The Mumbai Bench of Income Tax Appellate Tribunal (ITAT),held that the service charges collected from the tenant were accepted as assessable under the head “income from business”, therefore, the expenses which are having nexus with the purpose of the business has to be allowed.
The assessee company M/s. Gentex Merchants Pvt. Ltd. had filed its return of income for Assessment Year(AY) 2012-13 declaring a total loss of Rs.2,14,60,919/-. The Assessing Officer (AO) noted that the assessee has declared income from two heads of income viz. income from house property and income from business and profession. While the rent was declared as “income from house property”, the service charges received are declared as “income from business” against which it claimed expenditure.
Thus the AO treated the service fee amounting to Rs.24,00,000/- as “income from house property” and therefore disallowed business expenses claimed against the said receipt. The AO accordingly passed the assessment order assessing the income from house property at Rs.14,38,94,120/- (Rs.14,14,94,120 + Rs.24,00,000) against which municipal taxes and standard deduction of 30% were allowed and the remaining was subject to tax.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted the addition by the AO in treating the income of Rs.24,00,000/- received towards service charges under the head “income from house property”.
The Revenue being aggrieved by the order filed an appeal before the Tribunal
The Bench comprising of ABY T. Varkey, Judicial Magistrate and Amarjit Singh Accountant Member observed that income by way of service charges was chargeable under the’ “Profits & Gains from Business”. Thus the service charges collected from the tenant were accepted by this Tribunal as assessable under the head “income from business”, therefore, the expenses which are having nexus with the purpose of the business be allowed.
Hence upheld the decision of CIT(A) and dismiss the appeal of Revenue.
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