RANJEET D VASWANI, MUMBAI V. ACIT 12(3), MUMBAI

ITA 3481/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0917 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3481/MUM/2014 ASSESSMENT YEAR: 2009-10 RANJEET D VASWANI VS. THE ACIT-12(3) 121 MAKER CHAMBERS, VI, MUMBAI NARIMAN POINT MUMBAI-400021 AAEPV1835C (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. VIMAL PUNMIYA, AR REVENUE BY: MS. R.M. MADHAVI, SR. DR DATE OF HEARING : 1/12/2016,10/03/2017 & 24/03/2017 DATE OF PRONOUNCEMENT: 19/04/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDE R COMMISSIONER (APPEALS) 23, MUMBAI AND ARISES OUT OF ASSESSMENT MADE U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- 1. THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DI SALLOWANCE OF BROKERAGE OF RS. 5,00,565/- FROM THE ANNUAL LETTING VALUE OF THE LET OUT PROPERTY AT MAKER CHAMBER, VI, NARIMAN POINT. 2. THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DI SALLOWANCE OF ELECTRICITY EXPENSES OF RS. 27,228/- FROM THE ANNUA L LETTING VALUE OF THE LET OUT PROPERTY OF DADA MANZIL. ITA NO. 3481/MUM/2014 2 3. THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DIS ALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES OF RS. 1,25,000/- FROM THE ANNUAL LETTING VALUE OF THE LET OUT PROPERTY OF DADA MANZIL. 4. THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF BANK CHARGES OF RS. 100/- FROM THE ANNUAL LETTING VALUE OF THE LET OUT PROPERTY OF DADA MANZIL. 5. THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THE GROUND OF THE ASSESSEE IN RESPECT OF INTEREST INCOME WHICH HAS BEEN WRONGLY T AKEN AS RS. 7,89,198/- INSTEAD OF RS. 2,71,591/-. 3. WE BEGIN WITH GROUND NUMBER 1 TO 4 OF THE APPEAL AS THEY ADDRESS A COMMON ISSUE. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2009-10 ON 19.08.2009 DECLARIN G TOTAL INCOME OF RS. 64,11,000/- . THE ASSESSEE HAS SHOWN INCOME FROM HO USE PROPERTY AND OTHER SOURCES. THE ASSESSING OFFICER (AO) ON PERUS AL OF THE COMPUTATION OF INCOME FOUND THAT THE ASSESSEE HAS CLAIMED THE FOLL OWING EXPENDITURES AS ALLOWABLE DEDUCTIONS IN RESPECT OF THE INCOME FROM THE RESPECTIVE HOUSE PROPERTIES A. 35 MAKER CHAMBER VI BROKERAGE PAID RS 5,00,565/- B GITANJALI SOCIETY OUTGOINGS RS 1,25,070/- C 37MAKER CHAMBER VI SOCIETY OUTGOINGS RS. 44,086/- D DADA MANZIL ELECTRICITY EXPENSE RS 27,228/- LEGAL & PROF. RS. 1,25,000/- BANK CHARGES RS. 100/- 3.1 THE AO CAME TO A FINDING THAT NONE OF THE ABOVE EXPENSES APPEAR AS ALLOWABLE AS THE ACT HAS EXPLICITLY MENTIONED THAT WHILE CALCULATING THE INCOME FROM HOUSE PROPERTY, ONLY CERTAIN ALLOWABLE DEDUCTIONS ARE ALLOWED U/S 23 AND 24. IN VIEW OF THE ABOVE, THE A O DISALLOWED THE CLAIM OF THE ASSESSEE OF THE ABOVE EXPENSES AND RECOMPUTED T HE INCOME FROM HOUSE PROPERTY SHOWN BY THE ASSESSEE ITA NO. 3481/MUM/2014 3 4. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE ORD ER OF THE AO BEFORE THE LEARNED CIT(A). WE FIND THAT THE LEARNED CIT(A) FOLLOWED THE ORDER OF THE ITAT IN THE CASE OF SHARMILA TAGORE 93 TTJ 483 AND ALLOWED THE CLAIM OF MAINTENANCE CHARGES PAID BY THE ASSESSEE TO THE SOCIETY. HOWEVER, IN VIEW OF THE SPECIFIC PROVISIONS OF THE ACT, THE LEA RNED CIT(A) DISALLOWED THE CLAIM OF THE ASSESSEE OF BROKERAGE EXPENSES, LEGAL AND PROFESSIONAL FEES, BANK CHARGES AND ELECTRICITY CHARGES. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE S UBMITS THAT BROKERAGE EXPENSES, LEGAL AND PROFESSIONAL FEES, BANK CHARGES AND ELECTRICITY CHARGES WERE NECESSARILY REQUIRED TO BE INCURRED FOR THE EN JOYMENT / USE OF THE RELEVANT PROPERTY BY THE TENANT AND THEREFORE, THE ANNUAL VALUE OF THE PROPERTY SHOULD BE TAKEN AFTER REDUCING SUCH EXPENS ES WHICH ARE DIRECTLY ATTRIBUTED TO THE EARNING OF RENTAL INCOME. IT IS FURTHER STATED THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 AND 2002-03, THE LEARNED CIT(A) HAS ALLOWED THE ABOVE EXPENSES . HEN CE, ONCE THE EXPENSES ARE ALLOWED BY THE LEARNED CIT(A) IN THE EARLIER YE ARS, DISALLOWANCE IN THE SUBSEQUENT YEAR IS NOT WARRANTED. RELIANCE IS PLA CED BY HIM ON THE DECISIONS IN THE CASE OF J.B. PATEL CO. VS DY. CIT (2009) 118 ITD 556 (AHD), ITO VS GOPICHAND P. GODHWANI (2005) 1SOT 374 (MUM), SHARMILA TAGORE VS JCIT (2006) 150 TAXMANN 4 (MUM), CIT VS R.J. WOOD P. LTD . (2012) 20 TAXMANN.COM 599 (DELHI) (HC), SAIF ALI KHAN VS ACIT (ITAT MUMBAI), BOMBAY OIL INDUSTRIES LTD. VS. DY. CIT (2002) 82 ITD 626 (MUM), NEELAM CABLE MFG. CO. VS ASSTT. CIT (1997) 63 ITD 1 (DELHI), LEK RAJ CHANNA VS ITO (1990) 37 TTJ (DEL) 297, BLUE MELLOW INVESTMENT & FINANCE (P) LTD . (IT APPEAL NO. 175 (BOM) 1993 DATED 06.05.1993. DURING THE COURSE OF CLARIFICATION ON 10.03.2017, THE ATTENTION OF THE L EARNED COUNSEL WAS DRAWN INTER-ALIA TO THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT I N CIT VS H.G. ITA NO. 3481/MUM/2014 4 GUPTA & SONS (1984) 17 TAXMANN 287 (DEL). THE LEARNED COUNSEL O F THE ASSESSEE FILED A PAPER BOOK ON 24.03.2017 PLACING R ELIANCE ON THE ORDER OF THE TRIBUNAL IN SIR SOBHA SINGH & SONS (P) LTD. VS. IAC [1996] 55 TTJ 699 (DEL); M/S. SUMAN DIDWANIA VS. ACIT (ITA NO. 5805/MUM/2010) ITAT H BENCH-MUMBAI; ACIT VS. MOHANLAL RUPESH KUMAR (2001) 114 TAXMAN 81 (GAUHATI) (MAG.); ACIT VS. SUNIL KUMAR AGARWAL (2012) 20 TAXMANN.COM 330 (LUCKNOW); VARMA FAMILY TRUST VS. 6 TH ITO (1984) 7 ITD 392 (BOM) AND REALTY FINANCE & LEASING (P) LTD. VS. ITO (2006) 5 SOT 348 (MUM). 6. THE LEARNED DR SUBMITS THAT THE ACT CLEARLY MENT IONS THAT WHILE CALCULATING THE INCOME FROM HOUSE PROPERTY, ONLY CE RTAIN ALLOWABLE DEDUCTIONS ARE TO BE ALLOWED U/S 23 AND 24 OF THE A CT. WHAT SPECIFIC DEDUCTIONS ARE TO BE ALLOWED IN COMPUTING THE INCOM E UNDER THE HEAD INCOME FROM HOUSE PROPERTY HAVE BEEN CATEGORICALLY AND UNEQUIVOCALLY SPECIFIED IN THE ACT. HENCE, NO DEDUCTION OF EXPEN SES OTHER THAN WHAT IS SPECIFIED IN THE ACT CAN BE ALLOWED IN COMPUTING TH E INCOME FROM HOUSE PROPERTY. SHE SUPPORTS THE ORDER OF THE LEARNED CI T(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE INCOME FROM A LET OUT HOUS E PROPERTY IS DETERMINED AS UNDER: GROSS ANNUAL VALUE LESS : MUNICIPAL TAXES NET ANNUAL VALUE LESS: DEDUCTION U/S 24 - STANDARD DEDUCTION - INTEREST ON BORROWED CAPITAL INCOME FROM HOUSE PROPERTY ITA NO. 3481/MUM/2014 5 GROSS ANNUAL VALUE IS DETERMINED AS FOLLOWS: STEP 1 FIND OUT REASONABLE EXPECTED RENT OF THE PRO PERTY STEP 2 FIND OUT RENT ACTUALLY RECEIVED OR RECEIVABLE AFTER EXCLUDING UNREALISED RENT BUT BEFORE DEDUCTING LOSS DUE TO VA CANCY STEP 3 FIND OUT WHICH ONE IS HIGHER: AMOUNT COMPUTED IN STEP 1 OR STEP 2 STEP 4 FIND OUT LOSS BECAUSE OF VACANCY STEP 5 STEP 3 MINUS STEP 4 IS GROSS ANNUAL VALUE WE FIND THAT FROM THE GROSS ANNUAL VALUE, MUNICIPAL TAXES (INCLUDING SERVICE TAXES) LEVIED BY ANY LOCAL AUTHORITY IN RES PECT OF THE HOUSE PROPERTY ARE DEDUCTED. MUNICIPAL TAXES ARE DEDUCTIBLE ONLY I F (A) THESE TAXES ARE BORNE BY THE OWNER, AND (B) ARE ACTUALLY PAID BY HI M DURING THE PREVIOUS YEAR. THE REMAINING AMOUNT LEFT AFTER DEDUCTION OF MUNICIPAL TAXES IS NET ANNUAL VALUE. AS PER PROVISIONS OF SECTION 24, TH E FOLLOWING TWO DEDUCTIONS ARE AVAILABLE:- A) STANDARD DEDUCTION B) INTEREST ON BORROWED CAPITAL THE LIST OF ALLOWANCE OF SECTION 24 IS EXHAUSTIVE. IN OTHER WORDS, NO DEDUCTION CAN BE CLAIMED IN RESPECT OF EXPENSES ON INSURANCE, GROUND RENT, LAND REVENUE, REPAIRS, COLLECTION CHARGES, ELECTRIC ITY, WATER SUPPLY, SALARY OF LIFTMAN ETC. 7.1 NOW WE TURN TO THE DECISIONS RELIED ON BY THE L EARNED COUNSEL OF THE ASSESSEE. IN J.B. PATEL & CO. (SUPRA) , THE ISSUE WAS DEDUCTION FROM INCOME FROM HOUSE PROPERTY U/S 24 R.W.S. 23 OF THE ACT. THE ASS ESSMENT YEAR WAS 1993- 94. FOR THE RELEVANT ASSESSMENT YEAR, WHILE COMPUTI NG INCOME FROM HOUSE ITA NO. 3481/MUM/2014 6 PROPERTY, THE ASSESSEE CLAIMED DEDUCTIONS IN RESPEC T OF SALARIES PAID TO PUMPMAN, SWEEPER AND LIFTMAN AND ALSO ELECTRICITY C HARGES FOR PUMP MOTOR AND COMMON PASSAGE. THE REVENUE AUTHORITIES R EJECTED THE ASSESSEES CLAIM. THE TRIBUNAL HELD THAT THOUGH THE ASSESSEE, BEING ENTITLED ONLY TO DEDUCTIONS IN RESPECT OF EXPENDITURE IN COM PUTATION OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY IN TERMS OF PROVISIONS OF ACT, WOULD NOT BE ENTITLED TO IMPUGNED DEDUCTION S, YET ANNUAL VALUE OF ITS HOUSE PROPERTY BE ASSUMED AT REDUCED VALUE I.E. AFTER DEDUCTING IMPUGNED AMOUNTS (FROM THE RENTAL) BEING, ONLY IN R ELATION TO EXPENDITURE REQUIRED TO BE NECESSARILY INCURRED FOR ENJOYMENT / USE OF RELEVANT PROPERTY. IN GOPICHAND P. GODHWANI (SUPRA) , THE ISSUE WAS DETERMINATION OF ANNUAL VALUE OF INCOME FROM HOUSE PROPERTY U/S 23 O F THE ACT. THE ASSESSMENT YEARS WERE 1997-98 TO 1998-99. AS PER RE NT AGREEMENT, IN RESPECT OF CERTAIN PREMISES, THE ASSESSEE WAS TO RE CEIVE RENT EXCLUDING WATER CHARGES AND HAD TO BEAR ALL TAXES, CESSES AND OUTGOINGS AND LESSEE HAD TO BEAR ANY FURTHER INCREASE THEREON. FURTHER T HE ASSESSEE HAD TO PROVIDE RESERVE PARKING SPACE AGAINST MONTHLY WAGES . THE AO, WHILE COMPUTING INCOME OF ASSESSEE FROM HOUSE PROPERTY, D ISALLOWED EXPENSES ON ACCOUNT OF CAR PARKING, WATER CHARGES AND MUNICI PAL AND OTHER CHARGES PAID BY LESSEE AND MADE ADDITION. THE TRIBUNAL HELD THAT IN VIEW OF SECTION 23(1)(B), IF OUTGOINGS WERE LIABILITIES OF ASSESSEE , SAME SHOULD BE EXCLUDED FROM ASSESSABLE INCOME AS NET AMOUNT ONLY COULD BE CONSIDERED WHICH WAS RECEIVED AND WAS RECEIVABLE BY THE ASSESSEE. THE MA TTER WAS REMANDED TO THE AO TO DETERMINE WHETHER OUTGOINGS CLAIMED WERE ASSESSEES LIABILITY AGAINST RENTAL INCOME. ITA NO. 3481/MUM/2014 7 IN SHARMILA TAGORE (SUPRA) , THE TRIBUNAL HELD THAT MAINTENANCE CHARGES PAID TO HOUSING SOCIETY HAVE TO BE DEDUCTED EVEN WHILE ARRIVING AT ANNUAL LETTING VALUE OF PROPERTY U/S 23. ALSO IT HE LD THAT NON-OCCUPANCY CHARGES LEVIED BY HOUSING SOCIETY WILL HAVE TO BE C ONSIDERED U/S 23 EVEN WHILE ARRIVING AT ESTIMATE OF ANNUAL LETTING VALUE OF THE PROPERTY. R.J. WOOD (P) LTD. (SUPRA) IS DISCUSSED AT PARA 7.3 INFRA. IN BOMBAY OIL INDUSTRIES LTD. (SUPRA) , THE ISSUE BEFORE THE TRIBUNAL WAS CAPITAL GAINS AND TAX PLANNING. THIS IS NOT SO IN THE INSTANT CASE. IN NEELAM CABLE MFG. CO.(SUPRA) , THE TRIBUNAL HELD THAT THE AMOUNT OF SECURITY SERVICE CHARGES CLAIMED BY THE ASSESSEE WA S DEDUCTABLE FROM GROSS RENT RECEIVED WHILE COMPUTING ANNUAL VALUE U/ S 23. ALSO IT HELD THAT IN VIEW OF PROVISO TO SECTION 23, ENTIRE AMOUNT OF HOUSE TAX ACTUALLY PAID BY THE ASSESSEE IN YEAR UNDER CONSIDERATION SHOULD BE ALLOWED AS DEDUCTION. IN LEKH RAJ CHANNA (SUPRA) , THE TRIBUNAL HAS HELD IN RESPECT OF COLLECTION CHARGES THAT THE ASSESSEE CAN CLAIM ONLY THAT PART OF THE EXPENDITURE WHICH IS REFERABLE TO COLLECTION; OTHER EXPENSES ON SECURITY AND SERVICES TO TENANTS CAN BE DEDUCTED FROM ALV. THE LEARNED COUNSEL OF THE ASSESSEE HAS NOT FILED A COPY OF THE UNREPORTED ORDER IN SAIF ALI KHAN (SUPRA) AND BLUE MELLOW INVESTMENT & FINANCE (P) LTD . (SUPRA) . THEREFORE, WE ARE NOT IN A POSITION TO ANALYSE TH E SAID DECISIONS. IN SIR SOBHA SINGH & SONS (P) LTD. (SUPRA) , FOR THE ASSESSMENT YEAR 1985-86 THE ASSESSEE CLAIMED DEDUCTION OF RS. 74,37 2/- ON ACCOUNT OF SALARIES PAID TO WATCHMAN, SWEEPERS, GARDENERS AND PUMP OPERATORS AND ONE-THIRD OF MANAGERS SALARY OF RS. 1,880/- WHILE COMPUTING THE INCOME ITA NO. 3481/MUM/2014 8 UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AS SESSEE SUBMITTED BEFORE THE COMMISSIONER (APPEALS) THAT WHILE COMPUT ING THE INCOME FOR THE ASSESSMENT YEARS 1983-84 AND 1984-85 THE SAID D EDUCTIONS HAD BEEN ALLOWED AS WAS EVIDENT FROM THE FACT THAT THE PROPE RTY INCOME HAD BEEN TAKEN AS DECLARED BY THE ASSESSEE. THE COMMISSIONER (APPEALS) ACCEPTED THE ASSESSEES CLAIM. ON FURTHER APPEAL, THE TRIBUN AL HELD THOUGH UNDER THE EXISTING PROVISIONS RELATING TO COMPUTATION OF INCO ME FROM HOUSE PROPERTY, THE AFORESAID DEDUCTIONS WERE NOT ALLOWABLE, YET CO NSIDERING THE PAST HISTORY OF THE ASSESSEE AND THE FACT THAT THE SAID DEDUCTIONS HAD BEEN ALLOWED TO THE ASSESSEE RIGHT UPTO THE ASSESSMENT Y EAR 1984-85 AND WITH A VIEW TO MAINTAIN CONSISTENCY IN THE CASE OF THE ASS ESSEE, THE DEDUCTIONS HAD TO BE ALLOWED TO THE ASSESSEE FOR THE AFORESAID SER VICES AND AMENITIES WHICH WERE PURELY ANCILLARY TO THE LETTING OUT OF T HE BUILDINGS. IN M/S. SUMAN DIDWANIA (SUPRA), FOR THE A.Y. 2006-07 THE ASSESSEE HAD DECLARED INCOME FROM HOUSE PROPERTY AND CLAIMED DEDUCTION OF THE MAINTENANCE CHARGES FROM THE RENT RECEIVED OF RS. 1 9,25,000/- WHICH WAS CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE TO THE SA ID SOCIETY. THE ASSESSEE STATED THAT SOCIETY CHARGES ARE FOR NOC CHARGES AND MAINTENANCE CHARGES OVER AND ABOVE MUNICIPAL TAXES AND HENCE SAME ARE DEDUCTABLE. THE TRIBUNAL FOLLOWED THE DECISION IN THE CASE OF SHARMILA TAGORE VS. JCIT 93 TTJ 483 AND ALLOWED THE APPEAL OF THE ASSESSEE. IN MOHANLAL RUPESH KUMAR (SUPRA), THE ASSESSEES CLAIM FOR DEDUCTION OF DEPRECIATION AND ELECTRICAL CHARGES FROM INCOME FROM HOUSE PROPERTY FOR THE A.Y. 1989-90 WAS DISALLOWED BY THE AO ON THE GR OUND THAT THERE WAS NO PROVISION FOR ALLOWING THE SAME. ON APPEAL, THE CIT (A) DIRECTED THE AO TO ALLOW THE CLAIM AS ALLOWED IN THE PAST. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT IN VIEW OF LEGAL POSITION AND FACTS OF INSTANT CASE, GROSS RENTAL INCOME ITA NO. 3481/MUM/2014 9 WAS REQUIRED TO BE SPLIT INTO COMPONENTS OF RENT FO R BUILDING AND RENT FOR FURNITURE, FIXTURES AND ADDITIONAL FACILITIES PROVI DED TO TENANT AND WHILE FORMER WOULD BE ASSESSABLE AS INCOME FROM HOUSE PRO PERTY FROM WHICH NO DEDUCTION ON ACCOUNT OF DEPRECIATION ON BUILDING CO ULD BE ALLOWED, LATTER WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES AN D ALL OUTGOINGS SUCH AS ELECTRICAL CHARGES AND DEPRECIATION OF FURNITURE AND FIXTURES WOULD BE ALLOWABLE THEREFROM. IN SUNIL KUMAR AGARWAL (SUPRA) , THE ASSESSEE HAD PURCHASED COMMERCIAL SPACE IN A SOCIETY WHICH HAD BEEN LET OU T TO A COMPANY. THE AGREEMENT WITH THE TENANT STIPULATED THAT THE PROPE RTY TAX AND THE MAINTENANCE CHARGES PAYABLE TO THE SOCIETY WOULD BE BORNE BY THE OWNER AS THE SAME WAS DULY COMPENSATED IN THE GROSS RENT. IN HIS RETURN OF INCOME, THE ASSESSEE HAD SHOWN GROSS RENT AND CLAIM ED DEDUCTION ON ACCOUNT OF CHARGES PAID TO THE SOCIETY FOR MAINTENA NCE. THE ASSESSING OFFICER DISALLOWED THE CLAIM HOLDING THAT 30 PER CE NT DEDUCTION ALLOWED UNDER SECTION 24 TAKES CARE OF SUCH EXPENSES. ON AP PEAL, THE COMMISSIONER (APPEALS) DELETED THE ADDITION. THE TRIBUNAL HELD T HAT THE ASSESSEE WAS PAYING THE CHARGES TO THE SOCIETY FOR THE COMMON AR EA AMENITIES WHICH WAS DEDUCTIBLE FROM THE GROSS RENT RECEIVED BY THE ASSESSEE. THE CHARGES PAID TO THE SOCIETY BY THE ASSESSEE WERE NOT COVERE D IN THE ALLOWABLE DEDUCTION AS ENUMERATED UNDER SECTION 24 SINCE THE GROSS RENT RECEIVED BY THE ASSESSEE ALSO INCLUDED THE SOCIETY CHARGES WHIC H WERE TO BE PAID BY THE ASSESSEE. THEREFORE, THE ANNUAL VALUE OF THE ACTUAL RENT RECEIVED BY THE OWNER IS TO BE DETERMINED AS PER THE PROVISIONS OF SECTION 23. AS SUCH THE DEDUCTION ON ACCOUNT OF CHARGES PAID TO THE SOCIETY FOR AVAILING OF THE FACILITIES OF GENERATOR, LIFT, LIGHTING, COMMON ARE A SWEEPING ETC., WAS ALLOWABLE FROM THE GROSS RENT. ITA NO. 3481/MUM/2014 10 IN VARMA FAMILY TRUST (SUPRA), THE ASSESSEE, A PRIVATE DISCRETIONARY TRUST, LEASED OUT ITS HOUSE PROPERTY ALONG WITH FUR NITURE FOR A PERIOD OF 9 YEARS AND PAID RS. 35,743/- AS STAMP CHARGES AND LE GAL FEES FOR DRAWING UP THE LEASE DEED. WHILE COMPUTING THE ANNUAL VALUE UN DER SECTION 23(1)(B) ON THE BASIS OF ACTUAL RENT AS PER LEASE DEED, THE ITO REJECTED THE ASSESSEES CLAIM TO DEDUCT THIS EXPENDITURE FROM THE RENT FOR PURPOSES OF DETERMINING ANNUAL LETTING VALUE. THE AAC ALSO REJECTED THE CLA IM ON THE GROUND THAT THE EXPENDITURE WAS OF A CAPITAL NATURE. IN SECOND APPE AL, THE ASSESSEE CONTENDED THAT WHAT WAS TAXABLE WAS REAL INCOME A FTER DEDUCTION OF EXPENSES, WHEREAS THE REVENUE CONTENDED THAT INCOM E FROM HOUSE PROPERTY WAS A NOTIONAL COMPUTATION AND DID NOT PE RMIT OF ANY DEDUCTIONS OTHER THAN THOSE LISTED IN SECTIONS 23 AND 24. THE TRIBUNAL HELD THAT IN COMPUTING ANNUAL VALUE UNDER RENTAL METHOD, OUTGOIN GS LIKE STAMP CHARGES AND LEGAL FEES PAID BY OWNER FOR DRAWING UP LEASE D EED ARE DEDUCTIBLE FROM ACTUAL RENT FIXED. IN REALTY FINANCE & LEASING (P) LTD. (SUPRA), FOR THE ASSESSMENT YEAR 1999-2000, THE AO DISALLOWED THE SOCIETY CHARGES ON THE GROUND THAT THE SAID EXPENSES WERE NOT ALLOWABLE U/S 24 OUT OF THE RENT RECEIVED BY THE ASSESSEE. ON APPEAL, COMMISSIONER (APPEALS) UPHELD THE AOS VIEW. THE TRIBUNAL HELD THAT IT WAS AN ADMITTED FACT THAT TH E GROSS RENT RECEIPT ALSO INCLUDED THE SOCIETY CHARGES WHICH WERE TO BE PAID BY THE ASSESSEE. THEREFORE, WHILE COMPUTING THE ANNUAL VALUE THE AMO UNT OF RENT WHICH ACTUALLY WENT INTO THE HANDS OF THE OWNER IN RESPEC T OF LEASED PROPERTY SHOULD BE TAKEN INTO CONSIDERATION. AS PER THE PROV ISIONS OF SECTION 23, THE ANNUAL VALUE OF PROPERTY IS TO BE DETERMINED ON THE BASIS OF ACTUAL RENT RECEIVED BY THE OWNER. ITA NO. 3481/MUM/2014 11 7.2 IT IS A SETTLED LAW THAT THE DOCTRINE OF RES JUDICATA OR ESTOPPEL BY RECORD DOES NOT APPLY TO AOS DECISIONS. A FINDING OR DECISION OF THE INCOME TAX AUTHORITIES IN ONE YEAR MAY BE DEPARTED FROM IN A SUBSEQUENT YEAR. IT HAS BEEN HELD SO IN NEW JEHANGIR VAKIL MILLS VS CIT 49 ITR 137 (SC) AND SANAKARLINGA VS. CIT 4 ITC 226, 241 (FB). THEREFORE WE ARE NOT ADDRESSIN G TO THE DECISIONS RELIED ON BY THE LEARNED COUNSEL O F THE ASSESSEE THAT CONSISTENCY SHOULD BE MADE. 7.3 THE LEARNED COUNSEL OF THE ASSESSEE HAS RELIED ON THE ORDERS OF THE TRIBUNAL AS DISCUSSED AT PARA PARA 7.1 HERE-IN-ABOV E. THERE IS ONLY ONE JUDGMENT OF THE HIGH COURT HE HAS RELIED ON I.E R.J. WOOD (P) LTD. (SUPRA) . IN THAT CASE, THE ASSESSEE HAD LEASED OUT ITS PREMI SES TO FIVE TENANTS. LEASE AGREEMENTS WERE ENTERED INTO IN THIS BEHALF WHEREIN RENT TO BE RECEIVED BY THE ASSESSEE FROM THOSE TENANTS WAS SPECIFIED. THE TENANCIES BECAME OPERATIVE WITH EFFECT FROM OCTOBER, 1992. HOWEVER, DISPUTE AROSE ABOUT PAYMENT OF THE SAID RENT. SAID PREMISES WERE IN A M ULTI-STOREY BUILDING AND MAINTENANCE CHARGES WERE PAYABLE BY THE OCCUPIER TO THE AGENCY/BUILDER MAINTAINING THE BUILDING. THE TENANTS CLAIMED THAT THE RENT PAYABLE BY THEM TO THE ASSESSEE INCLUDED MAINTENANCE CHARGES A ND, THEREFORE, IT WAS THE OBLIGATION OF THE ASSESSEE TO PAY THE MAINTENAN CE CHARGES. THE ASSESSEE, ON THE OTHER HAND, WANTED THESE TENANTS T O PAY THE MAINTENANCE CHARGES EXCLUSIVE OF CONTRACTUAL RENT. BECAUSE OF T HIS DISPUTE, THE TENANTS FILED A SUIT IN SMALL CAUSES COURT FOR FIXATION OF STANDARD RENT. IN THAT CASE, THE SMALL CAUSES COURT PASSED AN INTERIM ORDER IN 1 994 FIXING THE RENT AT RS. 30,000 PER MONTH, WHICH WAS LESS THAN THE CONTR ACTUAL RENT AGREED UPON BETWEEN THE PARTIES IN THE RENT AGREEMENT. SIN CE THE RENT WAS FIXED ON LUMP SUM BASIS AT RS. 30,000 PER MONTH, THE ASSE SSEE HAD TO PAY THE ITA NO. 3481/MUM/2014 12 MAINTENANCE CHARGES, WHICH WERE CLAIMED AS DEDUCTIO N. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT AS PER THE LEASE AGREEMENT THESE MAINTENANCE CHARGES WERE TO BE BORNE BY THE T ENANTS. THE COMMISSIONER (APPEALS), HOWEVER, ALLOWED THIS CLAIM WHICH VIEW OF THE COMMISSIONER (APPEALS) WAS AFFIRMED BY THE TRIBUNAL AS WELL. THE HONBLE HIGH COURT HELD THAT THAT SINCE THE MAINTENANCE AND OTHER CHARGES WERE PAID BY THE ASSESSEE, IT WAS RIGHTLY HELD TO BE DED UCTIBLE FROM THE RENT WHILE COMPUTING THE ANNUAL LETTING VALUE. IN THE INSTANT APPEAL, NO DISPUTE AROSE ABOUT PAYME NT OF RENT NOR THE TENANTS HAVE FILED ANY SUIT IN THE COURT FOR FIXATI ON OF STANDARD RENT NOR THE COURT HAS PASSED ANY ORDER FIXING THE RENT. THEREFO RE, THE CASE OF THE ASSESSEE IS DISTINGUISHABLE FROM R.J. WOOD (P) LTD. (SUPRA) RELIED ON BY THE LEARNED COUNSEL OF THE ASSESSEE. 7.4 WE HAVE DISCUSSED AT PARA 7.1 HERE-IN-ABOVE, TH E ORDERS OF THE TRIBUNAL RELIED ON BY THE LEARNED COUNSEL OF THE AS SESSEE. IT WOULD NOW BE APPOSITE TO REFER TO THE JUDGEMENT OF THE HONBLE D ELHI HIGH COURT IN CIT VS H.G. GUPTA & SONS (1984) 17 TAXMANN 287 (DEL). THE ASSESSEE-FIRM OWN ED SOME PROPERTY WHICH WAS GIVEN ON LEASE TO A COMPANY . THE LEASE DEED PROVIDED THAT THE STAMP DUTY AND REGISTRATION CHARG ES IN RESPECT OF THE LEASE WERE TO BE BORNE BY THE LESSEE AND THE ASSESS EE EQUALLY. THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF RS. 5,977 I.E. ITS HA LF SHARE OF STAMP DUTY ETC. WAS DISALLOWED BY THE ITO. THE AAC UPHELD THE ITOS ORDER. ON FURTHER APPEAL, THE TRIBUNAL, HOWEVER, ALLOWED THE ASSSESSE ES CLAIM. ON APPEAL BY THE REVENUE, THE HON'BLE HIGH COURT HELD THAT THE I MPUGNED EXPENDITURE WAS NOT ALLOWABLE AS A DEDUCTION IN ASSESSING ANNUA L VALUE OF THE PROPERTY. THEIR LORDSHIPS HELD AS UNDER: ITA NO. 3481/MUM/2014 13 5. THE ANNUAL VALUE OF THE PROPERTY, WHICH IS THE SUB JECT OF CHARGE, WAS ORIGINALLY DEFINED IN SECTION 23(1) AS 'THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR'. THE ANNUAL VALU E IS THUS THE SUM FOR WHICH A LANDLORD COULD LET THE PREMISES HAVING REGARD TO TH E CONDITIONS OF THE PROPERTY AND OF THE PREVAILING CIRCUMSTANCES, AS THE LANGUAG E SUGGESTS THE TAXES ARE CHARGED ON THE ARTIFICIAL OR NOTIONAL INCOME. IT IS BASED ON THE ANNUAL VALUE OF THE PROPERTY. THE AUTHORITIES UNDER THE ACT, THEREFORE, HAVE TO MAKE THE ASSESSMENT ON THE BASIS OF THE NOTIONAL ANNUAL VALUE. SECTION 23 LAYS DOWN HOW THE ANNUAL VALUE IS TO BE DETERMINED. SECTION 24 PROVIDES THAT INCOME CHARGEABLE UNDER THE HEAD 'DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY' S HALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED AFTER MA KING THE DEDUCTIONS SPECIFIED THEREIN. THE LEGISLATURE HAS USED THE WORD 'NAMELY' AND THIS SHOWS THAT THE HEADS OF EXPENDITURE WHERE FOR DEDUCTION CAN BE CLAIMED A RE EXHAUSTIVE. THE EXPENSES INCURRED IN PROVIDING THE PROPER STAMP PAPER IN CAS E OF A LEASE OR AGREEMENT TO LEASE IS BY VIRTUE OF THE PROVISIONS CONTAINED IN S ECTION 23 OF THE INDIAN STAMP ACT, 1899, AND IS ON THE LESSEE OR INTENDED LESSEE, IN THE ABSENCE OF AN AGREEMENT TO THE CONTRARY. IT MAY BE FOR THIS REASON, THAT TH E LEGISLATURE DID NOT INCLUDE SUCH EXPENSES IN THE PERMISSIBLE DEDUCTIONS UNDER SECTIO N 23 OR SECTION 24. IF A PARTICULAR TYPE OF EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDUCTIBLE, DEDUCTION, THEREFORE, CANNOT BE CLAIMED FROM OUT OF THE ANNUAL VALUE. NEITHER SECTION 23 NOR SECTION 24 PROVIDES FOR THE DEDUCTIO N OF THE EXPENSES INCURRED TOWARDS THE STAMP DUTY OR REGISTRATION CHARGES IN R ESPECT OF THE LEASE. 6. IF THE VIEW OF THE TRIBUNAL IS ACCEPTED THAT THE E XPENDITURE INCURRED HAS TO BE DEDUCTED FROM THE GROSS RENT IN ORDER TO ARRIVE AT THE REASONABLE ANNUAL LETTING VALUE, THEN THE ANNUAL LETTING VALUE WOULD BE DIFFE RENT IN THE FIRST YEAR AS COMPARED TO THE SUBSEQUENT YEARS, THE EXPENDITURE I NCURRED ON A LEASE FOR A PERIOD OF 5 YEARS TOWARDS THE STAMP DUTY AND REGIST RATION CHARGES IS ONLY IN THE FIRST YEAR. THE ANNUAL VALUE OF ANY PROPERTY IS DEE MED TO BE THE SAME FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FR OM YEAR TO YEAR. IT IS A NOTIONAL INCOME TO BE GATHERED FROM WHAT A HYPOTHETICAL TENA NT WOULD PAY WHICH IS TO BE OBJECTIVELY ASCERTAINED ON A REASONABLE BASIS. THE ANNUAL VALUE CANNOT BE LEFT TO FLUCTUATE WHEN THE LEASE IS FOR A PERIOD OF 5 YEARS . 7. WE, THEREFORE, ANSWER THE REFERENCE IN THE NEGATIV E, I.E., IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE. AS THE ASSESSE E HAS NOT PUT IN APPEARANCE, WE LEAVE THE PARTIES TO BEAR THEIR OWN COSTS. 7.5 THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED O N THE ANVIL OF THE AFORESAID PRONUNCIATION OF LAW. RESPECTFULLY FOLLOW ING THE JUDGEMENT OF THE ITA NO. 3481/MUM/2014 14 HON'BLE DELHI HIGH COURT IN THE CASE OF H.G. GUPTA AND SONS (SUPRA) , WE DISMISS GROUND NO 1 TO 4 OF THE ASSESSEE. 8. NOW WE TURN TO GROUND NO 5 OF THE APPEAL. IT REL ATES TO THE GRIEVANCE OF THE ASSESSEE THAT INTEREST INCOME HAS BEEN WRONG LY TAKEN AS RS. 7,89,198/- INSTEAD OF RS. 2,71,591/-. IT IS THE CON TENTION OF THE LEARNED COUNSEL THAT THERE WAS A CLERICAL ERROR IN TAKING I NTEREST INCOME AS RS. 7,89,198/- IN THE PROFIT & LOSS ACCOUNT OF THE ASSE SSEE; HOWEVER THE ACTUAL INTEREST INCOME IS ONLY RS. 2,71,591/- AND THIS CAN BE VERIFIED FROM THE TDS CERTIFICATE. 8.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ACTUAL INTEREST INCOME RECE IVED BY THE ASSESSEE CAN BE VERIFIED FROM THE TDS CERTIFICATES. THEREFORE, T HE ORDER OF THE LEARNED CIT(A) RELATING TO THIS GROUND OF APPEAL IS SET ASI DE AND THE SAME ISSUE IS RESTORED TO THE FILE OF THE AO. WE DIRECT THE AO TO VERIFY THE TDS CERTIFICATES AND BRING TO TAX THE ACTUAL INTEREST INCOME AS PER THE PROVISIONS OF THE ACT. NEEDLESS TO SAY, THE AO WOULD GIVE A REASONABLE OPP ORTUNITY TO THE ASSESSEE TO REPRESENT BEFORE HIM THIS ISSUE. THE ASSESSEE IS ALSO DIRECTED TO FILE THE RELEVANT DETAILS BEFORE THE AO. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCO UNTANT MEMBER ITA NO. 3481/MUM/2014 15 MUMBAI; DATED: 19/04/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI