ROCKCASTLE PROPERTY PVT. LTD., MUMBAI V. CIT(A)-10, MUMBAI

ITA 7377/MUM/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5478 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMALD
• Assessee Lawyers: GOPAL SHARMALD
• Keywords: Business income; TDS
• Section: 143(3)

Judgement Text

1 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.7377/MUM/2018 ( / ASSESSMENT YEAR: 2012-13) RO C KCASTLE PROPERTY PRIVATE LTD 3 RD FLOOR, SUNAMA HOUSE 140, AUGUST KRANTI MARG OPP. SHALIMAR HOTEL, KEMPS CORNER MUMBAI 400 026. / VS. I TO - 5(3)(1) ROOM NO.21, 3 RD FLOOR B-WING MITTAL COURT, NARIMAN POINT MUMBAI 400 021. $% # ./ # ./PAN/GIR NO. AABCR-9466-M ( ' %' /APPELLANT ) : ( ()%' / RESPONDENT ) ASSESSEE BY : SHRI GOPAL SHARMA-LD. AR REVENUE BY : MS. SMITA VERMA LD. SR. DR / DATE OF HEARING : 17/03/2021 / DATE OF PRONOUNCEMENT : 18/05/2021 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. IN THIS APPEAL FOR ASSESSMENT YEAR (AY) 2012-13 , THE ASSESSEE IS AGGRIEVED BY THE ORDER OF LD. COMMISSIONER OF INCOM E-TAX (APPEALS)- 10, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)] DATE D 25/10/2018 WHICH HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM SO CIETY MAINTENANCE CHARGES FROM RENTAL INCOME. 2. THE LD. AR ADVANCED ARGUMENT IN SUPPORT OF ASSES SEES CLAIM AND RELIED UPON VARIOUS DECISIONS OF THIS TRIBUNAL, A C OPY OF WHICH HAS BEEN 2 PLACED ON RECORD. IT WAS URGED THAT GROSS RENT RECE IVED BY THE ASSESSEE INCLUDED SOCIETY MAINTENANCE CHARGES WHICH WERE TO BE PAID BY THE ASSESSEE. THEREFORE, IN COMPUTING THE ANNUAL VALUE, THE AMOUNT OF RENT WHICH ACTUALLY GOES INTO THE HANDS OF THE OWNER SHO ULD BE TAKEN INTO CONSIDERATION SINCE THE PROVISIONS OF SEC. 23(1)(B) USES THE EXPRESSION ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE A SSESSEES CLAIM IS NOT ADMISSIBLE AS PER STATUTORY PROVISIONS. WE HAVE CAREFULLY CONSIDERED THE SAME. OUR ADJUDICA TION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PA RAGRAPHS. 3. THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE HAS BEEN ASSESSED U/S 143(3) ON 19/09/2014 WHEREIN IT TRANSP IRED THAT IT EARNED RENTAL INCOME FROM A COMMERCIAL PROPERTY WHICH IS S ITUATED IN A CONDOMINIUM. THE ASSESSEE CREDITED AN AMOUNT OF RS. 91.42 LACS AS RENTAL INCOME IN PROFIT & LOSS ACCOUNT AS AGAINST R ECEIPTS OF RS.93.65 LACS. THE DIFFERENTIAL OF RS.2.23 LACS WAS DUE TO T HE FACT THAT THE ASSESSEE CREDITED RENTAL RECEIPTS NET OF SOCIETY M AINTENANCE CHARGES. THE LD. AO OPINED THAT THE SAME IS NOT ALLOWABLE SI NCE THE ASSESSEE IS ALREADY ALLOWED DEDUCTION OF 30% U/S 24(A). CONSEQU ENTLY, THE RENTAL INCOME WAS TAKEN ON GROSS BASIS. 4. THE LD. CIT(A) NOTED THAT THE ACTION OF LD. AO W AS IN LINE WITH THE DECISION OF MUMBAI TRIBUNAL IN TOWNSHIP REAL ESTATE DEVELOPERS INDIA PRIVATE LIMITED V/S CIT (51 SOT 411 04/04/201 2 AY 2004-05) WHICH CONSIDERED THE DECISIONS OF HONBLE DELHI HIG H COURT IN H.G. GUPTA & SONS (149 ITR 253), THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN ARAVALI ENGINEERS P. LTD. (200 TAXMAN 81) AND THE DECISION OF CHANDIGARH BENCH IN CASE OF PICCADILLY HOTELS PRIVATE LTD. 3 (97 TTJ 411). THE DECISION OF MUMBAI TRIBUNAL IN SHARMILA TAGORE (93 TTJ 483) WAS HELD TO BE NOT APPLICABLE SINCE THIS D ECISION DID NOT CONSIDER THE DECISION OF HONBLE DELHI HIGH COURT I N H.G.GUPTA & SONS. RESULTANTLY, THE ACTION OF LD. AO WAS UPHELD. AGGRI EVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. UPON PERUSAL OF CLAUSE-9 OF LEAVE & LICENSE AGRE EMENT DATED 15/11/2004 ENTERED INTO BY THE ASSESSEE WITH ONE OF THE LICENSEE, WE FIND THE ASSESSEE AS A LICENSOR WAS LIABLE TO PAY M UNICIPAL TAXES AND ANY OUTGOINGS AND ANY FURTHER INCREASE THEREOF TO T HE RESPECTIVE AND APPROPRIATE LOCAL AUTHORITY / ORGANIZATIONS SAVE AN D EXCEPT ELECTRICITY, WATER AND TELEPHONE CONNECTION / USAGE CHARGES IN R ESPECT OF THE LICENSED PREMISES. THE LICENSEE IS OBLIGATED TO PAY LUMP SUM LICENSE FEES TO THE ASSESSEE. THE ASSESSEE IS ALSO PROVIDIN G CERTAIN AMENITIES AND FACILITIES OF VARIED NATURE TO THE USERS UNDER SEPARATE AGREEMENT AGAINST LUMP SUM MONTHLY PAYMENT AS WELL AS AGAINST INTEREST FREE SECURITY DEPOSIT. ALL THESE CHARGES HAVE BEEN OFFER ED AS WELL AS ACCEPTED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . SIMILAR ARE THE TERMS OF THE OTHER AGREEMENTS AS PLACED BEFORE US. 6. UPON PERUSAL OF THE AGREEMENTS, IT COULD BE GATH ERED THAT THE PAYMENT OF MUNICIPAL TAXES AND OTHER OUTGOINGS WAS THE LIABILITY OF THE ASSESSEE. ANY INCREASE WAS ALSO TO BE BORNE BY THE ASSESSEE. THE LICENSEE WAS REQUIRED TO PAY FIXED MONTHLY LUMP SUM PAYMENT TO THE ASSESSEE AS LICENSE FEES IRRESPECTIVE OF ASSESSEES OUTGOINGS. THEREFORE, TO SAY THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE WAS NET OF SOCIETY MAINTENANCE CHARGES, WOULD NOT BE CORR ECT AS PER THE TERMS OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE. 4 7. WE FIND THAT AS PER THE PROVISIONS OF SECTION 23 (1)(B), ANNUAL VALUE SHALL BE DEEMED TO BE THE ACTUAL RENT RECEIVED OR R ECEIVABLE BY THE ASSESSEE. THE PROVISO PROVIDES FOR DEDUCTION OF MUN ICIPAL TAXES LEVIED BY ANY LOCAL AUTHORITY. AS PER EXPLANATION, THE ACT UAL RENT RECEIVED OR RECEIVABLE WOULD NOT INCLUDE THE AMOUNT OF RENT WHI CH OWNER COULD NOT REALIZE. WE FIND THAT THE STATUTORY PROVISIONS ARE QUITE CLEAR AND PROVIDE FOR DEDUCTION OF ONLY SPECIFIED ITEMS I.E. TAXES PA ID TO LOCAL AUTHORITY AND THE AMOUNT OF RENT WHICH COULD NOT BE REALIZED BY T HE ASSESSEE, FROM THE EXPRESSION ACTUAL RENT RECEIVED OR RECEIVABLE. NO OTHER DEDUCTION IS PERMISSIBLE. ALLOWING THE OTHER DEDUCTION WOULD AMO UNT TO DISTORTION OF THE STATUTORY PROVISIONS AND SUCH A VIEW COULD NOT BE COUNTENANCED. TO ACCEPT THE PLEA THAT RENT WHICH ACTUALLY GOES INTO THE HANDS OF THE ASSESSEE IS ONLY TO BE CONSIDERED, WOULD ENABLE THE ASSESSEE TO CLAIM ANY EXPENDITURE FROM RENT ACTUALLY RECEIVED OR RECE IVABLE SINCE THE SAME WOULD ULTIMATELY REDUCE THE AMOUNT WHICH ACTUALLY G OES INTO THE HANDS OF THE ASSESSEE. THE SAME IS NOT THE INTENTION OF T HE LEGISLATURES. THE STATUTORY PROVISIONS, AS NOTED EARLIER, PROVIDE FOR DEDUCTION OF SPECIFIED ITEMS ONLY. 8. PROCEEDING FURTHER, WE ARE OF THE CONSIDERED OPI NION THAT THE SOCIETY MAINTENANCE CHARGES AS PAID BY THE ASSESS EE, BY NO STRETCH OF IMAGINATION, COULD BE HELD TO BE TAXES PAID TO LOCA L AUTHORITY. THIS VIEW HAS ALREADY BEEN EXPRESSED BY THIS VERY BENCH IN TH E CASE OF STERLING & WILSON PROPERTY DEVELOPERS PVT. LTD. V/S ITO (ITA N O.1085/MUM/2015 DATED 11/11/2016) AS UNDER: - 3. GROUND NO. 1 TO 3 PERTAINS TO CLAIM OF THE ASSES SEE WITH RESPECT TO MAINTENANCE CHARGES AGAINST LEASE INCOME. THE ASSESS EE HAS NOT CONTESTED THE ASSESSABILITY OF LEASE INCOME UNDER THE HEAD INCOM E FROM HOUSE PROPERTY AND HENCE, THE ONLY DISPUTE IS WITH RESPECT TO ALLOWABI LITY OF IMPUGNED CHARGES/TAXES 5 FROM LEASE INCOME WHICH HAS BEEN DISALLOWED BY REVE NUE PRIMARILY ON THE GROUND THAT THE ASSESSEE HAS OFFERED INCOME ONLY AGAINST O NE PROPERTY. FIRST OF ALL, TO DELVE INTO THE MATTER PROPERLY, WE FIND THAT THE AS SESSEE HAS DEBITED A SUM OF RS.3,74,100/- IN PROFIT & LOSS ACCOUNT UNDER THE HEA D STERLING SEAFACE MAINTENANCE CHARGES, THE BREAK-UP OF WHICH IS AS F OLLOWS:- FLAT NO. MAINTENANCE CHARGES (RS.) MUNICIPAL TAXES (RS.) 704 0 (SINCE RECOVERED FROM TENANT) 0 (SINCE RECOVE RED FROM TENANT) 1101 61,036 61,920 1102 46,000 NIL 1202 61,036 61,920 GODOWN NIL 82,188 TOTAL 1,68,072/- 2,06,028/- THEREFORE, WE FIND THAT CIT(A) HAS ERRED IN ALLOWING TWO DEDUCTIONS TO THE EXTENT OF RS.1,22,956/- & RS.61,920/- SEPARATELY ON ACCOUN T OF MAINTENANCE CHARGES AND MUNICIPAL TAXES RESPECTIVELY WHICH PERTAINED TO FLA T NO. 1101 WHEREAS IN FACT THE TOTAL AMOUNT PERTAINING TO FLAT NO. 1101 WAS, IN FA CT, RS.1,22,956/- INCLUSIVE OF MUNICIPAL TAXES. FURTHER, WHEN INCOME IS CALCULATED UNDER THE HEAD HOUSE PROPERTY, THEN BESIDES STATUTORY DEDUCTION OF 30% U /S 24, AN ASSESSEE IS ENTITLED ONLY FOR DEDUCTION WITH RESPECT TO TAXES LEVIED BY ANY LOCAL AUTHORITY . THEREFORE, SOCIETY MAINTENANCE CHARGES LEVIED BY THE SOCIETY W HICH IS NOT A LOCAL AUTHORITY ARE NOT AT ALL ALLOWABLE TO THE ASSESSEE. THEREFORE, WE HELD SO AND ACCORDINGLY, MAINTENANCE CHARGES OF FOUR FLATS AMOUNTING TO RS.1 ,68,072/- ARE NOT ALLOWABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FURTHE R, THE ASSESSEE HAS CONTENDED THAT GODOWN HAS BEEN USED BY ASSESSEE FOR BUSINESS PURPOSES AND THEREFORE, WE RESTORE THIS MATTER TO FILE OF AO FOR LIMITED PURPO SE OF VERIFYING ASSESSEES CLAIM THAT THE GODOWN WAS USED FOR BUSINESS PURPOSE DURI NG IMPUGNED AY OR NOT AND IF SO, ALLOW THE DEDUCTION FOR MUNICIPAL TAXES UNDER T HE HEAD BUSINESS INCOME. SO FAR AS REGARDING, MUNICIPAL TAXES FOR FOUR PROPERTI ES ARE CONCERNED, A COMBINED PERUSAL OF STATEMENT OF TOTAL INCOME FOR AY 2006-07 & 2005-06 STRENGTHENS THE CLAIM THE ASSESSEE THAT LEASE INCOME HAS BEEN OFFER ED ON RECEIPT BASIS AS PER TDS CERTIFICATES TO AVOID MISMATCH OF TDS CREDIT. THEREFO RE, WE HELD THAT MUNICIPAL TAXES RELATING TO FOUR PROPERTIES ARE ALLOWABLE UND ER THE HEAD INCOME FROM HOUSE PROPERTY. THE APPEAL OF THE ASSESSEE AGAINST GROUND NOS. 1 TO 3 IS PARTLY ALLOWED. THE DECISIONS AS REFERRED TO BY LD.CIT(A) ALSO SUPP ORTS THE SAME VIEW. THE DECISION OF THIS TRIBUNAL IN TOWNSHIP REAL ESTATE DEVELOPERS INDIA PRIVATE LIMITED V/S CIT (SUPRA) HAS BEEN PASSED AFTER CONSIDERING THE TWO DECISIONS OF HONBLE HIGH COURT S. THE CASE LAW OF SHARMILA TAGORE (93 TTJ 483) AS CITED BY LD.AR, HAS ALREADY BEEN DISTINGUISHED THEREIN. THE OTHER CASE LAWS AS CITED BY LD. AR PRIMARILY 6 FOLLOW THE RATIO OF SHARMILA TAGORE (SUPRA). IN ANY EVENTUALITY, WE ARE INCLINED TO FOLLOW OUR EARLIER VIEW TAKEN IN THE CI TED ORDER AS EXTRACTED ABOVE. 9. THEREFORE, ON THE FACTS & CIRCUMSTANCES OF THE C ASE, FINDING NO INFIRMITY IN THE IMPUGNED ORDER, WE DISMISS THE APP EAL. 10. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED ON 18 TH MAY, 2021. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 18/05/2021 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ' %'/ THE APPELLANT 2. ()%'/ THE RESPONDENT 3. (' ) / THE CIT(A) 4. / CIT CONCERNED 5. Z[ (\, ' \, / DR, ITAT, M UMBAI 6. [_` / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.