Viswarupa Builders & Developers (P) Ltd. v. Income-tax Officer, Ward-3(1), Hyderabad
[Citation -2017-LL-1122-24]

Citation 2017-LL-1122-24
Appellant Name Viswarupa Builders & Developers (P) Ltd.
Respondent Name Income-tax Officer, Ward-3(1), Hyderabad
Court HIGH COURT OF HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
Relevant Act Income-tax
Date of Order 22/11/2017
Judgment View Judgment
Keyword Tags income from house property • depreciation on building • maintenance charges • source of income • business income • rental receipts • other sources • rental income • letting out of property
Bot Summary: In response to the notices issued under Section 148 of the Income Tax Act, 1961, the assessee has filed returns disclosing nil income, claiming the rental income and maintenance charges as income from business source. The Assessing Officer, on consideration of the accounts and the legal position, treated the rental income as income from house property and receipts towards maintenance charges as income from other sources. The assessee has raised two contentions, namely, that the AO has committed an error in treating the income from rentals and maintenance charges received by the assessee as income from property and income from other sources respectively, and that instead, he ought to have treated the amounts received from both the sources under the head income from business. Whether on facts and circumstances of the case, the Hon ble Tribunal was right in confirming the orders of the revenue authorities to the effect that the 4 CVNR, J TA, J ITTA Nos.59 of 2005 and batch rental income and the maintenance charges received by the Appellant Assessee are not assessable under the head income from business 5. At the hearing, Mr. A.V.A. Siva Kartikeya, learned counsel for the assessee, made a strong bid to convince us to adjudicate on the issue as to whether the rental income must be treated as business income or not. The Tribunal further observed that the AO has not included the maintenance charges under the head house property , but he has separately assessed them under the head other sources , and computed the said income at a nil figure for all the years, and that the maintenance charges cannot be treated under the head business income. The maintenance charges have to be treated as either falling under the head income from property or income from other sources.


THE HON BLE SRI JUSTICE C.V. NAGARJUNA REDDY AND HON BLE SRI JUSTICE T. AMARNATH GOUD I.T.T.A. Nos.59, 151, 152, 153, 154 and 156 of 2005, and 25 of 2014 DATED:22-11-2017 Between: M/s. Viswarupa Builders & Developers (P) Ltd., Hyderabad Appellant And Income Tax Officer Ward-3(1) Hyderabad Respondent COUNSEL FOR APPELLANT: Mr. A.V.A. Siva Kartikeya COUNSEL FOR RESPONDENT: Mr. B. Narasimha Sarma, Senior Standing Counsel for Income Tax Department COURT MADE FOLLOWING: 2 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch COMMON JUDGMENT: (per Hon ble Sri Justice C.V. Nagarjuna Reddy) This batch of seven appeals not only involves identical questions, but also same parties. Hence, they are heard and disposed of together. 2. appellant (hereinafter referred to as assessee ) has constructed sixteen apartments and claimed to have let out same on rent. In response to notices issued under Section 148 of Income Tax Act, 1961 (for short, Act ), assessee has filed returns disclosing nil income, claiming rental income and maintenance charges as income from business source . assessee has claimed expenditure and depreciation on building, and maintenance. Assessing Officer (AO), on consideration of accounts and legal position, treated rental income as income from house property and receipts towards maintenance charges as income from other sources . Feeling aggrieved by these orders, assessee filed appeals before Commissioner of Income Tax (Appeals). On considering case of assessee, Commissioner has confirmed assessment orders. Assailing said orders, assessee filed appeals before Tribunal. 3 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch 3. Before Tribunal, assessee has raised two contentions, namely, (i) that AO has committed error in treating income from rentals and maintenance charges received by assessee as income from property and income from other sources respectively, and (ii) that instead, he ought to have treated amounts received from both sources under head income from business. Tribunal in its order observed that Authorized Representative of assessee has conceded in course of hearing that rental income received by assessee in different years is assessable under head house property and that he has restricted himself to claim that maintenance charges received by assessee for different years are assessable under head business . These observations are reflected in paragraphs 3 and 9 of Tribunal s orders. As regards maintenance charges, Tribunal declined to interfere with view taken by AO, as confirmed by first appellate authority. Feeling aggrieved by said orders of Tribunal, assessee filed these appeals. 4. In appeals, following substantial question of law is framed. Whether on facts and circumstances of case, Hon ble Tribunal was right in confirming orders of revenue authorities to effect that 4 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch rental income and maintenance charges received by Appellant Assessee are not assessable under head income from business? 5. At hearing, Mr. A.V.A. Siva Kartikeya, learned counsel for assessee, made strong bid to convince us to adjudicate on issue as to whether rental income must be treated as business income or not. We are afraid, we cannot decide this issue at this stage for reason that Tribunal in categorical terms placed on record fact that Authorized Representative of assessee has given up issue and has not disputed that rental income is assessable under head income from house property. law is well settled that recording of any fact by judicial authority of any event that transpired during proceedings is conclusive. If any party disputes such recoding of fact, he has to necessarily approach same forum seeking correction of error. For reasons best known to assessee, it has not taken recourse to this procedure. Therefore, it is not possible for us to ignore finding of Tribunal recorded in its order on concession of Authorized Representative of assessee, and adjudicate issue on merits. Accordingly, we are not inclined to interfere with finding of Tribunal as regards rental income. 5 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch 6. Coming to maintenance charges, Tribunal has placed reliance on judgments of Supreme Court in Sultan Brothers (P) Ltd. v. C.I.T.1 and Shambhu Investment (P) Ltd. v. C.I.T.2 and held that applying test laid down in Sultan Brothers (P) Ltd., (1 supra), irrespective of whether rents and maintenance charges are under one composite agreement or separate agreements, where services are not provided independent of letting out of property, maintenance charges being incidental to activity of letting out of property, they are integral part of rental receipts and are assessable under head house property . Tribunal further observed that AO has not included maintenance charges under head house property , but he has separately assessed them under head other sources , and computed said income at nil figure for all years, and that maintenance charges cannot be treated under head business income . 7. On careful consideration of reasoning of Tribunal, we do not find any error in order to interfere with it. Admittedly, there are no separate agreements for rental income and maintenance charges. On facts of case, it cannot be 1 [1964] 51 ITR 353 (SC) 2 [2003] 263 ITR 143 (SC) 6 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch disputed that maintenance of flats was undertaken by assessee in connection with letting out of apartments to lessees. When rentals, which are main source of income, are treated as not falling under head business source , it would be anomalous to treat maintenance charges under head from business source . Therefore, maintenance charges have to be treated as either falling under head income from property or income from other sources . It is not pleaded case of assessee that said charges must be treated under head income from property . When its claim to treat said source under business income is declined, it has to be necessarily included under head other sources . 8. For all above mentioned reasons, substantial question of law raised in these appeals is answered against assessee. appeals are accordingly dismissed. C.V. NAGARJUNA REDDY, J T. AMARNATH GOUD, J 22-11-2017 bnr 7 CVNR, J & TA, J ITTA Nos.59 of 2005 and batch Viswarupa Builders & Developers (P) Ltd. v. Income-tax Officer, Ward-3(1), Hyderabad
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