2016 (6) TMI 1239 - AT - Income Tax

Rental income - Income received towards provision of amenities under the head Income from house property - nature of income - let out of property - expenses incurred towards security services and pantry services adjustment - Held that - The assessee has let out the two storey building to only one tenant. The nature of amenities claimed to have been provided consisted of security services, building maintenance, car parking facility, pantry services. The electricity expenses incurred by the assessee are being reimbursed by the tenant. As notice that the security services and pantry services are not germane to the letting of building, but other services are part and parcel of letting of building. Hence the decision rendered by the Hon ble Supreme court in the case of Shambu Investments (2001 (3) TMI 77 - CALCUTTA High Court) shall squarely apply to the assessee. Also agree with the Ld D.R that the principle of res-judicata shall not apply to income tax proceedings. Thus the predominantly, the receipts towards amenities are to be considered as part of rental income only. However, as stated earlier, the expenses incurred towards security services and pantry services are not connected to the rental income and hence they should be deducted from the receipts towards amenities. Accordingly the only net receipts after deduction of above said income should be considered as part of rental receipts. Appeal filed by the assessee is partly allowed.

Summary

Issues involved:
Assessment of income received towards provision of amenities under the head Income from house property.

Detailed Analysis:
1. Background: The assessee appealed against the order upholding the assessment of income received for amenities under the head of Income from house property for the assessment year 2008-09.

2. Contentions: The assessee argued for consistency in treatment based on previous years where business income was not disturbed. The department contended that amenities provided were usual and the income should be treated as house property income.

3. Decision: The CIT(A) upheld the AO's decision citing precedents like National Storage and Shambu Investments Pvt Ltd. The primary object of letting property for rent was considered, leading to the income being taxed as house property income.

4. Further Analysis: The Tribunal noted the amenities provided and differentiated between those connected to letting the building and those that were not. It applied the Supreme Court's decision in Shambu Investments to conclude that most amenities were part of rental income, except security and pantry services expenses.

5. Conclusion: The appeal was partly allowed, with only net receipts after deducting expenses for security and pantry services to be considered as part of rental income. The decision emphasized the primary purpose of property exploitation for rental income and clarified the treatment of specific amenities in the overall income assessment.