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Facts
The assessee appealed against two disallowances by the CIT(A). Firstly, the denial of deduction under Section 10(13A) for House Rent Allowance (HRA), where the assessee, a co-owner, allegedly paid rent to his wife, another co-owner, without sufficient proof. Secondly, the denial of treating a one-time maintenance deposit of Rs. 7,70,625/- as part of the cost of acquisition for deduction under Section 54F.
Held
The Tribunal dismissed the appeal regarding HRA, upholding that the assessee failed to substantiate the rent payments and that the CIT(A)'s findings were correct. However, it allowed the appeal concerning Section 54F, holding that the one-time maintenance charge was a compulsory, non-refundable payment and thus an integral part of the cost of acquisition of the property.
Key Issues
1. Whether HRA deduction under Section 10(13A) can be denied if rent payments between co-owning spouses are not properly substantiated. 2. Whether a compulsory, one-time maintenance deposit should be included in the cost of acquisition for claiming deduction under Section 54F.
Sections Cited
10(13A), 54F
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘B’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the assessee against the order dated 16-08-2019 of Ld. Commissioner of Income Tax (Appeals), Shimla H.P. [ herein referred to as ‘CIT(A)’]
Grounds of appeal are as under:
1340-Chd-2019 Vinod Sharma, New Delhi 2
1. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax (Appeals) is not justified in upholding the denial of deduction claimed under section 10(13)A of the Income Tax Act, 1961 in respect of house rent allowance by the assessee appellant. Disallowance is bad in law and facts and is not sustainable in the eyes of law.
2. That in the facts and circumstances of the case the Ld Commissioner of Income Tax (Appeals) is not justified in treating the one-time maintenance deposits of Rs. 7,70,625/ paid by the appellant not as cost of acquisition of the property and thereby upholding the denial of deductions under Section 54F of the Income Tax Act, 1961.
3. The order of the CIT(A) is bad in law and facts.
The first ground of appeal is against the rejection of deduction claimed u/s 10(13)A of the Income Tax Act, 1961 (in short 'the Act') in respect of House Rent Allowance claimed by the Assessee-appellant.
The Ld. CIT(A) in his order has given a very clear and categorical findings on this issue which is as under: -
“5.2.2 The detailed observation of the A.O. are already made supra. The undisputed
1340-Chd-2019 Vinod Sharma, New Delhi 3 facts that emerge are that the assessee is a co-owner in the said property along with his wife have been indivisible and undivided share in the property. No rent agreement has been produced and no monthly outgo in the shape of rent paid is substantiated in the bank account. In these facts, the findings of the A.O. cannot be faulted with. The husband and wife in this case are co-owners in the property, are residing jointly in the property and the excess share of the wife is only 40% (She owns 70% while the assessee owns 30%) and the quantum of rent paid is also not justified in the given circumstances. In this context, the decision of the ITAT, Mumbai in the case of Mrs. Meena Vaswani v. Assistant Commissioner of Income-tax- 26(1), Mumbai [2017] 80 taxmann.com 2 held that HRA exemption claim could not be allowed under section 10(13A) based on sham rent payments supported only by rent receipts from mother where assessee produced no evidence arising in normal course of happening of transaction of hiring premises.”
Even during proceedings before us, the Counsel of the Assessee was asked to furnish the details of Income Tax Returns filed by Smt. Neelam Sharma, recipient of the rent
1340-Chd-2019 Vinod Sharma, New Delhi 4 showing the amount received as rent and tax paid on it. But from the records, it is found that such details were neither furnished before the Assessing Officer nor before the Ld. CIT(A) and not even during the proceedings before the Tribunal. Therefore, there is no reason to believe the claim of the Assessee. Accordingly, under such circumstances, we find that the findings given by the Ld. CIT(A) on this issue in his order are clear and correct. Accordingly, Assessee’s appeal on this ground is dismissed.
Appeal on other ground is against the rejection of one-time maintenance deposit of Rs. 7,70,625/- paid by the Assessee - appellant to be included in the cost of acquisition of property.
During proceedings before us, ld. Counsel for the Assessee argued that the Ld. CIT(A) has uphold the denial of deduction u/s 54F of the I.T. Act, 1961 made by the Assessing Officer denying the one-time maintenance deposit of Rs. 7,70,625/- paid by the appellant-assessee
1340-Chd-2019 Vinod Sharma, New Delhi 5 and claimed as cost of acquisition. We find from the submissions made by the Ld. counsel that this one-time payment in the name of maintenance charges is a compulsory payment at the time of acquisition of the property. It was also submitted that no purchaser can purchase the property without making payment of this one-time maintenance charges, so, although the nomenclature is ‘maintenance charges’, but, in fact, in a way, it is a part of the cost of the property. It is also important to note that such maintenance charges are not refundable nor adjustable under any head, so for all practical purposes, such payments are part and parcel of the cost of the acquisition of property.
Per contra, the Ld. DR relied on the order of the Ld. CIT(A).
We have considered this issue and we are of this view that since one-time maintenance charge is a compulsory payment at the time of acquisition of property, so it should be taken as a part of cost of the property. Accordingly, in 1340-Chd-2019 Vinod Sharma, New Delhi 6 our considered view, deduction claimed by the Assessee under Section 54F of the Act of this amount is justified. Thus, Assessee’s appeal on this issue is allowed.
In the result, Assessee’s appeal is partly allowed.
Order pronounced on 06.08.2025.