WADHWAGROUP HOLDINGS PRIVATE LIMITED,MUMBAI V. ACIT, CENTRAL CIRCLE 5(4), MUMBAI

ITA 1988/MUM/2024

AI Insights

The case involves cross appeals by Wadhwagroup Holdings Private Limited and the Deputy Commissioner of Income-Tax, Central Circle - 5(4), Mumbai, against the order of the CIT(A) - 53, Mumbai, for the assessment year 2020-21. The appeals addressed several issues, including the disallowance of subleasing expenses, reduction in business loss due to cancellation/revision in the area of sale of flats, disallowance of construction costs, and treatment of interest expenses. The Tribunal examined the arguments and evidence presented, focusing on the application of relevant sections of the Income Tax Act and the principles of accounting, particularly the matching concept.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28552 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2020-2021
• Other Referred Cases: Taparia Tools Ltd v/s JCIT, Rakesh Shantilal Mardia Vs. DCIT, Sunil Kumar Gupta v/s Asstt. Commissioner of Income Tax, PCIT v. Caraf Builders and Constructions Pvt. Ltd, CIT vs. Runwal Developers (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHOR DHULE; DR
• Assessee Lawyers: MADHUR AGRAWAL; SHALINI R. JAIN; ARS
• Keywords: Business income; Revenue expenditure; Business expenditure; Depreciation; Rule of consistency; TDS; Earning of tax free income
• Section: 14A; 194C; 20

Judgement Text

" | आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 1988/Mum/2024 Assessment Year: 2020-21 Wadhwagroup Holdings Private Limited 301, Platina G Block, Plot No. C-59 Bandra Kurla Complex Bandra (East) Maharashtra - 400098 [PAN: AACCV3961G] Vs ACIT – Central Circle -5(4), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) I.T.A. No. 2323/Mum/2024 Assessment Year: 2020-21 Deputy Commissioner of Income-Tax, Central Circle – 5(4), Mumbai Vs Wadhwagroup Holdings Private Limited 301, Platina G Block, Plot No. C-59 Bandra Kurla Complex Bandra (East) Maharashtra - 400098 [PAN: AACCV3961G] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Madhur Agrawal & Shalini R. Jain, A/Rs Revenue by : Shri Dr. Kishor Dhule, CIT D/R सुनवाई की तारीख/Date of Hearing : 19/02/2025 घोषणा की तारीख /Date of Pronouncement: 28/02/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 2 I.T.A. No. 1988/Mum/2024 & I.T.A. No. 2323/Mum/2024 are cross appeals by the assessee and the revenue preferred against the order of the ld. CIT(A) - 53, Mumbai, pertaining to AY 2020-21. 2. Both the appeals were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. We first take up the revenue’s appeal in I.T.A. No. 2323/Mum/2024. 4. The revenue is aggrieved and has taken the following grounds of appeal:- “1. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance of subleasing expenses of Rs. 1,67,71,848/- under section 57(iii) of the Act without appreciating the fact that assessee company has failed to establish the fact that said expenses are incurred wholly and exclusively for the purposes of the earning the sub-lease income shown under the head ‘Income from Other Sources’ which is necessary precondition to claim deduction under Section 57(iii) of the Act?” 2. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete reduction in the business loss by Rs. 3,51,44,651/- on account of cancellation / revision in area of sale of flats in respect of two parties without appreciating the fact that arriving at negative sales revenue on one hand and debiting cost on other hand is clearly in blatant violation of the provisions of the Income Tax Act and Matching concept as cost can be debited or matched only with the revenue and no cost or expense can be allowed in absence of revenue being offered? 3. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance of cost of construction amounting to I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 3 Rs.4,04,89,652/- pertaining to Project NEST without appreciating the fact that debit of expenses in P/L account without offering corresponding revenue against such expenses violates the matching concepts as pronounced by the Hon’ble Bombay High Court in the case of Taparia Tools Ltd v/s JCIT, 2003 126 Taxman 544 & Hon’ble Supreme Court in the decision rendered in the case of Rakesh Shantilal Mardia Vs. DCIT [2012] 26 taxmann.com 253?\" 4. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance of interest expense amounting to Rs.2,04,20,10,031/- made u/s 36(1)(iii) of the Act without appreciating the fact that Section 36(1)(iii) of the Income Tax Act, 1961 clearly provides for deduction of interest expenses on the loan raised for business purposes and assessee failed to establish that interest expenses claimed as deduction u/s 36(1)(iii) of the Act are pertaining to loans raised for the business purpose?\" 5. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance of interest expense amounting to Rs.2,04,20,10,031/- made u/s 36(1)(iii) of the Act without appreciating the fact that assessee has claimed deduction of interest on interest portion along with interest on borrowed capital portion which is not allowable as per provisions of Section 36(L)(iii) of the Income Tax Act, 1961?\" 6. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance u/s 14A of the Act by holding that the disallowance u/s 14A of the Act cannot exceed the amount of exempt income earned during the year, thereby ignoring the clarificatory Explanation of disallowance u/s. 14A(1) inserted vide the Finance Act 2022 that the provisions of section 14A shall apply and shall be deemed to have always applied even in a case when exempt income has not accrued or arisen or has not been received during the previous year but expenditure has been incurred during the said previous year in relation to earning of such exempt income?\" 7. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to direct to tax the common maintenance charges received amounting to Rs.44,60,16,088/- as business income instead of Income from House Property and to delete disallowance of maintenance I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 4 expenses amounting to Rs.34,58,543/- claimed as business expenditure related to Income from House Property ignoring the decision of Hon'ble Punjab & Haryana High Court (HC) in the case of Sunil Kumar Gupta v/s Asstt. Commissioner of Income Tax dated 27 September, 2016 where Hon'ble High Court has held that maintenance charges received in relation to the property should have been included within the ambit of \"rent\" and be taxed under the head \"Income from house property?\" 8. Whether on the facts and circumstances of case and in law, the Ld. CIT(A) was justified to delete disallowance made on the account of unallocable expenses without appreciating the fact that assessee has failed to prove that these expenses are expanded wholly and exclusively for the purpose of business or profession and thus admissible under provisions of Section 37(1) of the Income Tax Act, 1961? 9. The Applicant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be.” 5. Representatives of both the sides were heard at length. Case records carefully perused and with the assistance of the Counsels, the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules. 6. Ground No. 1, relates to the disallowance of subleasing expenses of Rs.1,67,71,848/-. 7. The underlying facts in the issue are that the assessee is engaged in the business of real estate development and offering the property for sale or offering them on rent. The assessee has multiple real estate projects. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has claimed to have earned sublease rental income of Rs.3,38,91,817/- and offered the same for taxation under the head income from other sources. The AO further found that the assessee I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 5 has claimed to have incurred sublet charges and expenses to the tune of Rs.5,06,63,665/- and claimed the deduction u/s 57 of the Act. Accordingly, the net loss of Rs.1,67,71,848/- from sublet activity was computed under the head income from other sources. 7.1. The assessee was asked to justify its stand. In its reply, the assessee explained that it has taken few small units from various unit holders and ground floor of the building Raghuleela Arcade Mall at Vashi. These units along with the area owned by the assessee in the ground floor is leased to Future Retail Ltd., Future Lifestyle Fashion Ltd., & Kambala Hospitality Pvt. Ltd., as a larger unit as per the requirement. It was explained that the sublease rent claimed is rent paid to various unit holders against the proportionate rent received on the total area rented to Future Retail Ltd., Future Lifestyle Fashion Ltd., & Kambala Hospitality Pvt. Ltd.. The explanation of the assessee did not find any favour with the AO. The AO was of the opinion that the assessee has not expended the excess amount of lease premium for the purpose of subleasing activities alone but for the purpose of operation of leasing its own properties to big corporates. The AO concluded that since the amount of sublease premium paid by the assessee is not “expenses wholly and exclusively for the purpose of earning sublease income”, whole of the expenditure incurred for sublease expenses is not allowable u/s 57 of the Act and went on to make addition of Rs.1,67,71,848/-. I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 6 7.2. The assessee challenged the addition before the ld. CIT(A) and reiterated its claim of expenses. It was once again explained that Raghuleela Arcade Mall at Vashi was constructed in the year 2008 which consisted of approximately 525 small shops and out of the total constructed area, part of the area was sold and part of the area was held as investments to be given on lease. The small shops admeasuring about 77 to 600 sq.ft., and were mostly sold during the construction phase itself. However, these small shops created a lot of problem as the rental income was not enough and the maintenance was very high and the tenants were not paying maintenance for such small shops. In order that the Raghuleela Mall, does not shut down, the management changed its strategy and attracted large tenants like Pantaloons, Central Fame Cinema etc.. The demand for these brands was large floor space but due to adjacent offices which were already sold to other small businesses the same could not be leased out to such larger retailers. For taking advantage of leasing a larger area and giving comfort to large retailers, the assessee entered into lease agreements with these small buyers to whom the units were sold. Thus the area owned by the assessee along with the area taken by the assessee on lease were leased to Future Retail Ltd., Future Lifestyle Fashion Ltd., & Kambala Hospitality Pvt. Ltd.. It was strongly contended that the assessee is surviving because of brands like, Smart Bazaar, PVR cinema etc., operating from the mall. 7.3. After considering the facts and the submissions, ld. CIT(A) was convinced that the assessee has booked high rents from the shopkeepers I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 7 from letting out his own property in combined manner which otherwise would have remained vacant had such an arrangement not been resorted to. Taking into account the assessee’s view-point to maximise its profit, the ld. CIT(A) deleted the disallowance of Rs.1,67,71,848/-. 7.4. Before us, the ld. D/R strongly supported the findings of the AO and the ld. Counsel for the assessee, reiterated what has been stated before the lower authorities. 8. We have carefully perused the orders of the authorities below. There is no dispute that small shops were taken by the assessee which were sold earlier, on rent to give a large premise to the brands like Pantaloons, Central Fame Cinema etc.. This decision has not only kept the Raghuleela Mall alive but is also a decision taken by a prudent businessman. We are of the considered view that commercial expediency of a businessman should not be questioned by the revenue as the revenue cannot step into the shoes of a businessman to see how a prudent businessman would act in the given facts and circumstances. We, therefore, do not find any merit in this grievance of the revenue and the same is dismissed. 9. Ground Nos. 2 & 3 relate to the deletion of reduction in the business loss by Rs.3,51,44,651/- and cost of construction at Rs.4,04,89,652/-. 10. While scrutinising the return of income, the AO noticed that the assessee has reduced amount of revenue recognition by Rs.3,51,44,651/- I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 8 on account of cancellation/revision in area of sale of flat in respect of Sushil Rambilas Gupta and Shri Haresh Mehta. 10.1. The assessee was asked to explain why it has not increased the corresponding work in progress as against sales reversal of Rs.3,51,44,651/-. In its reply, the assessee explained that the reversal in sales has the effect of reducing the total sales during the year. It was further explained that the cumulative effect and due to decrease in sale ratio on account of cancellation of flat, the cumulative effect has already given in the work in progress. Thus, the cost is reduced by way of reduced sale ratio as per the POCM followed by the assessee. 10.2. This explanation of the assessee was not accepted by the AO who was of the opinion that the assessee has claimed original sum of Rs.3,45,71,165/- as cost of construction in respect of project “Nest” for the year under consideration without offering any additional revenue or increasing the corresponding work in progress of inventory as against the reversal of such sale. The basis of revenue recognition explained by the assessee is as under:- ***This space has been left blank intentionally, P.T.O.*** I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 9 I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 10 10.3. The AO strongly opined that the basis of arriving at negative sales revenue on one hand and debiting cost on other hand is clearly in blatant violation of the provisions of the Income-tax Act as cost can be debited or matched only with the revenue and no cost or expense can be allowed in absence of revenue being offered. The AO accordingly went on to disallow the sales reversal of Rs. 3,51,44,651/- and the cost of work in progress debited at Rs. 4,04,89,652/-. 10.4. The assessee agitated the matter before the ld. CIT(A) and once again explained the accounting treatment. After considering the facts and the submission and understanding the accounting treatment, the ld. CIT(A) observed that the assessee had to refund back Rs. 3,51,44,651/- to two buyers in respect of which income had already been recognized in earlier years. The ld. CIT(A) further observed that the assessee has incurred additional expenses of Rs. 4,04,89,652/- during the year on account of cost of construction of the project “Nest”. In the absence of fresh sales being booked during the year and the assessee following PCM method, the ld. CIT(A) was convinced that the actions are appropriate enough so as to reflect the true income of the assessee on the basis of consistent method of accounting followed by it and went on to delete both the disallowances of Rs.4,04,89,652/- and Rs.3,51,44,651/-. 11. Before us, the ld. D/R strongly supported the findings of the AO and read the operative part. The ld. Counsel for the assessee reiterated I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 11 and explained once again the accounting treatment given by the assessee by referring to the relevant documents in the paper book. 12. We have given a thoughtful consideration to the orders of the authorities below. The summary of cost incurred and area sold as on 31/03/2020 & 31/03/2019 of the project “Nest” can be understood from the following chart:- Summary off Cost Incurred and AREA sold as on 31.03.2020 and 31.3.2019 of the Project Nest Sr No. Particular (A. Y 2020-21) (A.Y.2019-20) Difference A Projected Saleable Area (In Sq.Ft.) 148,221 148,221 B Total Estimated Projected Cost 2,814,681,848 2,554,037,625 c Cost to P&L Opening WIP Cost other than Land Cost (already Incurred) Add: Addition during the year 2,364,926,725 251,469,316 1,393,027,588 971,899,138 Total Cost Incurred 2,616,396,041 2,364,926,726 251,469,315 Cost Ratio (Total Cost Incurred till date /Estimated Cost *100) i.e. (Rs 2,616,396,041/Rs.2,814,681,848)*100 92.96% 92.60% 036% Cost to be debited to P&L in Current year up to March 2020 (Cost Incurred till date • Sales Ratio) i.e 2,616,396,041*29.30% 537,792 730,917,301 Cost already debited to P&L up to March 2019 730,917,301 713,461,380 Cost debited for the year to P&L 35,620,491 17,455,921 D Sales Revenue Total Saleable Area sold (In Sq.Ft.) Sales Ratio 43,425 29.30% 45,810 30.91% 2,385 -1.6% Sales Amount Total revenue to be recognised till March 2020 (Sales Amount * Cost Ratio) La 712,672,210 * 29.30% 712,672,210 662,466,612 752,776,160 697,037,679 - 40,103,950 (Note 1) Less: Revenue already recognised 697,037,777 682,705,620 Sales Revenue for the year (34,571,314) 14,332,059 I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 12 Note 1 -Sales Consideration has reduced by the Flat Cancelled of MR Sushil Gupta Total Reversal of Revenue Sales Reversal due to Cancellation of Flat Sale Consideration of the Sold Flat Revenue Offered till Last year 40,103,950 92.60% 37,134,502 Less Addl revenue to be offered on account of Increase In cost Sale Agreement till date 712,672,210 Incremental Cost Ratio ____________ 036% 2,563,337 Total Cost to be Recognised on Protect Nest Total Cost to be recognised for the year under consideration Total Cost Incurred during the year 251,469,316 34,571314 Sales Ratio ___________ 29.30% 73,674,142 less Reversal of Cost due to Flat Cancellation Cost Incurred as on 1.4.2019 2,364,926,725 Deferential Sales Ratio 1.61% 38,053,651 Total Impact on Cost 35,620,491 12.1. The reversal entry can be understood from the following chart:- Details of Sales more than Rs. 10 lakhs Sr No Name of the Party Address PAN Amount A) 1 B) 1 2 Sale of Hats Suresh Balkrishnanan Less: Sales reversal due to cancellation of flats Sushil Rambilas Gupta Haresh Mehta 102,1st Floor, Brookvllle- W, S B Cross Lane, Off Mughal Lane, Mahim (West), Mumbai- 400 016 301, Pooja Apts, Gulmohar Road No. 1, Juhu, Mumbai-400 049 Mumbai AERPB3730R 146,090,000 34,571,314 573,337 35,144,651 A-B) Net Sale of Flats as per Note 21 of Financial Statement 110,945,3449 I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 13 12.2. It can be seen from the above that the cost ratio which was 92.60% as on 31/03/2019, increased to 92.96% as on 31/03/2021. The sales ratio was 30.91% which came down to 29.30% with a difference of (-)1.61% because of which, the sales revenue for the year came down from Rs.1,43,32,059/- to (Rs.3,34,71,314/-). 12.2.1. A further perusal of the aforementioned chart would show that sale consideration of the sold flat was Rs.4,01,03,950/- on which revenue offered till 31/03/2019 being 92.60% amounted to Rs. 3,71,34,502/- and because of the increase in cost, sale agreement till 31/03/2020 would be Rs.71,26,72,210/- with incremental cost ratio of 0.36% being difference between 92.60% as on 31/03/2019 and 92.96% as on 31/03/2020 would come to Rs.25,63,337/- for which total cost to be recognized on project “Nest” would be Rs.3,45,71,314/- and the total impact on cost would be Rs.3,56,20,491/-. 12.3. Considering the aforementioned accounting treatment, we do not find any error or infirmity in the findings of the ld. CIT(A). Accordingly, Ground Nos. 2 & 3 taken together, are dismissed. 13. Ground Nos. 4 & 5 relate to the deletion of disallowance of interest expenses of Rs. 2,04,20,10,031/-. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has claimed huge interest expenses of Rs. 2,65,27,32,829/- under the head income from business/profession. The AO further observed that this huge interest expenditure is claimed against a very minimal business income of Rs.2006.70 Lakhs. The assessee was asked to furnish explanation for I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 14 the allowability of interest expenses as revenue expenditure u/s 36(1)(iii) of the Act. The assessee filed detailed reply and explained the allowability of interest expenditure by the following chart:- Statement showing Interest Cost claim as allowable expenditure under the head Business and Profession. Particulars Amount Total Interest Cost Less: Interest Cost Capitalised in Inventories 3,80,06,20,172 36,20,60,338 3,43,85,59,834 Total Interest cost debited to P & L A/c Less: Interest claimed u/s 24B against rental income & disallowed under Business 55,60,85,290 & Profession 55,26,146 Less: Interest on Income tax disallowed under Business & Profession Less: Other Interest cost including Financial guarantee commission expenses disallowed under Business & Profession(lnd As Adjustments) 22,42,15,569 Net Interest cost allowable 2,65,27,32,829 13.1. The AO found that a very substantial portion of the funds have been invested by the assessee in the Investment Property, investments, project work in progress and other financial assets like loans and only a nominal portion of funds have been invested in other business assets like stock of raw material, finished goods, property plant and equipment and debtors. The AO further observed that the assessee in its return of income considered interest income under the head “income from other sources” where no deduction is claimed for interest expenses meaning thereby that assessee itself has accepted that the loans advanced are out of interest free funds available with the assessee. The AO went on to recompute the liability of interest expenses which are mentioned at pages 20 to 24 of the assessment order and in doing so, the AO rubbished the contention of the assessee that its project has been I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 15 stalled by the local authorities and went on to compute the disallowance of interest as under:- Sr No Name of Project Interest expense not allowable as business expense as claimed by the assessee 1. The Capital & Trade Centre 1242088620 2. Raghuleela Arcade & Vishroop 795204416 3. Raghuleela Mall 4716995 4. Palm Beach Arcade 168974776 Total Interest 221,09,84,807 13.2. The assessee agitated the matter before the ld. CIT(A) and reiterated its claim of allowability of interest, once again emphasising that the project was stalled by the local authorities and the assessee could not have done anything. The ld. CIT(A) was convinced with the claim of the assessee. However, the issue of interest expenses claim of Rs. 16,89,74,776/- in respect of Palm Beach Arcade property, did not convince the ld. CIT(A) and accordingly went on to confirm the addition to the extent of Rs. 16,89,74,776/- thereby deleting the disallowance to the extent of Rs. 2,04,20,10,031/-. 14. Before us, the ld. D/R read the operative part of the assessment order and drew our attention to the chart exhibited elsewhere. The ld. Counsel for the assessee, reiterated his contention and vehemently stated that the disallowance sustained by the ld. CIT(A) is uncalled for. 15. We have given a thoughtful consideration to the orders of the I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 16 authorities below. The Hon’ble Bombay High Court in the case of Taparia Tools Ltd. Vs. JCIT [2003] 260 ITR 102 (Bombay), has held as under:- “Therefore, under the Mercantile System of Accounting, in order to determine the net income of an accounting year, the revenue and other incomes are matched with the cost of resources consumed [expenses]. Under the Mercantile System of Accounting, this Matching is required to be done on accrual basis. Under this Matching concept, revenue and income earned during an Accounting Period, irrespective of actual cash in-flow, is required to be compared with expenses incurred during the same period, irrespective of actual out-flow of cash. In this case, the assessee is following Mercantile System of Accounting. This Matching concept is very relevant to compute taxable income particularly in cases involving DRE.” 16. In light of the aforementioned decision, we are of the considered view that where an assessee who is engaged in business of land development and has been consistently following Mercantile system of accounting in respect of its projects, PCM method of accounting in the case in hand, the AO should not selectively alter the method of accounting for just one of its projects at his whims and fancies. Considering the overall claim of the assessee, we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, Ground No. 5 of the revenue is dismissed. While doing so, Ground No. 2 of the assessee’s appeal is also dismissed. The interest cost of Rs. 16,89,74,776/- has to be capitalized in the Palm Beach Arcade property, following the matching concept followed by the assessee. 17. Ground No. 6 relates to the restriction of disallowance u/s 14A of the Act to the extent of exempt income earned by the assessee. 18. This issue is no more res integra as has been held in plethora of judgements for example PCIT v. Caraf Builders and Constructions Pvt. Ltd. I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 17 (2019) 414 ITR 122 (Delhi)(HC). Respectfully following the same, we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, Ground No. 6 is dismissed. 19. Ground No. 7 relates to the deletion of common area maintenance (CAM) charges of Rs.44,60,16,088/- as business income instead of income from house property and the addition of disallowance of maintenance expenses of Rs.34,58,543/-. 20. The AO noticed that the assessee has received maintenance charges of Rs.48,72,29,783/- u/s 194C of the Act and other income of Rs. 10,94,88,979/- u/s 194I(a) but found that the assessee has not disclosed this income but has netted off with expenses and has also claimed TDS u/s 194C & 194I(a) of the Act. The assessee was asked to justify its claim. The assessee submitted the following details:- Details of CAM expenses & income Particulars Amount CAM and electricity expenses 566,284,165 Less: CAM and Electricity charges received 510,052,684 CAM expenses as per P&L A/c (Net) (Note 28: Other Expenses of the financials) 56,231,481 Less: Disallowed under 'Any Other Additions U/S 28 To 44DA' in the Computation Of Income 46,345,565 Taken as allowable Business Expenses 3,458,543 Disallowed in COI - As property Tax 6,427,372 Balance 0 I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 18 20.1. The AO was not convinced with the noting of all expenses with income. The AO found that the assessee has received rent and has claimed standard deduction as under:- Property Gross Rent received 30% Standard Deduction UNITS, CAPITAL, TRADE CE NTER,IT PARK, BKC 193,92,10,908 55,84,20,510 Total 193,92,10,908 55,84,20,510 20.2. The AO was of the opinion that since the assessee has already claimed standard deduction on account of repairs and maintenance and since the assessee has recovered electricity expenses of Rs.6,50,36,596/- which is not considered as part of rent, the AO went on to compute the income from house property on account of maintenance charges which according to him was rental income shown as business income received by the assessee and went on to disallowed under “income from business and profession” at Rs.45,49,02,004/- treating maintenance charges received Rs.44,60,16,088/-, as income from house property and allowed statutory deduction @30% on the same and further disallowed CAM of Rs.34,58,543/-. 21. The assessee strongly agitated the matter before the ld. CIT(A) and claimed that the AO grossly erred in treating CAM charges as income from house property which was nothing but reimbursement of the charges paid by the assessee. After considering the facts and the submissions, the ld. CIT(A) was convinced that CAM charges are to be taxed under the head business income and deleted the additions made by the AO. I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 19 22. Before us, the ld. D/R repeated what has been stated before the AO and the ld. Counsel for the assessee, reiterated its claim. 23. We have carefully considered the orders of the authorities below. There is no dispute that the assessee has received Gross rent of Rs.1,93,92,10,908/- against which it claimed statutory deduction on account of repairs and maintenance amounting to Rs.55,84,20,510/-. However, the assessee as incurred expense of only Rs.50,12,47,569/- and the electricity expenses of Rs.6,50,36,596/- has been recovered by the assessee. The maintenance charges received from tenants is considered as the part and parcel of rent and considered as part of ALV. This observation of the AO does not carry any weight. The assessee has received over and above the rental income, reimbursement on account of CAM and electricity charges which is netted off against the actual expenses incurred by the assessee and the net expenditure has been debited to the profit and loss account. The point of dispute is whether the recovery of CAM charges are to be considered as part of rent eligible for statutory deduction @30% or has to be assessed as business income. 23.1. The Hon’ble Bombay High Court in the case of CIT vs. Runwal Developers (P) Ltd. 15 taxmann.com 196 (Bom), has held as under:- “9. We see no merit in the aforesaid contention. The fact that the assessee apart from carrying on the construction activity, is in fact carrying on the business of running a Mall in the name of 'R Mall' is not in dispute. Admittedly, part of the premises constructed by the assessee have been sold to third parties on outright sale basis. It is also not in dispute that maintenance charges for promotion and upkeep of the Mall has been collected not only from the persons to whom the premises have been given on lease basis but also from persons to whom the premises have been sold on out right sale basis. Obviously, no rent could be recovered from the persons to whom the premises were given on outright sale basis. Therefore, the Tribunal was justified in holding that the maintenance charges received were towards the maintenance and I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 20 promotion of the common area and the amounts received towards maintenance charges were business receipts liable to be assessed under the head \"income from business'. 10. Moreover, perusal of clause (6) in the business conducting agreement clearly shows that the maintenance charges collected by the assessee not only relates to the open area / common area, repair and maintenance of equipment, land, atrium, fire fighting equipments, transformers, air conditioner plants, water tank and other services in the common areas of the complex, but also towards the cost of security services and overall house keeping of the common area. The fact that the quantum of maintenance charges under the agreement are based on the area of the premises given on lease / sale basis cannot be a ground to hold that the maintenance charges received were part and parcel of the rent payable in respect of the leased premises. 11. In these circumstances, the decision of the ITAT in holding that the maintenance charges recovered by the assessee towards the promotion and upkeep of the Mall, from the persons to whom the premises are let out and also from the persons to whom the premises were sold are attributable to conducting the business activity of running the Mall and therefore, the amount of maintenance charges received were business receipts assessable under the head 'business income' cannot be faulted.” 24. Respectfully following the same, we decline to interfere with the findings of the ld. CIT(A). Accordingly, Ground No. 7 is dismissed. 25. Ground No. 8 relates to the deletion of the disallowance made on account of unallocable expenses. The expenses have been disallowed on the ground that the same has not been incurred wholly and exclusively for business purposes and further depreciation has also been disallowed on the ground that the premises were not used for the purpose of business. 26. The root cause for the disallowance is that the assessee has not allocated expenses to its various purchases. 27. After perusing the orders of the authorities below and considering rival submissions, we are of the considered view that the expenses incurred at the head office level which pertains to the overall business I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 21 of the assessee need not be allocated to various schemes as long as the same are incurred wholly and exclusively for the purpose of business. Therefore, the impugned disallowance is uncalled for and the ld. CIT(A) has rightly deleted the same which calls for no interference. Insofar as, the claim of depreciation is concerned, the following factual findings of the ld. CIT(A) will suffice:- “11.5. As regards the depreciation of Rs.43,69,000/-, it is the contention of the appellant that no such sum of Rs.43.69 lakhs has been claimed by the appellant. I find that Schedule 27 to Financial Statements of the appellant titled as “Depreciation and Amortisation Expense” contains the following 3 items: Particulars Amount Rs. Lakhs Depreciation on tangible assets 35.88 Amortisation on intangible assets 7.80 Amortisation on right of use assets 569.82 Total 613.50 11.6. In Schedule 33 to Financial Statements of the appellant titled as “Segment Reporting”, the appellant has allocated Rs.569.82 lakhs as related to “Leasing” segment. Hence, the AO has held that that balance of Rs.43.69 lakhs is unallocable and hence stands disallowed. However, a perusal of the computation of income shows that the appellant has added back the entire sum of Rs.6,13,50,017/- as “depreciation disallowed” and thereafter claimed depreciation as per IT Act separately. Given these set of facts, there is merit in the claim of the appellant that no disallowance is warranted on the basis of segment reporting and that it has not claimed such depreciation of Rs.43.69 lakhs. Hence, the disallowance of Rs.43,69,000/- is deleted.” 28. The aforementioned factual findings of the ld. CIT(A) need no disturbance and the same is confirmed. Ground No. 8 is accordingly dismissed. 29. Coming to the assessee’s appeal in I.T.A. No. 1988/Mum/2024. 30. Ground No. 2 has been adjudicated by us while deciding Ground No. 4 & 5 of the revenue’s appeal. For our detailed discussion therein, Ground No. 2 is dismissed. I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 22 31. Vide Ground No. 1, the assessee has challenged the deemed rental income from house property u/s 23(1)(a) of the Act amounting to Rs.23,11,235/-. 31.1. While perusing the return of income, the AO found that the assessee was claiming that Flat No. 901 in building Golden Peak, was used for business purposes. The AO was of the opinion that the said property was neither shown as fixed asset nor any depreciation has been claimed on it. The assessee was asked to justify its stand. The assessee explained that the said flat is used for keeping important documents and for storing records of the assessee company and partly used as guest house. The contention of the assessee was dismissed by the AO who was of the opinion that since the property is kept as investment property, therefore, it is liable to be taxed as deemed let-out property u/s 23(1)(a) of the Act. Accordingly, deemed rental income was computed at Rs.23,11,235/-. 31.2. The assessee carried the matter before the ld. CIT(A) but without any success. 32. Before us, the ld. Counsel for the assessee vehemently stated that the said property has been used as such since 2006 and till the present assessment year, no addition has been made by the AO and prayed for the rule of consistency. The ld. D/R simply supported the findings of the AO. 33. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the status of the said I.T.A. No. 1988/Mum/2024 I.T.A. No. 2323/Mum/2024 23 property is the same since 2006 and no such addition has been made till the assessment year under consideration. Therefore, following the rule of consistency as laid down by the Hon’ble Supreme Court in the case of Radhasoami Satsang v. CIT (1992] 193 ITR 321 (SC), we do not find any merit in this addition made by the AO and the same is directed to be deleted. Accordingly, Ground No. 1 raised by the assessee is allowed. 34. In the result, appeal of the revenue is dismissed and that of the assessee is partly allowed. Order pronounced in the Court on 28th February, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 28/02/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001c / The Appellant 2. \u0015\u001dथ\u001c / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "