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2017 (9) TMI 572 - AT - Income TaxNature of income - rent received from mobile towers - income from house property OR income from other sources - AO disallowed 30% deduction - Held that - As in the case of M/s. Bajaj Bhavan Owners Premises Co-op Society Ltd. 2012 (10) TMI 179 - Bombay High Court held that rent received from mobile towers had to be treated as income from house property, that in the contract there was no obligation on part of the owner with regard to repairs and maintenance of the terrace, that on terrace there were no rooms/structure, that only a portion of terrace had been rented out, that the assessee was entitled for deduction of 30%. FAA has correctly allowed the appeal of the assessee Rent credited to the capital account of the assessee in his proprietary concern - amount over and above the rental income offered to tax - addition to total income after granting deduction of 30% u/s. 24(a) - Held that - We find that the assessee had shown rental income from Mobile Towers of ₹ 4. 51 lakhs, that it included the disputed amount of ₹ 1. 85 lakhs. If the amount in question was already offered for taxation, then there was no justification for taxing it again. We agree with the FAA that AO had not properly understood the entries in the books of account. Confirming the his order, we decide second ground of appeal against the AO. Addition under the head income from house property - computation to taxable rent - Held that - As gone through the registered leave and license agreement. We find that assessee owned several properties, residential as well as commercial in Kalyan, that the AO had estimated the ALV of all the properties by adopting the highest rent(Rs. 238/-per sq. ft. ), that no comparable instance of property located in same building /area and having higher rent than the rent received by the assessee was brought on record. It is also a fact that the actual rent received by the assessee is substantially higher than the rateable value as per the local authority i. e. Kalyan-Dombivili Municipal Corporation (KDMC). The AO had not alleged that the assessee had received any amount over and above the rent received in pursuance of the leave and license agreement. - The AO has estimated the house property income without any basis and ignoring the principles enumerated in Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT) and Akshay Textiles and Trading Agencies (P. ) Ltd. (2007 (10) TMI 251 - BOMBAY HIGH COURT ) - Decided against revenue
Issues Involved:
1. Treatment of income from mobile tower rent. 2. Deletion of addition of ?1.29 lakhs. 3. Deletion of addition of ?97.46 lakhs under the head income from house property. Issue-Wise Detailed Analysis: 1. Treatment of Income from Mobile Tower Rent: The first ground of appeal concerns the treatment of ?4.51 lakhs received from Mobile Tower Company. The Assessing Officer (AO) classified this income under 'income from other sources' instead of 'income from house property,' disallowing the 30% deduction claimed by the assessee under section 24(a) of the Act. The First Appellate Authority (FAA) referred to the case of M/s. Bajaj Bhavan Owners Premises Co-op Society Ltd. and held that the rent received from mobile towers should be treated as 'income from house property,' allowing the 30% deduction. The ITAT upheld the FAA's decision, citing the Hon'ble Bombay High Court's judgment, and decided the first ground of appeal against the AO. 2. Deletion of Addition of ?1.29 Lakhs: The second ground of appeal pertains to the addition of ?1.29 lakhs by the AO, who found that ?1.85 lakhs credited as rent to the capital account of the assessee's proprietary concern, M/s. Sab Reality, was not included in the computation of income. The FAA concluded that the disputed amount was part of the Mobile Tower Rent already offered for taxation and deleted the addition, stating that the AO misunderstood the accounting entries. The ITAT agreed with the FAA, confirming that the amount was already taxed and there was no justification for taxing it again, thus deciding the second ground of appeal against the AO. 3. Deletion of Addition of ?97.46 Lakhs under the Head Income from House Property: The third ground of appeal involves the deletion of ?97.46 lakhs added by the AO, who applied the highest rent of ?238 per sq. ft. to the total area of all properties, resulting in a taxable rent of ?1.32 crores. The FAA found that the properties were located at different places with distinct features and advantages, and the AO was not justified in applying the highest rent to all properties. The FAA noted that the AO did not provide any evidence of higher rent received or examine any tenants. The ITAT upheld the FAA's decision, referencing the Hon'ble Bombay High Court's rulings in Tip Top Typography and Akshay Textiles and Trading Agencies (P.) Ltd., which emphasize that the annual letting value should be based on reasonable rent, not inflated or deflated figures. The ITAT confirmed that the AO's estimation lacked basis and ignored legal principles, thus deciding the last ground of appeal against the AO. Conclusion: The ITAT dismissed the appeal filed by the AO, confirming the FAA's decisions on all grounds and pronouncing the order in the open court on 6th September, 2017.
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