2012 (10) TMI 575 - AT - Income Tax

Rental income - Income from other sources v/s income from house property - two separate agreements have been made by the assessee one for rent i.e monthly license fee and another for services of amenities. - Held that - Character of income cannot be changed either by entering two agreements or by making other evidence. The amount of license fee earned by assessee on account of two agreements infact is on account of property given on license and the entire income of the property, in our considered view, has to be treated as income from house property and not income from other sources which is treated by Assessing Officer for the reason that a separate agreement has been entered on account of amenities provided by assessee. Entire amount received by assessee on account of two separate agreements is to be treated as income from house property.- in favour of assessee.

Summary

Issues:
Assessment of income from property as income from other sources based on separate agreements for rent and amenities services.

Analysis:
The appellant contested the assessed amount of Rs. 86,93,333/- received from a tenant, claimed as income from house property but assessed as income from other sources. The Assessing Officer noted rental income of Rs. 1,56,48,000/- from leasing out a property to a company. The appellant had separate agreements for rent and amenities/services. The Assessing Officer treated the rental income as income from house property and the amenities/services income as income from other sources, citing precedents. The CIT(A) upheld this decision, leading to the appeal.

The appellant argued that both agreements were interrelated, and no amenities were actually provided. The Tribunal examined the agreements listing amenities, such as electricity connection and signage permission, finding no actual services provided. The Tribunal disagreed with the separate treatment of income and held that the entire amount should be considered income from house property, as the agreements related to the same property without additional services.

The Tribunal distinguished previous cases where separate services were provided, emphasizing that in this case, no distinct amenities were offered. Referring to relevant case laws, including the Supreme Court decision in Shambhu Investment, the Tribunal concluded that the entire amount received should be treated as income from house property. Citing Bakhtawar Construction Pvt. Ltd. and other court rulings, the Tribunal directed the Assessing Officer to treat the entire consideration as income from house property, allowing the appeal.