23 Lewis Family Trust vs. ITO [TS-1121-ITAT-2021(Mum)] A.Y.: 2012-13 ; Date of order: 30th November, 2021 Sections: 23, 24
Where premises were let along with furniture and fixture and rent for furniture and fixtures has been bifurcated by the assessee, deduction under Section 24(a) held to be allowable even for rent of furniture and fixture, etc
Reimbursement of member’s share of contribution for repairing the entire society building held to be not taxable as it has no income element in it
FACTS I
The assessee, in its return of income, declared rental income of Rs 57,56,998 under the head `Income from House Property’ and claimed deduction under Section 24(a) of the Act. The Assessing Officer (AO) on perusal of the leave and license agreement, found that the assessee trust had let out premises along with furniture, fixtures and decoration, air-conditioning, etc, and the rent for furniture and fixtures has been separately bifurcated by the assessee. The AO held that rent of premises amounting to Rs. 34,54,199 is only taxable under the head `income from house property’ and deduction under Section 24(a) allowable in respect thereof and rent of furniture, fixtures, etc amounting to Rs. 23,02,799 would get taxed under the head `income from other sources’ and therefore, standard deduction @ 30% thereon would not be allowable.
Aggrieved, the assessee preferred an appeal to CIT(A) where it contended that the total rent has been bifurcated into rent for premises and hire charges for furniture, fixtures, etc. only for the purpose of enabling property tax charged by MCGM at a lower amount and there was no intention to defraud the income-tax department; furniture is attached with the property and cannot be removed without damaging the wall or the floor; and that without furniture rent cannot be equivalent to the amount agreed upon. The CIT(A) confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal.
FACTS II
During the previous year relevant to the assessment year under consideration, the assessee made a payment of Rs. 4,45,266 towards members’ share of contribution for repairing the entire society building. This payment was made by account payee cheque through regular banking channels by the assessee to the housing society. Since repairs costs were to be borne by the tenant, the assessee got a sum of Rs. 4,45,266 reimbursed from the lessee bank. The AO taxed this sum of Rs. 4,45,266 under the head `income from other sources’.
Aggrieved, the assessee preferred an appeal to CIT(A) who confirmed the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal.
HELD I
The Tribunal noted that the assessee had received composite rent from its tenant State Bank of Patiala. The lessee bank had treated the entire payment of rental and hire charges as the composite payment and had charged tax at source in terms of Ssection 194I of the Act. It observed that this aspect is not a relevant consideration for determining the taxability of rental under the head of income in the hands of the assessee. However, it noted that for A.Y. 2010-11, the AO, in order giving effect to order of CIT(A), had accepted the stand of the assessee vide his order dated 19th March, 2014 and in scrutiny assessments framed for A.Ys. 2016-17 and 2018-19 also the stand of the assessee has been accepted. Applying the principle laid down by the Apex Court in Radhasoami Satsang [193 ITR 321 (SC)], namely that the revenue cannot take a divergent stand for one particular year, ignoring the rule of consistency, the Tribunal allowed this ground of appeal filed by the assessee.
HELD II
The Tribunal held that since the assessee had merely got the reimbursement of the amount paid by it to the society, there is no income element in it. Hence, it held that the reimbursement received by the assessee cannot be taxed under the head `income from other sources’.
