By TIOL News Service

AHEMDABAD, OCT 20, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether consideration received by housing cooperative society, for having given rights to have play hoardings in its complex, forms part of annual letting value, and hence taxable as income from house property. YES is the answer.

Facts of the case:

The Assessee, a cooperative housing society, had received Rs.16,00,000/- from M/s Selvel Media Services Pvt. Ltd. during subject year, in respect of hoarding rent. These hoardings, as was the claim of Assessee, were built on common land owned by the society. The assessee treated the hoarding rent receipts as income taxable under the head "income from house property", and, accordingly claimed deduction u/s 24(a) @ 30% of the annual value. The AO however, declined this claim by observing that "these hoardings were erected in the ground adjacent to satellite Road and there was no building nearby. Meaning thereby that the land on which there hoardings were erected could not be termed as 'land appurtenant thereto". The AO further observed that these hoardings erected by the said M/s Selvel Media Services (P) Limited were in the back yard of some of the buildings owned by the members of the assessee society for their own residence. On appeal, the CIT(A) confirmed the action of AO, by observing that since the Assessee society did not own the residential building, it could not let out residential building owned by the members and, therefore, the rent derived from the hoardings could not be termed as having been derived from the land appurtenant thereto.

ITAT held that,

++ the counsel for Assessee rightly pointed out 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 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. As observed by Karnataka High Court in the case of CN Ananthram vs. ACIT, which is equally valid in the present context, "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, this court is 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. In view of the above discussions, the income earned by assessee, in consideration of having given rights to have play hoardings, are taxable as income from house property. Accordingly, deduction u/s 24(a) was indeed admissible in the present case.

(See 2017-TIOL-1433-ITAT-AHM)