2016 (4) TMI 403 - HC - Income Tax

Maintenance charges - AO adding a sum received as maintenance charges to the income of assessee for the reason that the agreement entered into for providing the services was a collusive agreement with a view to divert the rental income because the maintenance charges are an integral part of the licence agreement - CIT(A) and ITAT deleted the addition - Held that - The CIT(A) as well as the Income Tax Appellate Tribunal have recorded a concurrent finding of fact that both the Companies are separate and the respondent assessee company is the service provider and has installed various equipments including lift, generators for the building in question and a separate agreement was entered with the tenant for providing the maintenance. No reason to include the income of maintenance charges earned by M/s. IHDP Home Interiors Exports Parks Pvt. Ltd. who is a separate assessee, in the hands of the assessee-company. - Decided against revenue

Summary

Issues:
Appeal against dismissal of revenue's appeal by Income Tax Appellate Tribunal for Assessment Year 2009-10 regarding addition of maintenance charges to assessee's income.

Analysis:
The judgment involves an appeal against the dismissal of the revenue's appeal by the Income Tax Appellate Tribunal concerning the addition of maintenance charges to the assessee's income for the Assessment Year 2009-10. The assessee company, a holding company, received rental income from a self-occupied property, while its subsidiary company provided maintenance services to the tenant and received charges for the same. The assessing officer added the maintenance charges to the assessee's income, alleging a collusive agreement to divert rental income. However, the Commissioner of Income Tax (Appeal) deleted the addition, and the Income Tax Appellate Tribunal upheld this decision.

The Tribunal found that both the assessee company and its subsidiary, providing maintenance services, were separate entities and income-tax assessees. It was noted that the maintenance charges were paid to the subsidiary under a separate agreement, and the equipment installed in the premises belonged to the service provider, not the assessee company. The Tribunal highlighted that similar income treatment was accepted in subsequent assessment years, indicating consistency in the assessee's operations. The Tribunal rejected the revenue's arguments, stating that no evidence of collusive agreements was presented, and previous decisions cited did not support the revenue's position.

The appellant contended that the Tribunal failed to consider the Assessing Authority's findings regarding the diverted sum. However, the High Court disagreed, affirming the concurrent findings of fact by the CIT(A) and the Tribunal. The Court emphasized that the Tribunal's decision was based on a thorough evaluation of the facts, without any apparent errors or perversity. Consequently, the Court concluded that no substantial question of law arose from the Tribunal's order and dismissed the appeal.

In conclusion, the judgment upholds the decisions of the CIT(A) and the Income Tax Appellate Tribunal, emphasizing the separation of entities, lack of collusive agreements, and consistent treatment of income in subsequent years. The Court found no merit in the revenue's arguments and dismissed the appeal, affirming the Tribunal's decision regarding the addition of maintenance charges to the assessee's income for the Assessment Year 2009-10.