In M/s. Sree Seshachala Builders Ltd v. DCIT & Anr, the ITAT Bangalore held that the consideration for amenities provided to the tenant is “Income from House Property” if the same is not separable from Rental Income.
Assessee received rental income from letting out his immovable property. According to them, they provided certain amenities to the tenants and therefore, the rental income received by them is taxable under the head “business income”. The Assessing Officer, relying upon the Apex Court decision in Shambu Investment Private Limited, disallowed the claim.
On appeal, the appellants contended that wherever it is possible to work out receipt received on account of services rendered, it would be business income. The Department, on the other hand, submitted that from the Leave and License Agreement, it is not clear as to what consideration was received on account of providing certain amenities and therefore, the entire consideration received by the assessee should be treated as income from house property.
the property was let out to the lessee and certain amenities were also provided, but nothing has been stipulated in the agreement as to what amount to be paid for availing the amenities by the lessee to the lessor. It was also noted that the Agreement for Hire of
Amenities, was executed only to provide the electricity facilities through generator for which the lessee is required to pay certain amount to the lessor.
It was noticed that CIT vs. S. Mohan Kumar (HUF), it was held that wherever the income from properties are separable from letting out the other amenities, the income can be divided in 2 categories viz., income from house property and income from business but wherever the income is inseparable from letting out the property and other amenities, the entire income would be chargeable under the head “income from house property”.
Read the full text of the order below.
