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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: & & &
These cross appeals are arising out of the order of CIT(A)-37, Mumbai, in appeal No. CIT(A)-37/IT-3/JCIT 25(2)/2015-16 dated 27.07.2016. The Assessment was framed by the Jt. Commissioner of Income Tax, Circle-25(2), Mumbai (in short ‘JCIT’) for the A.Y. 2012-13 & 5886/Mum/2016 vide order dated 04-03-2015 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is regards to the order of CIT(A) directing the AO to allow municipal taxes against income from other sources under section 57(iii) of the Act instead of income from house property. For this Revenue has raised the following two grounds: -.
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing municipal taxes against 'Income from Other Sources' u/s.57(iii) instead of 'Income from House Property' ignoring that the municipal taxes are paid in respect of the house property and thus are directly related to the House Property on which income is earned."
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring that the municipal taxes are to be deducted from 'Income from House Property' u/s 23 and not from "Income from Other Sources' and hence not covered u/s 57(Hi) of the Income-tax Act, 1961"..”
Brief facts are that on verification of accounts of the assessee the AO noted that, it has declared income from house property showing gross rental income at ₹ 16,54,93,212/- i.e. income received from lease and amenity charges from let out of its property situated at Vile Parle, Mumbai. The assessee firm entered into two different agreements with HSBC Bank for the lease rentals and amenity charges separately for letting out its property at Vile Parle, Mumbai. Lease agreement is entered dated 28-02-2007 for ground floor to 5th floor and on 28-03-2008 for 6th floor with HSBC bank. As per clause No. 5 of the said agreement the & 5886/Mum/2016 assessee firm received a rent of ₹ 7.32 crore per annum for letting out the said property. Similarly, the amenity agreement is also entered on 02-03- 2007 and as per amenities agreement the amenity charges received from HSBC bank by assessee was ₹ 8,04,79,212/- per annum for maintaining the property. The assessee has not bifurcated the rental income and amenity charges, but treated the nature of income under head of income from house property and claimed the deduction of Municipal Taxes at ₹ 1,73,14,846/-. The AO treated the amenity charges of ₹ 8,04,79,212/- received from HSBC bank as income from other sources instead of declared by assessee as income from house property and disallowed the claim of property taxes i.e. Municipal Taxes. Aggrieved assessee preferred the appeal before CIT(A), who allowed the claim of the assessee by relying on the order of AY 2009-10 of CIT(A) by observing in Para 7.1 as under: -
“7.1 The facts in the year under consideration are similar to the case of assessee for A.Y.2009-10 as also the submission of the assessee in this regard. Therefore, keeping in view of the principles of judicial consistency, the action of the AO in5diing the receipt pursuance to the amenities agreement treated as income fr3y"other sources is upheld. However, the AO is directed to compute the income om house property and income from other sources for the year under consideration in the manner directed by Predecessor in the assessee's case for A.Y.2009-10. Accordingly, this ground or appeal is treated as partly allowed.”
Aggrieved Revenue is in appeal before Tribunal.
At the outset, the learned Counsel for the assessee stated that this issue is squarely covered against assessee and in favour of revenue by ITA No. 5780 & 5886/Mum/2016 Tribunal’s decision in assessee’s own case for AY 2009-10 in & 170 /Mum/2012 order dated 29-05-2015, whereby the Tribunal vide Para 13 has allowed the Revenue’s appeal by observing as under: -
“13. We have given a thoughtful consideration to the rival submission and have carefully perused the orders of the authorities below. As discussed elsewhere, we have held that the amenities charges have to be taxed under the head of 'income from other sources'. Section 57(iii) shows that any other expenditure not been in the nature of capital expenditure lead out of expanded wholly and exclusively for the purpose of making or earning income which is taxed under the head 'income from other sources'. In our considered opinion, payment of municipal taxes cannot be said to be let out or expanded wholly and exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head 'income from house property'. We. therefore, find that the finding of the Id. CIT(A), in allowing the municipal taxes deductible as erroneous. We set aside the findings of the ld. CIT(A) and confirm that of the A.O. Ground Nos. I and 2 are accordingly allowed.”
At the time of hearing, the learned Counsel fairly conceded the position.
After hearing the rival contentions and going through the facts, we find that the issue is squarely covered in favour of Revenue and against assessee. Respectfully following the Tribunal’s decision in assessee’s own case, we restore the order of the AO. Similar is the position in AY
ITA No. 5780 & 5886/Mum/2016 2010-11 in & 4583/mum/2014, wherein the Tribunal vide order dated 20-01-2016 restored the order of AO. Hence this issue of Revenue’s appeal is allowed.
6. Coming to assessee’s appeal, the only issue is as regards to the order of CIT(A) confirming the order of AO in giving treatment to income received in respect of amenities agreement of leased premises. For this assessee has raised the following two grounds: -
“1. The Commissioner of Income-tax(Appeals)- 37. Mumbai (ClT (A)") erred in directing the Joint Commissioner of Income-tax- 25(2), Mumbai ('A.O ") in treating income received in respect of the Amenities Agreement with the lessee of the premises tinder the head 'Income from Other Sources' instead of 'Income from House Property% as claimed by the Appellant.
2. In the facts and circumstances of the case and in law, the CIT (A) ought to have held that such income received under the Amenities Agreement was assessable under the head 'Income from House Property' only, along with the rental income received under the Lease Agreement with the lessee for the same premises.”
7. Without prejudice also the assessee has also raised the following two grounds: -
““1. The CIT(A) ought to have considered that if at all any part of the amount received under the Amenities Agreement is ascribed to its obligation to carry out repairs etc., the same must be treated as & 5886/Mum/2016 receipts in advance, to be set off against such expenditure in future years.
The appellant therefore prays that such receipts under the Amenities Agreement be directed to be treated as ‘receipts in advance’ and not as ‘income’
At the outset, the learned Counsel for the assessee stated that the Tribunal in earlier years in & 170 /Mum/2013 order dated 29-05-2015 for AY 2009-10, exactly on identical issue has confirmed the action of the AO vide Para 5 to 7 including contention of alternate argument of the assessee as under: -
“5. Per contra, the ld. DR strongly supported the orders of the Revenue authorities. After giving a thoughtful consideration to the rival submissions, we have carefully perused the orders of the authorities below. It is not in dispute that the assessee has entered into two separate agreements, one for lease rental and the other for amenities. On going through the amenities agreement, the only amenity to be provided by the lessor to the lessee was in respect of structural repairs to the building let out and to pay municipal and property taxes in respect of the let out property. We fail to understand how these can be termed as amenities in respect of the letting out property. Even if the property is not let out, the assessee has to incur expenditure towards repairs and maintenance of the said property and also to pay municipal taxes. It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the & 5886/Mum/2016 property. The cases relied upon by the ld. Counsel are totally misplaced and not matching the facts of the case in hand. Considering the fact in totality, we do not find any error in treating the amenity charges under the head ‘income from other sources’. Ground No. 1 is accordingly dismissed.
Ground No. 2 is an alternate plea by which the assessee has claimed that the amenities charges received by it should be treated as advance. It is the claim of the assessee that amenity charges should be treated as advance, as it runs through the period of lease. Therefore for the year under consideration, the amenity charges should be treated as advance.
We do not subscribe to this claim of the ld. Counsel. The amenity charges have been received by the assessee as per the agreement and the same has to be taxed under the head ‘income from other sources’ as held hereinabove. The alternate claim of the assessee is accordingly dismissed.’ Respectfully following the Tribunal’s decision in assessee’s own case, we confirm the order of the AO and this appeal of the assessee is dismissed.
In the Result, the appeal of the assessee is dismissed and that of the revenue is allowed.
Order pronounced in the open court on 16-03-2018.