Maintenance charge received from tenants held income from Business / Profession

Maintenance charge income received from tenants held income from business or profession not income from house property.

ABCAUS Case Law Citation:
ABCAUS 3764 (2023) (06) ITAT

Important Case Laws relied upon:
M/s. Kirloskar Systems Ltd. vs. ACIT
CIT vs. Model Manufacturing Co. Pvt. Ltd. (1986) 159 ITR 270
CIT vs. Kanak Investments (Pvt) Ltd. (1974) 95 ITR 419

In the instant case, the assessee had challenged the order passed by the CIT(A) in upholding the Maintenance Income received from tenants as Income from House Property and disallowing all the expenses claimed against Maintenance Income under the head Profits and Gains from Business & Profession.

The appellant assessee was a resident corporate entity. The source of income of the assessee was rental and other income received from letting out building owned by it.

In the course of assessment proceedings for the impugned assessment year, the Assessing Officer noticed that the assessee had offered rental income as income from house property. Whereas, the maintenance income received from the building let out had been treated as business income.

The Assessing Officer was of the view that since, the rental income as well as the maintenance income was received by the assessee from the building let out, they cannot be given different treatment, only because, the assessee has received such income under two separate agreements.

Thus, ultimately, the AO concluded that the maintenance income received by the assessee partakes the character of income from house property.

Accordingly, the Assessing Officer included it as part of rental income and brought to tax as income from house property.

The Tribunal observed that first and second floor of the building was leased out to to a company vide an agreement and on the very same day, the assessee had executed two separate agreements for the first and second floor of the same building towards maintenance and certain common facilities provided to the tenants such as lift from the main lobby to the leased out portion, uninterrupted power supply, provision for clean drinking water from water tank, access to staircase/landing, sufficient lighting arrangement, up-keeping  the common area and common drainage, a generator set in  running condition etc.

The Tribunal observed that it can be seen from the facts that the maintenance charges were no way connected to the rental income. Rather, they were for certain additional facilities provided to the tenants, which are unconnected to leasing out the tenanted premises. These facilities, even, could have been provided by a third party.

Therefore, the Tribunal opined that the maintenance charges had no connection with the rental income, hence, could not be considered to be a part of rental income to treat it as  income from  house property.

Accordingly, the appeal of the assessee was allowed.

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