In a significant ruling, the Ahmedabad bench of the ITAT held that the rent received by a Co-operative housing society by letting out space for hoardings are taxable under the head ‘Income from House Property’ under the Income Tax Act, 1961.
In the instant case, the Assessing Officer, while completing assessment against the assessee, Bimanagar Co. Op. Housing Society Ltd, observed that the amount received is assessable as ‘income from other sources’ since “these hoardings are erected in the ground adjacent to satellite Road and there is no building nearby. Meaning thereby that the land on which there hoardings are erected cannot be termed as ‘land appurtenant thereto”.
Accepting the contentions of the assessee, the bench noted that the assessee Society is a tenement co-operative housing society, in which ownership of the land and building vests in the society itself, and not the member of society.
“The very foundation of stand taken by the authorities below is thus legally unsustainable. Coming to the connotations of “land appurtenant thereto” in the expression ‘building or land appurtenant thereto’, it does not mean that land should be used as an integral part of the building as a unit. The assessee in the present case is owner of entire set of housing units, which can be collectively referred to as housing complex, and, the vacant land in this complex is thus essentially an integral part of the housing complex.”
The bench noticed the decision of the Karnataka High Court in the case of CN Ananthram vs. ACIT wherein the Court observed that ”When the legislature has used the word ‘or’ which means the word buildings or land appurtenant thereto should be understood disjunctively having regard to the context in which it is used, it cannot be read as ‘and’ as clearly, therefore, land being appurtenant to the building is sufficient; it need not be integral part of the building itself. In any case, having seen pictures of hoardings in question, I am satisfied that land on which hoarding rights were given is appurtenant to the building and cannot be viewed on standalone basis.
“In the present case also, the consideration received by the assessee is for the right to install the hoarding rather than rent for hoarding installed by the assessee. The above observations are thus equally valid in the present context,” the bench said.
The single Member, therefore, held that the income earned by the assessee, in consideration of having given rights to have play hoardings etc. are taxable as income from house property. Accordingly the Tribunal granted deduction under section 24(a) of the Income Tax Act to the assessee.
Read the full text of the Order below.
