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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI RAVISH SOOD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax-33, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The ground of appeal
filed by the assessee reads as under: On the facts and in law, the Ld. CIT(A) erred in upholding the rental income of Rs.41,80,000/- received from M/s Dezens Products, for display of commercial advertisement on the appellants’ undergoing real estate Chaitanya Developers Louis Mansion, Mahim, Mumbai to be in the nature of income from other sources, instead of income from house property as declared by the appellant, by holding the appellant to be not the owner of the said property, not appreciating that the appellant has obtained conveyance of the said property and is therefore owner of the Louis Mansion property at Mahim, Mumbai and the income is required to be assessed as ‘Income from House Property’ only.
3. Briefly stated, the facts are that the assessee is a partnership firm engaged in the business of builders and developers. During the course of assessment proceedings the Assessing Officer (AO) observed that the assessee had received hoarding charges of Rs.41,80,000/- from M/s Dezen Products (in short ‘DP’) for advertising display on boundary walls and the same was offered for taxation under the head “Income from House Property”. In response to a query raised by the AO to explain as to why the receipts on account of advertising display charges should not be assessed under the head “Income from Other Sources” instead of “Income from House Property”, the assessee filed a reply stating that the compound wall/building wall is an integral part of the building and it had satisfied all the conditions of section 22 of the Act to treat the rental income as “Income from House Property”. However, the AO was not convinced with the said explanation of the assessee for the reason that section 22 of the Act prescribes the following three conditions for taxing any income under the head “Income from House Property”- (a) the property should consists of any building or land appurtenant thereto, (b) the assessee should be the owner of the property, Chaitanya Developers (c) the property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax. The AO further observed that the advertising display was made by the assessee with DP on 18.03.2009 whereas DP was allowed to erect G.I. Sheets Structure from the ground along with periphery/compound boundary of the re-developing property and a temporary advertising wrap can be amounted/put up/installed and be used for displaying commercial advertisement hoardings. Thus the AO observed that the assessee did not let out any building or land appurtenant thereto to the assessee but only provided some space of land to erect a G.I. Sheet for displaying advertisement/hoarding. Therefore, he held that the receipt of hoarding charges was not in the nature of income from house property. Thus the AO brought to tax the hoarding charges of Rs.41,80,000/- under the head “Income from Other Sources”.
4. In appeal, the Ld. CIT(A) observed that the ownership of the said property at Louis Mansion, Mahim consisting of the buildings and the land appurtenant belong to the society only and not with the appellant. As per him the appellant has got limited re-development rights over the property as a result of entering into re-development agreement and it does not have exclusive bundle of rights associated with the ownership of the property i.e. right to posses, right to use and enjoy, right to manage, right to its income and right to alienate the said property. As per the Ld. CIT(A) these rights are vested with the Society only and even the advertisement display agreement specified the appellant as the Chaitanya Developers “developer” of the property and not “owner” of the property. Referring to the audit report, the Ld. CIT(A) observes that the appellant was a developer instead of being owner. Therefore, the Ld. CIT(A) came to finding that the appellant cannot be treated as “owner” for the purpose of annual let out value of the property, including land appurtenant for display of commercial advertisement on the compound boundary of the project at Louis Mansion, Mahim to DP and therefore, the income is to be charged under the head “Income from Other Sources”. Thus the Ld. CIT(A) confirmed the order of the AO in treating the hoarding charges of Rs.41,80,000/- received from M/s Dezens Products under the head ‘Income from Other Sources’.
5. Before u/s the Ld. counsel of the assessee submits that the appellant is the “owner” of the concerned property at Louis Mansion, bearing F.P. No. 1224-A of TPS-IV at Mahim, Mumbai. As per him, this is evident from a copy of conveyance agreement dated 01.04.2005, enclosed at page No. 73 to 86 of the paper book (P/B) filed. Therefore, it is stated that as the appellant is the “owner” of the concerned property, the cause for denial of deduction u/s 24 of the Act is legally unjustified. In this regard reliance is placed by him on the decision in Niagara Hotels & Builders (P.) Ltd. v. CIT 60 taxmann.com 83 (Delhi) (2015), Matru Ashish Co-operative Housing Society Ltd. v. ITO 144 TTJ 446 (Mum) (2012), Kohinoor Industrial Premises Co-operative Society Ltd. v. ITO 173 ITD 263 (Mum) (2018), Citi Centre Premises Co-op. Society Ltd. v. ITO, & 3030/Mum/2018 by SMC Bench, ITAT, Mumbai dated 01.02.2019.
6. On the other hand, the Ld. DR submits that the assessee did not let out any building or land appurtenant thereto to the lessee but only provided some space of land to erect a G.I. Sheet for displaying advertisement/hoarding. Referring to the fact that the assessee received hoarding charges of Rs.41,80,000/- from DP for advertising display on boundary walls only, the Ld. DR submits that the Ld. CIT(A) has rightly confirmed the same as income from other sources.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. A perusal of the conveyance agreement dated 01.04.2005 (page 73 to 86) of the P/B filed by assessee clearly indicates that the appellant is the “owner” of the concerned property at Louis Mansion, bearing F.P. No. 1224-A of TPS-IV at Mahim, Mumbai. The above documents were also filed before the AO. The appellant had obtained development rights of the re-development project at Louis Mansion, Mahim and therefore, is the owner of the re-development rights of the said society. The provisions of section 22 of the Act, defining income from house property reads as under: “22. The annual value of property consisting of any building or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purpose of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head “Income from house property”.