Maintenance charges received for common area are taxable as business income- ITAT Delhi
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Case Details: |
DCIT vs. Arham IT Infrastructure Pvt. Ltd. |
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Appeal No.: |
ITA No. 5300/DEL/2016 |
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Order pronounced by: |
ITAT Delhi |
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Date of Order: |
27-07-2021 |
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Assessment Year: |
2013-14 |
Brief Facts:
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The assessee is in receipt of common area maintenance charges from tenants which is shown by him as income from revenue operations (business income). However, the A.O. disagreed and dismissed the contention of the assessee observing as under:
Thus, the A.O. treated the receipt from common area maintenance charges as ‘income from house property’. The assessee assailed the matter before the ld. CIT(A) and vehemently opposed the stand of the A.O. The A/R on behalf of the assessee categorically answered against the abovementioned issues raised by the ld. A.O. In result, the ld. CIT(A) passed an order in favor of the assessee and held that the income from common area maintenance charges should be treated as business income. Hence, the revenue is in the present appeal before the Tribunal. |
Findings & Ruling of Tribunal:
- It is not in dispute that the appellant had an agreement with the tenants and in such agreement, there was a specific clause in respect of common area maintenance charges, and in the agreement, it has been specifically mentioned that maintenance charges shall be payable from the rent commencement date.
- The Hon’ble High Court of Delhi in the case of Abhishek Govil ITA No. 19/2016 and ITA 21/2016 has held that contractual receipt received by the assessee, being the owner of house property, after deducting TDS pursuant to maintenance agreement cannot be treated as rental income in the hands of the assessee.
- The Hon’ble High Court of Bombay in the case of Runwal Developers Pvt. Ltd. 115 com 196 has held that maintenance charges received towards maintenance and promotion of common area and the amounts received from maintenance charges were business receipts liable to be assessed under the head ‘Income from business’.
- The Hon’ble Supreme Court in the case of Karnani Properties 82 ITR 547 has held that services rendered by the assessee to its tenants were the result of its activities carried on continuously in an organized manner with a set purpose and with a view to earn profit and hence those activities were business activities and income arising therefrom was assessable as ‘business income’.
- Considering the totality of the facts in light of the judicial decisions discussed above, we do not find any error in the findings of the ld. CIT(A). Hence, the grounds taken by the revenue are accordingly dismissed. As a result, the appeal of the revenue is dismissed.
Read Detailed Judgement: DCIT vs. Arham IT Infrastructure Pvt. Ltd.
Disclaimer: The above article is based upon the judgement of the ITAT Delhi and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before relying upon the above information.
