Leon Realtors Pvt. Ltd. Vs ACIT (ITAT Delhi)
The ITAT Delhi disposed of cross appeals filed by the assessee and the Revenue for AYs 2015-16 and 2016-17 involving two principal issues: the head of income applicable to maintenance charges received from tenants and the allowability of deduction under Section 24(b) for interest on replacement loans.
On the first issue, the Tribunal noted that the assessee had entered into two independent agreements with its tenants—one for letting out the premises and another for providing maintenance services, amenities, car parking and other incidental facilities. The assessee had offered rental income under the head “Income from House Property” and maintenance receipts as “Business Income.” The Assessing Officer treated the maintenance charges as house property income, disallowed the related business expenditure, and the CIT(A) upheld that view. The Tribunal observed that the maintenance charges were separately identifiable under independent agreements and did not form part of a composite rental. Following the coordinate bench decision in LPR Company Pvt. Ltd. Vs. ACIT, it held that the maintenance charges were taxable as business income and directed the Assessing Officer to recompute the income accordingly. The issue relating to TDS credit was restored to the Assessing Officer for factual verification, while the challenge to initiation of penalty proceedings under Section 271(1)(c) was held to be premature.
