2020 (3) TMI 883 - HC - Income Tax

Correct head of income - leasing and renting of immovable properties with all infrastructural facilities with providing maintenance and related activities of the said immovable properties sub-leasing of already leased out property - income from house property or income from business - HELD THAT - A perusal of the Judgment of the Hon'ble Supreme Court in RAYALA CORPORATION PVT. LTD. 2016 (8) TMI 522 - SUPREME COURT would show that it only treats the assessee's income by leasing out the property as income from business and profession as claimed by the assessee. However, the said Judgment does not deal with the income under other heads and no finding has been given by the Hon'ble Supreme Court. Making it clear as stated above, as no finding has been given with regard to any other heads, this Court is of the view that as per the Judgment of the Hon'ble Supreme Court, the rental income derived from the house property should be treated as business income. Hence, the question of law viz., 1 (a) is answered in favour of the assessee. Income from maintenance charges and air conditioning hire charges - It should not be treated as business income as it is covered by the Judgment of this Court in the case of Tarapore Co. Vs. Commissioner of Income Tax 2002 (8) TMI 47 - MADRAS HIGH COURT wherein this Court has held that Service charges received from tenants are liable to be assessed as income from other sources and not as income from house property . Hence, the question of law viz.,1 (b) is answered in favour of the Revenue.

Summary

Issues:
1. Whether the Tribunal was justified in upholding the assessment of income received by the appellant from leasing and renting of properties as income from house property and not business income.
2. Whether income from maintenance charges and air conditioning hire charges should be treated as business income.

Analysis:
1. The tax case appeal was filed against the Tribunal's order confirming the Commissioner of Income Tax's decision under Section 143(3) of the Income Tax Act, 1961 for the assessment year 2010-2011. The substantial question of law was whether the Tribunal was correct in treating the appellant's income from leasing and renting of properties as income from house property and not business income. The appellant argued that a previous Supreme Court judgment supported treating such income as business income. However, the respondent contended that the Supreme Court judgment only covered lease or rental income, not other charges like maintenance and air conditioning hire charges. The Court found that the Supreme Court judgment only addressed income from leasing properties as business income, not other sources. Therefore, the rental income was deemed business income, but other charges were not covered, leading to a split decision in favor of the appellant for leasing income and in favor of the Revenue for maintenance and air conditioning hire charges.

2. Regarding the second issue, the Court referred to a previous judgment where it was held that service charges received from tenants should be assessed as "income from other sources" and not as "income from house property." Therefore, the Court ruled in favor of the Revenue, stating that income from maintenance charges and air conditioning hire charges should not be treated as business income but as income from other sources. Consequently, the appeal was disposed of with no costs, with a split decision on the two issues discussed in the judgment.