Shri Tushar Shantilal Kothari, Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2945/AHD/2010

• Counselvise Citation: 294520514 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA; R K DHANISTA
• Assessee Lawyers: P R SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.2945/AHD/2010 A.Y. 2007-08 TUSHAR SHANTILAL KOTHARI, 11, PARVATINAGAR, B/H, SHYAMAL ROW HOUSE, SATELLITE, AHMEDABAD. PAN: ABEPK 2434M V/S. DY. COMMISSIONER OF INCOME TAX CIRCLE-5, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R.K. DHANISTA & O.P. BATHEJA, D.R. ASSESSEE(S) BY : SHRI P.R. SHAH, A.R. / DATE OF HEARING : 20/12/2013 / DATE OF PRONOUNCEMENT: 21/02/2014 / O R D E R PER SHRI T.R. MEENA, ACCOUNTANT MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE EMANATI NG FROM THE ORDER OF LEARNED CIT(A)-XVI, ORDER DATED 01.09. 2010, FOR A.Y. 2007-08. THE SOLE GROUND OF APPEAL IS AGAINST NOT A LLOWING THE STANDARD DEDUCTION OF RS.8,40,000/-. 2. THE AO HAS OBSERVED THAT IN A.Y.2006-07, STANDAR D DEDUCTION WAS NOT ALLOWED U/S.24 IN THE CASE OF ASS ESSE BY THE THEN AO. THE FACTS OF THE CASE IS THAT ASSESSEE HAD SHOW N THE RENT RECEIPT FROM THE HOUSE PROPERTY AND CLAIMED DEDUCTI ON U/S.24 AT RS.8,40,000/- @ 30%. AS PER RENT DEED MADE WITH M/S .ROHAN AUTOMOTIVE EQUIPMENT P. LTD AND M/S. RUTU AUTO GAS P. LTD. REPAIR CHARGES WERE TO BE BORNE BY TENANT. THUS, IN THIS CASE ITA NO.2945/AHD/2010 TUSHAR SHANTILAL KOTHARI VS. DCIT CIR-5, AHMEDABAD. A.Y.2007- 08 - 2 - ASSESSEE WAS GETTING THE REPAIR CHARGES FROM THE TE NANT. EVEN THEN ASSESSEE WAS TAKING BENEFIT OF SECTION 24 ON ACCOUN T OF STANDARD DEDUCTION. THE AO GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON THIS ISSUE WHICH WAS AVAILED BY THE ASSESSEE VIDE H IS LETTER DATED 22.10.2009 AND IT WAS CLAIMED BEFORE THE AO THAT TH E STANDARD DEDUCTION IS ALLOWABLE IRRESPECTIVE OF THE ACTUAL E XPENDITURE AND THE SAID DEDUCTION IS STANDARD DEDUCTION. THUS, AO MADE ADDITION OF RS.8,40,000/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE LEARNED CIT(A) WHO HAD DISMISSED THE ASSESSEES APPEAL BY OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELL ANT AND OBSERVATION OF THE AO. THE HONBLE CALCUTTA HIGH CO URT IN THE CASE OF MAGMA LEASING LTD. 129 TAXMAN 651 HAS STATED AS UND ER: A PLAIN READING OF THE PROVISIONS OF SECTION 24 SH OWS THAT IF THE LESSOR IS LIABLE FOR REPAIR, IN THAT EVENT, HE IS E NTITLED TO DEDUCTION OF ONE-SIXTH OF ANNUAL VALUE. IF THE TENANT IS RESPONS IBLE FOR REPAIR, IN THAT EVENT, THE ASSESSEE, SHALL BE ENTITLED TO DEDU CTION OF AN AMOUNT BEING THE DIFFERENCE BETWEEN THE ANNUAL VALUE EXCEE DING THE ANNUAL RENT OR ONE-SIXTH OF THE ANNUAL VALUE, WHICHEVER IS LESS. THIS SECTION DOES NOT PROVIDE FOR JOINT LIABILITY. NEITHER DOES IT PROVE FOR ANY APPORTIONMENT ON ACCOUNT OF SUCH JOINT LIABILITY. T HEREFORE, AS SOON AS SUB-CLAUSE (A) STATES THAT IF THE LESSOR UNDERTA KES TO BEAR THE COST OF REPAIRS OF THE PROPERTY OCCUPIED BY THE LESSEE, THEN THE LESSOR WOULD BE ENTITLED TO A DEDUCTION EQUIVALENT TO ONE- SIXTH OF THE ANNUAL VALUE. WHEN THE STATUTE IS SILENT, IT HAS TO BE INT ERPRETED IN A MANNER BENEFICIAL TO THE ASSESSEE. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE HONBLE HIGH COURT HAS STATED THAT THIS SECTION DOES NOT PROVIDE FOR JOINT LIABIL ITY. NEITHER DOES IT PROVE FOR ANY APPORTIONMENT ON ACCOUNT OF SUCH JOIN T LIABILITY. IN THE PRESENT CASE, THE REPAIRS ARE TO BORNE BY THE TENAN T AND HENCE THE STANDARD DEDUCTION HAS BEEN RIGHTLY DENIED BY THE A O. IN VIEW OF THIS REASON, THIS GROUND OF APPEAL IS DISMISSED. 4. NOW ASSESSEE IS BEFORE US. IT WAS SUBMITTED BY T HE LEARNED AR, MR. P.R. SHAH THAT DEDUCTION @ 30% IS LIKE A ST ANDARD ITA NO.2945/AHD/2010 TUSHAR SHANTILAL KOTHARI VS. DCIT CIR-5, AHMEDABAD. A.Y.2007- 08 - 3 - DEDUCTION AS PRESCRIBED U/S.24, NOT NECESSARILY INC URRED TOWARDS REPAIRS OF THE HOUSE PROPERTY AS HELD IN THE CASE O F J.B. PATEL AND CO., 118 ITD 556. THEREFORE, THE ALLEGATION OF AO T HAT AT THE SAME TIME THIS EXPENDITURE WOULD HAVE NOT BEEN CLAIMED B OTH BY THE OWNER AS WELL BY THE TENANT HAS NO LEGAL BASIS. HE FURTHER ARGUED THAT HONBLE ITAT HAD NOT APPRECIATED THE FACT THAT THIS AMOUNT IS INCLUDABLE IN THE ANNUAL LETTING VALUE OF PROPERTY AS HELD IN THE CASE OF MUKESH D. AMBANI, (2006) 7 SOT 521 (MUM). T HE ASSESSEES OWN CASE, FOR A.Y.2006-07, IS ALSO SQUAR ELY APPLICABLE. HE FURTHER DRAWN OUR ATTENTION TO THE ORDER OF LEAR NED CIT(A) FOR A.Y.2008-09, WHEREIN LEARNED CIT(A) ALLOWED THE APP EAL IN FAVOUR OF THE ASSESSEE. AT THE OUTSET, LEARNED DR R ELIED UPON THE CASE OF MAGMA LEASING LTD. VS. CIT, (2003) 129 TAXM AN 651 (CAL), WHEREIN ASSESSMENT YEAR 1990-91 WAS INVOLVED AND IT WAS HELD THAT (LESSOR) ASSESSEE WAS LIABLE TO REPAIR EX TERIOR TOGETHER WITH MAINTENANCE OF SUPPLY LINES OF ELECTRICITY, WA TER AND SEWERAGE AND OTHER ESSENTIAL SERVICES IN DEMISED PREMISES, W HICH WERE INTEGRAL PARTS OF PREMISES, AS WELL AS OF INTERIOR OTHER THAN THOSE UNDERTAKEN BY LESSEE. THEREFORE, ASSESSEE WAS NOT E NTITLED TO GET BENEFIT OF SUB SECTION (A) OF SECTION 24. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE C ASE LAW CITED BY THE REVENUE IS RELEVANT TO ASSESSMENT YEAR 1990-91 BUT SECTION 24 HAD BEEN AMENDED W.E.F. 01.04.2002 AND DEDUCTION U/S.24 WILL BE ALLOWABLE TO SUM EQUAL TO 30% OF ANNUAL VALUE. THE EXPLANATORY NOTE TO BUDGET IS REPRODUCED AS UNDER: ITA NO.2945/AHD/2010 TUSHAR SHANTILAL KOTHARI VS. DCIT CIR-5, AHMEDABAD. A.Y.2007- 08 - 4 - THE EXISTING PROVISION CONTAINED IN SECTION 23 OF THE INCOME-TAX ACT PROVIDES FOR DETERMINATION OF ANNUAL VALUE OF THE PROPERTY IN CERTAIN CIRCUMSTANCES INCLUDING WHERE T HE PROPERTY IS LET, OR IS SELF-OCCUPIED, OR IS VACANT, OR IS PARTI ALLY LET, OR IS LET FOR PART OF THE YEAR. THE ANNUAL VALUE SO DETERMINED IS SUBJECT TO DEDUCTIONS ALLOWABLE UNDER SECTION 24, INCLUDING DE DUCTIONS ON ACCOUNT OF VACANCY FOR ANY PART OF THE YEAR IN RESP ECT OF THE PROPERTY LET, AND ON ACCOUNT OF RENT WHICH CANNOT B E REALIZED. WITH THE VARIOUS AMENDMENTS MADE OVER THE YEARS IN THIS SECTION, THE PROVISIONS HAVE BECOME QUITE COMPLICATED AND DI FFICULT FOR THE TAXPAYER TO UNDERSTAND. IT IS THEREFORE PROPOSED TO SUBSTITUTE THE SAID SE CTION SO AS TO PROVIDE FOR A SIMPLIFIED DETERMINATION OF ANNUAL VALUE IN CERTAIN CIRCUMSTANCES SPECIFIED IN THE PROPOSED NEW SECTION, AFTER ALLOWING DEDUCTIONS IN COMPUTING THE ANNUAL VALUE O N ACCOUNT OF VACANCY AND UNREALISED RENT. UNDER THE EXISTING PROVISIONS CONTAINED IN SECTION 24, THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS, IN CERTAIN CASES, COMPUTED AFTER MAKING DEDUCTI ONS OF ONE- FOURTH OF THE ANNUAL VALUE IN RESPECT OF REPAIRS OR COLLECTION CHARGES. INTEREST ON CAPITAL BORROWED FOR ACQUIRIN G, CONSTRUCTING, REPAIRING, RENEWING OR RECONSTRUCTING THE PROPERTY, AND OTHER DEDUCTIONS ON ACCOUNT OF INSURANCE PREMIUM, GROUND RENT, ANNUAL CHARGE, ETC. IT IS PROPOSED TO SUBSTITUTE THE SAID SECTION SO A S TO PROVIDE FOR ONLY TWO DEDUCTIONS, NAMELY AN AMOUNT EQUAL TO THIRTY PERCENT OF THE ANNUAL VALUE, AND THE INTEREST PAID ON CAPIT AL BORROWED FOR ACQUIRING, CONSTRUCTING, REPAIRING, RENEWING OR REC ONSTRUCTING THE PROPERTY. IT IS ALSO PROPOSED TO MAKE CONSEQUENTIAL AMENDMEN TS BY INSERTING A NEW SECTION 25AA AND AMENDING SECTION 2 5, 25A, 25B, 27 AND 80GG OF THE INCOME-TAX ACT. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. IT IS UNAMBIGUOUS THAT THE DEDUCTION @ 30% IS NOT F OR REPAIRS. THEREFORE, THE DEDUCTION U/S.24 IS ALLOWABLE IRRESP ECTIVE OF THE FACT WHETHER ANY EXPENSES TOWARDS REPAIR OR OTHER RELATE D ACTIVITY IS ITA NO.2945/AHD/2010 TUSHAR SHANTILAL KOTHARI VS. DCIT CIR-5, AHMEDABAD. A.Y.2007- 08 - 5 - INCURRED OR NOT BY THE TENANT. ACCORDINGLY, WE ALLO W THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. SD/- SD/- (MUKUL KR. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED 21/02/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD