Facility service charges apart from property rent taxable as business income – ITAT

Facility service charges apart from house rent taxable as business income. Amount received was for specific services like housekeeping, security, etc.

ABCAUS Case Law Citation:
ABCAUS 2900 (2019) (05) ITAT

Important Case Laws Cited/relied upon by the parties
Kavita Marketing Pvt. Ltd. vs. ITO [2016] (159 ITD 547)/70 taxmann.com 391
Vikram Golecha vs. CIT 123 ITD 438

The appeal by the assessee was directed against the order of the Commissioner of Income-tax (Appeals) in confirming the action of the Assessing Officer (AO) in treating outgoing charges as income under the head “Income from House property” as against offered under head “Profits and gains from business & profession” as claimed in the return of income filed under section 139(1) of the Income Tax Act, 1961 (the Act) by the assessee.

The Assessing Officer while passing the assessment order has treated the amount received on account of outgoing charges as “Income from House Property” in place of “Income from Business and Profession” as claimed by assessee.

On appeal before the CIT(A), the action of AO was confirmed.

Before the Tribunal, the assessee submitted that outgoing charges were nothing but payments for providing services called maintenance charges, electricity charges, security charges and water charges etc. which are part of rental income, therefore, the same was required to be charged under the head “Income from House Property”.

The assessee further submitted that the said outgoing charges were in respect of maintenance of common area, garden, building premises, 24 hour security, parking, attendant, infrastructure maintenance, water and common area, power, annual maintenance in generating power back up. The assessee also submitted that as per leave and license agreement, tenants/lessee/licensee were liable to pay maintenance of agency/association of actual/proportionate share of common cost of maintenance of said building on pro-rata basis on per sq. ft area, therefore, the outgoing charges were distinct and separate from rent received and same cannot be a part of rental income.

The assessee submitted that in past, the said outgoing charges had been accepted as “Income from Business and Profession”.

The Tribunal observed that the coordinate bench of Tribunal had, where apart from letting out, assessee was also rendering certain services by providing various amenities for which amount was being separately charged, held that such services services were distinct from letting out of the property and, therefore, assessee was justified in asserting that the same be taxed as ‘business income’.

Thus, following the decisions of coordinate bench, the Tribunal directed the assessing officer to treat the outgoing charges as business income.

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