Madras High Court
M/S.Rayala Corporation Pvt. Ltd vs The Assistant Commissioner Of ... on 26 April, 2022
Tax Case Appeal No.226 of 2012
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 26.04.2022
CORAM :
THE HONOURABLE MR. JUSTICE R.MAHADEVAN
AND
THE 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 Tax Act, 1961
against the order dated 16.05.2012 in I.T.A.No.1947/Mds/2011 passed by the
Income Tax Appellate Tribunal, 'D' Bench, Chennai.
For Appellant : Mr.R.Vijaya Narayanan
for Mr.Subbaraya Aiyar Padmanabhan
For Respondent : Mr.T.Ravikumar
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1/6
Tax Case Appeal No.226 of 2012
JUDGMENT
(Judgment of the Court was made by R.MAHADEVAN, J.)
The present Tax Case Appeal has been filed by the appellant/assessee
against the order passed by the Income Tax Appellate Tribunal, 'D' Bench,
Chennai in I.T.A.No.1947/Mds/2011 dated 16.05.2012, relating to the
assessment year 2007-08.
2.On 10.08.2012, this court admitted the aforesaid tax case appeal on
the following substantial questions of law:
“1. Whether on the facts and circumstances of the case, the
Income Tax Appellate Tribunal is justified in upholding the
assessment of the income received by the appellant by way of (a) sub-
leasing of already leased out property and (b) maintenance charges
as income from house property and not income from business, having
regard to the fact that the appellant company is pursuing the main
object of the company, as provided in the Memorandum and Objects?
2. Whether the income earned by the appellant by commercial
exploitation of sub-leasing leased premises in terms of the
Memorandum and Articles of Associations of the appellant company
and providing integrated services such as maintenance and further
investing the returns in real estate development is assessable as
income from business under Section 28 or income from house
property under Section 22 of the Income Tax Act?”
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Tax Case Appeal No.226 of 2012
3.The learned counsel appearing for the appellant/assessee and the
learned standing counsel for the respondent/Revenue jointly submitted that the
issues involved herein have already been decided by a Co-ordinate Bench of
this court in the appellant's own case, by order dated 26.02.2020 in
T.C.A.No.67 of 2020, the relevant paragraphs of which are usefully
reproduced hereunder:
“3.This Tax Case Appeal is admitted on the following substantial
question of law:
“Whether on the facts and circumstances of the case,
the Tribunal was justified in upholding the assessment of the
Income received by the appellant by
a)leasing and renting of immovable properties with all
infrastructural facilities with providing maintenance and
related activities of the said immovable properties and
b) maintenance charges and air conditioning hire
charges
as income from house property and not income from business,
having regard to the fact that the appellant company is
pursuing the main object of the company as provided in the
Memorandum and Objects?
4.Mr.M.Venkat Narayanan, learned counsel for the appellant would
submit that in the assessee's own case in “Rayala Corporation Pvt. Ltd ., Vs.
Assistant Commissioner of Income Tax” reported in “[2016] 386 ITR 500
(SC)”, the Hon'ble Supreme Court has reversed the Judgment of this Court
holding that the assessee's income from the house property should be treated
as business income and therefore, he would submit that the appeal has to be
allowed.
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Tax Case Appeal No.226 of 2012
5.However, Mr.T.Ravikumar, learned counsel for the respondent
would submit that the issue covered in the Judgment of Supreme Court is
only with regard to treating the lease income or rental income from the
property of the assessee as income from business or profession. However,
the issue regarding the maintenance charges and air conditioning hire
charges, land rent, ground rent etc., is not covered in the Judgment of the
Hon'ble Supreme Court.
6.A perusal of the Judgment of the Hon'ble Supreme Court would
show that it only treats the assessee's income by leasing out the property as
income from business and profession as claimed by the assessee. However,
the said Judgment does not deal with the income under other heads and no
finding has been given by the Hon'ble Supreme Court. Making it clear as
stated above, as no finding has been given with regard to any other heads,
this Court is of the view that as per the judgment of the Hon'ble Supreme
Court, the rental income derived from the house property should be treated
as business income. Hence, the question of law viz., 1(a) is answered in
favour of the assessee.
7. With regard to question of law viz., 1(b) as to whether income
from maintenance charges and air conditioning hire charges should be
treated as business income, it should not be treated as business income as it
is covered by the Judgement of this Court in the case of “Tarapore & Co.
Vs. Commissioner of Income Tax” reported in “(2002) 70 CCH 0748
ChenHC”, “(2003) 180 CTR 0472 : (2003) 259 ITR 0389 : (2002) 125
TAXMAN 0446” wherein this Court has held that Service charges received
from tenants are liable to be assessed as “income from other sources” and
not as “income from house property”. Hence, the question of law viz., 1(b)
is answered in favour of the Revenue.”
4.Following the aforesaid decision, the question of law no.1(a) is
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Tax Case Appeal No.226 of 2012
answered in favour of the appellant / assessee and the question of law no.1(b)
is answered in favour of the respondent / Revenue. Consequently, the second
question of law is left open.
5.Accordingly, this tax case appeal stands disposed of. No costs.
(R.M.D., J.) (J.S.N.P.,
J.)
26.04.2022
mrr
Index : Yes/No
Speaking Judgement (or) Non-Speaking Judgement
To
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.
https://www.mhc.tn.gov.in/judis
Tax Case Appeal No.226 of 2012
R.MAHADEVAN, J.
and
J.SATHYA NARAYANA PRASAD, J.
mrr
Tax Case Appeal No.226 of 2012
26.04.2022
https://www.mhc.tn.gov.in/judis
