PRAKASH DATTA SAMANT,MUMBAI vs. ACIT CEN CIR 20, MUMBAI

1. On the facts and in the circumstances of the case and in law, the Learned Commissioner Of Income Tax (Appeals) erred in confirming the enhancement to the taxable income by Rs.1,99,256/- merely on the basis of agreements mentioning 5% increase every year to the consideration receivable for renting out of property without appreciating the fact that such increment was never realized by the appellant.

Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 07/01/2016 where the assessee contended that increased rent was never received by the assessee and both income, being derived out of house property, were assessable as Income from House Property. However, not convinced, Ld. CIT(A) while upholding enhancement of income concluded that the amenity charges were rightly taxed as Income from Other Sources against which the assessee was entitled to claim security charges of Rs.1.20 Lacs provided the nexus thereof with amenity charges could be established by the assessee before Ld. AO. Aggrieved, the assessee is in further appeal before us.

Per Contra, Ld. Departmental Representative [DR] contended that the onus was on assessee to establish that rental income / amenity charges could not be increased as per contractual terms. The Ld. DR further contended that amenity charges received by the assessee does not partake the character of rental income so as to be assessed under the head Income from House Property.

We have carefully heard the rival contentions and perused relevant material on record. The perusal of contractual terms of respective agreements placed on record reveals that the assessee was entitled for certain increase in the charges every year. At the same time, it is also noted that the receipts of the assessee were subjected to Tax Deduction at Source, the details of which are reflected in Form 26AS. The perusal of Form 26AS reveals that the assessee has received total rental income ITA.No.2886/Mum/2016 Prakash Datta Samant Assessment Year-2011-12 of Rs.36.60 Lacs from two entities against which tax has been deducted at source u/s 194-I for Rs.3.66 Lacs. Prima facie, the assessee has not received any other rental income during impugned AY. The revenue has nowhere controverted the entries of Form 26AS. Therefore, we find strength in the arguments of Ld. AR that the assessee has received only an amount of Rs.36.60 Lacs towards rental income & amenity charges as against Rs.38.59 Lacs as computed by Ld. AO. Therefore, we delete the additional income being computed by the Ld. AO since no addition could be made merely on the basis of doubts, conjectures or surmises without bringing on record any cogent material to substantiate the same. Resultantly, Ground No. 1 of the assessee’s appeal stands allowed.

Ground No. 2 & 3 is related with head under which amenity charges received by the assessee would be assessable to tax. A perusal of Clause-1 of Amenities Agreement dated 21/08/2008 reveals that this agreement was to run concurrently and was to be co-terminus with the Leave & License Agreement of same date. As per Clause-3, the assessee was required to provide services of maintenance, upkeep, cleanliness, security services and other general services that may be required by the user. As per Clause-4(c), the assessee could terminate the agreement in the event of non-payment of amenity fees for two consecutive months and in that event, lease and license agreement was also liable and considered to be terminated. Upon perusal of these clauses, we find that the two agreements were linked together and part and parcel of the same transactions. The prescribed amenities could not be provided by the assessee independently to the tenants and was co- terminus with lease and license agreement. Further, a bare perusal of ITA.No.2886/Mum/2016 Prakash Datta Samant Assessment Year-2011-12 nature of services, prima facie, reveals that the said services were of general in nature which is usually provided by the landlord to the tenant. Therefore, amenity charges, in our opinion, being part and parcel of same transaction, were assessable as Income from House Property. Our view is further fortified by the cited order of the Tribunal where similar view has been taken and which has nowhere been controverted by the Ld. DR before us. Therefore, we hold that the amenity charges earned by the assessee were assessable under the head Income from House Property against which the assessee was entitled for statutory deduction of 30%. Resultantly, this ground of assessee’s appeal also succeeds.

In nutshell, the assessee’s appeal stands allowed. Order pronounced in the open court on 01st November, 2017.