M/s Jethmal Banthia, HUF, Kolkata V. ACIT, CC-XXVIII,Kolkata, Kolkata

ITA 2361/KOL/2013

• Counselvise Citation: 236123514 RSA 2013
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 6; 143(3)

Judgement Text

I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER I.T.A. NO.: 2361/ KOL./ 2013 ASSESSMENT YEAR : 2007-2008 M/S. JETHMAL BARTHIA, HUF,......................... ............APPELLANT 147, MAHATMA GANDHI ROAD, KOLKATA-700 007 [PAN : AABHJ 5399 G] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.......... RESPONDENT CENTRAL CIRCLE-XVIII, KOLKATA AAYAKAR BHAWAN, PURBA, 110, SHANTI PALLY, E.M. BYE PASS, KOLKATA-700 107 APPEARANCES BY: SHRI SUNIL SURANA, F.C.A., FOR THE APPELLANT MD. GAYASUDDIN ANSARI, JCIT, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : AUGUST 22, 2014 DATE OF PRONOUNCING THE ORDER : 02.09.2014 O R D E R PER SHRI MAHAVIR SINGH, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS ARISING OUT O F THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, K OLKATA IN APPEAL NO. 5/CC-XVIII/CIT(A)C-II/11-12 DATED 17.07.2013 FOR TH E ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF LD. CIT(APPEALS) CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE ELECTRICITY EXPENSES PAID WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY AND TAKING THE ALV UNDER SECTION 23 OF THE ACT AS GROSS RENT. I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 2 OF 7 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE H AS DISCLOSED GROSS RENT AT RS.3,21,412/- AND CLAIMED ELECTRICITY CHARG ES FROM THE GROSS RENT AT RS.2,35,666/- AND DISCLOSED A SUM OF RS.85,746/- AS ALV OF THE HOUSE PROPERTY AND DECLARED THIS AS RENTAL INCOME. THE AS SESSING OFFICER DISALLOWED THE CLAIM OF ELECTRICITY CHARGES PAID BY THE ASSESSEE BY OBSERVING THAT THE ACT IS SPECIFIC ABOUT WHAT EXPENSES CAN BE CLA IMED AGAINST HOUSE PROPERTY INCOME. THERE IS NO PROVISIO N OF CLAIMING ELECTRICITY EXPENSES AGAINST HOUSE PROPERTY INCOME. ACCORDINGLY , I DECIDE TO INCREASE ASSESSEE-HUFS HOUSE PROPERTY INCOME BY RS.2,35,666 /- AND TREAT RS.3,21,412/- AS ANNUAL RENT RECEIVED. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(APPEALS), WHO ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT ON CAREFUL CONSIDERATION OF THE FACT AND IN LAW, I AM OF THE OPINION THAT THE AO WAS JUSTIFIED IN REJECTING CLAIM OF THE APPELLANT F OR DEDUCTION OF ELECTRICITY CHARGES FROM THE RENTAL INCOME AS THERE IS NO PROVI SION UNDER THE ACT TO ALLOW SUCH A DEDUCTION WHILE COMPUTING THE INCOME U NDER THE HEAD INCOME FROM HOUSE PROPERTY. IN VIEW OF THE ABOVE, THE ACTI ON OF THE AO IS UPHELD. 5. AGGRIEVED, NOW THE ASSESSEE CAME IN APPEAL BEFOR E THE TRIBUNAL. 6. BEFORE ME LD. COUNSEL FOR THE ASSESSEE SHRI SUNI L SURANA STATED THAT THE GROSS RENT DURING THE YEAR RECEIVED BY THE ASSE SSEE WAS TO THE TUNE OF RS.3,21,412/- AND ASSESSEE HAS CLAIMED ELECTRICITY EXPENSES PAID AT RS.2,35,666/- OUT OF THE SAME AND AFTER THAT COMPUT ED THE ALV OF THE PROPERTY AT RS.85,746/-. LD. COUNSEL STATED THAT TH E ASSESSEES ANNUAL RENT RECEIVED WAS AT RS.85,746/-. HE STATED THAT TH E PROVISIONS OF SECTION 23 CLEARLY MANDATE COMPUTATION OF INCOME FROM HOUSE PROPERTY ON THE BASIS OF ANNUAL LETABLE VALUE. HE REFERRED TO THE P ROVISIONS OF SECTION 23(1)(A) BY VIRTUE OF WHICH THE ANNUAL VALUE OF THE PROPERTY SHALL BE DEEMED TO BE THE ALV THAT THE SUM FOR WHICH THE PRO PERTY MIGHT I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 3 OF 7 REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A) OF SECTION 23(1) OF THE ACT, THE AMOUNT SO RECEIVED OR RECEIVABLE. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS.- JYOTSNA RANI SAHA (1999) 239 ITR 916 (CAL.); (II) BAGREE ESTATES (P) LTD. VS.- DCIT, SPECIAL RA NGE-10, CALCUTTA (ITA NO. 1661/CAL./1990), ITAT, KOLKATAS ORDER DATED 25.03.1994; (III)NEELAM CABLE MANUFACTURING CO. VS.- ACIT (199 7) 59 TTJ DEL. 474; (IV)ACIT VS.- MOHANLAL RUPESH KUMAR (2001) 70 TTJ GAU. 931; (V) M/S. KAMLESH REAL ESTATES PVT. LTD. VS.- ACIT( OSD)-2, MUMBAI IN ITA NO. 1451/MUM/2010- ORDER DATED 20.04. 2011; (VI)SHARMILA TAGORE VS.- JCIT- (2005) 93 TTJ MUM.4 83; (VII)SHRI SAIF ALI KHAN VS.- ACIT IN ITA NO. 1653/ MUM./2009 ORDER DATED 29.06.2011. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSESESE STATED THAT BOTH THE LOWER AUTHORITIES HAVE WRONGLY DISALLOWED THE ELECT RICITY EXPENSES PAID BY THE ASSESSEE WHICH ARE ACTUALLY TO BE DEDUCTED F ROM THE GROSS RENT FOR COMPUTING THE ALV UNDER THE PROVISIONS OF SECTION 2 3 OF THE ACT. HENCE HE REQUESTED THE BENCH TO CONSIDER THE ABOVE CASE L AWS AND THE PROVISIONS OF SECTION 23 OF THE ACT AND DECIDED THE ISSUE. 7. ON THE OTHER HAND, LD. SR. D.R. ARGUED THAT THER E IS NO PROVISION IN THE ACT TO REDUCE THE ELECTRICITY EXPENSES FROM THE GROSS RENT. HE STATED THAT ONCE THERE IS NO PROVISION IN THE ACT FOR DEDU CTION OF ELECTRICITY EXPENSES PAID FROM THE GROSS RENT, NO FURTHER REDUC TION PAID ALLOWED FOR THE SAME. 8. I HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE FACTS OF THE CASE WHICH ARE VERY CLEAR THAT THE ASSESSEE HAS CLAIMED ELECTRICITY CHA RGES PAID FROM THE GROSS I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 4 OF 7 RENT AND COMPUTED THE ALV. I HAVE GONE THROUGH THE PROVISIONS OF SECTIONS 23(1)(A) AND 23(1)(B) OF THE ACT AND WHICH READ AS UNDER :- 23(1) FOR THE PURPOSES OF SECTION 22,THE ANNUAL VA LUE OF THE PROPERTY SHALL BE DEEMED TO BE THE ALV THAT THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR; OR (2) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A) OF S ECTION 23(1) OF THE ACT, THE AMOUNT SO RECEIVED OR RECEIVABLE. I FIND THAT NOW THE ISSUE IS COVERED BY THE DECISIO N OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF JYOTSNA RANI SAH A (1999) 239 ITR 916(CAL.), WHERE THE QUESTION REFERRED TO WAS AS UN DER:- WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN ALLO WING DEDUCTIONS ON ACCOUNT OF SALARY PAID TO NIGHT GUARD , SWEEPER AND CARETAKER AND CERTAIN ELECTRICITY CHARG ES FROM GROSS RENT RECEIVED IN COMPUTING HOUSE PROPERT Y INCOME WHEN THE SAME ARE NOT ALLOWABLE AS DEDUCTION EITHER UNDER SECTION 23 OR 24 OF THE INCOME TAX ACT , 1961? AND HONBLE HIGH COURT HAS ANSWERED THAT THE DEDUCT ION CLAIMED WILL BE ALLOWABLE IF THE SAME RELATES TO THE INCOME, AND TH E HONBLE HIGH COURT CONFIRMED THE FINDING OF THE TRIBUNAL VIDE PARAS 10 AND 11 AS UNDER:- 10. THE ABOVE FINDING OF THE TRIBUNAL IS A FINDING OF FACT AND AN ACCEPTANCE THAT THE RENT CHARGED BY THE ASSESSEE HAS TO BE TREATED AS COMPOSITE. IF IT IS C OMPOSITE IT DOES NOT WHOLLY ARISE FROM HOUSE PROPERTY THE ADMISSIBILITY AS UNDER SECTIONS 23 AND 24 ARE NOT T HE END OF THE CATEGORY OF ALLOWABLE DEDUCTIONS. IF THESE T WO SECTIONS ARE NOT THE END OF THE CATEGORIES THEN THE QUESTION SOUGHT TO BE REFERRED TO US IS A MERE ACAD EMIC QUESTION. 9. FURTHER THIS ISSUE IS CONSIDERED BY HONBLE DELH I BENCH OF THIS TRIBUNAL IN THE CASE OF NEELAM CABLE MANUFACTURING CO. VS.- ACIT (1997) 59 TTJ DEL. 474, WHEREIN THE ISSUE WAS DECIDED AS U NDER:- I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 5 OF 7 2.9 WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) HOLDING THAT SUCH INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2.10 WE WILL NOW CONSIDER THE ASSESSEES CLAIM WITH RE GARD TO GRANT OF DEDUCTION IN RESPECT OF THE VARIOUS EXPENSES CLAIMED BY THE ASSESSE E. THE ASSESSEE CLAIMED DEDUCTION OF RS. 55,552 ON ACCOUNT OF BUILDING REPAI RS AND SECURITY SERVICE CHARGES. NO SEPARATE DEDUCTION CAN BE ALLOWED IN RESPECT OF REPAIRS, AS THE AO HAD ALREADY ALLOWED DEDUCTION OF 1/6TH FOR REPAIRS AS PROVIDED IN S. 24 OF IT ACT, 1961. THE ASSESSEES CLAIM OF RS. 55,552 ON ACCOUNT OF BUILDING REPAIRS AND SECURITY SERVICE CHARGES INCLUDES A SUM OF RS. 30,012 INCURRED BY WAY OF SECURITY SERVICE CHARGES. THIS AMOUNT OF SECURITY SERVICE CHARGES OF RS. 30,012 SP ENT BY THE ASSESSEE SHOULD BE DEDUCTED OUT OF THE GROSS RENT OF RS. 2,72,707 RE CEIVED BY THE ASSESSEE. IT IS TRUE THAT NO SUCH DEDUCTION IS SPECIFICALLY PROVIDED IN S. 24 OF IT ACT, 1961. HOWEVER, DEDUCTION IN RESPECT OF SECURITY SERVICE CHARGES PAID BY THE ASSESSEE WILL BE DEDUCTIBLE WHILE COMPUTING THE ANNUAL VALUE UNDER S. 23 OF IT ACT, 1961. SEC. 23 PROVIDES THAT THE ANNUAL VALUE OF ANY PROPERTY SHALL BE THE SAME WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEA R. WHETHER THE PROPERTY HAS BEEN LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT OF SUCH PROPERTY IS IN EXCESS OF THE FAIR ANNUAL LETTING VAL UE, SUCH AMOUNT OF ACTUAL RENT SHALL BE TAKEN AS THE ANNUAL VALUE. THE GROSS RENT REC EIVED BY THE ASSESSEE AT RS. 2,72,707 ALSO INCLUDED SERVICE CHARGES. THEREFORE, WH ILE COMPUTING THE ANNUAL VALUE ONLY THAT AMOUNT OF RENT WHICH IS PAID IN RESP ECT OF THE LETTING OUT OF THE PROPERTY WILL HAVE TO BE TAKEN INTO CONSIDERATION. I T WILL, THEREFORE, BE NECESSARY TO DEDUCT THE AMOUNT OF SECURITY SERVICE CHARGES OF RS. 30,012 INCURRED BY THE ASSESSEE WHILE TAKING THE ACTUAL AMOUNT OF RENT RECEIVABLE I N RESPECT OF THE PROPERTY FOR DETERMINATION OF THE ANNUAL VALUE AS PER S. 23. THE AO IS, THEREFORE, DIRECTED TO GRANT DEDUCTION IN RESPECT OF RS. 30,012. SIMILARLY HONBLE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SAIF ALI KHAN VS.- ACIT IN ITA NO. 1653/MUM./2009 VIDE ORDER DATED 29.06.2011 HAS DECIDED THE ISSUE AS UNDER:- 18. IN REALTY FINANCE & LEASING (P) LTD. VS. ITO (20 06) 5 SOT 348 (MUM.), THE TRIBUNAL, AFTER RELYING ON THE DECISION IN PRAVEEN KUMAR VS. ITO (ITA NO.6159 (MUM) OF 2011), HAS OBSERVED AND HELD AS AS UNDER : 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THERE IS NO DISPUTE THAT THE CHARGES PAID TO THE SOCIETY ARE NOT COVERED IN THE ALLOWABLE DEDUCTIONS AS ENUMERATED UNDER SECTION 24 O F THE INCOME-TAX ACT. THE CLAIM OF THE ASSESSEE IS THAT THE SAID SOCIETY CHARGES ARE TO BE ALLOWED AS DEDUCTION FROM ANNUAL LETTING VALUE (ALV) AS IN THE CASE OF MUNICIPAL TAXES. IN THE CASE OF PRAVEENKUMAR (SUPRA), THE EXPENDITURE INCURRED TOWARDS SERVICE CHARGES AND LEGAL EXPENSES WE RE ALLOWED AS DEDUCTION WHILE COMPUTING THE ANNUAL LETTING VALUE UNDER SECTION 23 OF THE INCOME-TAX ACT. IT IS AN ADMITTED FACT THAT THE GROSS RENT RECEIPT BY THE ASSESSEE ALSO INCLUDE THE SOCIETY CHARGES WHICH A RE TO BE PAID BY THE ASSESSEE. IN OUR VIEW WHILE COMPUTING THE ANNUAL VAL UE THE AMOUNT OF RENT WHICH ACTUALLY GOES TO THE HANDS OF THE OWNER IN RESPECT OF LEASED PROPERTY SHOULD BE TAKEN INTO CONSIDERATION. AS PER TH E PROVISIONS OF I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 6 OF 7 SECTION 23 THE ANNUAL VALUE OF ANY PROPERTY IS TO BE DETERMINED ON THE BASIS OF ACTUAL RENT RECEIVED BY THE OWNER. 19. IN THE ABSENCE OF ANY CONTRARY DECISION PLACED ON RECORD BY THE REVENUE, WE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRI BUNAL, HOLD THAT THE SOCIETY CHARGES PAID BY THE ASSESSEE IN RESPECT OF THE LET OUT PROP ERTY ARE ALLOWABLE WHILE COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY UNDER SECT ION 23 OF THE ACT. THIS VIEW ALSO FINDS SUPPORT FROM THE RECENT DECISION OF HONBLE DELHI HIG H COURT IN CIT VS. R.J. WOOD P. LTD. (2011) 334 ITR 358 (DELHI) WHEREIN IT HAS BEEN HELD THAT THE MAINTENANCE AND OTHER CHARGES PAID BY THE ASSESSEE WERE DEDUCTIBLE FROM TH E RENT WHILE COMPUTING THE ANNUAL LETTING VALUE. ACCORDINGLY, THE AO IS DIRECTED TO AL LOW THE SAME. GROUND NO. 2 TAKEN BY THE ASSESSEE IS, THEREFORE, ALLOWED. 10. I FIND THAT FOR COMPUTING THE ALV THE RELATABLE EXPENSES THAT AS IN THE PRESENT CASE THE ELECTRICITY CHARGES PAID BY TH E ASSESSEE HAS TO BE DEDUCTED FROM THE GROSS RENT IN VIEW OF THE ABOVE P ROPOSITION ALLOWED BY THE HONBLE CALCUTTA HIGH COURT AND VARIOUS BENCHES OF THIS TRIBUNAL. ONE MORE ASPECT TO THIS ISSUE IS THAT EVEN FOR THE SAKE OF CONSISTENCY FROM LAST 30 YEARS, REVENUE IS ALLOWING THE PAYMENT OF ELECTR ICITY CHARGES FROM GROSS RENT. TO SUPPORT THIS, ASSESSEES LD. COUNSEL SHRI SUNIL SURANA FILED COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEA R 2008-09 PASSED UNDER SECTION 143(3) VIDE ORDER DATED 30.09.2010, W HICH WAS PASSED SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER I N THE PRESENT CASE, WHEREBY THE DEDUCTION WAS ALLOWED BY THE ASSESSING OFFICER HIMSELF. EVEN FOR THE SAKE OF CONSISTENCY ALSO, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 11. IN TERMS OF THE ABOVE, I ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DAY OF SEPTEMBER, 2014. SD/- MAHAVIR SINGH (JUDICIAL MEMBER) KOLKATA, THE 2 ND DAY OF SEPTEMBER, 2014 I.T.A. NO.: 2361/ KOL. / 2013 ASSESSMENT YEAR : 2007-2008 PAGE 7 OF 7 COPIES TO : (1) M/S. JETHMAL BANTHIA, HUF, C/O. S.M. SURANA, ADVOCATE, P-38, INDIA EXCHANGE PLACE, 3 RD FLOOR, ARUN CHAMBER, KOLKATA-700 001 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XVIII, KOLKATA AAYAKAR BHAWAN, PURBA, 110, SHANTI PALLY, E.M. BYE PASS, KOLKATA-700 107 (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.