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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH, NEW DELHI
Before: SHRI H.S. SIDHU
This appeal by the assessee is preferred against the order of the Ld. Commissioner of Income Tax [Appeals]-21, New Delhi dated 21.03.2018 pertaining to assessment year 2014-15 on the following grounds:-
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming action of the AO of denial deduction of amount of Rs. 25,98,622/- paid to Municipal Corporation of Delhi.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming addition of Rs. 18,19,035/- made by the AO under the head “Income from House Property”. The appellant craves leave to add one or more ground fo appeal or to alter/ modify the existing ground before or at the time of hearing of appeal. The aforesaid grounds of appeal are without prejudice to each other.
2. The brief facts of the case are that the assessee is having 25% share in property at B-1-I/2, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi which has been given on rent to Max Bupa Health Insurance Company Ltd. While computing the income from this property under the head income from house property, the assessee has deducted a sum of Rs. 27,37,851/- towards tax paid to the local authorities for this property. The AO asked the assessee to furnish the evidence in respect of this payment. The AR of the assessee furnished the evidence for payment of property tax amounting to Rs. 1,39,229/- and for the balance amount, the assessee furnished the copy of the, cheque of Rs. 25,98,622/- issued in favour of the Commissioner, South Delhi Municipal Corporation and submitted that the payment receipt was not available at that time. The AO has disallowed this sum of Rs. 25,98,622/- while computing income under the head income from house property and has made an addition of Rs. 18,19,035/- after allowing standard deduction @ 30% and completed the assessment at Rs. 41,52,670/- u/s. 143(3) of the I.T. Act, 1961 vide order dated 21.12.2016. Against the assessment order, assessee appealed before the Ld. CIT(A) who vide his impugned order dated 21.3.2018 has dismissed the appeal of the assessee. Aggrieved with the impugned order dated 21.3.2018, assessee is in appeal before the Tribunal.
During the hearing, Ld. AR of the assessee has submitted that the Ld. CIT(A) has gone wrong on facts. The payment made to South Delhi Municipal Corporation was not for conversion from leasehold to freehold. The amount paid was in the nature of tax charges levied by the municipality in respect of the property for renting it out for commercial use. The Ld. AR has also referred to provisions of proviso to section 23 to contend that what is allowed to be deducted is taxes levied by any local authority in respect of the property. The Ld. AR has further contended that the deduction is not confined to property tax. The deduction is available in respect of taxes levied in respect of the property. The taxes levied may be called by whatever name be it house tax or property tax or municipal tax or rates or charges or fees. To support his contention, he has relied upon decision of Coordinate Bench of ITAT, Delhi in case of DCIT v Haldiram Products Private Limited (ITA No. 5158/Del/2012) wherein, it was held that conversion charges were in the nature of municipal taxes. The Ld. AR has also submitted that the issue is no more debatable as the AO has himself allowed the deduction of similar expenses in the assessment made u/s. 143(3) of the Act for the subsequent year i.e. AY. 2015-16 by filing the copy of the assessment order dated 08.12.2017. Accordingly, he submitted that the deduction should be allowed for this year also.
On the other hand, the Ld. DR relied upon the orders of authorities below and did not refer any contrary decision which controverts the aforesaid contention of the Ld. Counsel for the assessee.
I have heard both the parties and perused the records especially the orders of the revenue authorities, assessment order dated 8.12.2017 passed in the case of the assessee for the AY 2015-16 u/s. 143(3) as well as ITAT, Delhi ‘C’ Bench decision dated 08.2.2013 passed in the case of DCIT vs. Haldiram Products Pvt. Ltd. Passed in (AY 2008-09). I note that AO has made net disallowance of Rs. 18,19,035/- in respect of payment made to South Delhi Municipal Corporation in relation to the property let out by the assessee. It is further noted that the AO made the disallowance because the receipt issued by South Delhi Municipal Corporation was not available not available and / or misplaced by the assessee and the duplicate receipt could not be received till the completion of assessment proceedings though the assessee furnished the proof of payment by way of bank statement and bank certificate. However, the duplicate receipt was received during the course of appellate proceedings before Ld. CIT(A) and the same was furnished before him. I further note that Coordinate Bench of ITAT, Delhi in case of DCIT v Haldiram Products Private Limited decided in ITA No. 5158/De1/2012 vide its order dated 08.2.2013 has held that conversion charges were in the nature of municipal taxes. As per provisions of section 23 of the Income Tax Act, 1961, deduction of taxes levied by any local municipality in respect of the let out property is allowable deduction. In the scrutiny assessment made in the case of the assessee for the subsequent assessment year i.e. AY. 2015-16, the AO vide his order dated 08.12.2017 has himself allowed the deduction of similar expenses. Hence, the addition in dispute is not sustainable in the eyes of law. Accordingly, I direct the AO to allow the deduction in dispute by deleting the addition of Rs. 18,19,035/- made in the hands of the assessee. Accordingly, the ground no. 1 & 2 raised by the assessee are allowed.