2013 (12) TMI 896 - AT - Income Tax

Leasing of property - valuation - nature of charges received towards amenities i.e renting out car parking spaces, high end air conditioning plant, lift, water supply with power back up, fittings, furnishings and fixtures like wooden cabins and wooden empanelling are common - Statutory deduction u/s 24(a) - Held that - These are common in nature which are to be provided to the tenants/lessees to carry out their day-to-day works by the landlord, without these they cannot function - For this the assessee has executed multiple agreements with the lessee company - The treatment of an income under the head house property is dependent upon the intrinsic nature of the letting out and not on the fact of multiple agreements execution. All the agreements are executed on the same day and assessee has given a plausible reason for drawing different agreements for letting the same house property - All the agreements together constitute a composite transaction for letting out of house property; rent there from is liable under the head income from house property, eligible for statutory deduction u/s 24(a) - In all the earlier years the entire rental income from this property based on these agreements has been considered as income from house property - Following Radhasoami Satsang Vs. CIT 1991 (11) TMI 2 - SUPREME Court - When facts and circumstances being same the revenue should not deviate and adopt contrary view unless there are extra ordinary circumstances - Decided against Revenue.

Summary

Issues Involved:
1. Classification of rental income from multiple agreements as "Income from house property" or "Income from other sources."
2. Allowance of deductions under section 24(a) of the Income Tax Act.
3. Consistency in assessment treatment in comparison to previous years.

Issue-wise Detailed Analysis:

1. Classification of Rental Income:
The primary issue revolves around whether the rental income from multiple agreements executed with Max New York Life Insurance Co. Ltd. should be classified as "Income from house property" or "Income from other sources." The agreements included:
- Leave and License Agreement
- Maintenance and Amenities Agreement
- Car Parking Space Agreement
- Mechanical Facilities Agreement
- Hire Agreement for renting of fittings, etc.

The Assessing Officer (A.O.) treated Rs. 30,93,639/- from the first agreement as "Income from house property" and the remaining Rs. 76,40,161/- from the other agreements as "Income from other sources." The A.O. argued that the segregation of agreements indicated separate services and facilities, which should be taxed differently.

2. Allowance of Deductions under Section 24(a):
The A.O. disallowed the deduction under section 24(a) amounting to Rs. 22,92,048/- on the income held to be from other sources. The assessee contended that all agreements constituted a composite transaction for letting out one property, and thus, the entire income should be treated as "Income from house property," allowing for deductions under section 24(a).

3. Consistency in Assessment Treatment:
The assessee argued that in previous years, the entire rental income from similar agreements had been treated as "Income from house property." The sudden change in the A.O.'s stance for the current year was questioned, citing the Supreme Court's decision in Radhasoami Satsang Vs. CIT, which emphasizes consistency in the absence of extraordinary circumstances.

Judgment Analysis:

1. Classification of Rental Income:
The CIT(A) concluded that the various agreements constituted a composite transaction for letting out the property. The CIT(A) observed that amenities like high-end air conditioning, lift, water supply with power backup, and fittings were integral to the property and necessary for its use. Therefore, the income from these amenities should also be considered as "Income from house property." The CIT(A) relied on the Supreme Court's decision in Shambhu Investment (P.) Ltd. vs. CIT, which held that the primary intention of letting out the property determines its classification.

2. Allowance of Deductions under Section 24(a):
The CIT(A) directed the A.O. to treat the income of Rs. 76,40,161/- as "Income from house property" and allow the deduction under section 24(a). The CIT(A) reasoned that the amenities provided were incidental to the letting out of the property and not separate assets like Plant and Machinery, thus not falling under section 56(2)(iii) of the Act.

3. Consistency in Assessment Treatment:
The ITAT upheld the CIT(A)'s order, agreeing that the facts and circumstances remained unchanged from previous years. The ITAT emphasized that the department should not adopt a different view on accepted issues unless there are extraordinary circumstances, as per the Supreme Court's decision in Radhasoami Satsang Vs. CIT.

Conclusion:
The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to treat the entire rental income as "Income from house property" and allow deductions under section 24(a). The judgment reinforced the importance of consistency in tax treatment and the composite nature of rental agreements involving property and amenities.