2015 (6) TMI 757 - AT - Income Tax

Income received towards amenities - income from other sources or income from house property - Held that - On going through the amenities agreement, the only amenity to be provided by the lessor to the lessee was in respect of structural repairs to the building let out and to pay municipal and property taxes in respect of the let out property. We fail to understand how these can be termed as amenities in respect of the letting out property. Even if the property is not let out, the assessee has to incur expenditure towards repairs and maintenance of the said property and also to pay municipal taxes. It appears that by separately charging in the guise of amenities charges, the assessee wanted to reduce the liability to property tax which is based on the rental income of the property. The cases relied upon by the ld. Counsel are totally misplaced and not matching the facts of the case in hand. Considering the fact in totality, we do not find any error in treating the amenity charges under the head income from other sources . - Decided against assessee. Addition on rent received - difference in TDS certificate and computation of total income - Held that - We do not agree with this claim of the assessee as the method of accounting is only in respect of profits and gains of business or profession or income from other sources. The reconciliation statement filed before us is also not convincing as the assessee is required to compute the income as per the provisions of the law. The undisputed fact is that the assessee has received rent of ₹ 11,87,27,690/- and the same has to be treated as income of the assessee. Therefore, we do not find any reason for not making an addition of ₹ 4,00,697/- - Decided against assessee. Liability of municipal taxes - allowable as income from other sources or income from house property - Held that - Section 57(iii) shows that any other expenditure not been in the nature of capital expenditure lead out of expanded wholly and exclusively for the purpose of making or earning income which is taxed under the head income from other sources . In our considered opinion, payment of municipal taxes cannot be said to be let out or expanded wholly and exclusively for the purpose of earning amenity charges, as these municipal taxes are directly related to the letting out of the property, the rental income from which is taxed is under the head income from house property . We, therefore, find that the finding of the ld. CIT(A), in allowing the municipal taxes deductable as erroneous. We set aside the findings of the ld.CIT(A) and confirm that of the A.O. - Decided in favour of revenue. Expenditure claimed in respect of cinema theatre to arrive at the business loss on cinema theatre - CIT(A) restricted the claim of expenditure at ₹ 1,86,47,691/- and directed the balance to be treated as capital expenditure - Held that - We have carefully perused the documentary evidences brought on record before us and referred to. In our considered opinion, there appears to be conflict in these documentary evidences, therefore, in the interest of justice, we restore this issue to the file of the A.O. The A.O. is directed to verify whether the Cinema Theatre was fit for use after considering the report from the office of Commissioner of Police, Mumbai as brought on record by the ld. AR. The A.O. is directed to decide the issue afresh after giving reasonable and fair opportunity to the assessee. - Decided in favour of revenue for statistical purposes..

Issues:
1. Classification of income received in respect of amenities under 'income from other sources' instead of 'income from house property.'
2. Treatment of amenities charges received as advance.
3. Addition of unexplained income difference in the computation.

Issue 1 - Classification of Income:
The appellant contested the Assessing Officer's decision to treat amenities charges under 'income from other sources' instead of 'income from house property.' The appellant argued for a nexus between lease receipt and amenities agreement, citing legal precedents. However, the tribunal upheld the AO's decision, emphasizing the nature of amenities provided and the attempt to reduce property tax liability. The tribunal dismissed the appeal, ruling the charges as 'income from other sources.'

Issue 2 - Treatment of Amenities Charges:
The appellant's alternate plea to treat amenities charges as advance payments was rejected by the tribunal. The charges were deemed as income from other sources based on the agreement terms, leading to the dismissal of the alternate claim.

Issue 3 - Addition of Unexplained Income Difference:
Regarding the unexplained income difference in the computation, the tribunal upheld the AO's decision to add the amount to the appellant's income. The appellant's argument based on cash system accounting was refuted, emphasizing the need to comply with income computation laws. The tribunal dismissed the appeal, affirming the addition to the income.

Revenue's Appeal - Issue 1 - Municipal Taxes Deduction:
The Revenue challenged the allowance of municipal taxes against income from other sources. The tribunal disagreed with the CIT(A)'s decision, stating that municipal taxes were not directly related to earning amenity charges. The deduction was disallowed, aligning with the AO's stance.

Revenue's Appeal - Issue 2 - Expenditure Claim on Cinema Theatre:
The Revenue contested the CIT(A)'s direction to allow remaining expenditure on the cinema theatre. Discrepancies in documentary evidence led the tribunal to remand the issue to the AO for verification. The tribunal directed a reevaluation of whether the cinema theatre was fit for use, considering conflicting evidence presented.

In conclusion, the tribunal dismissed the appellant's appeal while partially allowing the Revenue's appeal for statistical purposes. The judgment highlighted the importance of accurately classifying income and expenditures, emphasizing compliance with tax laws and the need for thorough verification in contentious issues.

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