ITAT upholds FAA's decision on mobile tower rent income classification

The Income Tax Appellate Tribunal (ITAT) dismissed the Assessing Officer's (AO) appeal, upholding the First Appellate Authority's (FAA) decisions on all grounds. The ITAT ruled in favor of treating income from mobile tower rent as 'income from house property,' deleting additions of Rs. 1.29 lakhs and Rs. 97.46 lakhs under different heads. The ITAT's decision aligned with the FAA's findings, referencing relevant case law and emphasizing the importance of reasonable rent valuation. The order was pronounced on 6th September, 2017.

---

---

Issues Involved:
1. Treatment of income from mobile tower rent.
2. Deletion of addition of Rs. 1.29 lakhs.
3. Deletion of addition of Rs. 97.46 lakhs under the head income from house property.

Issue-Wise Detailed Analysis:

1. Treatment of Income from Mobile Tower Rent:
The first ground of appeal concerns the treatment of Rs. 4.51 lakhs received from Mobile Tower Company. The Assessing Officer (AO) classified this income under 'income from other sources' instead of 'income from house property,' disallowing the 30% deduction claimed by the assessee under section 24(a) of the Act. The First Appellate Authority (FAA) referred to the case of M/s. Bajaj Bhavan Owners Premises Co-op Society Ltd. and held that the rent received from mobile towers should be treated as 'income from house property,' allowing the 30% deduction. The ITAT upheld the FAA's decision, citing the Hon'ble Bombay High Court's judgment, and decided the first ground of appeal against the AO.

2. Deletion of Addition of Rs. 1.29 Lakhs:
The second ground of appeal pertains to the addition of Rs. 1.29 lakhs by the AO, who found that Rs. 1.85 lakhs credited as rent to the capital account of the assessee's proprietary concern, M/s. Sab Reality, was not included in the computation of income. The FAA concluded that the disputed amount was part of the Mobile Tower Rent already offered for taxation and deleted the addition, stating that the AO misunderstood the accounting entries. The ITAT agreed with the FAA, confirming that the amount was already taxed and there was no justification for taxing it again, thus deciding the second ground of appeal against the AO.

3. Deletion of Addition of Rs. 97.46 Lakhs under the Head Income from House Property:
The third ground of appeal involves the deletion of Rs. 97.46 lakhs added by the AO, who applied the highest rent of Rs. 238 per sq. ft. to the total area of all properties, resulting in a taxable rent of Rs. 1.32 crores. The FAA found that the properties were located at different places with distinct features and advantages, and the AO was not justified in applying the highest rent to all properties. The FAA noted that the AO did not provide any evidence of higher rent received or examine any tenants. The ITAT upheld the FAA's decision, referencing the Hon'ble Bombay High Court's rulings in Tip Top Typography and Akshay Textiles and Trading Agencies (P.) Ltd., which emphasize that the annual letting value should be based on reasonable rent, not inflated or deflated figures. The ITAT confirmed that the AO's estimation lacked basis and ignored legal principles, thus deciding the last ground of appeal against the AO.

Conclusion:
The ITAT dismissed the appeal filed by the AO, confirming the FAA's decisions on all grounds and pronouncing the order in the open court on 6th September, 2017.

---