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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-7, Pune dated 20.11.2018 emanating out of proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter also called as ‘the Act’) for the Assessment Year 2012-13. The assessee has raised the following grounds of appeal: “1.The Hon. CIT(A) erred in confirming the order passed us 143(3) of the Income Tax Act 1961.
2) The Hon.CIT(A) erred a) Confirming the reimbursement of society maintenance charges of Rs.7,24,114/- as Income from house property.
A.Y. 2012-13 Mangalam Technology Pvt. Ltd., Vs. ITO, Ward-14(1), Pune (A) b) In not accepting the terms and conditions of Leave and License agreement dated 02/09/2011 regarding the reimbursement of society maintenance charges as may be charged by the society. c) In not accepting the fact that reimbursement of society maintenance charges cannot be income from property as per section 22 to 28 of Income Tax Act 1961, and cannot be taxed as income under the head “INCOME FROM HOUSE PROPERTY” as per the provisions of Income Tax Act 1961. d) In taxing the reimbursement of society maintenance charges as Income from House Property even after accepting the facts that the amount is reimbursement of society maintenance and it is the responsibility of Licensor. e) In not appreciating the facts that society maintenance charges are for the services / facilities provided by the society to the members towards common security/safety, common area lighting, common lift services, common infrastructure facility like garden, open spaces, common parking etc. and nothing to do with the property owned by individual members of the society. f) In not appreciating the fact that society maintenance charges are payable by the members to society for services rendered/facility provided by society irrespective of the facts whether the premises leased out or not / whether members earn income from the unit he owns in the society or not. 3) In not appreciating the facts that all receipts / reimbursement of expenses to assessee are not income as per provisions of Income Tax Act. 1961.
4) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
.”
2. Brief facts of the case as emanating from the assessment order and CIT(A)’s order are reproduced hereunder: “6.1 The Appellant vide its submission dated 24.03.2015 submitted that it hadentered into a leave and license agreement dated 02.09.2011 with IBM Pvt. Ltd.for letting out the office premises No. 803 measuring 11922sqmt. of built up areaon the 8th floor of the building "Godrej Castlemaine", Sasson Road, Pune411001 for a period of 44 months starting from 01.05.2011 for initial monthlylicensee fee of Rs.10,28,273/-. As per the Clause No.6 of the agreement thelicensor had expressly agreed to pay society maintenance charges at actualwhich at the point of agreement were estimated at Rs.5.50 per sqft per monthon the built
A.Y. 2012-13 Mangalam Technology Pvt. Ltd., Vs. ITO, Ward-14(1), Pune (A) up area of the licensed premises. As a part of the agreement thelicensee has kept an interest free amount of Rs.98,35,650/- as way of securitydeposit with the licensor. It is claimed that the appellant had received theconsolidated payment of Rs.10,28,273/- each month from the licensee and theConsolidated payment is inclusive of reimbursement of Society Maintenancecharges. The Appellant also submitted the ledger extract of the Societymaintenance charges and the copy of the bills of society maintenance chargesraised every quarter. The Appellant claimed that the AO had overlooked thenature of payment of Rs.7,24,114/- paid toward maintenance charges and hadtreated the same as a part of the rent for the premises. 6.2 It is clear from the clause 6 of the Leave and License Agreement dated 02.09.2011, the society maintenance charges are the responsibility of thelicensor. The monthly license fee fixed at Rs.10,28,273/- which included all themaintenance charges payable for the premises. Since the payment ofmaintenance charges is not the responsibility of the licensee as per theagreement, the claim of the appellant that it is reimbursement of the expenses isnot acceptable. There is also no clause in the agreement that the licensee isliable to pay the extra amount if any, on increase of maintenance charges.Therefore, the addition made by the AO in view of the specific clauses in theagreement is sustainable. Further, the appellant is entitled to 30% of the annualrent as an expenditure which covers such maintenance and repair expenditure. In view of this, the ground No. 3 is dismissed.”
No one has appeared on behalf of the appellant-assessee. We heard ld. DR, perused the records.
The basic facts: The assessee has entered into a Leave and licence agreement on 02.09.2011 with IBM Pvt. Ltd. for letting out office premises No.803 for licence of Rs.10,28,273/- per month. There is interest-free deposit of Rs.98,35,650/-. In the computation of income, the assessee claimed Rs.7,24,114/- as deduction from A.Y. 2012-13 Mangalam Technology Pvt. Ltd., Vs. ITO, Ward-14(1), Pune (A)
‘Income from house property’. The assessee claimed that it is a reimbursement of society maintenance charges and hence, should be allowed as deduction while calculating income from house property. Section 24 of the Act provides for deduction from ‘Income from house property’. Section 24 is reproduced hereunder:
“24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:— (a) a sum equal to thirty per cent of the annual value; (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital: ……”
On perusal of section 24, it is very much clear that no deduction is allowed for society maintenance charges. The assessee has received consolidated amount of Rs.10,28,273/- as licence fees per month. It means, the assessee has received rent of Rs.10,28,273/- per month. Therefore, while calculating income from house property, the assessee will be eligible only for deduction as mentioned in section 24 of the Act. There is no separate deduction allowed for society maintenance charges as per section 24 of the Act. Section 24 of the Act allows deduction of 30% of the annual value which includes everything like society maintenance charges etc. No other deduction is allowed u/s 24 of the Act for society maintenance
A.Y. 2012-13 Mangalam Technology Pvt. Ltd., Vs. ITO, Ward-14(1), Pune (A) charges. Therefore, the claim made by the assessee is not maintainable as per law. Hence, we agree with the findings of Ld.CIT(A) and Assessing Officer that the assessee is not eligible for any deduction of Rs.7,24,114/- claimed as society maintenance charges. Accordingly, assessee’s ground of appeal No.2 is dismissed.
Ground of appeal No.3 – In ground of appeal No.3, the assessee has claimed that these are reimbursement of expenses. Therefore, the assessee claimed that reimbursement of expenses is not an income. However, as mentioned in earlier para, the assessee is in receipt of monthly rent of Rs.10,28,273/- as per Leave and licence agreement. The said Leave and licence agreement has not given any break up of Rs.10,28,273/-. It means, it is a consolidated rent. The said agreement does not mention anything about reimbursement. Therefore, this assessee’s claim of reimbursement is not based on facts. Hence, the Assessing Officer was right in calculating income from house property taking total monthly rent of Rs.10,28,273/- for calculating annual lettable value. Accordingly, ground of appeal No.3 of the assessee is dismissed.
A.Y. 2012-13 Mangalam Technology Pvt. Ltd., Vs. ITO, Ward-14(1), Pune (A)
The grounds of appeal No.1 and 4 are general in nature and therefore, does not require any adjudication. Hence, grounds of appeal No.1 and 4 are dismissed.
In the result, the assessee’s appeal is dismissed.
Order pronounced in the open Court on 11th August, 2022.