BIMANAGAR CO.OP.HSG.SO.LTD.,,AHMEDABAD vs. THE INCOME TAX OFFICER,WARD-7(2),, AHMEDABAD

Briefly stated, the relevant material facts are like this. The assessee is a cooperative housing society. During the relevant previous year, the assessee received Rs.16,00,000/- from M/s Selvel Media Services Pvt. Ltd., in respect of hoarding rent. These hoardings, as is the claim of the assessee, are built on common land owned by the society. The assessee treated the hoarding rent receipts as income taxable under the head “income from house property”, and, accordingly claimed deduction under section 24(a) of the Act @ 30% of the annual value. The Assessing Officer, however, declined this claim by observing that “these hoardings are erected in the ground adjacent to satellite Road and there is no building nearby. Meaning thereby that the land on which there hoardings are erected cannot be termed as ‘land appurtenant thereto”. The Assessing Officer, in the impugned assessment order, further observed as follows :- “Admittedly, these hoardings erected by the said M/s Selvel Media Services (P) Limited are in the back yard of some of the buildings owned by the members of the assessee society for their own residence. The core issue is whether the receipts in the hands of the assessee society can be taxed under the head income from house property. Section 22 of the Act reds as ‘22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes 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’ Thus, it is clear that unless the property owned by the assessee is of such nature as could be let out, the charge under section 22 cannot be attracted. In other words, if the property is of such nature that it is inherently incapable of being let out and the assessee is the owner thereof, then the charge under section 22 cannot arise. In the case of the assessee co-operative society, the residential buildings are owned by the members and not by the society. Therefore, the assessee society is not in a position to let out the residential buildings which are owned by the members. Then how can the land on which hoardings are erected be termed as land appurtenant thereto. The assessee co-operative society is neither owner of the residential buildings constructed on the land on which

Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without any success. Learned CIT(A), while confirming the action of the Assessing Officer, opined as follows :- “I have carefully considered the assessment order and the submission made by the appellant during the course of appellate proceedings. The Assessing Officer has disallowed the claim of the appellant treating the payment received from Selvel Media Services (P) Limited for number of hoardings erected on common land owned by the society as income from house property. The Assessing Officer held that since the appellant society did not own the residential building, it cannot let out the residential building owned by the members and, therefore, the rent derived from the hoardings cannot be termed as having been derived from the land appurtenant thereto. The appellant has claimed that it was the owner of the land and all the residential units. The members have only been allotted the flats for use and they are not the absolute owners. Further, the hoardings have been put up in the backyard of some of the residential units which was the society land, and therefore, the hoarding were on the land appurtenant to building. The claim of the appellant is not acceptable. The appellant has not let out the land or any building from which it is deriving any income. The income is being derived by giving permission for installing the hoarding in the compound. The appellant has not given right of user of land to the advertising company. The income earned therefrom will therefore be not the income from letting out of land or building and, therefore, it cannot be assessed as house property income. The hoardings cannot be treated as part of the building and, therefore, the income can be assessed only as income from other sources. The reliance is also placed on the decision of Calcutta High Court in the case of Mukherjee Estate (P) Ltd. (224 ITGR 1). He ground of appeal is, therefore, dismissed.”

The assessee is not satisfied and is in further appeal before me. 6. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 7. I find that, as learned Counsel for the assessee rightly points out, the assessee Society is a tenement co-operative housing society, in which ownership of the land and building vests in the society itself, and not the member of society. This legal distinction, in principle, in recognized by Hon’ble jurisdictional High Court in the case of Mulshankar Kunwerji Gor and others vs. J.S. Judga [AIR 1980 Guj. 62]. The very foundation of stand taken by the authorities below is thus legally unsustainable. Coming to the connotations of “land appurtenant thereto” in the expression ‘building or land

In the present case also, the consideration received by the assessee is for the right to install the hoarding rather than rent for hoarding installed by the assessee. The above observations are thus equally valid in the present context. 9. In view of the above discussions, as also bearing in mind entirety of the case, I hold that the income earned by the assessee, in consideration of having given rights to have play hoardings etc. are taxable as income from house property. Accordingly, deduction under section 24(a) was indeed admissible in the present case. I direct the Assessing Officer to allow the deduction under section 24(a), as claimed by the assessee. The assessee gets the relief accordingly. 10. In the result, the appeal is allowed in the terms indicated above. Pronounced in the open court today on the 22nd day of September, 2017.