2021 (12) TMI 257 - AT - Income Tax

Taxability of rent received - Income from house property - assessee had received composite rent from its tenant State Bank of Patiala for letting out of premises and letting out of furniture and fixtures etc. - HELD THAT - We find that the lessee bank had also treated the entire payment of rental and hire charges as the composite payment and had charged tax at source in terms of Section 194I - This aspect, in our considered opinion, is not a relevant consideration for the purpose of determination of taxability of rental under the head of income in the hands of the assessee. Hence, the arguments advanced by the ld. AR in this regard is hereby dismissed. As going by the fact that for A.Y.2010-11, the ld. AO in the order giving effect to ld. CIT(A) order had accepted the stand of the assessee vide his order dated 19/03/2014. Similarly, he has accepted the stand of the assessee in the scrutiny assessments framed for A.Y.2016-17 and 2018-19 vide order u/s.143(3) of the Act dated 26/12/2018 and 28/03/2021 respectively. Hence, the rule of consistency would certainly have a role to play here and we find that assessee had been having the same stand by treating the entire rentals as income from house property and claiming 30% standard deduction thereon. There is absolutely no case of divergent of facts in the case of the assessee. Hence, applying the principle laid down in the case of Radhasaomi Satsang 1991 (11) TMI 2 - SUPREME COURT when there are no divergent facts, the Revenue cannot take a divergent stand for one particular year ignoring the rule of consistency. In view of the aforesaid observations, the ground No.2 is allowed. Taxability of reimbursement of maintenance charges received from the tenant under the head income from other sources - HELD THAT - As assessee had made payment on 10/01/2012 towards the member s share of contribution for repairing of the entire society building. This payment was admittedly made by account payee cheque through regular banking channels by the assessee to the housing society. The assessee also paid a sum as its share of society maintenance on 24/01/2012 by account payee cheque. The total of these two payments worked. Out of this, since the repairs cost paid to the society by the assessee need to be borne by the tenant i.e. State Bank of Patiala, the assessee got a sum of ₹ 4,45,266/- reimbursed from State Bank of Patiala on 03/02/2012. In effect, the assessee claimed deduction on account of maintenance charges only to the extent of ₹ 21,536/- as the same represents its share to be borne. Since, the assessee had merely got the reimbursement of maintenance charges paid by it to the society of ₹ 4,45,266/- from its tenant State Bank of Patiala, there is no income element in it. Hence, the reimbursement received by the assessee cannot be sought to be taxed by the ld. AO under the head income from other sources

Summary

Issues:
- Delay condonation petition due to Covid-19 lockdown
- Treatment of rental income under different heads
- Taxability of reimbursement of maintenance charges
- Principle of consistency in assessment

Analysis:
The appeal in ITA No.1814/Mum/2020 for A.Y.2012-13 was time-barred by 167 days, but the delay was condoned due to the Covid-19 pandemic lockdown. The assessee had raised various grounds challenging the order of the ld. CIT(A). The primary issue revolved around the treatment of rental income. The assessee had bifurcated the total rent into rent for premises and hire charges for furniture and fixtures. The ld. AO allowed the rent for premises under "income from house property" but disallowed standard deduction for rent received for furniture under "income from other sources."

The assessee argued that the rental bifurcation was for property tax purposes and not to defraud the tax department. The ld. CIT(A) upheld the ld. AO's decision. However, the assessee contended that similar treatment had been accepted by the Revenue in previous assessments. The Tribunal noted the principle of consistency and ruled in favor of the assessee, allowing the appeal on this ground.

Regarding the taxability of reimbursement of maintenance charges, the Tribunal found that the reimbursement received by the assessee from the tenant did not have an income element and could not be taxed under "income from other sources." The ground raised by the assessee on this issue was allowed.

The Tribunal decided not to adjudicate on additional grounds of appeal filed by the assessee. The general grounds raised by the assessee were deemed not to require adjudication. Ultimately, the appeal of the assessee was allowed, and the order was pronounced on 30/11/2021.