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TMI Blog2017 (8) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Disallowance of total expenditure claimed by the assessee against business receipts as the same are treated as compensation receipts and are taxed under the Head Income from House Property - standard deduction provided u/s 24 - Held that:- On perusal of the details filed by the assessee, we find that the assessee has incurred an amount of ₹ 44,44,226 towards electricity expenses and claims that the same has been reimbursed by the service receiver which is included in the compensation provided for amenities. Therefore, we are of the view that any amount paid towards reimbursement of electricity charges needs to be excluded for the purpose of compensation received from providing amenities for the purpose of computation of “Income from house property”. Accordingly, we set aside the issue to the file of the AO and direct the AO to examine the claim of the assessee in regards to the details furnished. In case it is found that electricity charges incurred and reimbursed is included in compensation payments, then the AO is directed to exclude such charges for the purpose of computation of gross receipts under the head “Income from house property”. We further direct the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanitary fittings, water supply, additional electricity supply for which separate agreement has been entered into, which has been considered under the head Income from business . The assessee further submitted that it was also providing facilities such as security services, maintenance of building, pantry services, etc. Hence, the assessee was shown business income for compensation received towards providing amenities after claiming expenditure. 3. The AO, after considering explanations of the assessee observed that the wordings and expressions used in the amenities agreement pointed out that receipts from the use of amenities were in the nature of Income from house property only. The AO further observed that the amenities provided by the assessee were part and parcel of the premises let out and no separate services were rendered by the assessee in any manner as contended. The assessee merely split rent agreement into two parts to make it convenient so that it can offer one part as Income from house property and the other part as Income from business so as to claim expenditure. Once the licensor has leased the premises, the licensee is automatically entitled to use thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the head, Income from business . The AO, without appreciating the facts, has simply considered amenity charges under the head Income from house property , which is incorrect. In support of its arguments, the assessee relied upon the decision of Hon ble Madras High Court in the case of CIT vs Chennai Properties Investments Ltd (2008) 303 ITR 33 (Mad). 5. The CIT(A), after considering the relevant submissions of the assessee observed that the ground was covered by his earlier decision in assessee s own case for AY 2008-09 wherein at paragraph 5.1 of the order it was held that amenity charges received from providing facilities was assessable under the head, Income from house property . Since the facts are almost identical for the year under consideration, he held that the entire income from amenity charges is taxable under the head Income from house property . Insofar as disallowance of expenditure is concerned, the CIT(A) observed that interest was allowed to assessee in assessment years 2009-10 2010-11; however, without any convincing reasons, the AO has not allowed interest during the year under consideration besides noticing that on perusal of balance-sheet of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder should be upheld. In support of his argument, he relied upon the decision of the Hon ble Supreme Court in the case of Shambhu Investment (P) Ltd vs. CIT (2003) 263 ITR 143 (SC) and submitted that income derived from letting out furnished premises on monthly rent to various parties along with furniture, fixtures, etc. and also providing them common services like watch and ward, electricity, water and other amenities without any separate charge was assessable as Income from house property and not as business income. 8. We have heard both the parties and considered the material available on record. The factual matrix which leads to the impugned addition is that the assessee has let out premises by entering into two separate agreements for letting out premises and providing amenities. The assessee has considered rental receipts under the head Income from house property , whereas compensation received for providing amenities has been considered as Income from business . The AO has assessed compensation received from providing amenities under the head Income from house property on the ground that mere splitting up of rental agreement cannot change the character of income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the co-ordinate bench is extracted below:- 6. I further notice that the assessee has let out the two storey building to only one tenant. The nature of amenities claimed to have been provided consisted of security services, building maintenance, car parking facility, pantry services. The electricity expenses incurred by the assessee are being reimbursed by the tenant. I notice that the security services and pantry services are not germane to the letting of building, but other services are part and parcel of letting of building. Hence the decision rendered by the Hon'ble Supreme court in the case of Shambu Investments (supra) shall squarely apply to the assessee. I also agree with the Ld D.R that the principle of resjudicata shall not apply to income tax proceedings. 7. Accordingly I am of the view that the predominantly, the receipts towards amenities are to be considered as part of rental income only. However, as stated earlier, the expenses incurred towards security services and pantry services are not connected to the rental income and hence they should be deducted from the receipts towards amenities. Accordingly the only net receipts after deduction of ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived for providing amenities is assessable under the head Income from house property . However, the AO has allowed standard deduction u/s 24 while computing Income from house property . Insofar as other expenses including interest paid on loan is concerned, the AO has disallowed the expenditure. It is the claim of the assessee that out of the total expenditure incurred, major portion of expenditure is incurred towards providing additional load of electricity which has been reimbursed by the service receiver which is included in compensation paid for amenity charges which needs to be excluded. We find force in the argument of the assessee for the reason that providing additional services in the form of electricity and security services is not part and parcel of providing premises on rental basis, therefore, any charges received towards services provided in the form of electricity supply and security services need to be excluded from the gross receipts received. In respect of amenity charges, the assessee has filed necessary details in support of expenditure incurred for providing electricity and security services. On perusal of the details filed by the assessee, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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