The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the income from maintenance services received along with rental income cannot be included under the head “income from house property” and the same is taxable as “Other Income” for the purpose of imposing an income tax.
The assessee company is a company engaged in the business of Alcoholic Beverages, Malted Milk Food, Dairy products, and Glass Containers, etc received rental income during the relevant year. Assessing Officer, while concluding the assessment proceedings against the assessee observed that the maintenance charges received in relation to the property should be regarded as part of the composite rent for computing the income taxable under the head ‘income from house property’ and no further deduction towards repairs and maintenance expenses actually incurred should be allowed.
On appeal, the CIT(A) allowed relief to the assessee.
The Tribunal was of the opinion that disallowance of expenditure cannot be deleted if he was treating the entire income from rent and maintenance charges as income from house property and thereafter was allowing statutory deduction u/s 24(a) of the Act @ 30% of the annual value.
“It is settled law that no other expenditure apart from the standard statutory deduction of 30% and the municipal taxes actually paid can be claimed as deduction from income from house property. On the other hand, we also note that, subsequently, in Assessment Year 2016-17, although the assessee had again claimed the maintenance income as part of rental income and had also claimed deduction of maintenance expenditure as part of the gross rent, the Assessing Officer has treated the maintenance income and expenditure as being chargeable to tax under income from the other sources,” the Tribunal said.
Referring to the Karnataka High Court judgment in CIT vs. Shantikumar Narayana Hotel Pvt. Ltd, “it is our considered opinion that only the rental income should be charged to tax under income from house property after allowing deductions in respect of the Municipal taxes paid and of the 30% standard statutory deduction u/s 24(a) of the Act. On the other hand, the income from maintenance services should be brought to tax under income from other sources after allowing the benefit of deduction towards expenditure incurred on maintenance charges. Accordingly, we set aside the order of the Ld. CIT (A) and direct the Assessing Officer to charge only the rental income under income from house property and allow the statutory permissible deductions therefrom. The expenditure on maintenance services is not to be deducted from income from house property and neither the income from maintenance charges recovered is to be treated as income from house property,” the Tribunal said.
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