My society lets space on the terrace to cellular operators for their towers and antennae. The Assessing Officer says that is income from other sources and has disallowed the thirty per cent under section 24(a). Is he right?
No, on these facts. The Tribunal held that the terrace is part of the house property, that letting space on it for installing and operating a mobile tower or antenna is letting a part of the house property itself, and that the receipt is therefore income from house property on which the section 24(a) deduction is allowable.
Decided by the ITAT (Saktijit Dey, Judicial Member (SMC Bench, Mumbai)) on 2018-10-05, reported as ITA No. 670/Mum./2018 (ITAT Mumbai, SMC Bench), assessment year 2013-14. It bears on section 22, section 23, section 24, section 24(a), section 56 of the Income Tax Act 1961, in House Property and Deductions & Disallowances matters.
This is a recurring assessment in Mumbai and in every city where societies and building owners take antenna rent. The Department attacks it on three fronts: that the terrace is a common amenity and not house property, that the society is not the owner because conveyance has not been executed, and that the agreement is worded as a licence to install and operate rather than a tenancy, so the payment is compensation for services. The Tribunal answered the first and third; it did not decide the ownership objection. The result turned on the absence of any evidence that the society provided anything beyond the space, so the case is only as strong as that fact — where the owner in truth supplies power, backup, air-conditioning, security or maintenance for the equipment, the Department's characterisation becomes far more arguable. Note also that this is a single-Member SMC order and the rule of consistency did part of the work, and that the Department's leading authority the other way is a High Court decision this order does not discuss: the Calcutta High Court in Mukherjee Estate (P.) Ltd. v. CIT [(2000) 244 ITR 1], which held that hoardings erected on the roof are "neither part of the building nor the land appurtenant thereto" so that the receipt is not income from house property, and answered the reference in favour of the Revenue. That decision is about hoardings rather than the terrace itself and is distinguishable on the Tribunal's reasoning here, but it must be met head-on in any reply.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a co-operative society, filed its return for assessment year 2013-14 declaring income of Rs 8,20,970. It had permitted mobile service providers to install their towers and antennae on the roof or terrace of its building and had offered the receipt as income from house property, claiming the deduction under section 24(a). The Assessing Officer took the view that no house premises had been let, that the terrace was a common amenity for members and could not be termed house property, that the society could not be considered the owner because conveyance had not been executed in its favour as recorded in the tax audit report, and that the annual letting value of the terrace was not ascertainable; he treated the receipt as income from other sources and disallowed the section 24(a) claim. The Commissioner (Appeals), on reading the agreement, noted that the assessee had invited the service providers to provide an in-building cellular coverage solution, that the operators were expressly denied any right as tenant, sub-tenant, lessee or sub-lessee, and concluded that the payment was compensation for permitting the operators to install, use and operate a cellular base station and for providing facilities and services, so that the income was assessable as income from other sources. The assessee appealed.
The appeal was allowed. The Assessing Officer was directed to treat the rental income received from the cellular operators as income from house property and to allow the deduction under section 24(a) (paragraphs 7 and 8).
The Tribunal held that the terrace of the building cannot be considered distinct and separate but is certainly a part of the house property, so that letting out space on the terrace for installation and operation of a mobile tower or antenna amounts to letting out a part of the house property itself; the Assessing Officer's contrary observation was therefore unacceptable (paragraph 7). As to the Commissioner (Appeals)'s reasoning that the receipt was compensation for services and facilities, the Tribunal held that the Departmental authorities had failed to bring on record any material to show that, in addition to letting out the space, the assessee had provided any other service or facility to the cellular operators; on the material available the receipt was on account of letting out space for installation and operation of antennae 'and nothing else' (paragraph 7). It added that the assessee's claim on the same footing had not been disturbed in any other assessment year and that this had not been controverted, so the rule of consistency also supported the claim (paragraph 7).
In my view, the terrace of the building cannot be considered as distinct and separate but certainly is a part of the house property.
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Handle my notice → Ask a CA on WhatsAppNo, on these facts. The Tribunal held that the terrace is part of the house property, that letting space on it for installing and operating a mobile tower or antenna is letting a part of the house property itself, and that the receipt is therefore income from house property on which the section 24(a) deduction is allowable. This was decided by the ITAT (Saktijit Dey, Judicial Member (SMC Bench, Mumbai)) and bears on section 22, section 23, section 24, section 24(a), section 56 of the Income Tax Act 1961. It is reported as ITA No. 670/Mum./2018 (ITAT Mumbai, SMC Bench), assessment year 2013-14. This is a recurring assessment in Mumbai and in every city where societies and building owners take antenna rent. The Department attacks it on three fronts: that the terrace is a common amenity and not house property, that the society is not the owner because conveyance has not been executed, and that the agreement is worded as a licence to install and operate rather than a tenancy, so the payment is compensation for services. The Tribunal answered the first and third; it did not decide the ownership objection. The result turned on the absence of any evidence that the society provided anything beyond the space, so the case is only as strong as that fact — where the owner in truth supplies power, backup, air-conditioning, security or maintenance for the equipment, the Department's characterisation becomes far more arguable. Note also that this is a single-Member SMC order and the rule of consistency did part of the work, and that the Department's leading authority the other way is a High Court decision this order does not discuss: the Calcutta High Court in Mukherjee Estate (P.) Ltd. v. CIT [(2000) 244 ITR 1], which held that hoardings erected on the roof are "neither part of the building nor the land appurtenant thereto" so that the receipt is not income from house property, and answered the reference in favour of the Revenue. That decision is about hoardings rather than the terrace itself and is distinguishable on the Tribunal's reasoning here, but it must be met head-on in any reply. If it applies to you, the first step is this: Produce the agreement and show what is actually being paid for: if it is space and nothing more, say so and make the Department point to any service it says was provided.
The assessee, a co-operative society, filed its return for assessment year 2013-14 declaring income of Rs 8,20,970. It had permitted mobile service providers to install their towers and antennae on the roof or terrace of its building and had offered the receipt as income from house property, claiming the deduction under section 24(a). The Assessing Officer took the view that no house premises had been let, that the terrace was a common amenity for members and could not be termed house property, that the society could not be considered the owner because conveyance had not been executed in its favour as recorded in the tax audit report, and that the annual letting value of the terrace was not ascertainable; he treated the receipt as income from other sources and disallowed the section 24(a) claim. The Commissioner (Appeals), on reading the agreement, noted that the assessee had invited the service providers to provide an in-building cellular coverage solution, that the operators were expressly denied any right as tenant, sub-tenant, lessee or sub-lessee, and concluded that the payment was compensation for permitting the operators to install, use and operate a cellular base station and for providing facilities and services, so that the income was assessable as income from other sources. The assessee appealed. The matter was decided on 2018-10-05 by the ITAT (Saktijit Dey, Judicial Member (SMC Bench, Mumbai)). On those facts the ITAT held as follows. The appeal was allowed. The Assessing Officer was directed to treat the rental income received from the cellular operators as income from house property and to allow the deduction under section 24(a) (paragraphs 7 and 8).
The Tribunal held that the terrace of the building cannot be considered distinct and separate but is certainly a part of the house property, so that letting out space on the terrace for installation and operation of a mobile tower or antenna amounts to letting out a part of the house property itself; the Assessing Officer's contrary observation was therefore unacceptable (paragraph 7). As to the Commissioner (Appeals)'s reasoning that the receipt was compensation for services and facilities, the Tribunal held that the Departmental authorities had failed to bring on record any material to show that, in addition to letting out the space, the assessee had provided any other service or facility to the cellular operators; on the material available the receipt was on account of letting out space for installation and operation of antennae 'and nothing else' (paragraph 7). It added that the assessee's claim on the same footing had not been disturbed in any other assessment year and that this had not been controverted, so the rule of consistency also supported the claim (paragraph 7). In the words reproduced by the source cited on this page: "In my view, the terrace of the building cannot be considered as distinct and separate but certainly is a part of the house property." The decision followed or applied Matru Ashish Co-operative Housing Society Ltd. v. ITO [2012] 144 TTJ 446 (Mum.) — relied on by the assessee and said to support the view taken; Manpreet Singh v. ITO [2015] 168 TTJ 502 (Mum.) — relied on by the assessee and said to support the view taken.
It was decided by the ITAT on 2018-10-05 and is reported as ITA No. 670/Mum./2018 (ITAT Mumbai, SMC Bench), assessment year 2013-14. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 22, section 23, section 24, section 24(a), section 56, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed. The Assessing Officer was directed to treat the rental income received from the cellular operators as income from house property and to allow the deduction under section 24(a) (paragraphs 7 and 8). It arises in House Property and Deductions & Disallowances matters, on section 22, section 23, section 24, section 24(a), section 56 of the Income Tax Act 1961, and was decided by Saktijit Dey, Judicial Member (SMC Bench, Mumbai). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the earlier and later assessment years on record where the same receipt was accepted as house property income; the Tribunal relied on the unrebutted rule of consistency. Meet the 'terrace is not house property' point directly: the terrace is not distinct and separate from the building of which it forms part. Expect the ownership objection where conveyance has not been executed in favour of a society, and prepare it separately under section 22 read with section 27(iii); it was raised here by the Assessing Officer but not adjudicated. If services genuinely are supplied along with the space, consider whether the composite receipt should be split, and be aware that the head may then be business income or income from other sources instead.
Validity check could not be completed. Validity check could not be completed; later treatment of this order was not searched. It is a single-Member SMC order and therefore carries limited precedential weight, and the contrary view taken by the Assessing Officer and the Commissioner (Appeals), that such receipts are income from other sources, remains the Department's working position. A contrary High Court decision on roof-space receipts, not considered in this order, is Mukherjee Estate (P.) Ltd. v. CIT [(2000) 244 ITR 1 (Cal)], where hoarding rent on the roof was held not to be income from house property and the reference was answered in favour of the Revenue. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order is by a single Judicial Member sitting on the SMC Bench and runs to eight paragraphs. Two of the three reasons given by the Assessing Officer were answered (that the terrace is not house property, and, through the finding on the agreement, that the receipt was for services); the third, that the society was not the owner because conveyance had not been executed in its favour, was recited at paragraph 3 but was not separately decided. The decisions the assessee relied on, Matru Ashish Co-operative Housing Society Ltd. v. ITO [2012] 144 TTJ 446 (Mum.) and Manpreet Singh v. ITO [2015] 168 TTJ 502 (Mum.), were said by the Tribunal to support its view but were not analysed. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. The Assessing Officer was directed to treat the rental income received from the cellular operators as income from house property and to allow the deduction under section 24(a) (paragraphs 7 and 8).
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