TMI Blog2021 (3) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No. 3136/Del/2018 - - - Dated:- 26-3-2021 - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Assessee by : Shri R. S. Singhvi, C.A. Shri Satyajeet Goel, C.A. Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce agreement with reference to let out properties, there is no valid basis for distorted working of income relating to maintenance services. (iii)That working of AO with reference to income from House Property and income from business activities is highly arbitrary and unjustified and same is also not based on facts and past history and as such order of CIT(A) to this effect is not sustainable. 4. That orders passed by lower authorities are not justified on facts and same are bad in law. 5. That the appellant craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice. 03 Consequently, the fact shows that assessee is the company engaged in the business of real estate. It is a builder. During the course of assessment Assessing Officer noted that assessee is getting rent from the office premises let out as well as maintenance charges for building, reimbursement for airconditioning charges and house-keeping. Assessee is providing services like running and operation of lifts, cleaning of floors etc. The assessee is maintaining a total area of 1,50,619 sq. ft. out of which 52,101 sq. ft. is owned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has shown expenditure of ₹ 4,42,00,476/- in the profit and loss account and has disallowed assessee himself ₹ 55,18,715/-. Thus, against the income from maintenance and reimbursement expenses assessee has claimed expenditure of ₹ 3,86,85,361/-. Since 34.70% of maintenance and reimbursement income is treated by the assessee as income from house property, he disallowed 34.72% of expenditure of ₹ 3,86,85,361/- i.e. ₹ 1,34,31,551/- as expenses related to the income from maintenance and reimbursement related to the property owned by the assessee. Out of this disallowance of ₹ 55,18,715/- Assessing Officer further granted 30% of standard deduction of ₹ 30,89,784/- and made the net disallowance of ₹ 1,03,41,773/- in the hands of the assessee. Accordingly, he assessed the total income of the assessee at ₹ 27,14,580/- against the returned income of ₹ 3,23,72,809/-. Assessment order was passed under Section 143(3) of the Act on 28.12.2013. 06 The assessee preferred an appeal before the ld. CIT (Appeals). Claim of the assessee that for assessment year 2009-10 the ld. CIT (Appeals) allowed the appeal of the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed standard deduction on this income and disallowed the expenses claimed under the head business or profession. Net expenses claimed by the Assessee were at ₹ 3,86,85,361/-. After apportioning the expenses for 34.72% of the total area, the Assessing Officer worked out the expenses at ₹ 1,34,3 1,557/-. The Assessing Officer disallowed this amount and allowed standard deduction @ 30% on ₹ 1,16,03,949/- treated as rental income. Thu^f the Assessing Officer disallowed ₹ 1,03,4!,773/-. 7.2 Before me, the Assessee pleaded that its case is covered by the decision of the Ld. CIT (Appeal) and the same confirmed by the Income Tax Appellate Tribunal. I have gone through the decision of Ld. CIT(Appeal) in the case of the Assessee for AY 2009-10, in which he relied on the decision of' the Hon ble ITAT in the case of the Assessee for AY 2001-02. I find that the Ld. CIT (A) and Hon. ITAT did not consider the facts, that the expenses allowed as deduction @ 30% and main other expenses claimed by \ the Assessee for maintenance are overlapping. The standard deduction @ 30% is allowed for various expenses like collection of rent, repair, maintenance of building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom house property for the area owned by it. However, income from the services has been shown separately under the head income from business or profession , whereas the fact is that the property owned by the Assessee cannot be exploited without giving those services. Another fact is that the Assessee is a claiming standard deduction for maintenance of the property and repairs etc. On the other hand, the Appellant is claiming from its tenants charges for maintenance and other services. It cannot be denied that the purpose of allowing standard deduction and expenses claimed by the Assessee against business income are overlapping to a great extent. Therefore, considering all the facts and in the circumstances, I decide to assess the composite income in respect of the owned up property under the head business or profession . This decision is taken in the light of powers given to the ClT(Appeal) which are co-extensive and co-terminus with the Assessing Officer. The rental income earned by the Assessee was ₹ 4,56,70,064/-. In addition to this the Assessee has earned ₹ 1,02,99,28 1/- for providing the services in respect of the area owned by it, as discussed above. The expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that the learned and CIT A is not incorrect in stating that the coordinate bench in the earlier year in the case of the assessee has decided this issue without appreciating the facts and the law in proper manner. He further referred to the decision of the honourable Calcutta High Court in case of CIT versus Shambhu investment private limited (2001) 249 ITR 47 cited by the learned and CIT A and stated that that merely because income is attached to any more property it cannot be the sole factors for assessment of such income as income from property in what has to be seen is what is the primary object of the assessee while exploiting the property. He further referred to the annual accounts of the company and computation of total income to justify the case of the company. He submitted that the assessee has shown rental income separately and maintenance income separately and the learned and CIT A has considered all the income is a composite income in respect of the owned the property under the head business or profession. He submitted that the learned and CIT A has done this without issuing any notice u/s 251 of the income tax act and therefore it is not valid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Air Conditioner) ₹ 42,79,053/- iii) Reimbursement (Maintenance) ₹ 2,07,493/- iv) Housekeeping Charges ₹ 4,84,245/- Total ₹ 3,24,29,316/- 3,24,29,316/- AO observed that the income of ₹ 3,24,29,316/- is from the property which are owned by assessee as well from others. AO opined that the maintenance income and other reimbursement like air conditioners, housekeeping, maintenance are in the nature of rental income and are part and parcel of rental income. He further observed that this rental income has been splitted by the assessee to claim the entire expense as business expenditure. As per Section 24 of the IT Act only 30% deduction out of rent amount is to be allowed to the assessee in respect of house property for collection of rent, repair and maintenance of building and there is no separate provision for allowability of expense under any other head of income. In view of above, AO held that the following income received by the assessee is being treated as income from house p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) noted that these maintenance receipts have been treated as business income from Asstt. Year 2001-02 and it was approved by the ITAT vide its order dated 30.5.2008 in ITA No. 4530/Del/2004 for Asstt. Year 2001-02. The observation of the ITAT was as under:- 3.3 We have perused the records and considered the matter carefully. The issue raised in this ground is whether the brokerage paid by the assessee in connection with ITA NOS. 3482/DEL/2011 2609/DEL/2012 renting out of the premises can be allowed as deduction from the income received by the assessee from maintenance and furnishing charges. The assessee had entered into the agreement with the tenants as per which in addition to the rent payable for the use of the property, the tenants were also required to pay separately for the maintenance and furnishing of the property. The assessee has paid onemonth rent in respect of rent of the property and one month charges receivable in respect of maintenance and furnishing to the brokers, who had introduced the tenants. The income received from maintenance and furnishing has been assessed as business income of the assessee and there is no dispute about this fact. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %. Hence, he pleaded that the order of the AO may be sustained. 18. Ld. Counsel of the assessee on the other hand submitted that without any cogent basis, the AO has treated the business income in the shape of maintenance and other services including reimbursement as income from house property. He claimed that in the assessment order in the concluding computation the AO has treated the entire income as business income. Still he has proceeded to disallow expenditures in this regard by treating the certain portion of the income as income from house property. Ld. Counsel of assessee submitted that assessee has receipts from maintenance and other services including reimbursement. In this regard, proper agreement with the tenants and the recipients of the services are there on record. He claimed that these agreements were in the existence from preceding number of years and in all these years, this income has been treated as income from business and no disallowance has been made. Ld. Counsel of the assessee further referred to the Tribunal decision in assessee's own case for asstt. year 2001-02 wherein such receipts have been accepted as business income. In light of the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,316) amounting to ₹ 11261952 as the expenses disallowed. From the above he has allowed 30% as standard deduction and has thereafter arrived at disallowance of ₹ 78,84,115/-. 22. We find that the above working out of disallowance by the AO is not comprehendible. AO has done some theoretical exercise by bifurcating maintenance receipts in the ratio of property owned vis-a- vis the total property and accordingly, out of the income in this regard assessee has made disallowance amounting to 70% of income thereof. We find that the above disallowance by the AO is devoid of cogency and the same is not sustainable. 23. We find that the assessee has entered into the maintenance agreement with various parties. These parties included those which are assessee's tenants as well as those to whom the flats had been sold out. As per the maintenance agreement in this regard, the assessee is receiving maintenance charges for building, reimbursement of A/C maintenance and house keeping etc. The assessee is also providing services like running and operation of lifts, cleaning of floors, window panes, white washing etc. Now the above contracts are separate contracts, they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the same. 27. In the result, both the appeals filed by the Revenue stand dismissed. 10 The learned departmental representative could not state that if the order of the coordinate bench in the earlier years are not in accordance with the law, why they have not been challenged before the higher forum. Further as per para number 7.2 of the order of the learned CIT A he held that the learned and CIT A and the ITAT 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. In the facts and circumstances of the case where the order of the coordinate bench was not shown t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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