2019 (7) TMI 166 - AT - Income Tax

Nature of income - Collection of Outgoing charges/ facility service charges from tenants - business income or Income from House Property - outgoing charges are in respect of maintenance of common area, garden, building premises, 24 hour security, parking, attendant, infrastructure maintenance, water and common area, power, annual maintenance in generating power back up. - HELD THAT - Where the assessee had given on rent a property, on which it was receiving rent and facility service charges, since facility service charges were being received by assessee in return of providing specific services like housekeeping, security, etc., same was liable to be assessed as business income. Similar view was taken by Jaipur Tribunal in Vikram Golecha 2008 (3) TMI 369 - ITAT JAIPUR-A Even in AY 2005-06, 2006-07, 2007-08, 2009-10, 2011-12 the revenue has allowed the said outgoing charges as business income of the assessee, therefore, the assessing officer should have allowed the outgoing charges as business income on the concept of consistency. Thus, in view of above discussions, we respectfully following the decisions of coordinate bench direct the assessing officer to treat the outgoing charges as business income.

Summary

Issues:
1. Treatment of outgoing charges as income under specific heads.
2. Consideration of net outgoing charges for calculating annual rateable value.
3. Levying of interest under sections 234B and 234C of the Income Tax Act.

Issue 1 - Treatment of Outgoing Charges:
The appellant contested the Assessing Officer's treatment of outgoing charges as "Income from House Property" instead of "Profits and gains from business & profession." The appellant argued that the charges were for maintenance services separate from rental income. Citing past assessments, the appellant claimed consistency in treating such charges as business income. The Tribunal referred to precedents where service charges were deemed business income, directing the Assessing Officer to treat the outgoing charges as business income, in line with the appellant's contentions.

Issue 2 - Net Outgoing Charges for Rateable Value:
The appellant, as an alternative, requested consideration of net outgoing charges for calculating annual rateable value under section 23 of the Act. The Tribunal found this issue academic due to the allowance of the first ground, rendering further adjudication unnecessary.

Issue 3 - Levying of Interest:
Regarding the levying of interest under sections 234B and 234C, the Tribunal directed the Assessing Officer to reevaluate the interest calculation under section 234C, as it should be based on return income, not assessed income. The Tribunal allowed this ground subject to the Assessing Officer's review and compliance with legal provisions.

In conclusion, the Tribunal allowed the appeal, directing the Assessing Officer to treat outgoing charges as business income, review interest calculations, and make necessary adjustments. The decision was based on the appellant's arguments, supported by legal precedents and the need for consistent treatment of outgoing charges.