREBY THAT THE BORROWED FUNDS ARE UTILIZE D FOR ACQUISITION OF PROPERTY AND THERE IS NO PROOF OF DI VERSION OF BORROWED FUNDS. UNDER THESE CIRCUMSTANCES, THE AO W AS DIRECTED TO ALLOW INTEREST CLAIMED BY THE ASSESSEE. WITH THESE OBSERVATIONS, THE CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE US. 6. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD .CIT(A) ERRED IN CONSIDERING COMPENSATION FOR USE OF AMENIT IES AND FACILITIES AS 'INCOME FROM HOUSE PROPERTY' WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS PROVIDE D ADDITIONAL FACILITY SUCH AS SECURITY SERVICES, ADDITIONAL LOAD OF ELECTRICITY SUPPLY, PARKING SERVICE AND OTHER RELATED SERVICES WHICH ARE NOT CONNECTED TO LETTING OUT OF PREMISES. THE AR FU RTHER SUBMITTED THAT IF THE MAIN OBJECT OF THE ASSESSEE I S LETTING OUT OF PREMISES AND EARNS RENT THEREFROM, INCOME SO EAR NED SHOULD BE TREATED AS BUSINESS INCOME. SINCE THE ASS ESSEE IS ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 6 INVOLVED IN THE ITA NO.351/MUM/2015 BUSINESS OF PRO VIDING FACILITY MANAGEMENT SERVICES AND INFRASTRUCTURE FOR BUSINESS, IT HAS RIGHTLY TREATED COMPENSATION RECEIVED TOWARDS P ROVIDING AMENITIES UNDER THE HEAD 'INCOME FROM BUSINESS'. IN SUPPORT OF HIS ARGUMENT, THE LD.AR RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION LTD VS ACIT 2016) 386 ITR 500 (SC) AND ALSO ITAT MUMBAI BENCH DECISION IN THE CASE OF KAVITA MARKETING PVT LTD VS ITO (2016) 47 CHH 228 (MUM TRIB). 7. THE LD.DR, ON THE OTHER HAND, SUPPORTED THE ORDE RS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ISSUE HAS BEEN ALREADY CONSIDERED BY THE ITAT, IN ASSESSEE'S OWN C ASE IN THE EARLIER YEARS AND OBSERVED THAT THE RECEIPTS TOWARD S AMENITIES ARE TO BE CONSIDERED AS PART OF RENTAL INCOME. THE LD.DR FURTHER SUBMITTED THAT THE ASSESSEE HAS EARNED COMP ENSATION FOR PROVIDING AMENITY CHARGES TO THE SAME TENANT, W HO OCCUPIED THE PREMISES BY SPLITTING RENTAL AGREEMENT INTO TWO PARTS WHICH IS EVIDENT FROM THE FACT THAT THE TENAN T HAS DEDUCTED TAX AT SOURCE U/S 194-I OF THE INCOME-TAX ACT, 1961 ON TOTAL PAYMENTS INCLUDING COMPENSATION PAID FOR P ROVIDING AMENITIES. THEREFORE, THE AO HAS RIGHTLY ASSESSED COMPENSATION RECEIVED UNDER THE HEAD 'INCOME FROM H OUSE PROPERTY AND HIS ORDER SHOULD BE UPHELD. IN SUPPORT OF HIS ARGUMENT, HE RELIED UPON THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD VS. CIT (2003) 263 ITR 143 (SC) AND SUBMITTED THAT INCO ME ITA NO.351/MUM/2015 DERIVED FROM LETTING OUT FURNISHED PREMISES ON MONTHLY RENT TO VARIOUS PARTIES ALONG W ITH FURNITURE, FIXTURES, ETC. AND ALSO PROVIDING THEM C OMMON SERVICES LIKE WATCH AND WARD, ELECTRICITY, WATER AN D OTHER AMENITIES WITHOUT ANY SEPARATE CHARGE WAS ASSESSABL E AS 'INCOME FROM HOUSE PROPERTY' AND NOT AS BUSINESS IN COME. 8. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. THE FACTUAL MATRIX WHICH LEADS TO THE IMPUGNED ADDITION IS THAT THE ASSESSEE HAS LET OUT PREMISES BY ENTERING INTO TWO SEPARATE AGREEMENTS FOR LETTING O UT PREMISES AND PROVIDING AMENITIES. THE ASSESSEE HAS CONSIDERE D RENTAL RECEIPTS UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY ', WHEREAS COMPENSATION RECEIVED FOR PROVIDING AMENITI ES HAS BEEN CONSIDERED AS 'INCOME FROM BUSINESS'. THE AO H AS ASSESSED COMPENSATION RECEIVED FROM PROVIDING AMENI TIES UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' ON THE GROUND THAT MERE SPLITTING UP OF RENTAL AGREEMENT CANNOT C HANGE THE CHARACTER OF INCOME WHICH HAS TO BE ASSESSED UNDER A PARTICULAR HEAD OF INCOME. THE AO FURTHER OBSERVED THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE, LIKE LEAVE & LICENCE AGREEMENT, THESE TWO AGREEMENTS ARE INSEPARABLE FRO M EACH ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 7 OTHER WHICH IS EVIDENT FROM THE ANNEXURE ANNEXED TO THE AGREEMENT WHICH STATES THAT THE ASSESSEE NEEDS TO P ROVIDE CERTAIN AMENITIES IN PURSUANCE TO LEAVE & LICENCE A GREEMENT. THE AO FURTHER OBSERVED THAT THE TENANT HAS DEDUCTE D TDS ITA NO.351/MUM/2015 ON TOTAL PAYMENTS INCLUDING COMPENSATION PAID FOR PROVIDING AMENITIES U/S 194-I . THEREFORE, IT IS ABUNDANTLY CLEAR THAT THE SOCALLED COMPENSATION RECEIVED FOR PROVIDING AMENITIES IS PA RT AND PARCEL OF RENTAL RECEIPTS. IT IS THE CLAIM OF THE A SSESSEE THAT ITS MAIN OBJECT IS TO PROVIDE BUSINESS FACILITIES AND I NFRASTRUCTURE FOR BUSINESS AND ONCE IT IS INVOLVED IN THE BUSINES S OF PROVIDING PREMISES ON RENTAL BASIS, THEN THE RENTAL RECEIPTS RECEIVED IS ASSESSABLE UNDER THE HEAD 'INCOME FROM BUSINESS'. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS ENTERED INTO SEPARATE AGREEMENT FOR PROVIDING AMENITIES WHICH IS NOT CONNECTED TO THE LETTING OUT OF THE PREMISES, THERE FORE, ANY CHARGES RECEIVED FOR PROVIDING ADDITIONAL SERVICES CANNOT BE CONSIDERED AS ANNUAL LETTING VALUE AS PER SECTION 2 3 OF THE INCOME-TAX ACT, 1961. THE ASSESSEE FURTHER CONTENDE D THAT IT IS PROVIDING ADDITIONAL SERVICES LIKE WATCH AND WARD, ADDITIONAL LOAD OF ELECTRICITY SUPPLY AND OTHER RELATED SERVIC ES FOR WHICH IT HAS SEPARATELY CHARGED THE TENANT AGAINST WHICH THE ASSESSEE HAS INCURRED EXPENSES. THEREFORE, THE SAID ACTIVITI ES COME UNDER THE HEAD 'INCOME FROM BUSINESS'. 9. THE QUESTION TO BE RESOLVED HERE IS WHETHER ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE COMPENSATION RECEIVED BY THE ASSESSEE FOR PROVIDING AMENITIES TO THE TENANT, WHO OCCUPIED THE PREMISES OF THE ASSSSEE, IS ASSESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' OR 'INCOME FROM BUSINESS'. A SIMILAR ISSUE HAS BEEN CONSIDERED BY T HE ITAT, SMC BENCH, ITA NO.351/MUM/2015 MUMBAI IN ASSESSEE'S OWN CASE FOR AY 2008-09 IN ITA NO.349/UM/2015 DATED 22- 06-2016. THE CO-ORDINATE BENCH OF THIS TRIBUNAL, UN DER SIMILAR FACTS, HAS HELD THAT RECEIPTS TOWARDS AMENITIES ARE TO BE CONSIDERED AS PART OF RENTAL INCOME. HOWEVER, THE E XPENSES INCURRED TOWARDS SECURITY SERVICE AND PANTRY SERVIC ES ARE NOT CONNECTED TO THE RENTAL INCOME AND HENCE, THEY SHOU LD BE DEDUCTED FROM THE RECEIPTS FROM AMENITIES. THE RELE VANT PAT OF THE ORDER OF THE CO-ORDINATE BENCH IS EXTRACTED BEL OW:- '6. I FURTHER NOTICE THAT THE ASSESSEE HAS LET OUT THE TWO STOREY BUILDING TO ONLY ONE TENANT. THE NATURE OF AMENITIE S CLAIMED TO HAVE BEEN PROVIDED CONSISTED OF SECURITY SERVICES, BUILDING MAINTENANCE, CAR PARKING FACILITY, PANTRY SERVICES. THE ELECTRICITY EXPENSES INCURRED BY THE ASSESSEE ARE B EING REIMBURSED BY THE TENANT. I NOTICE THAT THE SECURIT Y SERVICES AND PANTRY SERVICES ARE NOT GERMANE TO THE LETTING OF BUILDING, BUT OTHER SERVICES ARE PART AND PARCEL OF LETTING O F BUILDING. ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 8 HENCE THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF SHAMBU INVESTMENTS (SUPRA) SHALL SQUARE LY APPLY TO THE ASSESSEE. I ALSO AGREE WITH THE LD D.R THAT THE PRINCIPLE OF RESJUDICATA SHALL NOT APPLY TO INCOME TAX PROCEE DINGS. 7. ACCORDINGLY I AM OF THE VIEW THAT THE PREDOMINAN TLY, THE RECEIPTS TOWARDS AMENITIES ARE TO BE CONSIDERED AS PART OF RENTAL INCOME ONLY. HOWEVER, AS STATED EARLIER, THE EXPENSES INCURRED TOWARDS SECURITY SERVICES AND PANTRY SERVI CES ARE NOT CONNECTED TO THE RENTAL INCOME AND HENCE THEY SHOUL D BE DEDUCTED FROM THE RECEIPTS TOWARDS AMENITIES. ACCOR DINGLY THE ONLY NET RECEIPTS AFTER DEDUCTION OF ABOVE SAID INC OME SHOULD BE CONSIDERED AS PART OF RENTAL RECEIPTS. I ORDER A CCORDINGLY.' THE FACTS REMAIN UNCHANGED. THE ASSESSEE FAILS TO B RING ON RECORD ANY EVIDENCES TO PROVE THAT THE FACTS ARE DI FFERENT FROM THE FACTS CONSIDERED BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEAR. THEREFORE, WE ARE OF THE VIEW THAT ITA NO.351/MUM/2015 COMPENSATION RECEIVED FOR PROVIDING AMENITIES IS ASSESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', MORE PARTICULARLY, WHEN THE BUILDING IS LET OUT TO THE TENANT TO WHOM AMENITIES ARE PROVIDED BY WAY OF SEP ARATE AGREEMENT WHICH IS INSEPARABLE FROM THE LEAVE AND L ICENCE AGREEMENT ENTERED INTO WITH THE TENANT FOR LETTING OUT PREMISES. THOUGH ASSESSEE PLACED ITS RELIANCE ON TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAYALA CORP ORATION LTD (SUPRA), WITH DUE RESPECT, WE NOTICE THAT THE F ACTS BEFORE THE HON'BLE SUPREME COURT ARE ENTIRELY DIFFERENT FR OM THE FACTS OF THE PRESENT CASE, THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CASE LAW RELIED UPON BY THE ASSSESSEE HAS NO APPLICATION TO THE FACTS OF THE ASSESSEE'S CASE. TH E CIT(A), AFTER CONSIDERING RELEVANT FACTS, HAS RIGHTLY UPHELD THE ACTION OF THE AO IN TREATING COMPENSATION RECEIVED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. WE DO NOT FIND ANY ERROR IN T HE ORDER OF THE CIT(A); HENCE WE REJECT THE GROUND RAISED BY TH E ASSESSEE. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DEDUCTIONS TOWARDS EXPENSES CLAIMED AGAINST COMPENS ATION RECEIPTS. THE ASSESSEE HAS CLAIMED VARIOUS EXPENDIT URES AGAINST COMPENSATION RECEIPTS WHILE COMPUTING INCOM E UNDER THE HEAD 'INCOME FROM BUSINESS'. ACCORDING TO THE A SSESSEE, IT HAS INCURRED HUGE EXPENDITURE FOR ELECTRICITY CHARG ES WHICH IS INCLUDED IN THE RECEIPTS RECEIVED TOWARDS PROVIDING AMENITY SERVICES. THE ASSESSEE FURTHERITA NO.351/MUM/2015 C LARIFIED THAT IT HAS INCURRED VARIOUS EXPENSES SUCH AS SECUR ITY CHARGES, RATES & TAXES, ETC. IN CONNECTION WITH PROVIDING SE RVICES TO THE TENANT. THE AO DISALLOWED EXPENDITURE CLAIMED BY TH E ASSESSEE ON THE GROUND THAT THE AMOUNT OF COMPENSAT ION RECEIVED BY THE ASSESSEE IS ASSESSABLE UNDER THE HE AD 'INCOME ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 9 FROM HOUSE PROPERTY' AGAINST WHICH ONLY STANDARD DE DUCTION PROVIDED U/S 24 IS ALLOWABLE. 11. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL AVAILABLE ON RECORD, WE FIND THAT THE AO HAS DISALL OWED TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE AGAINST BUSINES S RECEIPTS ON THE SOLE GROUND THAT COMPENSATION RECEIVED FOR P ROVIDING AMENITIES IS ASSESSABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. HOWEVER, THE AO HAS ALLOWED STANDARD DED UCTION U/S 24 WHILE COMPUTING 'INCOME FROM HOUSE PROPERTY' . INSOFAR AS OTHER EXPENSES INCLUDING INTEREST PAID O N LOAN IS CONCERNED, THE AO HAS DISALLOWED THE EXPENDITURE. I T IS THE CLAIM OF THE ASSESSEE THAT OUT OF THE TOTAL EXPENDI TURE INCURRED, MAJOR PORTION OF EXPENDITURE IS INCURRED TOWARDS PR OVIDING ADDITIONAL LOAD OF ELECTRICITY WHICH HAS BEEN REIMB URSED BY THE SERVICE RECEIVER WHICH IS INCLUDED IN COMPENSATION PAID FOR AMENITY CHARGES WHICH NEEDS TO BE EXCLUDED. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT PR OVIDING ADDITIONAL SERVICES IN THE FORM OF ELECTRICITY AND SECURITY SERVICES IS NOT PART AND PARCEL OF PROVIDING PREMIS ES ON RENTAL BASIS, THEREFORE, ANY ITA NO.351/MUM/2015 CHARGES R ECEIVED TOWARDS SERVICES PROVIDED IN THE FORM OF ELECTRICIT Y SUPPLY AND SECURITY SERVICES NEED TO BE EXCLUDED FROM THE GROS S RECEIPTS RECEIVED. IN RESPECT OF AMENITY CHARGES, THE ASSESS EE HAS FILED NECESSARY DETAILS IN SUPPORT OF EXPENDITURE INCURRE D FOR PROVIDING ELECTRICITY AND SECURITY SERVICES. ON PER USAL OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE ASS ESSEE HAS INCURRED AN AMOUNT OF RS.44,44,226 TOWARDS ELECTRIC ITY EXPENSES AND CLAIMS THAT THE SAME HAS BEEN REIMBURS ED BY THE SERVICE RECEIVER WHICH IS INCLUDED IN THE COMPENSAT ION PROVIDED FOR AMENITIES. THEREFORE, WE ARE OF THE VI EW THAT ANY AMOUNT PAID TOWARDS REIMBURSEMENT OF ELECTRICITY CH ARGES NEEDS TO BE EXCLUDED FOR THE PURPOSE OF COMPENSATIO N RECEIVED FROM PROVIDING AMENITIES FOR THE PURPOSE OF COMPUTA TION OF 'INCOME FROM HOUSE PROPERTY'. ACCORDINGLY, WE SET A SIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT THE AO TO EX AMINE THE CLAIM OF THE ASSESSEE IN REGARDS TO THE DETAILS FUR NISHED. IN CASE IT IS FOUND THAT ELECTRICITY CHARGES INCURRED AND REIMBURSED IS INCLUDED IN COMPENSATION PAYMENTS, TH EN THE AO IS DIRECTED TO EXCLUDE SUCH CHARGES FOR THE PURP OSE OF COMPUTATION OF GROSS RECEIPTS UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY'. WE FURTHER DIRECT THE AO TO CONSID ER REIMBURSEMENT OF ELECTRICITY CHARGES AND ALLOW EXPE NDITURE INCURRED BY THE ASSESSEE FOR PROVIDING SUCH SERVICE S SEPARATELY UNDER THE HEAD 'INCOME FROM OTHER ITA NO.351/MUM/20 15 SOURCES'. ACCORDINGLY, THE GROUND RAISED BY THE ASS ESSEE IS PARTLY ALLOWED, FOR STATISTICAL PURPOSES. ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 10 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED, FOR STATISTICAL PURPOSES. 2.2. IN THE PRESENT APPEAL BEFORE US, THE FACTS, I N BRIEF, ARE THAT THE ASSESSEE AN INDIVIDUAL EARNED INCOME B Y WAY OF SALARY, RENT, PROFITS FROM PARTNERSHIP FIRM, ETC, D ECLARED INCOME OF RS.4,01,27,380/- IN ITS RETURN FILED ON 30/09/2011. SUBSEQUENTLY, THE ASSESSEE REVISED ITS TOTAL INCOME TO RS.4,01,87,850/-. DURING ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER ASKED EXPLAN ATION WITH RESPECT TO SALARY INCOME AND INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND ALSO INCOME FROM OTHER SOURCES. DURING THE RELEVANT YEAR, THE ASSESSEE RECEIVED RS.3,62,10,870/- AS RENT FROM ARCIL, WHICH WAS SHOW N UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSE SSEE GAVE THE BRAKE UP OF THE RENT ALONG WITH COPY OF TH E RENT AGREEMENT BEFORE THE ASSESSING OFFICER. THE LD. ASS ESSING OFFICER WAS OBSERVED THAT THE RENT RECEIVED FROM AR CIL CONSIST OF RENT AS WELL AS MAINTENANCE CHARGES. TH E ASSESSEE EXPLAINED THAT HE DOES NOT HAVE ANY SPECIF IC MAINTENANCE RESPONSIBILITY AND DID NOT INCUR ANY EX PENSES FOR MAINTAINING THE PROPERTY. THE LD. ASSESSING OFF ICER DID NOT CONSIDER THE CONTENTION OF THE ASSESSEE AND ASS ESSED ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 11 THE AMOUNT OF RS.82,29,740/-, TAKING SERVICE CHARGE S AS INCOME FROM OTHER SOURCES, THEREBY DISALLOWING CLAI MED DEDUCTION U/S 24(A) OF THE ACT. ON APPEAL BEFORE TH E LD. COMMISSIONER OF INCOME TAX (APPEAL), THE STAND TAKE N IN THE ASSESSMENT ORDER WAS AFFIRMED, WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. WE FIND THAT THE TR IBUNAL IN THE CASE OF STAR GOLD PVT. LTD., WHEREIN, THE ASSES SEE LET OUT THE PREMISES BY ENTERING INTO TWO SEPARATE AGREEMEN TS ONE FOR LETTING OUT THE PREMISES AND ANOTHER FOR PROVID ING AMENITIES. THE ASSESSEE CONSIDERED THE RENTAL RECE IPTS UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WHEREAS, COMPENSATION RECEIVED FOR PROVIDING AMENITIES WAS CONSIDERED AS BUSINESS. THE TRIBUNAL DECIDED THAT I T WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERT Y. IN THE CASE OF THE ASSESSEE, THERE IS ONLY ONE AGREEMEN T. THE TRIBUNAL HAS ALREADY CONSIDERED THE DECISION FROM H ON'BLE APEX COURT IN CIT VS NATIONAL STORAGE PVT. LTD. (19 67) 66 ITR 596 (SC), CIT VS CHENNAI PROPERTIES AND INVESTM ENT (2008) 303 ITR 33, RAYALA CORPORATION LTD. VS ACIT (2016) 386 ITR 500 AND KAVITA MARKETING PVT. LTD. VS INCOM E TAX OFFICER (159 ITD 547)(MUM. ITAT) AND ALSO THE DECIS ION FROM ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 12 HON'BLE APEX COURT IN SAMBHOO INVESTMENT PVT. LTD. (2003) 263 ITR 143(SC) BY HOLDING THAT IT WAS ASSESSABLE A S INCOME FROM HOUSE PROPERTY AND NOT BUSINESS INCOME. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ALSO CLAIMED THAT IN EARLIER YEAR, THE LD. ASSESSING OFFICER HIMSELF ACCEPTED TH E INCOME AS INCOME FROM HOUSE PROPERTY AND THIS CLAIM WAS NO T CONTRADICTED BY THE REVENUE, THEREFORE, IN THE ABSE NCE OF CONTRARY FACTS, IT HAS TO BE TAKEN AS INCOME FROM H OUSE PROPERTY ONLY. THE LD. ASSESSING OFFICER IS DIRECTE D TO FOLLOW THE AFORESAID ORDER OF THE TRIBUNAL AND TREAT THE I NCOME AS INCOME FROM HOUSE PROPERTY. THE APPEAL OF THE ASSES SEE IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDE AT THE CONCLUSION OF THE HEARING ON 31/10/2017. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % MUMBAI; ) DATED : 02/11/2017 F{X~{T? P.S / /. . . ITA NO. 5546/MUM/2015 RAJENDRA R. CHATURVEDI 13 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE ASSESSEE. 3. 1 1 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 2# / CIT(A)- , MUMBAI, 5. 4$5 /# , 1 +,' + 6 , % / DR, ITAT, MUMBAI 6. ! 7% / GUARD FILE. ! / BY ORDER, 04,# /# //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI