SULAKSHANA SECURITIES LTD,MUMBAI vs. ITO 1(3)(2), MUMBAI

The dispute in the present appeal is confined to part disallowance of expenditure claimed by the assessee.

Brief facts are, the assessee company filed its return of income on 17th November 2006, declaring loss of ` 3,63,414. In course of the 2 Sulakshana Securities Ltd. original assessment proceedings, the Assessing Officer while verifying the return of income filed by the assessee noticed that the assessee has offered rental income of ` 13,28,434, as income from house property, whereas, air conditioning charges and other charges of ` 1,84,239, was shown as income from other sources. Further, he found that the assessee had claimed deduction of ` 21,91,176, towards property maintenance expenses. While completing assessment under section 143(3) of the Income Tax Act, 1961 (for short “the Act”) the Assessing Officer treated air conditioning charges and other charges of ` 12,84,239, as income from house property and allowed the statutory deduction under section 24 of the Act. However, he disallowed the property maintenance expenditure of ` 21,91,176. Being aggrieved with the assessment order so passed, the assessee preferred appeal before the learned Commissioner (Appeals) and thereafter before the Tribunal. The Tribunal while disposing off the appeal vide order passed in ITA no.7271/Mum./2011, dated 11th April 2014, restored the issue to the Assessing Officer to consider assessee’s claim of deduction under section 57 of the Act. In the assessment proceedings, in pursuance to the directions of the Tribunal, the Assessing Officer again called for necessary details from the assessee and also called upon the assessee to justify its claim of expenditure. After considering the submissions of the assessee and taking note of the decisions of the Tribunal in assessee’s own case in earlier assessment years, the 3 Sulakshana Securities Ltd. Assessing Officer accepted assessee’s claim that the income received on account of air condition and other charges are to be treated as income from other sources. However, as regards assessee’s claim of expenditure of ` 21,91,176, the Assessing Officer was of the view that such expenditure has to be restricted to the income shown by the assessee under the head income from other sources. Accordingly, he allowed expenditure to the tune of ` 12,84,239. Being aggrieved of the part disallowance of expenditure claimed, the assessee preferred appeal before the first appellate authority.

The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record observed that while the assessee has shown income of air conditioning and other facilities provided to the tenant as income from other sources, it has claimed expenses towards water, electricity, fire fighting equipments, maintenance, etc. Thus, he held that the expenditures which are not connected or related to air conditioning and other facilities provided to the tenant are not allowable. Accordingly, he upheld the disallowance made by the Assessing Officer.

The learned Authorised Representative submitted that the expenditure claimed by the assessee is directly related to the income earned from air conditioning and other facilities provided to the tenant.

The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer.

I have considered rival submissions and perused materials on record. As could be seen, this is the second round of litigation before the Tribunal. In the first round, the head of income relating to air conditioning and other charges was not only in dispute, but the allowability of expenditure claimed against such income was also in dispute between the parties. As regards the head of income, as per the 5 Sulakshana Securities Ltd. factual position emerging from record, it is clear that the Department has accepted assessee’s claim of air condition and other charges to be assessable under the head income from other sources. The dispute is only with regard to the quantum of expenditure allowable to the assessee. While the Assessing Officer has disallowed part of the expenditure claimed by the assessee on the reasoning that it cannot exceed the income earned by the assessee, the learned Commissioner (Appeals) has held that some of the expenditures are not relatable to the air conditioning facilities. On a perusal of the assessment order, it is seen that the expenditure of ` 21,91,176 was claimed by the assessee towards air conditioning and other expenses, lift facilities, common securities, fire fighting system, water charges, electricity and other personal cost. Notably, in assessment year 2003–04, against income of ` 62,25,957 towards air conditioning and other charges, the assessee had claimed property maintenance expenses of ` 82,54,091. While examining the allowability of the aforesaid expenditure claimed by the assessee, in pursuance to the directions of the Tribunal, the Assessing Officer having found such expenditure to be directly relatable to the income earned from air conditioning and other charges has allowed them fully. This is evident from the copy of the assessment order passed for A.Y. 2003–04 as submitted in the paper book. On a perusal of the details of expenditure claimed in the impugned assessment year as well as in assessment year 2003–04, I

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 05.10.2018