2021 (1) TMI 201 - AT - Income Tax

Tribunal reclassifies terrace rental income as 'Income from House Property' with Section 24(a) deduction.

The Tribunal reversed the lower authorities' decisions, directing the income from renting the terrace to be classified as 'Income from House Property' and ... Correct head of income - income from renting of terrace - erection & installation of Antenna Tower - under the head 'Income from Other Sources' or 'Income from House Property' - AO disallowing claim for deduction under Section 24(a) of-the Act and bringing the same to tax under the head 'Income from Other Sources' - HELD THAT:- Under clause 3C of the Leave & Licence Agreement, it is provided licensee shall “(b)e responsible to obtain all prior approvals from all concerned authorities, as necessary under the relevant laws in force from all authorities concerned, to carry out installation and erection of and to run and maintain the antenna tower and BTS equipment in the semi permanent structure, or the installation thereof, including work of any other nature”. Similarly, under clause 3K of the Leave & Licence Agreement the assessee shall “(a)t its own costs, charges and expenses keep and maintain the Licensed Area in good condition and wind and water tight.” the very foundation of the impugned order of the learned CIT(A), therefore, is unsustainable in law. As relying on MANPREET SINGH case [2015 (2) TMI 159 - ITAT DELHI] we uphold the plea of the assessee and accordingly direct the assessing officer to treat the amount received by the assessee on account of renting out of terrace to M/s. Reliance Infratel Limited for the purpose of installation of antenna tower as income from house property in terms of the claimed made by the assessee. The assessee gets the relief accordingly. Issues Involved:1. Computation of income from renting of terrace under the head 'Income from Other Sources' versus 'Income from House Property'.2. Disallowance of deduction under Section 24(a) of the Income Tax Act.Issue-wise Detailed Analysis:1. Computation of Income from Renting of Terrace:The primary issue revolves around whether the income from renting out the terrace for the installation of an antenna tower should be classified under 'Income from House Property' or 'Income from Other Sources'. The assessing officer categorized the income of Rs. 16,20,000 received from M/s. Reliance Infratel Limited under 'Income from Other Sources', arguing that Section 22 of the Income Tax Act covers only the annual value of property consisting of any building or lands appurtenant thereto of which the assessee is the owner. The CIT(A) upheld this view, stating that the agreements were service agreements rather than rent agreements, emphasizing the service aspects like installation, upkeep, and maintenance of antennas. The CIT(A) also noted that the terminology used in the agreements indicated a service nature rather than a rental nature, citing the legal principle of 'CONSENSUS AD IDEM' which means the mutual understanding of the nature of the agreement by both parties.2. Disallowance of Deduction under Section 24(a):Due to the classification of the income under 'Income from Other Sources', the claim for deduction under Section 24(a) was disallowed. Section 24(a) allows a standard deduction of 30% of the annual value for income categorized under 'Income from House Property'. The CIT(A) rejected the assessee's reliance on various judicial precedents, arguing that each case is unique and the cited cases did not apply to the specific facts of this case.Tribunal's Decision:Upon appeal, the Tribunal found no basis for the CIT(A)'s conclusion that the payment was under a service agreement rather than a rent agreement. The Tribunal referred to the Leave & Licence Agreement, which clearly indicated that the licensee (Reliance Infratel Limited) was responsible for the installation, erection, and maintenance of the antenna tower, with no service obligations on the part of the assessee. The Tribunal emphasized that the rent was for the space used to install the antenna, which is part of the building, and thus should be classified under 'Income from House Property'. The Tribunal cited a coordinate bench decision in the case of Manpreet Singh vs. ITO, which supported the view that rent for space on the roof for installing antennas should be treated as 'Income from House Property'.Conclusion:The Tribunal reversed the decisions of the lower authorities, directing the assessing officer to treat the income from renting the terrace as 'Income from House Property' and allow the deduction under Section 24(a). The appeal was allowed, and the assessee was granted relief accordingly.Pronouncement:The judgment was pronounced in the open court on the 04th day of January, 2021.