M/S.rayala Corporation Pvt. Ltd v. The Assistant Commissioner Of Income Tax,Company Circle V (3),Uthamar Gandhi Salai,Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 26.04.2022CORAM : THE HONOURABLE MR. JUSTICE R.MAHADEVANANDTHE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD Tax Case Appeal No.226 of 2012 M/s.Rayala Corporation Pvt. Ltd.,144/7, Old Mahabalipuram Road,Kottivakkam,Chennai – 600 041.PAN : AAB CR 7230 D ...Appellant Versus The Assistant Commissioner of Income Tax,Company Circle V (3),Uthamar Gandhi Salai,Chennai – 600 034. ... Respondent Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the order dated 16.05.2012 inI.T.A.No.1947/Mds/2011 passed by the Income Tax AppellateTribunal, 'D' Bench, Chennai for the Assessment Year 2007-2008against the order dated 24.10.2011 made in ITA.NO.253/10-11 bythe Commissioner of Income Tax (Appeals)-VI, 121, MahathmaGandhi Road, Chennai 600 034 the Assessment Year 2007-2008 as against the order dated 30.09.2009 made inPAN.AABCR7230D/53043 R by the Income Tax Officer(OSD) Companycircle -V(3),Chennai for the Assessment Year 2007-2008. For Appellant :Mr.R.Vijaya Narayananfor Mr.Subbaraya Aiyar PadmanabhanFor Respondent :Mr.T.Ravikumar JUDGMENT (Judgment of the Court was made by R.MAHADEVAN, J.) The present Tax Case Appeal has been filed by theappellant/assessee against the order passed by the Income TaxAppellateTribunal,'D'Bench,Chennaiinhttps://hcservices.ecourts.gov.in/hcservices/I.T.A.No.1947/Mds/2011 dated 16.05.2012, relating to theassessment year 2007-08. 2.On 10.08.2012, this court admitted the aforesaid tax caseappeal on the following substantial questions of law: “1. Whether on the facts and circumstances ofthe case, the Income Tax Appellate Tribunal isjustified in upholding the assessment of the incomereceived by the appellant by way of (a) sub-leasing ofalready leased out property and (b) maintenancecharges as income from house property and not incomefrom business, having regard to the fact that theappellant company is pursuing the main object of thecompany, as provided in the Memorandum and Objects? 2. Whether the income earned by the appellant bycommercial exploitation of sub-leasing leased premisesin terms of the Memorandum and Articles ofAssociations of the appellant company and providingintegrated services such as maintenance and furtherinvesting the returns in real estate development isassessable as income from business under Section 28 orincome from house property under Section 22 of theIncome Tax Act?” 3.The learned counsel appearing for the appellant/assesseeand the learned standing counsel for the respondent/Revenuejointly submitted that the issues involved herein have alreadybeen decided by a Co-ordinate Bench of this court in theappellant's own case, by order dated 26.02.2020 in T.C.A.No.67of 2020, the relevant paragraphs of which are usefullyreproduced hereunder: “3.This Tax Case Appeal is admitted on thefollowing substantial question of law: “Whether on the facts and circumstancesof the case, the Tribunal was justified inupholding the assessment of the Incomereceived by the appellant bya)leasing and renting of immovablepropertieswithallinfrastructuralfacilities with providing maintenance andrelated activities of the said immovableproperties and b) maintenance charges and airconditioning hire charges as income from house property and notincome from business, having regard to thefact that the appellant company is pursuingthe main object of the company as providedin the Memorandum and Objects?4.Mr.M.Venkat Narayanan, learned counsel for theappellant would submit that in the assessee's owncase in “Rayala Corporation Pvt. Ltd ., Vs. AssistantCommissioner of Income Tax” reported in “[2016] 386ITR 500 (SC)”, the Hon'ble Supreme Court has reversedthe Judgment of this Court holding that theassessee's income from the house property should behttps://hcservices.ecourts.gov.in/hcservices/treated as business income and therefore, he wouldsubmit that the appeal has to be allowed. 5.However, Mr.T.Ravikumar, learned counsel forthe respondent would submit that the issue covered inthe Judgment of Supreme Court is only with regard totreating the lease income or rental income from theproperty of the assessee as income from business orprofession. However, the issue regarding themaintenance charges and air conditioning hirecharges, land rent, ground rent etc., is not coveredin the Judgment of the Hon'ble Supreme Court. 6.A perusal of the Judgment of the Hon'bleSupreme Court would show that it only treats theassessee's income by leasing out the property asincome from business and profession as claimed by theassessee. However, the said Judgment does not dealwith the income under other heads and no finding hasbeen given by the Hon'ble Supreme Court. Making itclear as stated above, as no finding has been givenwith regard to any other heads, this Court is of theview that as per the judgment of the Hon'ble SupremeCourt, the rental income derived from the houseproperty should be treated as business income. Hence,the question of law viz., 1(a) is answered in favourof the assessee. 7. With regard to question of law viz., 1(b) asto whether income from maintenance charges and airconditioning hire charges should be treated asbusiness income, it should not be treated as businessincome as it is covered by the Judgement of thisCourt in the case of “Tarapore & Co. Vs. Commissionerof Income Tax” reported in “(2002) 70 CCH 0748ChenHC”, “(2003) 180 CTR 0472 : (2003) 259 ITR 0389 :(2002) 125 TAXMAN 0446” wherein this Court has heldthat Service charges received from tenants are liableto be assessed as “income from other sources” and notas “income from house property”. Hence, the questionof law viz., 1(b) is answered in favour of theRevenue.” 4.Following the aforesaid decision, the question of lawno.1(a) is answered in favour of the appellant / assessee andthe question of law no.1(b) is answered in favour of therespondent / Revenue. Consequently, the second question of lawis left open. 5.Accordingly, this tax case appeal stands disposed of. Nocosts. Sd/- Assistant Registrar(CS VII) //True Copy// Sub Assistant Registrar mrrToTo 1.Income Tax Appellate Tribunal, 'D' Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Company Circle V (3), Uthamar Gandhi Salai, Chennai – 600 034. Company Circle V (3), Uthamar Gandhi Salai, Chennai – 600 034. 3.The Commissioner of Income Tax (Appeals)-VI, 121, Mahathma Gandhi Road, Chennai 600 034.121, Mahathma Gandhi Road, Chennai 600 034. 4.The Income Tax Officer(OSD) Company circle -V(3),Chennai. +1 cc to Mr.T.Ravikumar, Advocate Sr.NO. 28450 +1 cc to Mr.Subbaraya Aiyar Padmanabhan, Advocate Sr.NO. 28966Tax Case Appeal No.226 of 2012Tax Case Appeal No.226 of 2012 KV(CO) A.SK(23/05/2022)