Arora & Associates, New Delhi V. DCIT CC-22, New Delhi

ITA 2529/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9761 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 17-07-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C DASH
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `A : NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NOS.2529 & 2530/DEL./2008 (ASSESSMENT YEARS : 2005-06 & 06-07) M/S ARORA & ASSOCIATES, VS. ITO, CENT. CIR. 22, (FORMERLY KNOWN AS NEW DELHI. K.J. BUSINESS CENTRE) 131(GF), WORLD TRADE CENTRE, BABAR ROAD, NEW DELHI. (PAN/GIR NO.AADFK0550G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY JAIN. C.A. REVENUE BY : SHRI D.C. DASH, SR.DR ORDER PER K.D. RANJAN, AM THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEARS 2005-06 & 2006-07 ARISE OUT OF SEPARATE ORDERS OF COMMISSIONER OF INCOME-TAX (A PPEALS)-III, NEW DELHI. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CON VENIENCE ARE DISPOSED BY THIS COMMON ORDER. EXCEPT IN THE DIFFERENCE IN FIGURES, THE ISSUE INVOLVED IN BOTH THE YEARS IS IDENTICAL. THE GROUND OF APPEAL FOR ASSESSMENT YEA R 2005-06 IS REPRODUCED AS UNDER: 1. THAT ASSESSING OFFICER ERRED IN NOT DEDUCTING A SUM OF RS.4,42,300 FROM THE ANNUAL RENT. 2. THAT ANNUAL RENT AS DEFINED U/S 23 OF INCOME TA X ACT IS NET OF EXPENDITURE WHICH IS CHARGEABLE AGAINST THE RENT AND THE SUM OF RS.4,42,300 PAID BY ASSESSEE TOWARDS THE USE OF COMMON SERVICES IS DEDU CTIBLE TO ARRIVE AT THE ANNUAL VALUE. 2. THE ONLY ISSUE WHICH IS COMMON IN BOTH THE APPEA LS RELATES TO DISALLOWING THE CLAIM OF ASSESSEE ON ACCOUNT OF COMMON SERVICE CHAR GES FROM ANNUAL RENT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE ADMI TTED RENTAL INCOME OF RS.1,93,614 IN ASSESSMENT YEAR 2005-06 AND RS.1,95,000 IN ASSESSME NT YEAR 2006-07. THE ASSESSEE I.T.A. NOS.2529 & 2530/DEL./2008 (A.YS. : 2005-06 & 06-07) 2 CLAIMED DEDUCTION OF RS.4,22,300 IN ASSESSMENT YEAR 2005-06 AND OF RS.38,477 IN ASSESSMENT YEAR 2006-07 ON ACCOUNT OF REPAIRS AND M AINTENANCE OF FLATS. THE ASSESSING OFFICER WHILE COMPUTING THE INCOME FROM HOUSE PROPE RTY DISALLOWED THE CLAIM OF RS.4,42,300 IN ASSESSMENT YEAR 2005-06 AND RS.38,47 7 IN ASSESSMENT YEAR 2006-07 ON THE GROUND THAT THE EXPENSES ON REPAIRS AND MAINTEN ANCE WERE NOT ALLOWABLE AS DEDUCTION AGAINST INCOME FROM HOUSE PROPERTY AS PER SPECIFIC PROVISIONS OF THE ACT. THE DEDUCTION U/S 24 WAS ALLOWABLE TO THE EXTENT OF 30% OF RENT I N RESPECT OF REPAIRS AND MAINTENANCE. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS DISALLOW ED IN BOTH THE ASSESSMENT YEARS. 3. BEFORE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS SUBMITTED THAT THE AMOUNT IN QUESTION WAS PAID TO THE BUILDER FOR USE OF COMM ON FACILITIES AND SERVICES LIKE LIFT AND SECURITY ETC., PROVIDED BY THE BUILDER TO THE OWNER S OR TENANTS OF THE PREMISES IN THE BUILDING. IT WAS ALSO STATED THAT THESE PAYMENTS W ERE MADE AS ANNUAL MAINTENANCE CHARGES. LD.AR OF THE ASSESSEE FURTHER SUBMITTED TH AT THE RENT WAS RECEIVED BY THE ASSESSEE INCLUSIVE OF THESE EXPENSES AND, THEREFOR E, THESE EXPENSES WOULD BE REDUCED OUT OF THE RENTAL INCOME WHILE DETERMINING THE ANNUAL L ETTING VALUE OF PROPERTY U/S 23 AND NOT U/S 24 OF THE I.T. ACT. HE PLACED RELIANCE ON THE DECISON OF THE ITAT, CALCUTTA BENCH IN THE CASE OF BAGREE ESTATE PVT. LTD. VS. DCIT, 56 TT J (CAL.) 588. 4. LD.COMMISSIONER OF INCOME-TAX (APPEALS) AFTER CO NSIDERING THE FACTS AND SUBMISSION OF THE ASSESSEE HELD THAT SECTION 24 OF THE ACT SPECIFICALLY PROVIDE FOR DEDUCTIONS WHICH COULD BE ALLOWED WHILE COMPUTING I NCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ONLY TWO DEDUCTIONS, NAMELY (I) THE LUMP SUM AMOUNT EQUAL TO 30% OF ANNUAL VALUE AND (II) INTEREST PAID ON BORRO WED CAPITAL FOR THE ACQUISITION OF THE PROPERTY ARE ALLOWABLE. THE LUMP SUM DEDUCTION OF 30% PROVIDED IN SECTION 24(A) COVERS OF EXPENSES AND THERE WAS NO PROVISION IN SE CTION 24 FOR ALLOWING ANY OTHER EXPENDITURE IN CONNECTION WITH RENTED PROPERTY WHIL E COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AS REGARDS, THE CLAI M OF THE ASSESSEE THAT THESE EXPENSES WOULD BE REDUCED OUT OF RENTAL INCOME WHILE DETERMI NING THE ANNUAL VALUE OF THE PROPERTY U/S 23, THE COMMISSIONER OF INCOME-TAX (APPEALS) WA S OF THE VIEW THAT THE EXPENSES WERE NOT IN NATURE OF TAXES LEVIED BY ANY LOCAL AUT HORITY WITHIN THE MEANING OF PROVISO TO SECTION 23(1) OF THE ACT. FURTHER, THERE WAS NO EV IDENCE ON RECORD TO PROVE THAT THE RENT RECEIVED BY THE ASSESSEE FROM THE TENANTS WAS HAVIN G TWO COMPONENTS, NAMELY, RENT I.T.A. NOS.2529 & 2530/DEL./2008 (A.YS. : 2005-06 & 06-07) 3 PORTION PER SE AND SERVICE CHARGES FOR COMMON SERVI CES LIKE LIFT ETC. THERE WAS NO EVIDENCE ON RECORD TO PROVE THAT THE RENT RECEIVED FROM THE TENANTS WAS INCLUSIVE OF THESE EXPENSES. IN THE CASE CITED BY LD.AR OF THE ASSESS EE, THE MATTER WAS EARLIER SET ASIDE BY THE ITAT TO ASSESSING OFFICER AND DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS NUMBER OF TENANTS HAD FILED AFFIDAVIT CONFIRMING TH E FACT THAT BY MUTUAL UNDERSTANDING THE LANDLORDS WERE WEARING THE EXPENDITURE FOR LIFT , SECURTY ETC. AND AS SUCH EXPENDITURE WAS INCLUDED IN THE GROSS RENT ITSELF. HOWEVER, IN THE CASE OF THE ASSESSEE NO SUCH EVIDENCE WAS PRODUCED BEFORE THE ASSESSING OFFICER OR BEFORE HIM TO SUGGEST THAT THE RENT CHARGED FROM TENANTS ALSO INCLUDED SERVICE CHARGES ETC. PAID TO THE BUILDER. THEREFORE, THE RATIO OF DECISION CITED BY THE LD.AR OF THE ASS ESSEE COULD NOT BE APPLIED TO THE FACTS OF THE CASE. ACCORDINGLY, COMMISSIONER OF INCOME-T AX (APPEALS) REJECTED THE CLAIM OF THE ASSESSEE U/S 24 AS WELL AS SECTION 23 OF THE AC T. 5. BEFORE US, LD.AR OF THE ASSESSEE SUBMITTED THAT PART OF THE OFFICE WAS LET OUT AND MAINTENANCE CHARGES WERE PAYABLE AGAINST THE RENT R ECEIVED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ANNUAL VALUE HAS TO BE DETERMI NED AFTER DEDUCTING THE AMOUNT OF MAINTENANCE CHARGES PAYABLE BY THE ASSESSEE. HE PL ACED RELIANCE ON THE DECISION OF ITAT, AHEMDABAD BENCH IN THE CASE OF J.B. PATEL & C O. VS. DCIT, 100 ITD 556 (AHD.) FOR THE PROPOSITION THAT ANNUAL VALUE HAS TO BE DET ERMINED AFTER DEDUCTING THE ANNUAL MAINTENANCE CHARGERS FROM THE RENT RECEIVED BY THE ASSESSEE. ALTERNATIVELY, IT WAS PLEADED THAT IF THE CONTENTION OF THE ASSESSEE IS N OT ACCEPTED, THE PROPORTIONATE EXPENSES IN RELATION TO THE AREA OCCUPIED MAY BE DISALLOWED. 6. ON THE OTHER HAND, LD.SR.DR OF THE REVENUE SUBMI TTED THAT U/S 23, THE EXPENSES IN NATURE OF TAXES LEVIED BY THE LOCAL AUTHORITIES ARE DEDUCTIBLE. THE ASSESSEE HAS BEEN ALLOWED 30% DEDUCTION OF RENT IN RESPECT OF MAINTEN ANCE CHARGES. THEREFORE, IT IS NOT POSSIBLE TO ALLOW DEDUCTION U/S 23 OR SECTION 24 OF THE ACT. HE STRONGLY SUPPORTED THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS). 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. SECTION 23(1) PROVIDES THE MANNER IN WHICH ANNUAL VALUE OF ANY PROPERTY IS TO BE DETERMINED. CLAUSE (A) OF SECTION 23(1) PROVIDES T HAT ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGH T REASONABLE BE EXPECTED TO LET OUT FROM YEAR TO YEAR. UNDER CLAUSE (B), WHERE THE PRO PERTY OR ANY PART OF THE PROPERTY IS LET I.T.A. NOS.2529 & 2530/DEL./2008 (A.YS. : 2005-06 & 06-07) 4 AND ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE SHALL BE THE ANNUAL VALUE OF THE PROPERTY. UNDER CLAUSE (C), WHERE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING WHOLE OR ANY PART OF THE PREVIOUS YEA R AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE SHALL BE ANNUAL VALUE OF THE PROPERTY. PROVISO TO SECTION 23(1) SPECIFIES THAT TAXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWN ER), ACCORDINGLY TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THE PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. THUS, FROM THE LANGUAGE OF SECTION 23(1), IT IS CLEAR THAT ONLY THE TAXES L EVIED BY ANY LOCAL AUTHORITY ARE DEDUCTIBLE IN THE YEAR IN WHICH SUCH PAYMENTS ARE MADE. ADMIT TEDLY, THE ANNUAL MAINTENANCE CHARGES PAID BY THE ASSESSEE ARE NOT IN NATURE OF TAXES LEVIED BY ANY LOCAL AUTHORITY. ALSO THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE SO AS TO SUGGEST THAT THE RENT RECEIVED BY THE ASSESSEE WAS INCLUSIVE OF MAINTENANCE CHARGE S TO BE PAID ON BEHALF OF THE TENANT. THEREFORE, THE ANNUAL RENT RECEIVED BY THE ASSESSEE CANNOT BE REDUCED BY THE AMOUNT OF ANNUAL MAINTENANCE CHARGES CLAIMED BY THE ASSESSEE IN BOTH THE YEAR. THE ANNUAL MAINTENANCE CHARGES ARE ALSO NOT ALLOWABLE AS DEDUC TION U/S 24 AS LUMP SUM DEDUCTION @ 30% HAVE BEEN ALLOWED IN RESPECT OF MAINTENANCE ETC . ONLY THE INTEREST PAID ON BORROWED MONEY FOR THE PURPOSE OF ACQUISITION OF PR OPERTY CAN BE ALLOWED. THEREFORE, THE CLAIM O THE ASSESSEE CANNOT BE ALLOWED U/S 24 O F THE ACT ALSO. THE DECISION IN THE CASE OF J.B. PATEL & CO., RENDERED BY AHMEDABAD BEN CH OF THE ITAT CANNOT BE APPLIED AS THE ASSESSEE HAD NOT GIVEN ANY EVIDENCE THAT THE RENT RECEIVED WAS INCLUSIVE OF THE ANNUAL MAINTENANCE CHARGES. HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. HG. GUPTA & SONS HELD AS UNDER: THE LEGISLATURE HAS USED THE WORD, NAMELY IN SEC TION 24 OF THE ACT, 1961 AND THIS SHOWS THAT THE HEADS OF EXPENDITURE WHEREOF DE DUCTION CAN BE CLAIMED IN COMPUTATION OF INCOME FROM HOUSE PROPERTY ARE EXHAU STIVE. IF A PARTICULAR TYPE OF EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDU CTIBLE, DEDUCTION THEREOF CANNOT BE CLAIMED FROM OUT OF THE ANNUAL. VALUE. NEITHER SECTION 23 NOR SECTION 24 PROVIDES FOR DEDUCTION OF EXPENSES INCURRED TOWARDS STAMP DUTY OR REGISTRATION IN RESPECT OF LEASE OF THE HOUSE PROPERTY. I.T.A. NOS.2529 & 2530/DEL./2008 (A.YS. : 2005-06 & 06-07) 5 THE AMENDED PROVISIONS OF SECTION 24 ALSO HAS USED WORD NAMELY. THEREFORE, THE EXPENDITURE ON ANNUAL MAINTENANCE CHARGES CANNOT BE ALLOWED AS DEDUCTION U/S 24 OF THE ACT. THE AMOUNT WHICH COULD BE DEDUCTED FOR DETERM INING THE ANNUAL LETTING VALUE IS ONLY THE TAXES LEVIED BY THE LOCAL AUTHORITY WHICH SHALL BE ALLOWED AS DEDUCTION IN THE YEAR IN WHICH SUCH TAXES ARE PAID. SINCE, THE ANNU AL MAINTENANCE CHARGES ARE NOT IN NATURE OF TAXES LEVIED BY THE LOCAL AUTHORITY, THE SAME CANNOT BE ALLOWED AS DEDUCTION. ACCORDINGLY, IN OUR CONSIDERED OPINION, THE ASSESSE E IS NOT ENTITLED TO HAVE DEDUCTION ON ACCOUNT OF ANNUAL MAINTENANCE CHARGES EITHER U/S 2 3 OR 24 OF THE ACT. AS REGARDS, THE ALTERNATE CLAIM OF THE ASSESSEE THAT EXPENDITURE PR OPORTIONATE TO AREA LET OUT COULD BE DISALLOWED. WE ARE UNABLE TO AGREE WITH THIS REQUE ST AS ASSESSEE HAS NOT TAKEN THIS PLEA BY FILING ADDITIONAL GROUNDS OF APPEAL AND SECONDLY , THIS REQUIRES INVESTIGATION OF FACTS. IT IS NOT A PURE LEGAL ISSUE WHICH CAN BE ADMITTED AT ANY STAGE. HENCE, THE ALTERNATE PLEA OF THE ASSESSEE IS REJECTED. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY THE CONFIRMING THE ADDITIONS. 8. IN THE RESULT, BOTH THE APPEALS FLED BY THE ASSE SSEE ARE DISMISSED. 9. ORDER PRONOUNCED IN OPEN COURT ON 11.09.2009. (RAJPAL YADAV) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: SEP. 11 , 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-III, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT I.T.A. NOS.2529 & 2530/DEL./2008 (A.YS. : 2005-06 & 06-07) 6