2017 (8) TMI 752 - HC - Income Tax

Nature of receipt towards Rent and maintenance charges - treatment as income - whether the amount received in trust for a specific performance and therefore should not be treated as an income in the hands of the Assessee - Held that - This Court having decided the issue of maintenance charges in favour of the Revenue and against the Assessee for AY 2007-08 there is no reason particularly without any change in the circumstances in the present AY i.e. 2008-09 for the Court to take a different view in the matter as far as the maintenance charges are concerned. Treatment of ground rent - Held that - The Court finds that the decisions of the ITAT and even the decision of this Court for AY 2007-08 did not specifically deal with the issue of ground rent. They appear to have treated both the maintenance charges and ground rent alike whereas the decisions of the ITAT in favour of the Assessee even for the earlier AYs were specific to the issue of maintenance charges and not ground rent. Consequently the impugned orders of the ITAT the CIT (A) as well as the AO on the issue of ground rent for this AY 2008-09 is hereby set aside and the said issue is remanded to the file of the AO for re-determination in accordance with law after examining the accounts of the Assessee and any further evidence that may be led on this issue by the parties.

Summary

Issues:
1. Date confusion regarding the impugned order of ITAT.
2. Treatment of maintenance charges and ground rent as income.
3. Appeal's timeliness.
4. Justification of ITAT's confirmation of CIT's order.
5. Treatment of ground rent and maintenance charges.
6. AO's decision on ground rent and maintenance charges.
7. Appeal's disposal and costs.

Issue 1: Date Confusion Regarding ITAT Order
The Revenue appealed against ITAT's order for AY 2008-09, raising concerns about the treatment of maintenance charges and ground rent. The confusion arose regarding the date of the impugned ITAT order, with the Revenue citing 19th December 2014, which dealt with interest income from tax refunds, not the issue at hand. A Third Member opinion supported treating interest as income. However, for ground rent and maintenance charges, there was no difference of opinion among ITAT members. The final view on this issue was formed on 11th February 2014.

Issue 2: Treatment of Maintenance Charges and Ground Rent
The Assessee received maintenance charges and ground rent from plot allottees, claiming they are not part of its income. The AO added these amounts back to the Assessee's income, leading to an appeal. The CIT (A) referred to earlier ITAT decisions favoring the Assessee and directed deletion of the sums. The ITAT upheld this decision, citing past favorable rulings for the Assessee. However, a previous Court decision favored the Revenue regarding maintenance charges for AY 2007-08. Hence, the ITAT's order on maintenance charges for AY 2008-09 was set aside, restoring the AO's treatment. The issue of ground rent was remanded for further examination.

Issue 3: Appeal's Timeliness
The Revenue argued that the appeal, filed on 30th May 2015, was not time-barred as the final ITAT order was received on 30th January 2015. Section 260 A (1) of the Income Tax Act was cited to support the appeal's timeliness, resolving the issue of limitation. The Court proceeded to address the appeal on its merits.

Issue 4: Justification of ITAT's Confirmation
The question framed for consideration was whether ITAT was justified in confirming the CIT's order regarding maintenance charges and ground rent. The Assessee's projects involved borrowing funds, with interest credited to specific funds. The issue focused on the treatment of ground rent and maintenance charges collected from allottees in a housing scheme. The AO's rejection of the Assessee's explanation led to the addition of these amounts to income, which was later challenged and decided in favor of the Revenue.

Issue 5: Treatment of Ground Rent and Maintenance Charges
The Assessee's treatment of ground rent and maintenance charges differed, with the Assessee arguing that ground rent was held for the Government of NCT of Delhi and not considered income. The Revenue contended that both charges should be treated similarly for tax purposes. The Court noted a lack of detailed examination on this issue by previous authorities and remanded the matter to the AO for re-determination based on the Assessee's accounts and further evidence.

Issue 6: AO's Decision on Ground Rent and Maintenance Charges
The AO's decision to treat ground rent and maintenance charges as income was challenged by the Assessee, leading to various appeals and counter-arguments. Previous decisions favored the Assessee on maintenance charges but lacked specific consideration of ground rent. The Court set aside the ITAT's orders on ground rent for AY 2008-09, requiring a fresh determination by the AO.

Issue 7: Appeal's Disposal and Costs
The Court answered the question on maintenance charges in favor of the Revenue but remanded the issue of ground rent for further examination. The appeal was disposed of accordingly, with no order as to costs, concluding the legal judgment.

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