D.B. VASWANI, MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 345/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4246 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 345/MUM/2012 ASSESSMENT YEAR: 2007-08 SHRI D.B. WASWANI 121, MAKER CHAMBER VI NARIMAN POINT, MUMBAI-400021 PAN: AAEPV 1833 E VS. ITO 12(3)(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIMAL PUNMIYA RESPONDENT BY : SHRI D.K. SINHA DATE OF HEARING : 01.05.2013 DATE OF PRONOUNCEMENT : 10.07.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD.CIT(A)-21 DATED 23.11.2011 FOR THE ASSESSMENT YEAR 2007-08. 2. GROUND NO 1 RELATES TO THE DISALLOWANCE OF RS. 6 ,13,730/- MADE BY THE AO AND THE SAME CONFIRMED BY THE LD.CIT(A) AS AGAINST THE EXPE NDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF THE DADA MANZIL PROPERTY. 2.1 BRIEFLY STATED, THE RELEVANT FACTS ARE THAT TH E ASSESSEE, AN INDIVIDUAL WHO HAD THE MAIN SOURCE OF INCOME IN THE FORM HOUSE PROPERTY, I NCOME FROM BUSINESS, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER SOURCES, WHILE D ECLARING A TOTAL INCOME OF RS.1,30,24,697/-, HAD CLAIMED THE FOLLOWING AGAINST THE INCOME FROM HOUSE PROPERTY OF DADA MANZIL: A. ELECTRICITY EXPENSES RS.27,055/- B. LEGAL & PROFESSIONAL FEES RS.2,98,774/- C. MUNICIPAL TAXES RS.5,33,95 5/- D. LICENCE FEES RS.4,070/ - E. SALARIES RS.1,80 ,000/- ITA NO.345/M/2012 D.B. VASWANI A.Y. 2007-08 2 F. TELEPHONE EXPENSES RS.8,275/- G. TRAVELLING EXPENSES RS.36,796/- H. WATER CHARGES RS.58,760/- TOTAL RS.11,47,685/- HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), THE A O HAD ALLOWED ONLY THE EXPENSE OF RS.5,33,955/-ON ACCOUNT OF THE MUNICIPAL TAXES PAID BY THE ASSESSEE THEREBY DISALLOWED THE REMAINING EXPENSES TO THE TU NE OF RS.6,13,730/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS THESE EXPENSES ARE NOT ALLOWABLE IN VIEW OF SECTIONS 23 AND 24 OF THE INCO ME TAX ACT, 1961. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRI EVED BY THE IMPUGNED DECISION, THE ASSESSEE HAS RAISED THIS GROUND IN THE APPEAL B EFORE US. 2.2 BEFORE US, THE LD.AR HAS STATED THAT THE TENANT S ARE PROTECTED UNDER THE BOMBAY RENT ACT, WHEREIN THE RENT IS ALREADY FIXED BY THE BOMBAY MUNICIPAL CORPORATION OF GREATER BOMBAY (BMC). THE LANDLORD I S NOT ALLOWED TO CHARGE THE RENT AS PER MARKET VALUE. ALL THE EXPENSES MENTIONE D ABOVE INCURRED BY THE ASSESSEE ARE MUST AND LANDLORDS ARE COMPELLED AND B OUND BY LAW TO PROVIDE UTILITIES IN THE BUILDING. ANY PERSON WHO IS IN SEA RCH OF PLACE WILL LOOK FOR FACILITIES LIKE ELECTRICITY, WATER, LIGHT ETC. THESE ARE ESSEN TIAL UTILITIES AND CANNOT BE DENIED OTHERWISE NO PERSON WILL TAKE THE PROPERTY ON RENT. IF THESE EXPENSES WOULD HAVE NOT BEEN INCURRED THEN IT WOULD BE DIFFICULT TO FIN D A TENANT. THEREFORE THESE EXPENSES ARE BASIC REQUIREMENTS ARE REQUIRED TO BE INCURRED FOR THE BETTERMENT OF TENANT. THE SAID EXPENSES ARE TO BE INCURRED REGULA RLY SO AS TO AVOID ANY INCONVENIENCE TO THE TENANT, AND TO BE WITHIN FRAME WORK OF TENANCY LAW. THE MAIN PURPOSE OF THE EXPENDITURE INCURRED MUST BE TO EARN INCOME. THE CONNECTION BETWEEN THE EXPENDITURE AND THE EARNING OF INCOME N EED NOT BE DIRECT; EVEN AN INDIRECT CONNECTION COULD PROVE THE NEXUS BETWEEN T HE EXPENDITURE INCURRED AND THE INCOME. THE LD.AR HAS FURTHER RELIED ON THE DEC ISION OF THE ITAT IN THE CASE OF J.B. PATEL & CO (CO-OWNERS) REPORTED IN (2009) 118 ITD 556 IN SUPPORT OF THE PROPOSITION THAT THE ANNUAL LETTING VALUE OF THE PR OPERTY HAS TO BE ESTIMATED U/S 23(1) (A) OF THE ACT ONLY AFTER DEDUCTING THE EXPEN SES INCURRED FOR PROVIDING THE FACILITY. FURTHER, IT HAS BEEN SUBMITTED THAT THE D EPARTMENT IN THE AYS 2001-02 AND 2002-03 VIDE ORDERS OF THE LD.CIT(A) DATED 14.12.20 04 AND 10.05.2005 IN ITA NO.345/M/2012 D.B. VASWANI A.Y. 2007-08 3 XII/ITO12(3)-2/IT-19/04-05 AND CIT(A)XII/ITO12(3)-2 /IT-101/04-05 RESPECTIVELY HAS ACCEPTED AND ALLOWED ALL THE SAID EXPENSES INCU RRED FOR EARNING THE RENTAL INCOME. ON THE OTHER HAND, THE LD.DR HAS RELIED ON THE ORDERS OF THE AO AND THE LD.CIT(A) IN SUPPORT OF THE REVENUES CASE. 2.3 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE CONTENTION OF THE LD.AR THAT THE ANNUAL LETTING VALUE OF THE HOUSE PROPERTY HAS TO BE ESTIMATED AT THE REDUCED VALUE O NLY AFTER DEDUCTING THE EXPENDITURE IN SO FAR AS THE SAME ARE INCURRED NECE SSARILY FOR THE ENJOYMENT/USER OF THE RELEVANT PROPERTY AS DECIDED BY THE ITAT IN THE CASE OF J.B. PATEL & CO (CO- OWNERS) REPORTED IN (2009) 118 ITD 556, IT IS ALSO RELEVANT TO MENTION THE DECISION OF THE ITAT IN THE CASE OF PICCADILY HOLIDAY RESORT S LTD VS DCIT REPORTED IN (2005) 94 ITD 267 (DEL) IN WHICH THE PRESENT AM IS ALSO A PARTY TO THE SAID ORDER. IN A DETAILED DISCUSSION, IN THE CONTEXT OF THE SIMILAR CONTENTIONS PREFERRED BY THE LD.AR, THE ITAT IN THE CASE OF PICCADILY HOLIDAY RE SORTS LTD, HAS HELD THAT IN THE ABSENCE OF A CLEAR PROVISION IN THE INCOME TAX ACT, COMMISSION PAID BY THE ASSESSEE TO THE PROPERTY AGENT IS NOT DEDUCTIBLE IN COMPUTING ITS INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. IN THE SAID ORDER, THE ITAT HAS RELIED ON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT V. H.G. GUPTA & SONS (1984) 149 ITR 253 WHEREIN IT HAS BEEN HELD THAT DEDUCTION OF EXPENDITURE INCURRED ON STAMP DUTY AND REGISTRATION IN CONNECTION WITH EXECUTION OF LEASE DEED IS NOT ALLOWABLE AS NEITHER SECTION 2 3 NOR SECTION 24 PROVIDES FOR SUCH DEDUCTION. IN THE SAID CASE THE DELHI HIGH COU RT HAS OBSERVED THAT USE OF THE WORD 'NAMELY' IN SECTION 24 SHOWS THAT HEADS OF EXP ENDITURE WHEREOF DEDUCTION CAN BE CLAIMED IN THE COMPUTATION OF INCOME FROM HO USE PROPERTY ARE EXHAUSTIVE. THE ITAT HAS ALSO RELIED ON THE DECISION OF THE CAL CUTTA HIGH COURT IN THE CASE OF INDIAN CITY PROPERTIES V. CIT (1965) 55 ITR 262 WHE REIN IT HAS BEEN HELD THAT DEDUCTION SPECIFIED IN SECTION 24(1) ARE EXHAUSTIVE AND IN ORDER THAT A PARTICULAR EXPENDITURE MAY BE CLAIMED AS PERMISSIBLE DEDUCTION , IT SHOULD COME WITHIN THE AMBIT OF ONE OF THE CLAUSES OF SECTION 24(1). IT HA S ALSO BEEN HELD BY THE HON'BLE CALCUTTA HIGH COURT THAT DEDUCTION CANNOT BE CLAIME D UNDER ANY GENERAL PRINCIPLE OF LAW OR ON THE CONSIDERATIONS OF EQUITY. IT IS PE RTINENT TO MENTION THAT THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SREELEKHA BANERJEE (1989) 179 ITR 46 ITA NO.345/M/2012 D.B. VASWANI A.Y. 2007-08 4 (CAL), WHILE DECIDING THE ISSUE WHETHER THE SALARY PAID TO THE CARETAKER IS AN ADMISSIBLE DEDUCTION FROM THE ANNUAL RENT TO DETERM INE THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23 OF THE ACT, HAS HELD THAT IN DETERMINING THE ANNUAL VALUE, THE SALARY PAID TO THE CARETAKER CANNOT BE T AKEN INTO ACCOUNT AS THERE IS NO SPECIFIC ITEM FOR DEDUCTION OF THE SALARY OF A CARE TAKER FROM THE ANNUAL VALUE OF THE PROPERTY WHICH IS LET OUT AND IT DOES NOT, IN ANY W AY, AFFECT THE DETERMINATION OF THE ANNUAL VALUE. THE AFOREMENTIONED DECISIONS OF T HE HIGH COURTS FORTIFIES THE LEGAL POSITION THAT AS PER THE PROVISIONS OF SECTIO NS 23 & 24 OF THE ACT, INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY SHALL BE COMPUTED AFTER MAKING THE DEDUCTIONS OF MUNICIPAL TAXES PAID BY TH E OWNER, A SUM EQUAL TO THIRTY PER CENT OF ANNUAL VALUE AND THE AMOUNT OF INTEREST PAYABLE ON BORROWED CAPITAL WHERE THE PROPERTY HAS BEEN CONSTRUCTED, REPAIRED, RENEWED OR RE-CONSTRUCTED WITH BORROWED CAPITAL. ACCORDINGLY, AN ASSESSEE IS ENTI TLED ONLY TO THE DEDUCTIONS IN RESPECT OF THE SAID EXPENDITURE IN THE COMPUTATION OF THE INCOME UNDER THE HEAD OF INCOME. 2.3.1 COMING TO THE FACTUAL MATRIX AS REGARDS THE D ETAILS OF THE EXPENDITURE, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED AN EXPENSE O F RS.27,055/- IN RESPECT OF ELECTRICITY FOR THE COMMON PASSAGE, LIFT AND WATER PUMP. THE LEGAL & PROF. FEES OF RS. RS.2,98,774/- IS INCURRED BY ASSESSEE IN ORDER TO SOLVE THE DISPUTE BETWEEN ASSESSEE AND TENANT M/S. BATA SHOE & CO IN ORDER TO VACATE THE OCCUPATION AND THE SAME GIVEN ON RENT TO ANOTHER TENANT. THE TELEP HONE AND TRAVELLING EXPENSES ARE CLAIMED BY THE ASSESSEE FOR THE FOLLOW UP OF LE GAL CASE WITH M/S. BATA SHOE &CO. THE SALARY EXPENSES OF RS.1,80,000/- IS OUT OF THE MAINTENANCE STAFF FOR THE FACILITIES LIKE ELECTRIC MOTORS, LIFT, BILLING AND ACCOUNTING, CLEANING, ETC. THE WATER CHARGES OF RS.58,760/- HAS BEEN PAID TO BOMBAY MUNI CIPAL CORPORATION (BMC) IS FOR WATER CHARGES OF BUILDING. CONSIDERING THE DETA ILS OF THE EXPENDITURE CLAIMED BY THE ASSESSEE TO THE TOTAL TUNE OF RS.11,47,685/-, M UNICIPAL TAXES PAID BY THE ASSESSEE TO THE TUNE OF RS.5,33,955/- HAS ALREADY B EEN RIGHTLY ALLOWED BY THE LOWER AUTHORITIES. IN VIEW OF THE LEGAL POSITION STATED I N THE PRECEDING PARAGRAPH, WE ARE OF THE CONSIDERED OPINION THAT THE REMAINING EXPENS ES CLAIMED BY THE ASSESSEE DO NOT QUALIFY FOR DEDUCTION FROM THE ALV OF THE PROPERTY AS THESE EXPENDITURE ARE ITA NO.345/M/2012 D.B. VASWANI A.Y. 2007-08 5 INCURRED BY THE ASSESSEE ARE NOT PERMISSIBLE UNDER THE PROVISIONS OF SECTIONS 23 AND 24 OF THE ACT. 2.3.2 AS REGARDS THE CONTENTION OF THE ASSESSEE THA T SINCE ALL SIMILAR EXPENSES HAVE BEEN ALLOWED IN THE EARLIER YEARS BY THE LD.CI T(A), THE ASSESSEE IS ENTITLED FOR DEDUCTION OF ALL THE IMPUGNED EXPENDITURE THIS YEAR ALSO, WE DO NOT AGREE WITH THE SAID CONTENTION AS THE PRINCIPLE OF ESTOPPEL OR RES-JUDICATA IS NEITHER APPLICABLE AGAINST THE STATUTE NOR AGAINST THE SETTLED POSITIO N OF LAW. IN VIEW OF THAT MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD .CIT(A) AND HENCE THE SAME IS UPHELD. THUS, GROUND NO 1 IS DISMISSED. 3. GROUND NO 2 RELATES TO THE DISALLOWANCE OF RS.58 ,760/- ON ACCOUNT OF WATER TAX PAID BY THE ASSESSEE TO THE MUNICIPAL CORPORATI ON. AS THIS EXPENDITURE ALSO DOES NOT QUALIFY FOR DEDUCTION EITHER UNDER THE PRO VISO OF SECTION 23(1) OR SECTION 24, WE ARE OF THE VIEW THAT THE LD.CIT(A) IS JUSTIF IED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON THIS COUNT. THUS GROUND NO 2 IS DISMISSED . 4. GROUNDS NO 3 & 4 ARE CONSEQUENTIAL IN NATURE AND HENCE DO NOT REQUIRE ANY ADJUDICATION. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10TH DAY OF JULY, 2013. SD/- SD /- (P.M. JAGTAP) (DR.S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.07.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.