KAUSHLIYA N KUWADEKAR, MUMBAI V. ACIT 20(1), MUMBAI

ITA 184/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7711 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 21-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: D P BADANI
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO 184 / MUM/ 201 4 ( / ASSESSMENT YEAR : 20 09 - 10 ) KAUSHALIYA N KUWADEKAR, 1501, WOODSTOCK, J P ROAD, VERSOVA, ANDHERI (W), MUMBAI - 4000 61 / VS. ASSTT. COMMISSIONER OF INCOME TAX, 20(1), MUMBAI. / APPLICANT BY : SHRI D P BADANI /RESPONDENT BY : SHRI M C OMI NINGSHE N / DATE OF HEARING : 21.3.2017 / DATE OF PRONOUNCEMENT : 29. 3 .2017 / O R D E R PER RAJESH KUMAR, A. M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - 31 , MUMBAI, DAT ED 29.10.2013 FOR THE ASSESSMENT YEAR 20 09 - 10. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER : [I] IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED COMMISSIONER INCOME TAX [CIT - APPEALS] ERRED IN CONFIRMING THE ORDER OF ASSESSI NG OFFICER, ASSESSING HOUSE PROPERTY INCOME AT RS.99,98,100/ - IN STEAD OF ASSESSING IT AT RS.89,56,236/ - [II] THE CIT - APPEALS FAILED TO APPRECIATE THAT IN ORDER TO EARN RENTAL INCOME RS.99,98,100/ - ,THE ASSESSEE HAD TO PAY SERVICE TAX OF RS.10,41,864/ - A ND, THEREFORE EFFECTIVELY THE INCOME FROM THE HOUSE PROPERTY AMOUNTS TO RS.89,56,236/ - 2 ITA NO. 184/ MUM/ 201 4 [III]THE APPELLANT THEREFORE PRAYS THAT DIRECTION MAY BE GIVEN TO THE LOWER AUTHORITY TO ASSESS THE GROSS HOUSE PROPERTY INCOME AT RS. 89,56,236/ - AFTER TAKING O UT THE SERVICE TAX COMPONENT OF RS . 10,41,864/ - ,WHICH WAS BORNE BY APPELLANT AS PER LEAVE LICENCE AGREEMENT. 3. THE SOLE ISSUE RAISED BY THE ASSESSEE IN ALL THE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF ORDER OF AO BY THE LD.CIT(A) ASSESSIN G THE HOUSE PROPERTY INCOME AT RS.99,98,100/ - INSTEAD OF RS.89,56,236/ - WITHOUT ALLOWING SERVICE TAX OF RS.10.41,864/ - . 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HER RETURN OF INCOME ON 31.7.2009 AT RS.58,87,420 / - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961. THEREAFTER THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE STATUTORY PROCEEDINGS UNDER SECTION 143(2) AND 142(1) WERE INITIATED AGAINST THE ASSESSEE. THE ASSESSEE HAS GIVEN HER HOUSE PROPERTY ON REN T TO THE HDFC BANK IN TERMS OF LEASE AND LICENCE AGREEMENT DATED 15.2.2008 AND THE LICENCE FEE WAS FIXED AT RS. 8,33,175/ - PER ANNUM. SINCE THE PROPERTY WAS COMMERCIAL ONE AND THE ASSESSEE HA D TO PAY SERVICE TAX ON THE TOTAL RENT RECEIPT OF RS.99,98,100 / - WHICH CAME TO RS.10,41,864/ - AND THE ASSESSEE ACCORDINGLY OFFERED AN AMOUNT OF RS.89,56,287/ - AS INCOME FROM THE HOUSE PROPERTY STATING THAT RENT RECEIVED ON IMMOVABLE PROPERTY FOR COMMERCIAL USE WAS BROUGHT WITHIN THE AMBIT OF SERVICE TAX BY FINANC E ACT, 2007. ACCORDING TO THE AO , THE SERVICE TAX ON THE SAID RENT SHOULD HAVE BEEN COLLECTED FROM THE LESSEE AND ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE CALLING 3 ITA NO. 184/ MUM/ 201 4 UPON HER AS TO WHY THE SERVICE CHARGES SHOULD NOT BE ADDED TO THE RENTAL INCOME OF THE ASSESSEE , WHICH WAS REPLIED BY THE ASSESSEE SUBMITTING THAT IN THE LEAVE AND LICENCE AGREEMENT DATED 15.8.2008, PARA 4(V) OF THE AGREEMENT THAT THERE WAS NO MENTION OF SERVICE TAX IN THE DETAILS OF REIMBURSEMENT S TO BE MADE BY THE LESSEE AND THEREFORE NO SERVICE TAX WAS PAYABLE BY ASSESSEE. FINALLY, THE AO BRUSHED ASIDE THE CONTENTION AND SUBMISSIONS MADE BY THE ASSESSEE BY DISALLOWING THE DEDUCTION OF SERVICE TAX CLAIMED BY THE ASSESSEE BY STATING THAT NO DEDUCTION TOWARDS SERVICE TAX WAS ALLOWABLE UNDER THE INCOME TAX ACT AND SECTION 23 OF THE ACT ENVISAGES ONLY LEVY BY CIVIL AUTHORITIES. ULTIMATELY, THE ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER VIDE ORDER DATED 9.12.2011 PASSED UNDER SECTION 143 ( 3) ASSESSING THE TOTAL INCO ME OF THE ASSESSEE AT RS.66,16,730/ - . AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING T HE SUBMISSIONS AS MADE BY T HE ASSESSEE AS INCORPORATED IN PARA 4 OF THE APPEAL ORDER , DISMISS ED THE APPE AL OF THE ASSESSEE BY HOLDING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE FACTS RELATING TO THE ISSUE AS THEY EMERGE FROM THE IMPUGNED ASSESSMENT ORDER AND THE SUBMISSIONS MADE IN APPEAL THE APPELLANT HAS OFFERED INCOME FROM HOUSE PROPERTY AT THE NET FIGURE AFTER DEDUCTING THE AMOUNT OF SERVICE DUE ON THE RECEIPT FROM GROSS RENT RECEIVED. THE LEAVE & LICENSE AGREEMENT FURNISHED DOES NOT CONTAIN ANY SPECIFIC CLAUSE TO INDICATE THAT THE ARRANGEMENT BETWEEN THE APPELLANT AND THE HDFC BANK IS SUCH THAT THIS AMOUNT IS DEEMED INCLUDED IN THE GROSS RENT AMOUNT. IN THE CASE OF PEAREY LAL BHAVAN ASSOCIATE V/S M/S SATYA DEVELOPERS PVT. LTD. REPORTED AT 2011 - TIOL - 114 - HC - DEL - ST, IT WAS HELD THAT THE RECIPIENT OF THE SERVICE IS REQUIRED TO PAY THE SERVICE TAX TO THE SERVICE PROVIDER EVEN IF THE CONTRACT DID NOT SPECIFICALLY 4 ITA NO. 184/ MUM/ 201 4 MENTION IT; IT IS THE SERVICE WHICH IS TAXED, AND THE LEVY IS AN INDIRECT ONE, WHICH NECESSARILY REPRESENTS ONLY THOSE TAXES SPECIFIED THEREIN WHICH ARE A LIABILITY OF THE LANDLORD/OWNER OF A PROPERTY LIKE WATER TAX, MUNICIPAL TAX, SEWERAGE TAX ETC AND NOT THOSE TAXES WHICH SPECIFICALLY ARE BASED UPON THE CONSUMPTION OF A SERVICE. 5.1 IN THE PRESENT CASE, THE APPELLANT HAS BEEN UNABLE TO SHOW THAT THE GROSS RENT CONTAINS THE SERVICE TAX DU E TO THE GOVERNMENT FROM THE USER OF THE SERVICE I.E. HDFC BANK. THE PROVISIONS RELATING TO COMPUTATION OF INCOME FROM HOUSE PROPERTY ALLOW SPECIFIC DEDUCTIONS AS PER SECTION 24, OVER AND ABOVE THE DEDUCTION ON ACCOUNT OF TAXES LEVIED BY LOCAL AUTHORITIES AND THE DEDUCTION OF SERVICE TAX IS NOT INCLUDED THEREIN. ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O. IS UPHELD AND THE GROUND RAISED BY THE APPELLANT IS DISMISSED AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUN AL. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS ON RECORDS INCLUDING THE IMPUGNED ORDERS. WE FIND THAT THE ASSESSEE HAS LEASED OUT HIS COMMERCIAL PROPERTY TO HDFC BANK FOR ANNUAL RENTAL INCOME OF RS.99,98,100/ - AND DURING THE YEAR PAID SER VICE TAX OF RS.10,41,804/ - . CONSEQUENTLY, OFFERED RS.89,56,236 / - AS ANNUAL LETTING VALUE AND PAID THE TAX ACCORDINGLY. ACCORDING TO THE AO THE SAID SERVICE TAX SHOULD HAVE BEEN RECOVERED FROM THE TENANT BUT THE ASSESSEE FAILED TO DO SO AND THEREFORE D ISALLOW ED THE DEDUCTION SO CLAIMED BY THE ASSESSEE IN RESPECT OF SERVICE TAX PAID . THE ASSESSEE ALSO REFERRED TO PROVISIONS OF LEAVE AND LICENCE AGREEMENT DA T ED 15.2.2008 , WHEREIN THERE WAS NO MENTION OF SERVICE TAX TO BE REIMBURSED BY THE TENANT TO LANDL ORD. THE AO DISALLOWED THE SAID DEDUCTION BY HOLDING THAT ONLY LEVY BY MUNICIPAL CORPORATION WAS 5 ITA NO. 184/ MUM/ 201 4 DEDUCTIBLE UNDER SECTION 23 OF THE ACT. THE FAA ALSO UP HELD THE SAME BY OBSERVING THAT ONLY SPECIFIC DEDUCTION HAS BEEN PROVIDED UNDER SECTION 23 OF THE AC T AND NOWHERE HAS IT BEEN MENTIONED THAT SERVICE TAX WAS ADMISSIBLE UNDER THE PROVISIONS OF SECTION 23 OF THE ACT . 6 . AFTER HAVING CONSIDERED THE RIVAL CONTENTIONS , WE FIND THAT THE ALV OF THE PROPERTY HAS TO BE DETERMINED AFTER DEDUCTING THE LEVY OF TAX ES WHICH HAVE BEEN MADE BY THE STATE GOVERNMENT, CENTRAL GOVERNMENT OR ANY GOVERNMENT AUTHORITY WHO HAVE BEEN AUTHORIZED TO DO SO AND ONLY THEN THE RENT RECEIVED IS DETERMINED. WE ARE NOT IN AGREEMENT WITH THE LD.CIT(A) THAT THE AMOUNT OF SERVICE TAX WAS NOT MENTIONED IN THE AGREEMENT AND HENCE NO DEDUCTION IS TO BE ALLOWED U/S 23 OF THE ACT. IN OUR CONSIDERED VIEW , THE RENTAL VALUE SHOULD BE ASCERTAINED AFTER REDUCING OR SUBTRACTING THE AMOUNT OF SERVICE TAX PAID BY THE ASSESSEE FROM THE GROSS RENTAL RE CEIPT S. THE CONCLUSION OF THE LD.CIT(A) IS WRONG TO THAT EXTENT AND CANNOT BE SUSTAINED. WE ARE THEREFORE, ARE INCLINED TO SET ASIDE THE ORDER PASSED BY THE LD.CIT(A) AND DIRECT THE AO TO ASSESS THE INCOME FROM PROPERTY AT RS.89,56,230/ - AFTER REDUCTION OF SERVICE TAX OF RS.10.41,864/ - AND NOT ON RS. 99,98,100/ - . 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH MARCH , 2017 SD SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 6 ITA NO. 184/ MUM/ 201 4 MUMBAI ; DATED : 29. 3. 2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPEL LANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI DATE INITIALS 1. DRAFT DICTATED ON 21 .3.2017 SPS 2. DRAFT PLACED BEFORE AUTHOR 22.3.2017 SPS 3. DRAFT PROPOSED & PLACED BEFORE THE SECON D MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SPS 6. KEPT FOR PRONOUNCEMENT ON SPS 7. FILE SENT TO THE BENCH CLERK SPS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO A.R. 10. DATE OF DISPATCH OF ORDER