ACIT, CHENNAI vs. TAMILNADU REAL ESTATES PVT LTD., CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-11, Chennai, dated 29.12.2016 and pertains to assessment year 2009-10. The assessee has filed cross-objection against the very same order of the CIT(Appeals). Therefore, we heard both the appeal and the cross-objection together and disposing of the same by this common order.

Smt. Tirupurasundari, the Ld. Departmental Representative, submitted that the assessee derived rental income from three buildings and offered the same under the head “income from house property”. However, in the Profit & Loss account, the assessee has debited an amount of `1,07,02,526/- and `12,82,606/- towards repairs and maintenance for building and electrical equipments.

On the contrary, Shri G. Sitharaman, the Ld. representative for the assessee, submitted that in respect of rental income received by the assessee, the same was offered under the head “income from house property”. According to the Ld. representative, other than receiving rental income, the assessee is also income from maintaining a building called Ispahani Centre at door No.123/124, Nungambakkam High Road, Chennai-34. This building was occupied by several business entities. The property was owned by several landlords and the assessee is owning a part of property. However, according to the Ld. representative, the entire building was maintained by the assessee. There was an agreement for maintaining the common area, providing common facilities to all the tenants. The assessee was recovering maintenance charges for the purpose of providing facilities like security, common area maintenance, etc. An identical issue came before this Tribunal for assessment year 2007-08 in the assessee's own case in I.T.A.

Referring to the agreement of the assessee, the Ld. representative for the assessee submitted that the tenants agreed to pay maintenance charges on pro rata basis of the portion which is under the occupation, for providing common facilities such as security, maintaining common area, providing common facilities such as security services, lift maintenance, firefighting equipments and other utilities. The Ld. representative further submitted that the maintenance agreement was also executed, a copy of which is already available on record. As per the maintenance agreement, the landlords of multistory commercial complex known as Ispahani Centre appointed the assessee-company as a contractor for maintaining and upkeeping the common facilities. Therefore, according to the Ld. representative, the maintenance charges received by the assessee is in the nature of business, hence, the expenditure claimed by the assessee for maintaining building as contractor has to be allowed.

We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee is one of the co-owners of the building known as Ispahani Centre at door No.123-124, Nungambakkam High Road, Chennai-34. All the landlords executed maintenance agreement independently with the assessee for maintaining the building and to provide common facilities. The assessee being owner of a part of the building, has undertaken to maintain the building on behalf of the owners. Therefore, as rightly submitted by the Ld. representative for the assessee, the separate contract entered into by the assessee with other owners of the building is business in nature, therefore, the expenditure claimed by the assessee for maintaining the building in respect of common facilities and providing securities, etc. has to be allowed. After considering the agreement, this Tribunal for the assessment year 2007-08, remitted back the matter to the file of the Assessing Officer. The Assessing Officer disallowed 10% of the expenditure incurred by the assessee. Therefore, for the sake of consistency, the expenditure of the assessee to the extent of 10% can be disallowed for this year also. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Now coming to the cross-objection filed by the assessee, the only issue raised by the assessee is with regard to reopening of assessment.

We have considered the rival submissions on either side and perused the relevant material available on record. The assessment was reopened within a period of four years, therefore, as rightly found by the CIT(Appeals), the Assessing Officer issued notice under Section 148 of the Act for considering the claim of the assessee. Therefore, the CIT(Appeals) has rightly upheld the reopening of assessment under Section 147 of the Act. In view of the above, the order of the CIT(Appeals) is confirmed.

In the result, both the appeal of the Revenue and the cross- objection of the assessee stand dismissed.