Maintenance Income from Building Let out Treats as Business Income: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) ruled that the maintenance income received from building let out is treated as business income.

LPR Company Pvt. Ltd., the assessee, is a resident corporate body. The assessee's source of revenue is from the rental and other income it receives from letting out buildings that it owns.

During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had offered rental income as income from house property. Whereas, the maintenance income received from the building letting out has been treated as business income.

After considering the submissions of the assessee, the AO concluded that the maintenance income the assessee had received had the characteristics of income from house property, included it in the calculation of rental income, and was subject to taxation as such. 

Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals), who dismissed the appeal of the assessee. Thus, the assessee filed a second appeal before the tribunal.

Before the tribunal, Amarjit Singh, the counsel for the assessee submitted that the assessee has entered into two separate agreements with the tenants. One for rental income and the other for maintenance charges. He added that the maintenance charges could not be treated as part of rental income since they are for actual expenses incurred by the assessee for certain facilities provided to the tenant.

Virendra Singh, the counsel for the revenue supported the decision of the lower authorities.

The ITAT observed that the maintenance charges are no way connected to the rental income. Also, they are for the certain additional facilities provided to the tenants, which are unconnected to leasing out the tenanted premises.

The bench further mentioned that a third party might have even supplied the amenities. Because the maintenance fees are unrelated to the rental income, they cannot be treated as income from house property since they are not included in the rental income.

The Two-member bench of G.S. Pannu, (President) and  Saktijit Dey, (Judicial Member) held that  maintenance income received by the assessee has to be treated as income from business.

To Read the full text of the Order CLICK HERE

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