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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, dated 6-12-2012, for the assessment year 2009-10, wherein the assessee is aggrieved for treating income from house property as income from other sources in respect of amenities provided by the assessee.
Rival contentions have been heard and record perused. The facts of the case are that the assessee has let out office premises at Gr. Floor, Saarathi Building, Hanuman Road, Vile Parle (E), Mumbai. The assessee had entered into two separate agreements i.e. one for license fee and other for amenities, charges receivable. The total rent plus amenities charges received by the assessee was Rs.86,25,000/- out of which Rs.36 2 lakhs was received as per the amenities agreement in respect of the amenities provided as per annexure "A" of the- Amenities agreement dated 05-06-2006. Amenities provided as mentioned in annexure "A" of the amenities agreement are as under :-
1. 1. To help in obtaining all the necessary licenses and the premises from BMC and other Government authorities 2. Liaison with local government authorities, BMC for smooth running of business of user.
3. Liaison with - Electrical & water authorities for uninterrupted and. smooth supply of water and electricity 4. Perform and carry out the all the above listed work in a good and workmanlike manner and to the best of amenities provider's abilities 5. Separate entrance gate 6. Open parking provision" Looking to the nature of the amenities mentioned as per Annexure A of the amenity agreement, the AO asked the assessee to explain why the receipts as per amenities agreement may not be taxed under the head income from other sources instead of income from house property. In response to the same the assessee stated that the premises could not be let out without the amenities and hence the receipts as per amenity agreement cannot be treated as income from other sources. However, the AO did not agree to the contentions of the assessee on the grounds that the receipts as per amenities were specifically for providing certain services to the tenant but not from letting out of any premises and hence the receipts as per amenities agreement was not assessable under house 3 property. Accordingly he treated sum of Rs.36 lakhs as income from other sources.
By the impugned order the CIT(A) confirmed the action of AO, against which the assessee is in further appeal before us.
We have considered rival contentions and carefully gone through the orders of authorities below and found that the nature of amenities so provided by assessee flows out of the rent agreement itself. That all amenities are integral part of the Property rented. Just because there is separate agreement, it does not lead to the conclusion that it is to be assessee separately as income from business. It is not uncommon to provide these amenities along with the rented premises, and it is not the case that these are provided as per specific requirements of the tenants business. Keeping in view the nature of the rent agreement, the amenities provided by the assessee are to exploit the property in most profitable manner, and as the agreement itself states for the smooth running of the business of the user. From the plain reading it is very obvious that the amenities to be provided are very basic and without which it would be impossible to use the premises, which are, supply of continuous water and electrical supply, parking, entrance and liaisioning for the same.
The ITAT Mumbai bench in the case of Narendrapal Gupta, ITA No.3269/Mum/2013, order dated 3-2-2016, held as under :- “6. Having heard the rival contentions, we are of the view that there is merit in the contentions of the assessee. It is a well settled proposition of law that substance will prevail over the form. We have noticed that the assessee has entered into two separate agreements while leasing out the premises, viz., one for leasing out the premises and another one for leasing out furniture and fixtures.
4 The lease agreement entered for leasing out the furniture and fixtures contains a list of items covered by it. A perusal of the said list would show that they are amenities attached with the building only. For the sake of convenience, we extract below the list of items which have been named as “furniture and fixtures”: “i. Two lockable single Wardrobes in every room; ii. Modular Kitchen in Kitchen; iii. Water Purifier (with 24 months warranty); iv. Sliding covering Niche Areas in each Bedroom; v. Intercom system; vi. Installation of Safety grills on all windows in the said building; vii. Provision of one-liter hot water instant Geyserin Bathrooms (with 24 months warranty); viii.Tube lights and fans; ix. Plaster of paris work done in the flats; x. Stilt Car Parking spaces : 9 (nine )Nos.; xi. Open car parking spaces: 60 (sixty) Nos. xii. 24 hrs Security Guards presence at the compound’s main gate, at the ground floor lobby entrance the building and in the car parking areas. There would be 3 guards of M/s Trig……Ltd working 8 hours shift each at the entrance of lobby of the building….” A careful perusal of the details given above would show that they are in the nature of amenities only and hence, in our view the decision rendered by the Hon’ble Hyderabad Bench of the Tribunal in the case of G Raghuram (supra) shall squarely apply to the facts of the present case. In addition to the above, we notice that the Co- ordinate Benches of the Tribunal has also taken identical views in the case of Unique Construction and Developers (supra) and also in the case of Mrs. Manju Gupta (supra). Accordingly, we are of the view that the lease rent received by the assessee for the building as well as furniture and fixtures, which are in the form of amenities only, should be assessed as income under the head “Income from House Property”.
7. Accordingly, we set aside the order of ld. CIT(A) and direct the AO to assess the entire lease rental income received under both the agreements as income under the head “Income From House Property”.
8. In the result, the appeal filed by the assessee is allowed. 6 Similarly, Hon’ble Bombay High Court in the case of J.K.Investors (Bom) Ltd., 25 taxmann.com 12, held that where services charges are found to be profit under service agreement in respect of staircase of 5 building, lift, common entrance and where these services were not separately provided but went along with occupation of property, the amount received as service charges was a part of rent received and subjected to tax under the head ‘income from house property’.
As per the terms of the agreement dated 5-6-2006, providing such amenities, we found that same are integral part of the rent. Respectfully following the order of the coordinate bench and hon’ble jurisdictional High Court as discussed above, we do not find any merit for taxing the amenities income as income from other sources in place of income offered by the assessee under the head income from house property.
In the result, appeal of assessee is allowed. Order pronounced in the open court on this 10/05/2016. Sd/- Sd/- (AMARJIT SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 10/05/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. सत्मावऩत प्रनत //True Copy// आदेशाि सार/ BY ORDER,