IGUANA REALTY P. LTD, MUMBAI V. DCIT 3(2), MUMBAI

ITA 1238/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 31-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; ,OA ,OA ,OA ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K JH JKTSUNZ] YS[KK LNL; DS LE{K JH JKTSUNZ] YS[KK LNL; DS LE{K JH JKTSUNZ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO. 1238/MUM/2013 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2009-10 IGUANA REALTY P. LTD 01 ST FLOOR, MAKER TOWER, F 85, CUFFE PARADE, MUMBAI 400005. VS. DCIT-3(2) AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400 020. AABCI5501Q APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.12.2012 OF CIT (APPEALS) FOR THE A.Y. 2009-10. THE ASSESSEE HA S RAISED FOLLOWING GROUND IN THIS APPEAL:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN NOT ALLOWING BROKERAGE PAID TO BROKERS AMOUNTING TO RS. 16,32,34 7/- AS BROKERAGE FOR ARRANGEMENT OF LEASE, TO BE REDUCED FROM RENT RECEI VED FOR DETERMINATION OF ACTUAL RENT AS PER PROVISIONS OF SECTION 23(1)(B) OF THE I NCOME TAX ACT . 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED RENT OF RS. 79,72,967/-. THE ASSESSEE CLAIMED BROKERAGE EXPENSE S OF RS. 16,32,347/- AGAINST THIS INCOME IN ADDITION TO THE CLAIM OF INTEREST EX PENSES AND STATUTORY DEDUCTION U/S 24. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF B ROKERAGE CHARGES BY FOLLOWING ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS MS. MRUGAKSHI JOSHI REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI ROOPAK KUMAR DATE OF HEARING 21.08.2014 DATE OF PRONOUNCEMENT 21.08.2014 IGUANA REALTY P. LTD 2 | P A G E THE DECISION OF DELHI BENCHES OF THIS TRIBUNAL IN T HE CASE TUBE ROSE ESTATES VS. ACIT (123 ITD 498) . 3. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE THE CIT(A) BUT COULD NOT SUCCEED . 4. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS INCURRED THESE EXPENDITURES F OR EARNING THE RENTAL INCOME AND WITHOUT INCURRING THESE EXPENSES, THE ASSESSEE COUL D NOT HAVE EARNED THE RENTAL INCOME. THE BROKERAGE HAS BEEN PAID FOR LETTING OUT PROPERTY IN QUESTION, THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE ON BROKERA GE IS AN ALLOWABLE DEDUCTION AND ONLY NET RENTAL INCOME HAS TO BE ASSESSED U/S 2 3(1)(B). IN SUPPORT OF HER CONTENTION, THE LD. AR HAS RELIED UPON THE FOLLOWIN G DECISIONS:- (I) GOVIND S. SINGHANIA (ITA NO. 4581/MUM/2006.) (II) SHARMILA TAGORE VS. JCIT 93 TTJ (MUMBAI) 483 (III) LEKH RAJ CHANNA VS. INCOME TAX OFFICER 337 TT J (DEL) 297. (IV) J.B. PATEL AND CO. VS. DCIT (312 ITR 171). 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE BROKERAGE EXPENSES CANNOT BE ALLOWED AGAINST THE INCOME FROM HOUSE PRO PERTY AS THE SAME IS NOT PERMITTED U/S 24 OF THE INCOME TAX ACT. HE HAS FURT HER CONTENDED THAT THE ALLOWABLE EXPENDITURE HAS BEEN PERMITTED U/S 24 OF THE INCOME TAX ACT WHICH IS EXHAUSTIVE IN NATURE AND, THEREFORE, THERE IS NO SCOPE OF ALLOWIN G ANY OTHER EXPENDITURE APART FROM THE EXPENDITURE PERMITTED U/S 24 OF INCOME TAX ACT. HE HAS STRONGLY RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT CIT( A) HAS RELIED UPON THE VARIOUS DECISIONS OF THIS TRIBUNAL AS WELL AS THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ARAWALI ENGINEERS PVT. LTD. VS. CIT (335 ITR 508). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE EXPENDITURE AGAINST TH E INCOME FROM HOUSE PROPERTY IS IGUANA REALTY P. LTD 3 | P A G E PERMITTED U/S 24 WHICH STIPULATES ALLOWABLE DEDUCTI ON FOR A SUM EQUIVALENT TO 30% OF THE ANNUAL VALUE AND FURTHER EXPENDITURE OF INTERES T PAYABLE ON BORROWED CAPITAL USED FOR ACQUIRING, CONSTRUCTION, REPAIR, RENEWAL O R RECONSTRUCTION. THUS UNDER THE PROVISIONS OF SECTION 24 THE STATUTORY DEDUCTION OF 30% HAS BEEN PERMITTED WHICH TAKE CARES OF ALL OTHER SUNDRY EXPENSES AND FURTHER THE INTEREST EXPENDITURE ON BORROWED CAPITAL FOR THE PURPOSE OF ACQUIRING CONST RUCTION, REPAIR, RENEWAL OR RECONSTRUCTION IS ALSO PERMITTED. THERE IS NO SCOPE UNDER THE PROVISIONS OF SECTION 24 TO ALLOW ANY OTHER EXPENDITURE. WE NOTE THAT THE RE ARE VARIOUS DECISIONS OF THIS TRIBUNAL TAKING DIVERGENT VIEWS ON THIS ISSUE. THE ASSESSEE HAS RELIED UPON CERTAIN DECISIONS WHEREIN THE TRIBUNAL HAS TAKEN THE VIEW T HAT THE EXPENDITURE OF BROKERAGE SHOULD BE ALLOWED AGAINST THE RENTAL INCOME AND ONL Y NET RENTAL INCOME SHOULD BE TAKEN INTO ACCOUNT, WHEREAS A NUMBER OF DECISIONS W HICH HAS BEEN RELIED UPON AND REFERRED BY THE AUTHORITIES BELOW IN WHICH THE TRIB UNAL HAS TAKEN THE VIEW THAT NO EXPENDITURE OTHER THAN EXPENDITURE PERMITTED U/S 24 CAN BE ALLOWED AGAINST THE INCOME FROM HOUSE PROPERTY. THE CIT(A) HAS REFERRED AND RELIED UPON THE VARIOUS DECISIONS WHILE DECIDING THIS ISSUE IN PARA 4.1 AS UNDER:- 4.1 SIMILAR CLAIM HAVE BEEN REJECTED BY THE HON'BL E ITAT IN VARIOUS CASES. IF A PARTICULAR EXPENDITURE IS NOT SPECIFICALLY PROVID ED TO BE DEDUCTIBLE, DEDUCTION THEREOF CANNOT BE CLAIMED U/S. 24 OF THE LT. ACT, A S DECIDED IN THE FOLLOWING CASES: I. CIT VS. H.G. GUPTA & SONS (DEL) 149 ITR 253 II. ITO VS. CHUNILAL JAIN (ITAT, GAU) 60 TTJ 448 SIMILARLY IT HAS BEEN DECIDED IN THE FOLLOWING CASE S THAT BROKERAGE ETC. IS NOT AN ALLOWABLE EXPENDITURE: I. TUBE ROSE ESTATES PVT. LTD. VS. ACIT (ITAT, DEL) 123 ITD 498 II. ARAVALI ENGINEERS PVT. LTD. VS. CIT (P&H) 335 I TR 508 LLL.PICCADILY HOLIDAY RESORTS LTD. VS. DCIT (ITAT, DEL) 94 ITD 267 IV. CIT VS. ORIENT BEVERAGES LTD. 203 ITR 0559 (CAL ).. V. EXCELLENT ASSOCIATES VS. JCIT 280 ITR (AT) 60. VI. CIT VS. PREMNATH MOTORS (RAJ) PVT. LTD. : 297 I TR 83 (RAJ) 212 CTR IGUANA REALTY P. LTD 4 | P A G E (RAJ) 16. 7. SINCE THERE ARE DIVERGENT VIEWS OF THE TRIBUNAL, THEREFORE, THE DECISION OF HONBLE HIGH COURT IN THE CASE OF ARAWALI ENGINEERS PVT. LTD. VS. CIT (SUPRA) IS RELEVANT ON THE POINT AND ALSO BINDING ON THE TRIBU NAL. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS UPHELD THE DECISION OF CHAND IGARH BENCHES OF THIS TRIBUNAL. THE HONBLE HIGH COURT HAS QUOTED THE RELEVANT PART OF THE TRIBUNALS DECISION ON THIS POINT AT PAGE 513 AND 514 AS UNDER:- WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. IN OUR CONSIDERED VIEW, THE COMMISSION PAID BY THE ASSESSEE IN RESPE CT OF THE LETTING OUT OF THE HOUSE PROPERTY IS NOT PERMISSIBLE AS A DEDUCTION UNDER S ECTION 24 OF THE ACT. ANNUAL LETTING VALUE OF THE PROPERTY IS DEFINED UNDER SECTION 23 OF THE ACT AND IN CASE OF PROPERTY LET OUT, IF THE ACTUAL RENT RECEIVED IS MORE THAN T HE EXPECTED RENTAL VALUE, THE ACTUAL RENT IS TREATED AS THE ANNUAL LETTING VALUE OF THE PROPERTY. OUT OF THE SAID ANNUAL LETTING VALUE, DEDUCTIONS PERMISSIBLE ARE SPECIFIE D UNDER SECTION 24 OF THE ACT. IN THIS CASE, THE RENTAL VALUE IS NOT DISPUTED. IT IS ALSO NOT DISPUTED THAT DEDUCTION OF COMMISSION DOES NOT FALL WITHIN THE SPECIFIED DEDU CTIONS UNDER SECTION 24 OF THE ACT. IT IS ALSO PERTINENT TO MENTION THAT SECTION 2 4(1) PROVIDES DEDUCTION EQUAL TO 30 PER CENT. OF THE ANNUAL VALUE WITHOUT THE ASSESSEE HAVING TO ESTABLISH THE INCURRING OF ANY EXPENDITURE. THUS, THE EXPENDITURE WHICH IS INCURRED BY THE ASSESSEE CAN BE SAID TO BE COVERED UNDER THE STATUTORY DEDUCTION A LLOWED TO THE ASSESSEE. SINCE THE LEGISLATURE IN ITS WISDOM HAS NOT PROVIDED ANY SEPARATE DEDUCTION ON ACCOUNT OF COMMISSION/BROKERAGE PAID TO THE PROPERTY DEALERS, THE COMMISSIONER OF INCOME- TAX (APPEALS), IN OUR VIEW, WAS NOT JUSTIFIED IN A LLOWING THE DEDUCTION TO THE ASSESSEE. WE ARE FORTIFIED IN OUR VIEW BY THE DECIS ION OF THE DELHI BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF PICCA DILY HOLIDAY RESORTS LTD. V. DEPUTY CIT [2005] 278 ITR (AT) 154 (DELHI) ; [2005] 94 ITD 267 FOR THE REASONS GIVEN EARLIER BY US IN THIS REGARD AND RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF THE DELHI BENCH OF THE TRIBUNAL, WE RE STORE THE DISALLOWANCE OF RS. 2,50,000. THE GROUND OF APPEAL RAISED BY THE REVEN UE IS THUS ALLOWED. 8. THUS IT IS CLEAR THAT IN THE SAID CASE THE ISSUE I NVOLVED WAS IDENTICAL OF PAYMENT OF COMMISSION/BROKERAGE TO THE PROPERTY DEA LERS FOR LETTING OUT THE PROPERTY ON RENT WHICH WAS CLAIMED BY THE ASSESSEE AS DEDUCT ION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD IN PARA 14 AS UNDER:- AS REGARDS QUESTION (III), LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT RENT TO THE EXTENT OF BROKERAGE PAID HAVING NEVER BEEN RECEIVED BY THE ASSESSEE, THE ASSESSEE WAS NOT LIABLE TO INCLUDE THE SAID RENT IN THE INCO ME. THIS SUBMISSION CANNOT BE ACCEPTED. RENT ADMITTEDLY WAS PAYABLE TO THE ASSES SEE AND BROKERAGE WAS AN INDEPENDENT TRANSACTION ENVISAGING PAYMENT TO THE B ROKER. WHEREVER DEDUCTIONS OUT OF INCOME FROM PROPERTY ARE PERMISSIBLE, THE SAME HAVE BEEN SPECIFIED IN SECTION IGUANA REALTY P. LTD 5 | P A G E 24. DE HORS THE SAID PROVISION, DEDUCTION FROM IN COME IS NOT PERMISSIBLE. THIS VIEW HAS ALSO BEEN TAKEN BY DELHI HIGH COURT IN CIT V. H. G. GUPTA AND SONS [1984] 149 ITR 253 (DELHI). WE ARE IN AGREEMENT WITH THE VIEW TAKEN IN SAID JUDGMENT. QUESTION NO. (III) IS THUS ANSWERED AGAINST THE ASS ESSEE. ACCORDINGLY, THE APPEAL IS DISMISSED. 9. IT IS CLEAR FROM THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT THAT THE ASSESSEE ADVANCED CONTENTION THAT THE RENT TO THE E XTENT OF BROKERAGE PAID HAVE NEVER BEEN RECEIVED BY THE ASSESSEE, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO INCLUDE THE SAID RENT IN THE INCOME. THE HONBLE H IGH COURT HAS REJECTED THE CONTENTION AND HELD THAT THE DEDUCTION AGAINST THE INCOME FROM HOUSE PROPERTY ARE PERMISSIBLE AND SPECIFIED IN SECTION 24. NO DEDUCTI ON DE HORS THE PROVISIONS OF SECTION 24 IS PERMISSIBLE. RESPECTFULLY, FOLLOWING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ARAWALI ENGINEERS PVT. LTD. VS. CIT (SUPRA), WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND IN FAVOU R OF THE REVENUE, ORDERS OF THE AUTHORITIES BELOW ARE UPHELD. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF AUGUST 2014. SD/- SD/- (RAJENDRA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 21-8 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI