2021 (3) TMI 1158 - AT - Income Tax

Income from house property - expenditure for which deduction @ 30% is allowed - CIT (Appeals) as well as ITAT did not consider the fact that there are several expenditure for which deduction @ 30% is allowed under the income from house property as well as the expenses claimed by the assessee under the head business income are over-lapping - HELD THAT - In assessee s own case in the previous year did not consider the fact that the expenses allowed as a deduction at the rate of 30% and many other expenses claimed by the assessee for maintenance are overlapping. However he failed to exhibit that what are those expenses are overlapping. Even, the judicial discipline also requires us to follow the order of the coordinate bench. Even otherwise the learned departmental representative could not show us any reason to deviate from the order of the coordinate bench in assessee s own case for earlier years where the identical issue has been decided. Where the order of the coordinate bench was not shown to us is decided on incorrect facts or incorrect law, we are duty-bound to follow the same - Decision of the coordinate bench in assessee s own case in earlier years, we hold that assessee has correctly offered the income as income from house property and it is not chargeable to tax as income from business and profession as held by the learned and CIT A. CIT A was not justified in rejecting the claim of the standard deduction u/s 24 in respect of income from letting out of the property by the classified the same Under the head income from business and profession. The maintenance and service income are backed by the agreement with reference to the left out properties, the characterization of the same cannot be disturbed without any cogent reasons. CIT A has also and hence the income of the assessee without giving a notice u/s 251 of the income tax act, which is not in accordance with the law. Thus, we reverse the orders of the lower authorities. In the result ground number one three of the appeal of the assessee are allowed.

Summary

Issues Involved:
1. Classification of rental income: "Income from House Property" vs. "Income from Business and Profession."
2. Rejection of Standard Deduction under Section 24.
3. Computation of income from maintenance activities.
4. Adherence to the principle of consistency in tax assessments.

Issue-Wise Detailed Analysis:

1. Classification of Rental Income:
The primary issue revolves around whether the rental income should be classified as "Income from House Property" or "Income from Business and Profession." The assessee argued that the rental income should be classified under "Income from House Property," consistent with past assessments. The CIT(A) reclassified this income under "Income from Business and Profession," citing overlapping expenses and the need for associated services to exploit the property. The Tribunal, however, noted that the assessee's income from maintenance and other services has consistently been treated as business income in prior years, supported by agreements with tenants and service recipients. The Tribunal emphasized the need for consistency and found no cogent reason to deviate from past practice, thus ruling in favor of the assessee.

2. Rejection of Standard Deduction under Section 24:
The CIT(A) rejected the assessee's claim for a standard deduction under Section 24, arguing that the expenses claimed under "Income from Business and Profession" overlapped with those allowed under "Income from House Property." The Tribunal found that the CIT(A) failed to demonstrate specific overlapping expenses. It upheld the assessee's right to claim the standard deduction, as the income from maintenance and services was separate from rental income and backed by agreements.

3. Computation of Income from Maintenance Activities:
The CIT(A) computed the income from maintenance activities by apportioning it based on the area owned by the assessee (34.72%) and disallowed related expenses. The Tribunal found this computation arbitrary and unsupported by specific facts. It noted that the assessee provided distinct maintenance services, which should be treated as business income. The Tribunal ruled that the CIT(A)'s apportionment and disallowance lacked a legal basis and upheld the assessee's treatment of maintenance income as business income.

4. Adherence to the Principle of Consistency:
The Tribunal emphasized the principle of consistency, citing previous years' assessments where similar income was treated as business income. It referred to judicial precedents, including the Hon'ble Calcutta High Court's decision in CIT vs. Shambhu Investment Pvt. Ltd. and the Hon'ble Apex Court's ruling in CIT vs. Excel Industries Ltd., which support maintaining consistency in tax treatment unless there is a significant change in facts or law. The Tribunal found no such change and ruled that the CIT(A)'s departure from past practice was unjustified.

Conclusion:
The Tribunal concluded that the assessee's rental and maintenance income should be classified as "Income from House Property" and "Income from Business and Profession," respectively, consistent with past assessments. It upheld the assessee's claim for a standard deduction under Section 24 and found the CIT(A)'s computation of maintenance income arbitrary. The Tribunal reversed the orders of the lower authorities, ruling in favor of the assessee on all grounds.