2018 (10) TMI 437 - AT - Income Tax

Rental income from mobile towers - income from house property or income from other sources - Disallowance of deduction claimed towards repairs and maintenance u/s 24 - AO concluded that the income received from the mobile companies towards installation of mobile towers / antenna is to be treated as income from other sources - CIT(Appeals) held that the income received by the assessee is in the nature of compensation for providing services and facility to cellular operators - Held that - The assessee has let out some space on the terrace of the building to the cellular operators for installing and operating the mobile towers / antenna for the purpose of providing mobile telecom services. The terrace of the building cannot be considered as distinct and separate but certainly is a part of the house property. Therefore, letting out space on the terrace of the house property for installation and operation of mobile tower / antenna certainly amounts to letting out a part of the house property itself. That being the case, the observation of the Assessing Officer that the terrace cannot be considered as house property is unacceptable. CIT(Appeals) s reference that the rental income received by the assessee is in the nature of compensation for providing services and facility to cellular operators, it is relevant to observe, the Departmental Authorities have failed to bring on record any material to demonstrate that in addition to letting out space on the terrace for installation and operation of antenna the assessee has provided any other service or facilities to the cellular operators. Thus, from the material on record, it is evident that the income received by the assessee from the cellular operators/mobile companies is on account of letting out space on the terrace for installation and operation of antennas and nothing else. Thus the rental income received by the assessee from such letting out has to be treated as income from house property. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction claimed towards repairs and maintenance under section 24 of the Income Tax Act, 1961.

Analysis:
The only issue in dispute in the present appeal is related to the disallowance of deduction claimed towards repairs and maintenance under section 24 of the Income Tax Act, 1961. The assessee, a Co-operative Society, filed its return of income for the assessment year 2013-14, declaring income. The Assessing Officer noticed that the assessee derived rental income from mobile towers and claimed deduction under section 24(a) of the Act. However, the Assessing Officer disallowed the claim, stating that the terrace cannot be termed as house property and that the assessee cannot be considered the owner of the premises. The Assessing Officer treated the income as from other sources, leading to the appeal before the first appellate authority.

The Commissioner (Appeals) observed that the income received was a compensation for providing facilities and services to the cellular operators, thus categorizing it as income from other sources. The Authorized Representative argued that the income should be treated as income from house property since the terrace was let out to mobile operators. The Tribunal analyzed the nature of income received by the assessee for letting out space on the terrace for mobile towers/antennas. It concluded that the terrace is part of the house property, and the income received from letting out space should be treated as income from house property. The Tribunal also noted the lack of evidence showing additional services provided by the assessee to the cellular operators, supporting the claim that the income was solely from letting out space on the terrace.

The Tribunal accepted the Authorized Representative's argument, emphasizing the consistency in the treatment of such income in previous assessment years. It directed the Assessing Officer to treat the rental income as income from house property and allow the deduction under section 24(a) of the Act. The Tribunal allowed the assessee's appeal, highlighting the nature of the income received from letting out space on the terrace for mobile towers/antennas as income from house property.