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INCOME TAX APPELLATE TRIBUNAL, KOLKATA ‘SMC’ BENCH, KOLKATA

I.T.A. No. 886/KOL/ 2015 Assessment Year: 2008-2009
Smt. Taramoni Jalan (Appellant) vs. Income Tax Officer (Respondent)
Date of Judgment: 06-01-2016

ORDER

This appeal is preferred by the assessee against the order of ld. Commissioner of Income Tax (Appeals)-XIII, Kolkata dated 25.03.2014 for the assessment year 2008-09 and the grievance of the assessee is projected in the solitary ground raised therein as under:-

“That under the facts and circumstances the ld. CIT(A)-13 erred in law as well as in facts in confirming the order of the ld. ITO, Ward-42(1) in respect of rental income of Rs.92,129/- treated as ‘income from other sources’ instead of claim of the assessee as ‘income from house property’ for letting out 350 sq.ft. of terrace space and disallowing deductions claimed u/s 24 of the I.T. Act on such rental income”.

2. The assessee in the present case is an individual, who filed her return of income for the year under consideration on 17.03.2009 declaring total income of Rs.2,21,720/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has received a sum of Rs.92,129/- from Dishnet Wireless Limited for allowing to use the roof of her house for installation of tower and the said amount is declared in the return under the head “income from house property” after claiming standard deduction under section 24. Relying on the decision of the Hon’ble Calcutta High Court in the case of Mukherjee Estate Pvt. Limited –vs.- CIT reported in 244 ITR 1, the Assessing Officer held that the said amount was chargeable to tax in the hands of the assessee as income from other sources and accordingly the standard deduction claimed by the asseessee under section 24 was disallowed by him in the assessment completed under section 143(3) vide an order dated 06.07.2010.

3. Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the action of the Assessing Officer in bringing to tax the amount in question received from Dishnet Co. Limited under the head “income from house property” and thereby disallowing her claim for deduction under section 24. After considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) did not find any infirmity in the order of the Assessing Officer on this issue and relying on the decision of the Hon’ble Calcutta High Court in the case of Mukherjee Estate Pvt. Limited (supra) as well as the decision of the Hon’ble Delhi Bench of ITAT in the case of JMD Realtors (P) Limited –vs.- DCIT [22 ITR (Tribunal) 654, he upheld the action of the Assessing Officer in treating the amount in question received by the assessee from M/s. Dishnet Co. Limited as income from other sources thereby disallowing the claim of the assessee for deduction under section 24. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

4. The ld. Counsel for the assessee at the time of hearing before me submitted that the solitary issue involved in this appeal of the assessee is squarely covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in the case of Niagara Hotels & Builders (P) Limited – vs.- CIT (I.T. Appeal No. 43 of 2014 dated March 25, 2015) as well as the decision of the Delhi Bench of this Tribunal in the case of Manpreet Singh –vs.- ITO (ITA No. 3976/Del./2013 dated 06.01.2015), wherein a similar issue is decided in favour of the assessee after taking into consideration the decision of the Hon’ble Calcutta High Court in the case of Mukherjee Estate Pvt. Limited (supra), which is relied upon by the Assessing Officer as well as the ld. CIT(Appeals) to decide the issue against the assessee in the present case.

5. The ld. D.R., on the other hand, invited my attention to the provisions of section 22 of the Act to point out that the annual value of property consisting of any building or land appurtenant thereto of which the assessee is owner is chargeable to tax under the head “income from house property”. He contended that although the expression ‘buildings’ used in section 22 is not specifically defined, it envisages a holistic structure and terrace, which is given by the assessee on rent in the present case, cannot be regarded as buildings, although the same may be a part of a building. He, therefore, strongly supported the impugned order of the ld. CIT(Appeals) upholding the action of the Assessing Officer in treating the rental income received by the assessee for terrace as income from other sources.

6. I have considered the rival submissions and also perused the relevant material available on record. It is observed that a similar issue had come up for consideration before the Coordinate Bench of this Tribunal in Delhi in the case of Manpreet Singh (supra) cited by the ld. Counsel for the assessee, wherein the rent received by the assessee for use of terrace by Bharati Airtel Limited and Idea Cellular Limited for installation of Mobile Tower was held to be income chargeable to tax under the head “income from house property” after taking into consideration the decision of the Hon’ble Calcutta High Court in the case of Mukherjee Estate Pvt. Limited (supra), which is relied upon by the Assessing Officer as well the ld. CIT(Appeals) in their respective orders as well as the provision of section 22 of the Act, which have been relied upon by the ld. D.R. at the time of hearing before me in support of the Revenue’s case. The relevant observations and the findings recorded by the Tribunal in this context in paragraphs no. 6 to 8 of its order are extracted below:-

“6. We find that Section 22 of the Act provides that “annual value of property consisting of a building or land appurtenant thereto of which the assessee is owner” is taxable under the head “income from house property”. There is no dispute on the facts of this case that the assesse is owner of the property but the authorities below have rejected the taxability under the head “income from house property” only on the ground that the rent in question is not in respect of any part of the building but for an unrelated attachment, i.e. mobile antenna, to the roof. It is thus contended that the rental income in question can only be taxed as “income from other sources”, i.e. residuary head. In other words, according to the stand taken by the revenue, the rent in question cannot form part of the annual value as it is sine qua non for its such inclusion that the rent must be for “the property or any part of the property”, whereas the rent in question is not for any part of the property but an unrelated attachment to the roof or terrace. The revenue implications of this change of head lie in the fact that whereas an income from house property is eligible for standard deduction, under section 24(a), @ 30% of the annual value, the taxability under the head ‘income from other sources’ does not entitle the assessee for such a deduction. The basis on which learned CIT(A) has upheld that taxability under the head ‘income from other sources’ and thus reject the claim of deduction under section 24(a), is his understanding of the law laid down by Hon’ble Calcutta High Court in the case of Mukerjee Estates Pvt Ltd Vs. CIT [244 ITR 1 (2000)].

7. We find that so far as Hon’ble Calcutta High Court’s judgment in the case of Mukerjee Estates Pvt Ltd (supra) is concerned, it is wholly misplaced inasmuch as it was a case in which the Tribunal had given a categorical finding that the assessee had “let out the hoardings” and in which the assessee’s claim that he had let out the roof for advertisement and hoarding remained to be unsubstantiated inasmuch as when “a query was put to him (i.e. the assessee) whether there was an agreement to this effect to conclude whether the hoarding was let out or the roof is let out”, the assessee “failed to produce that agreement nor there is (was) any reference to such an agreement before the authorities below”. It was in this backdrop that Hon’ble Calcutta High Court concluded as follows:

“…….Therefore, considering the finding of the Tribunal that the assessee has let out the hoarding, these are neither part of the building nor land appurtenant thereto. Therefore, permitting some companies to display their boards on hoardings cannot be taken as income from the house property as hoardings cannot be taken as part of the building”.

8. Learned CIT(A) was thus clearly in error in observing, in the impugned order, that “Hon’ble High Court has held that if the rent is only for fixing the hoarding, it cannot be treated as part of the building, nor could it be treated as land appurtenant thereto, therefore such income will have to be separately considered as income from other sources (Emphasis by underlining supplied by us)”. As is clearly discernible from the extracts from the observations of Their Lordships of Hon’ble Calcutta High Court, the rent was taken as rent for hoardings per se rather than rights on the roof where hoardings could be installed or, as the learned CIT(A) puts it, ‘fixed’. There was a categorical finding to that effect in the order of the Tribunal as well and this finding remained uncontroverted before Hon’ble Calcutta High Court as well. It was based on this uncontroverted finding that Hon’ble Calcutta High Court reached the conclusion that the income in question is taxable as income from other sources. This decision, therefore, cannot even be an authority for the proposition that the income from renting out the roof for placing the hoardings can be treated as income from other sources. Quite to the contrary to this interpretation, the observations made in this decision unambiguously show that when it can be demonstrated, as Their Lordships wanted the assessee to demonstrate in that case, that the consideration received is rent for letting out the roof rather than the hoardings, the legal position will be materially different. Such being the correct position, it is certainly stretching the things a bit too far to suggest that rent for roof, for installation of mobile antennas, cannot be taxed under the head ‘income from house property’. Learned CIT(A)’s observations to the effect that “On the same analogy, rent from the installation of mobile antennae which has been erected on the top at the building would not be taxable under the head “income from property” as the rent was only for providing space for installation of the mobile antennae on the top of building, and the same cannot be treated as part of the building nor can it be treated as land appurtenant thereto” is a classic case of fallacious logic. Once learned CIT(A) agrees that “rent was only for providing space for installation of the mobile antenna”, there is no occasion to consider whether antenna will be a part of a building or land appurtenant thereto as the true test is whether such a space, as has been rented out, is part of the building or land appurtenant thereto. The rent is not for the antenna but for the space for installation of antenna. It is not the case of the Assessing Officer that the rent is for the antenna, and, therefore, it is wholly irrelevant whether antenna is part of the building or land appurtenant thereto. What is relevant is the space which has been rented out and, therefore, as long as the space, which has been rented out, is part of the building, the rent is required to be treated as “income from house property”. Learned counsel for the assessee has filed copies of leaves and licence agreements with the Bharti Airtel Limited and the Idea Cellular Limited. In both of these agreements, it is specifically mentioned that the rent is for use of “roof and terrace” area (not more than 900 sq ft in the case of Bharti Airtel Ltd and approx 800 sq ft in the case of Idea Cellular Limited). The agreement with Bharti Airtel Ltd mentions that the assessee “permits the licences to install, establish, maintain and work on the licenced premises, inter alia, including the following – (a) transmission tower/pole, with multiple antennas; (b) prefabricated equipment shelter; (c) D G Set upto 25 KVA: and (d) two earthing connection and laying of other cables to ground an one lightning arrestor, necessary cabling and connecting to each antenna/ equipment, and space for installation of electricity meter and power connectivity etc”. Similarly, agreement with Idea Cellular Ltd, inter alia, states that the assessee gives permission and licence “to use and occupy a portion admeasuring approx. 800 sq ft terrace and roof area for installation of prefabricated temporary assembled air conditioned shelter, tower/antenna poles and such other equipment as may be necessary”. All these installations are to be done by the related companies and the obligation of the assessee does not extend beyond permitting use of space for such installations. It is thus clear that the rent is for space to host the antennas and not for the antennas. As long as the rent is for the space, terrace and roof space in this case and which space is certainly a part of the building, the rent can only be taxed as ‘income from house property’”.

7. Even in the case of Niagara Hotels & Builders (P) Limited (supra) cited by the ld. Counsel for the assessee, the issue involved was whether the rent received by the assessee for giving top terrace of his house property for installing space antenna is chargeable to tax under the head “income from house property” or income from other sources” and after taking into consideration all the relevant aspects of the case as well as the judicial pronouncements including the decision of the Hon’ble Calcutta High Court in the case of Mukherjee Estate Pvt. Limited (supra), it was held by the Hon’ble Delhi High Court that the amount in question was chargeable to tax in the hands of the assessee as income from house property. It was held by the Hon’ble Delhi High Court that the terrace floor cannot exist in the air and it is very much a part of the building, which has been constructed on the land beneath to super structure.

8. Keeping in view the decision of the Hon’ble Delhi High Court in the case of Niagara Hotels& Builders (P) Limited as well as the decision of the Coordinate Bench of this Tribunal in the case of Manpreet Singh (supra), which is squarely applicable in the facts of the present case, I hold that the amount in question received by the assessee from M/s. Dishnet Co. Limited for use of terrace of the assessee’s house property for installation of tower is chargeable to tax under the head “income from house property” as claimed by the assessee. I, accordingly, direct the Assessing Officer to bring the said amount to tax in the hands of the assessee under the head “income from house property” and allow deduction under section 24 of the Act, as claimed by the assessee.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on January 6, 2016.

(P.M. Jagtap)
Accountant Member

Rent Received for installation of cellular/mobile tower at the roof/terrace of the assessee is chargeable to tax under the head income from house property | 08-01-2016 |