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Facts
The assessee, Mall Hotel Ltd., filed appeals against the orders of the Ld. CIT(A) for assessment years 2012-13 to 2014-15. The appeals involved disallowances related to power & fuel expenses and building repair expenses on rented portions of properties.
Held
The Tribunal held that the disallowance of power and fuel expenses was not justified as the expenditure was met by charges received from tenants. Similarly, the disallowance of repair expenses was also deleted, following previous decisions in identical cases.
Key Issues
Whether disallowance of power & fuel expenses and repair expenses on rented portions of properties is justified when the income and expenditure are duly accounted for and supported by prior year decisions.
Sections Cited
143(3), 250, 144B
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Income Tax Appellate Tribunal, DELHI BENCH, E: NEW DELHI
Before: SHRI RAJ KUMAR CHAUHAN, HON’BLE JUDICIAL & SMT. RENU JAUHRI, HON’BLE
Date of Hearing 12.03.2026 Date of Pronouncement 19.03.2026 ORDER PER RENU JAUHRI:
The above captioned three appeals are filed by the assessee against orders of Ld. CIT(A)/NFAC, Delhi, dated 18.06.2025, passed under section 250 of the Income
ITA_5061_5062_5063_Mall Hotel Ltd Delhi Tax Act, 1961 [hereinafter referred to as, “Act”]. The assessments were framed by the Ld. AO u/s 143(3) r.w.s 254 r.w.s 144B of the Act.
In all these three appeals, identical grounds have been taken and, therefore, these are being disposed off vide a common order. The appeal i.e., [Assessment Year: 2012-13], is being taken as the lead case in which the following grounds have been raised:
“1 That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as 'CIT (A)'), grossly erred in sustaining of Rs. 71,59,544/-on account of Power & Fuel Expenses. In spite grounds of appeal and the records are available with him which is uncalled for, based on surmises and conjectures and bad in law.
2. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as 'CIT (A)'), grossly erred in sustaining the 24.05% of building repair expenses in respect of JHV(Cinema) and 1.38% of building repair expenses in respect of Ramada (Hotel). In spite grounds of appeal and the records are available with him which is uncalled for, based on surmises and conjectures and bad in law.
3. Because on the Facts and Circumstances of the case order passed by Ld. A.O. and CIT(A) is arbitrary in nature, against the principle of natural justice & equity and also without giving proper opportunity of being heard.
4. The Appellant hereby prays for any consequential relief arising out of the above appeal and further prays for any addition, modification, deletion and alteration in the ground of appeal for the serve of Natural Justice. ”
ITA_5061_5062_5063_Mall Hotel Ltd Delhi
Brief facts of the case are that the assessee company filed return for A.Y. 2012- 13 on 1st October, 2012, declaring income of Rs. 3,72,24,600/-. The assessee company is engaged in the business of running hotel, cinema theatre, and has also shown business income from shops as well as rental income received from shops given on rent. The case was selected for scrutiny and the assessment was completed at an income of Rs. 5,57,55,008/-. Thereafter, the assessee filed appeal before Ld. CIT(A) who had passed the original appellate order on 18.01.2017 against which the assessee preferred an appeal before the Tribunal. Vide order dated 27.05.2019, Hon’ble co-ordinate Bench set-aside the assessment and directed the Ld. AO to pass a fresh assessment order. Thereafter, the case was again fixed for scrutiny and order u/s 143(3) r.w.s 254 r.w.s 144B of the Act was passed on 27.09.2021, making the following additions to the returned income:
(i) Disallowance out of power and fuel expenses- Rs. 71,59,544/-. (ii) Depreciation at proportionate basis @ 25.43% (iii) Expenses on insurance disallowed Rs. 5,22,404/- + Rs. 96,098/-,
Aggrieved, the assessee preferred an appeal before Ld. CIT(A). The appeal of the assessee was partly allowed. Further aggrieved, the assessee preferred an appeal before the Tribunal and the following grounds have been raised which are discussed as under:
4. Ground No. 1: Disallowance of power and fuel expenses : Rs. 71,59,544/- Brief facts related to this issue are that the assessee is the owner of a JHV Mall and Ramada Hotel wherein some of the shops are let out from which rental 3
ITA_5061_5062_5063_Mall Hotel Ltd Delhi income has been shown under the head ‘income from house property’ while in respect of the remaining shops, theatre and hotel business income has been declared. During the course of assessment, Ld. AO disallowed Rs. 71,59,544/- on account of power and fuel expenses on the rented portion of the property on proportionate basis. The assessee has explained that the power and fuel expenditure incurred on rented portion of the property is met out of the power charges received from the tenants amounting to Rs. 64,77,957/- which is treated as business income by the assessee, and, therefore, no disallowance is required to be made in this regard.
4.1 Ld. AR has filed before us a chart showing unit wise income and expenditure statement wherein it is seen that for the shops on rent in JHV Mall and Hotel power charges received from the tenants amount to Rs. 64,77,957/- as against the total expenditure claimed for the entire property i.e., 63,48,39,786/-. Accordingly, Ld. AR has argued that amount more than the expenditure incurred in respect of rented shops has been recovered from the respective tenants and duly reflected in the income and, therefore, no further addition on this account ought to have been made. It has further been pointed out by the Ld. AR that the issue is squarely covered by the order of Hon’ble Co-ordinate Bench in assessee’s own case for A.Y. 2009-10 wherein relief to the assessee on this ground has been allowed in view of the facts as well as after noting that the same issue was considered by the Ld. AO in the course of assessment proceedings for A.Y. 2018-19 and the disallowance was proposed to 4
ITA_5061_5062_5063_Mall Hotel Ltd Delhi be made vide draft assessment order dated 12.04.2021. However, the contention of the assessee was accepted while passing the regular assessment order u/s 143(3) dated 17.04.2021, copies of which have also been placed on record.
(i) On the other hand, Ld. DR has strongly relied on the orders of the lower authorities. (ii) We have heard the rival submissions and perused the material available on record. We note that the issue is a recurring one and relief has been allowed by the Hon’ble Co-ordinate Bench after noting that identical issue stand accepted during the assessment proceedings for A.Y. 2018-19 under similar facts and circumstances. The relevant portion of the order of the Hon’ble co-ordinate Bench is reproduced below: “6 We have heard the parties and perused the material available on record. The assessee has produced the challan along with TDS deducted and deposited in the paper book at Page No. 91 to 164, it is also found that the Ld. CIT(A) has not verified those documents on the contrary the Ld. CIT(A) erroneously observed that "the assessee has failed to furnish all the challans" without even verifying the challans produced by the assessee. Therefore, in the above facts and circumstances we deem it fit to restore the matter to the file of the A.O. for de-novo verification to verify all the challans and the details produced by the assessee and pass appropriate order in accordance with law. Ordered accordingly. Thus, the Ground No. 2 of the assessee is partly allowed for statistical purpose. 5
ITA_5061_5062_5063_Mall Hotel Ltd Delhi
The Ground No. 3 is regarding disallowance of Rs. 16,27,495/- being 10% of Rs. 1,62,74,947/- claimed as maintenance of JHV Mall which was disallowed by the A.O. and the same has been upheld by the CIT(A). The Ld. counsel for the assessee submitted that the CIT(A) has erred in sustaining the disallowance ignoring the fact that Rs. 10,61,415/- for building maintenance has been incurred during the year under consideration in the books of accounts of JHV mall and Multiplex, remaining Rs. 1,52,13,531/- related to Ramada Plaza Hotel, however, the repair and maintenance of building related to JHV Mall and Multiplex amount of Rs. 10,61,415/-has been incurred against the CAM charges received amounting to Rs.1,36,73,547/-. Thus, the disallowance of building repair treating the same against the rental income is highly unjustified. The Ld. Counsel also submitted that in the subsequent year i.e. Assessment Year 2018-19 the same issue arose for consideration before the A.O. and after hearing in detail, no such disallowance has been made by the Department. Therefore, submitted that the addition made in the present Assessment Year deserves to be deleted.”
In view of the facts and circumstances, expenditure by the Ld. AR as well as the decision of the co-ordinate Bench, we, hereby, delete the addition made on account of disallowance out of the power and fuel expenditure out of Rs. 71,59,544/.
(ii) Ground No. 2 : Disallowance out of completing repair expanses in respect of the JHV @ 25.04% in respect of Ramada Hotel @1.38% at total Rs. Rs. 1,71,25,129/- Brief facts are that the Ld. AO was sought to disallow proportionate expenses on the rented portion on the ground that while offering rental income, as income from 6
ITA_5061_5062_5063_Mall Hotel Ltd Delhi house property, the assessee had reduced the rental income from total income shown from business and profession. It had not reduced any expenses from total expenses. It was noted by the Ld. AO that all the rented shops are situated inside the mall and hotel and, therefore, we proposed to disallow the repair and maintenance expenses on building furniture and others on proportionate basis. Accordingly, disallowance of Rs. 43,54,920/- has been walked out of the total expenditure of Rs. 1,71,25,129/- @ 25.43%. Aggrieved, the asseesee preferred an appeal before Ld. CIT(A). However, Ld. CIT(A) partly allowed the assessee’s appeal in line with the A.Y. 2009-10.
(ii) Before us, Ld. AR has submitted that the assessee has already been covered in the assessee’s favour by the order of the Hon’ble co-ordinate Bench for A.Y. 2016- 17 whereby the disallowance made in respect of repairs and maintenance has been deleted. Further, Ld. AO has pointed out that the same issue came up for consideration in subsequent A.Y. 2018-19 whereby although the addition was proposed in draft assessment order finally after considering assessee’s explanation no addition has been made in the final assessment year order. Copies of which have been placed on record.
(iii) On the other hand, Ld. DR has placed reliance on the orders of the lower authorities.
(iv) We have heard the rival submissions and perused the material placed before us. We note that disallowance @ 25.43% was proposed to be made out of repair and maintenance charges for A.Y. 2012-13. This issue is also a recurring one and in A.Y. 2016-17, the same has been discussed and decided in favour of the assessee in ITA No. 2490/Del/2022. The relevant portion of the order is reproduced below:
ITA_5061_5062_5063_Mall Hotel Ltd Delhi
“8. The Ld. DR relied on the findings of the A.O. and the CIT(A) and submitted that the above grounds of Appeal of the assessee deserves to be dismissed.
We have heard both the parties and perused the material available on record. The assessee running hotel under the name and style of Ramada Plaza, JHV in the separate premises, apart from the hotel, the assessee having JHV Mall in which the assessee is running a Multiplex Theater, Food court and shops given on rent, the expenses claimed in P & L Account are business expenditure against business income of hotel business, theatre income, food court, Mirchi Restaurant etc. it is the case of the assessee that during the year the assessee earned rent from various shops of Rs.4,81,82,741/- and Rs. Common area 1,53,28,744/- as common area maintenance charges. maintenance charges is business income against various expenses for running and maintenance of Common facilities i.e., Housekeeping expenses, Repair & Maintenance Expenses, Mall Insurance, Security Expenses, Staff Salary (Mall Operation), electricity charges for common area etc not area given on rent, accordingly the same is part of business income and expenses over & above incurred by the assessee is allowable as business expenditure. It is further submitted that hotel JHV Ramada and JHV Mall both are running in separate premises.
The dispute before the A.O. regarding building repair and maintenance expenses against rental income. The assessee had provided details of building repair and maintenance unit wise and corresponding business income as under:-
ITA_5061_5062_5063_Mall Hotel Ltd Delhi JHV Mall & Particulars Multiplex Ramada Plaza (Hotel) Building Repair and maintenance 10,61,415/- 1,52,13,531/- Expense A. Revenue from Shop Rent. 4,33,71,916/ - 48,10,825/- B. Revenue from CAM Charges 1,36,73,547/- 16,55,197/- C. Revenue from Food court 47,19,642/- D. Revenue from Homemaker 5,69,38,597/- (Retail shop) 'E. Theater Income 6,03,55,160/- F. Sale of Food and Beverage 2,16,87,542/- 7,38,53,902/- G. Others Sales 44,88,729/- 60,40,406/- H. Hotel Room Sales 16,73,44,813/- 20,52,35,133/- 25,37,05,143/- 1. Total Revenue (A to H above)
From the above chart it depicts that only Rs. 10,61,415/- for building maintenance has been incurred during the year under consideration in the books of account of JHV Mall and multiplex and remaining Rs. 1.52,13,531/related to Ramada Plaza Hotel. It is the case of the assessee that the repair and maintenance of building related to JIIV Mall and Multiplex amounting to Rs. 10,61,415/ has been incurred against the CAM charges received amounting to Rs. 1,36,73,547/. Thus, the CIT(A) has committed an error in making proportionate disallowance of building repairs treating the same against the rental income. It is found that the similar issue has also arose for consideration before the A.O. for the Assessment Year 2018-19, in the draft assessment order placed in the paper book Page No. 85 to 88, the similar issue has been considered by the A.O. but in the final Assessment Order for the Assessment Year 2018-19 placed on paper book 89 to 90 no such disallowance has been made. Considering the above facts and circumstances, we find merit in the argument of the Ld. AR regarding Ground No. 3 and we deem it fit to allow the ground No.3. Accordingly, Ground No. 3 of the assessee is allowed and 9
ITA_5061_5062_5063_Mall Hotel Ltd Delhi the disallowance of Rs. 16,27,495/- made by the A.O. which was sustained by the CIT(A) is hereby deleted.”
Further, it has been demonstrated before us by the Ld. AR that the repair expenditure incurred on rented portion is met out of the maintenance charges received from the tenants and the same has been shown as business income by the assessee and duly accounted for in its books of accounts. Since the facts and circumstances in the present year are identical to the facts in A.Y. 2016-17, respectfully following the decision of the Hon’ble Co-ordinate Bench, we hereby delete the disallowance of Rs. 1,71,25,129/- made by the Ld. AO out of repair and maintenance expenses. (iii) Ground No. 3 & 4 are general in nature and, hence, need no separate adjudication.
In the result, the appeal of the assessee is allowed.
Since identical grounds have been taken in the remaining appeals i.e., A.Y. 2014-15, the above order shall apply mutatis mutandis to these appeals also.
In the result, all the three appeals of the assessee are allowed.
Order pronounced in the open court on 19th March, 2026.