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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI KULDIP SINGH & SHRI PRASHANT MAHARISHI
ASSESSEE BY : Shri D.K. Agarwal, CA REVENUE BY : Shri S.K. Jain, Senior DR Date of Hearing : 09.01.2017 Date of Order : 16.01.2017
O R D E R
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, Assistant Commission of Income-tax, Circle 22 (1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal sought to set aside the impugned order dated 29.01.2014, passed by the Commissioner of Income-tax (Appeals)-XXIII, New Delhi under section 143(3) of the Income- tax Act, 1961 (for short ‘the Act’) qua the assessment year 2010-11 on the grounds inter alia that :-
“Whether n the facts and in the circumstances of the case, Ld. CIT (A) was right in deleting the addition of Rs.47,84,215/- which was claimed by assessee as annual charges but was eleven times higher than normal charges and was treated as capital in nature by the A.O.
On the facts and on the circumstances of the case the impugned order passed by Ld. CIT (A) is perverse both in facts and law.
The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal.”
2. Briefly stated facts of this case are : assessee’s return of income declaring income of Rs.22,57,050/- for Assessment Year 2010-11 was put to scrutiny. Assessing Officer during assessment proceedings noticed that the assessee had paid Rs.47,84,215 to New Okhla Industrial Development Authority (NOIDA) and claimed the same as deduction under section 23 of the Act against the total rental income of Rs.79,82,200/-. Assessee was called upon to file rent agreement and proof of house tax assessment which the assessee filed. Assessee had paid lease rent for AY 2009-10 on 01.06.2009 to the tune of Rs.41,88,000/- under the head ‘one time lease rent’ paid to NOIDA Authority. AO further show-caused the assessee to explain as to why the payment of Rs.47,84,215/- be not disallowed as these were not on account of payment of house-tax but for lease rent for AY 2009-10 and another payment of Rs.41,88,000/- for one time payment of lease rent. Assessee took the plea that these payments are in the nature of municipal tax levied by NOIDA Authority and Rs.41,88,000/- was on account of one time payment of lease rent and submitted that the entire amount of Rs.47,84,215/- is allowable deduction u/s 23 of the Act. However, the AO rejected the claim of the assessee by disallowing the claim of Rs.47,84,215/- out of rental income.
Assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has allowed the assessee’s appeal. Feeling aggrieved, the revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
AO has primarily disallowed the claim of the assessee for the reason that lease rent / one time lease rent is not in the nature of taxes levied by any local authorities and as such not deductible in view of the provisions of section 23 of the Act. Ld. AO is also of the view that in the land deals, payment of ‘one time lease rent’ amounts to getting the property freehold which are not taxes levied within the meaning of section 23 of the Act.
From the pleadings of the parties, grounds raised and order passed by the lower authorities, the sole question arises for determination in this case is :-
“as to whether the assessee is entitled for deduction to the tune of Rs.47,84,215/- claimed as taxes paid out of the rental income u/s 23 of the Act?”
Undisputedly, the assessee has made total payment of Rs.1,66,96,220/- to the NOIDA Authority, which was qua premium plus interest paid by the assessee for obtaining 99 years lease of the plot to be treated as cost of the plot and second part of the payment was on account of annual lease rent which was paid at 2.5% of the premium which was actually in the nature of maintenance charges.
Assessee opted for a scheme floated by NOIDA Authority for making one time payment of annual lease rent @ 11 times the annual charges with the benefit that no further payment was to be made as annual lease rent. So, in total, the assessee paid an amount of Rs.47,84,215/- during the year under assessment and claimed the deduction against the rental income for the year.
We are of the considered view that the payment made by the assessee cannot be treated as capital in nature in any manner as has been held by the AO, rather it was an annual payment in the nature of maintenance charges which the assessee had paid at the higher rate of 11 times than the normal rate in order to avoid any annual payment thereafter. It is also not in dispute that in the next years, no such deductions have been claimed by the assessee. So, when the assessee has paid the amount by availing of the option of making one time payment @ 11 times higher than the normal rate, it cannot be treated as capital expenditure by any stretch of imagination rather it is the maintenance charges. So, we are of the considered view that the assessee is entitled for deduction of amount of Rs.47,84,215/- u/s 23 of the Act. So, finding no illegality or perversity in the order passed by ld. CIT (A), the Revenue’s appeal is hereby dismissed. Order pronounced in open court on this 16th day of January, 2017.