M/S. MARIGOLD PREMISES PVT.LTD,,PUNE vs. INCOME-TAX OFFICER (HQ) -6(1),, PUNE

आदेश / ORDER

PER R.S. SYAL, VP :

This batch of five appeals by the assessee involves

assessment years 2013-14 to 2017-18. Since a common issue is

raised in these appeals, we are, therefore, proceeding to dispose

them off by this consolidated order for the sake of convenience.

assessee is a company deriving income from Rent and Business.

The return was filed declaring total income at Rs.69,13,624/-.

2 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

During the course of assessment proceedings, the Assessing

Officer (AO) observed that the Business income earned by the

assessee consisted mainly from Renting of parking spaces, Table

spaces and Games collection etc. The assessee was show caused

as to why such income should not be treated as ‘Income from

house property’ instead of ‘Business income’ claimed by it. The

assessee submitted that such income from Canvassing, Space

selling, providing Table space, Parking charges, Games

collection, Maintenance charges amounting to Rs.1.65 crore was

rightly offered as ‘Business income’, because that was its

business activity, against which expenses of Rs.2.22 crore were

incurred in addition to depreciation of Rs.96.29 lakh. The AO

jettisoned the assessee’s contention and treated the entire gross

receipts of Rs.3.39 crore as ‘Income from house property’, which

also included the income claimed by the assessee as `Business

income’. After allowing statutory deduction, the AO determined

‘Income from house property’ at Rs.2.34 crore, in addition to

‘Income from other sources’. The ld. CIT(A) accepted the

assessee’s contention that income from Canvassing, Space selling,

providing Table space, Parking charges etc. was liable to be

3 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

considered as ‘Business income’. To this extent, the assessment

order was overturned. It was, however, noticed by him that the

assessee claimed Maintenance charges of Rs.1,17,67,484/- against

the ‘Business income’. The ld. CIT(A) opined that such

Maintenance charges were required to be apportioned between

‘Business income’ and `Income from house property’. In the

absence of any details furnished by the assessee, he allocated such

expenses in the ratio of House rent receipts to Business receipts at

51:49. As a result of that, 51% of such Maintenance expenses

were disallowed as they pertained to the house property, income

from which was subjected to the standard deduction u/s.24 of the

Act. Aggrieved thereby, the assessee has come up in appeal

before the Tribunal.

relevant material on record. The AO treated income from

providing services, such as, Canvassing, Space selling, providing

Table space, Parking charges, Games collection, Maintenance

charges etc. as ‘Income from house property’ in addition to

certain income voluntarily offered by the assessee as ‘Income

from house property’. The ld. CIT(A) overturned the assessment

4 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

order to this extent, against which the Revenue has not preferred

any appeal before the Tribunal. Thus, the treatment of such

amount as `Business income’ has attained finality and the only

issue which survives for consideration is to find out the portion of

Maintenance charges of Rs.1.17 crore as relatable to the property

used for Business and Renting.

to ascertain if it pertained to business activity or of earning rental

income. In this direction, he invited our attention towards pages

21 and 22 of the paper book, which are part of the assessee’s

Annual accounts. There is a detail of `Society Maintenance

expenses’ totaling Rs.1,17,67,484/- comprising of Repair and

Maintenance of Rs.35,59,108/-; Deejay expenses of Rs.92,166/-;

Garbage expenses of Rs.60,000/-; Garden expenses of Rs.13,100/-

; Housekeeping and maintenance expenses of Rs.24,92,445/-;

Security charges of Rs.15,94,355/-; and Mali expenses of

Rs.10,000/- etc. etc. The ld. AR was required to correlate such

expenses with the earning of `Business income’ and/or the Rental

income. It is quite natural that only the expenses pertaining to the

business activity can be claimed as deduction against the

5 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

‘Business income’ and the other expenses which pertain to the

Rental activity will fall for consideration under Chapter IV-C of

the Act only. The AO has granted standard deduction under the

head ‘Income from house property’. In that view of the matter,

the expenses which pertain to the earning of rental income have to

be disallowed.

with the Business and Rental activities. In the absence of such

details, no decision can be reached on the allocation of the

expenses. The ld. CIT(A) has also recorded in para 5.4 of the

impugned order that the assessee did not furnish any details, in

the absence of which he proceeded to apportion the Maintenance

charges on the basis of receipts. The ld. AR submitted that all the

necessary details are now available with the assessee, which can

be verified by the AO.

property’ that the assessee, in addition to earning rental income,

also received Maintenance charges for the portion let out, which

were included in the ‘Business income’ and the same have also

been assessed accordingly. It was, therefore, urged that even the

6 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

expenses pertaining to portion of the property let out should not

be disallowed because the receipts in relation to Maintenance

charges have been taxed as ‘Business income’. We find that the

fact of such receipts of Maintenance charges arising from the

rented portion and having been clubbed with the ‘Business

income’ is also not borne out from the record. In view of the

foregoing discussion, we are satisfied that it would be just and fair

if the impugned order is set-aside and the matter is remitted to the

file of the AO. We order accordingly and direct him to allocate

item-wise expenses to the requisite heads. The portion of the

expenses pertaining exclusively to the business activity should be

considered as business expenses and allowed as deduction against

the income under the head “Profits and gains of business or

profession”. Expenses pertaining exclusively to the renting

activity should be considered only under the head ‘Income from

house property’. The remaining common expenses should be

allocated between the two heads on some rational basis, such as,

area used for both the activities or revenue from both the activities

on gross basis etc. The AO will also ascertain if the receipts of

Maintenance charges from the let out portion have been

7 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

considered as ‘Business income’. If yes, then the nature of

expenses against which the Maintenance charges were received is

required to be looked into. The nature of expenses, forming part

of the expenses relating to the renting activity, against which

Maintenance has been recovered from the tenants, should be

considered under the Business head only and others to be

disallowed as pertaining to the income falling under the head

`Income from house property’. Needless to say, the assessee will

be allowed a reasonable opportunity of hearing.

similar except for the fact that the details of expenses as shown

for the A.Y. 2013-14 were available up to the first appeal stage

only for the A.Y. 2014-15 and the details of such expenses for the

remaining three years under appeal could not be produced before

the AO or the ld. CIT(A).

AO for the A..Y. 2013-14, we hold that such decision will hold

good for other four years under consideration as well.

8 Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

purposes.

Order pronounced in the Open Court on 04th May, 2023.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 04th May, 2023 सतीश आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent 2. 3. The Pr.CIT concerned 4. DR, ITAT, ‘A’ Bench, Pune गाड� फाईल / Guard file. 5.

आदेशानुसार/ BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Marigold Premises Pvt. Ltd. A.Yrs. 2013-14 to 2017-18

Date 1. Draft dictated on 04-05-2023 Sr.PS 2. Draft placed before author 04-05-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *