DCIT 12(2), MUMBAI V. JOLLY MAKER 1 PREMISES CO OP SOCIETY LTD, MUMBAI

ITA 5140/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3874 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER / I .TA NO. 5140 & 5142/MUM/2014 ( / ASSESSMENT YEAR: 2009-10 THE ACIT 12(2), MUMBAI / VS. M/S. JOLLY MAKER 1 PREMISES CO.OP. SOC. LTD., GROUND FLOOR, TOWER B, 95-97, CUFFE PARADE, MUMBAI-400 05 ./ ./ PAN/GIR NO. AAAJJ 0005E ( / APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY: SHRI ASHISH HELIWAL / ASSESEE BY: NONE / DATE OF HEARING :29.02.2016 ! / DATE OF PRONOUNCEMENT :27 .04.2016 / O R D E R PER C.N. PRASAD, JM: THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-23, MUMBAI DATED 7.5.2014 & 8.5.2014 PERTAINING TO ASSESSMENT YEAR 2009-10 ARISING OUT OF THE ORDER PA SSED U/S. 143(3) AND PENALTY U/S. 271(1)(C) OF THE ACT RESPECTIVELY. ITA NO. 5140/M/2014 2. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT THE ISSUE IN APPEAL IS AS TO WHETHER THE SOCIETY M AINTENANCE CHARGES ITA NOS.5140 & 5142/M/2014 2 PAID BY THE ASSESSEE IN RESPECT OF LET OUT PROPERTI ES SHOULD BE ALLOWED AS DEDUCTION FROM INCOME FROM HOUSE PROPER TY OR NOT AND THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06 IN ASSESSEES OWN CASE IN ITA NO. 3503/M/0 9 DATED 10.3.2010. HE SUBMITS THAT FOLLOWING THE ORDER OF T HE CO-ORDINATE BENCH FOR THE ASSESSMENT YEAR 2005-06, THE LD. CIT( A) PARTLY ALLOWED THE APPEAL AGAINST WHICH THE REVENUE IS IN APPEAL. 3. THE LD. AR PLACED RELIANCE ON THE DECISION OF TH E TRIBUNAL AS WELL AS THE ORDER OF THE LD. CIT(A). 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 5. HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISION OF THE CO-ORDINATE BEN CH FOR THE ASSESSMENT YEAR 2005-06. THE ISSUE HAS BEEN CONSID ERED BY THE LD. CIT(A) FOLLOWING THE DECISION OF THE CO-ORDINATE BE NCH FOR ASSESSMENT YEAR 2005-06 AND HELD THAT THE INCOME C LUBBED BY THE ASSESSEE TOWARDS SOCIETY SERVICE CHARGES SHOULD BE CONSIDERED AS PART OF RENT AND THE SOCIETY MAINTAINS CHARGES INC URRED BY THE ASSESSEE SHOULD BE ALLOWED AS DEDUCTION FROM SUCH RENTAL INCOME OBSERVING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS MADE BY THE ASSESSEE. I FIND THAT THE ASSESSEE HAS DISCLOSED INCOME OF RS.63,14,015/- ON ACCOUNT OF SOCIETY CHAR GES RECOVERED. AS AGAINST THIS, THE ASSESSEE HAS CLAIME D EXPENSES OF RS. 71,87,089/- ON ACCOUNT OF SOCIETY CHARGES PAID. PRIMA FACIE, IT ITA NOS.5140 & 5142/M/2014 3 APPEARS THAT THE SOCIETY CHARGE COLLECTED BY THE AS SESSEE IS TOWARDS PROVIDING VARIOUS SERVICES TO THE TENANTS. FOR PROVIDING THESE SERVICES, THE ASSESSEE HAS INCURRED EXPENDITU RE OF RS.71 ,87,089/ - WHICH IT HAS PAID TO NARIMAN BHAVAN SOCI ETY FOR PROVIDING THE VARIOUS SERVICES TO THE TENANTS OF TH E ASSESSEE. HENCE, PRIMA FACIE, THE EXPENDITURE OF RS.71,87,089 /- HAS BEEN INCURRED AGAINST THE INCOME EARNED ON ACCOUNT OF SE RVICE CHARGES. THE A.O. HAS NOT DOUBTED THE GENUINENESS O F THE EXPENDITURE. NO DOUBT THE INCOME EARNED ON ACCOUNT OF SOCIETY CHARGES IS LESS THAN THE EXPENDITURE INCURRED. HOWE VER, THE ASSESSEE HAS EXPLAINED THAT SOCIETY CHARGES HAVE NO T BEEN CHARGED FROM SOME OF THE TENANTS SEPARATELY BUT ARE PART OF THE LEASE RENT WHICH HAS BEEN DISCLOSED AS RENTAL INCOM E AND, HENCE, THESE HAVE NOT BEEN SEPARATELY. 2.1.8. I FIND THAT IN THE A.Y.2005-06, THE HON'BLE ITAT HAS HELD THE SOCIETY CHARGES TO BE DEDUCTIBLE AGAINST T HE RENTAL INCOME FOR ARRIVING AT THE ANNUAL VALUE OF THE PROP ERTY FOR DETERMINING THE INCOME OF THE ASSESSEE UNDER THE HE AD 'INCOME FROM HOUSE PROPERTY'. THE LD.CIT(A) HAS ALSO, ON ID ENTICAL FACTS, IN HER APPELLATE ORDER FOR THE A.YR.2008-09 IN APPE AL NO.CIT(A)- 23/ ACIT.12(2)/IT-341/2010-11 DT.07/03/2012, DELETE D THE DISALLOWANCE, AND CONSEQUENT ADDITION ON ACCOUNT OF SOCIETY SERVICE CHARGES OF RS.78, 18, 389/-. THE ASSESSEE HAS IN ITS SUBMISSION DT.23/04/2014, SUBMITTED THAT THE AMOUNT OF SERVICE CHARGES COLLECTED MAY BE TREATED AS PART OF ANNUAL VALUE AND DEDUCTION MAY BE TREATED AS PART OF ANNUAL VALUE AN D DEDUCTION MAY BE ALLOWED AS PER ORDER OF !TAT FOR THE A. YR.2 005- 06 AND ORDER OF LD.CIT(A) FOR THE A.YR.2008-09. 2.1.9 I FIND THAT THE ASSESSING OFFICER HAS OBSERVE D IN THE ASSESSMENT ORDER THAT IN THE EARLIER YEARS, THIS SE RVICE CHARGE WAS BEING SHOWING AS INCOME FROM HOUSE PROPERTY BUT THIS YEAR, THE ASSESSEE HAS CLAIMED THE SAME UNDER 'INCOME FRO M OTHER SOURCES'. THE ASSESSEE HAS ALSO NOT FURNISHED ANY E VIDENCE BEFORE ME TO SHOW THAT THIS SERVICE CHARGE COLLECTED WAS N OT PART OF THE AGREEMENT RELATING TO THE LEASE RENT AND WAS NOT PA RT OF THE RENT ITSELF. THE ASSESSE E HAS ALSO REQUESTED IN ITS SUB MISSION DT. 23.04.2014 THAT THE AMOUNT OF SERVICE CHARGES COLLE CTED MAY BE TREATED AS PART OF ANNUAL RENT. I ALSO FIND THAT IN THE A. Y.2005-06, THE HON'BLE ITAT HAS ALSO HELD THAT THE EXPENDITURE ON ACCOUNT OF SOCIETY MAINTENANCE CHARGES IS TO BE DEDUCTED FO R ARRIVING AT ITA NOS.5140 & 5142/M/2014 4 THE ANNUAL VALUE OF THE PROPERTY. HENCE, FROM THE O RDER OF THE HON'BLE ITAT IN ASSESSES'S OWN CASE FOR A.YR.2005-0 6, WHAT WOULD BE EVIDENT IS THAT THE SOCIETY MAINTENANCE CHARGE H AS TO BE DEDUCTED FROM THE RENT RECEIVED TO ARRIVE AT THE AN NUAL VALUE OF THE PROPERTY. THEREFORE, THE SOCIETY MAINTENANCE CH ARGE RECEIVED WILL ALSO HAVE TO BE ADDED TO THE RENT RECEIVED BEF ORE ALLOWING ANY DEDUCTION OF SOCIETY MAINTENANCE CHARGES. OTHE RWISE, THE EXPENDITURE ON ACCOUNT OF SOCIETY MAINTENANCE CHARG ES WILL HAVE TO BE ALLOWED AS DEDUCTION AGAINST THE INCOME ON AC COUNT OF SOCIETY MAINTENANCE CHARGES. HENCE, FOR THE REASON S GIVEN HEREINABOVE AND FOLLOWING THE ORDER THE HON'BLE TRI BUNAL IN ASSESSEE'S OWN CASE FOR THE A. YR.2005-06, THE SOCI ETY MAINTENANCE CHARGE WILL BE ALLOWED AS DEDUCTION IN THE ARRIVING AT THE ANNUAL VALUE OF THE PROPERTY IN QUESTION AFT ER CONSIDERING THE INCOME ON ACCOUNT OF SOCIETY MAINTENANCE CHARGE S AS PART OF THE RENT. THE IMPACT OF THE SAME AND THE CONSEQUENT INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' WOULD B E AS FOLLOWS: - RENT INCOME AS DISCLOSED RS.16,96,54,091/- ADD: SOCIETY CHARGES RS. 63,14,015/- . RS.17,59,68,106/- LESS: PROPERTY TAX RS. 2,41,33,626/- RS.15, 18,34,480/- LESS: SOCIETY CHARGES PAID RS. 71,87,08 9/- ANNUAL VALUE RS. 14,46,47,391/- LESS: DEDUCTION U/S 24(A) @ 30% RS. 4 ,33,94,217/- INCOME FROM HOUSE PROPERTY RS.10 , 12,53, 174/- 2.1.10 THE GROUND OF APPEAL FILED BY THE ASSESSEE I S DECIDED AS ABOVE AND IS PARTLY ALLOWED 7. ON READING OF THE LD. CIT(A)S APPEAL, WE DO NOT FIND ANY INFIRMITY IN HOLDING THAT THE SOCIETY MAINTENANCE CHARGES INCURRED BY THE ASSESSEE SHOULD BE ALLOWED AS DEDUCTION IN A RRIVING AT THE ANNUAL VALUE OF THE PROPERTY AFTER CONSIDERING THE INCOME ON ACCOUNT ITA NOS.5140 & 5142/M/2014 5 OF SOCIETY MAINTENANCE CHARGES RECEIVED BY THE ASSE SSEE AS PART OF THE RENT. THUS, WE SUSTAIN THE ORDER OF THE LD. CI T(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ITA NO. 5142/M/2014 9. SINCE THE QUANTUM APPEAL IS ALLOWED BY US UPHOLD ING THE ORDER OF THE LD. CIT(A) TO ALLOW THE SOCIETY MAINTENANCE CHARGES AS DEDUCTION AGAINST THE RENTAL INCOME, THE QUESTION O F DISALLOWANCE DOES NOT ARISE AND CONSEQUENTLY NO PENALTY IS LEVIA BLE U/S. 271(1)(C) OF THE ACT. THUS WE CONFIRM THE DELETION OF PENALT Y BY THE LD. CIT(A). 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2016. SD/- SD/- (ASHWANI TANEJA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 27 TH APRIL, 2016 . % . ./ RJ , SR. PS ITA NOS.5140 & 5142/M/2014 6 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI