INCOME TAX ACT, 1961

Section 14

Head of Income - Recovery made towards common area maintenance charges - 'Income from other sources' or 'Income from house property' -

Assessee-company constructed a shopping mall cum multiplex theatre, which was given on leave and license basis. It was offering the rental income received in terms of the leave and license agreements along with the maintenance charges received under the head income from house property. Even during subject assessment year, the assessee originally declared the income under the head income from house property. However, it revised its return of income by offering the maintenance charges under the head 'Income from Other Sources'. AO rejected the contention of the assessee by referring to the declaration of incomes of earlier years under the head income from rental income on the concept of consistency. Further, he also held that the rental income received by the assessee was composite income, which could not be separated and the maintenance charges income could not be treated on standalone basis. Held: The intention of the assessee to give shopping mall under leave and license to earn rental income was first place and offer the other facilities as a facility to the lessee/users. Further, the purpose of providing separate maintenance to the lessee was not to earn any profit and might be to maintain the property in a good condition and give the licensee added convenience for the usage of the property. Further, it was found that the claim of expenditure made by the assessee was considerable when compare to the maintenance charges collected from the licensee. Therefore, maintenance charges claimed by the assessee could only be treated as separate source of income and it could be charged as a separate head under income from other sources. Further, it was not relevant, how the assessee declared previously over the years and what was relevant was the lawful claim of the assessee and whether the claim of the assessee was legally tenable. Accordingly, the assessee's claim of assessing maintenance charges under the head 'income from other sources' was accepted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13, 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 14A

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