2018 (8) TMI 1189 - AT - Income Tax

Income from house property - assessee had received rental receipts as well as maintenance charges from lessees. Assessee had shown its income under the head income from business/profession - AO took the view that though it was on separate agreements provision for such services were inseparable from the activity of renting out the property. - Held that - the income of the assessee both from leasing the space as well as providing maintenance services had to be considered only under the head income from business. Ld. Assessing Officer fell in error in treating such amounts under the head income from house property. We are of the opinion that assessee s income has to be considered only under the head income from business . Ordered accordingly - Decided in favor of assessee.

Summary

Issues:
Assessment of income under the head "income from house property" instead of "business."

Analysis:
The case involved appeals by the assessee challenging the treatment of its income under the head "income from house property" instead of "business." The assessee, engaged in building, selling, and leasing Information Technology parks, rented out an IT Park named "Ambit IT Park" to various parties. The Assessing Officer classified the income under "income from house property" due to tax deductions by lessees under section 194I of the Income Tax Act, despite the assessee's argument that the IT park was leased for both space and supporting services. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, citing various judgments, including those by the Hon'ble Apex Court. The assessee contended that the primary object was to lease the IT park along with services, emphasizing contemporaneous agreements with lessees. The Tribunal analyzed the agreements, the nature of the property, and the firm's business objectives. It referenced the Hon'ble Karnataka High Court's decision and the judgments in the cases of Rayala Corporation Pvt. Ltd and Chennai Properties & Investments Ltd by the Hon'ble Apex Court. The Tribunal concluded that the income should be considered under the head "income from business" as the primary business activity was leasing the property and earning rent. It criticized the Assessing Officer's classification under "income from house property" and allowed the assessee's appeals.

This detailed analysis highlights the key arguments, legal precedents, and the Tribunal's reasoning in determining the appropriate classification of the assessee's income, emphasizing the business nature of the activities and contemporaneous agreements with lessees.