STERLING & WILSON PROPERTY DEVELOPERS P.LTD,MUMBAI vs. ITO 1(3)(2), MUMBAI

The aforesaid appeal by assessee for Assessment Year [AY] 2006-07 is directed against the order of Commissioner of Income Tax (Appeals)- 3 [CIT(A)], Mumbai dated 19/01/2015 on the following grounds of appeal:-

The learned Commissioner of Income Tax (Appeals) erred in holding that an amount of Rs 7,70,986/- being stamp duty actually paid during the year was not allowable, as no claim had been raised in the Return of Income.

The appellant submits that the learned Commissioner of Income Tax (Appeals) failed to consider that the claim for the deduction to be allowed in the current year was only an alternative claim to the appellant’s primary submission that the same be allowed in Assessment Year 2005-06.

The learned Commissioner of Income Tax (Appeals) failed to consider the provisions of section 43B, while confirming the above mentioned disallowance of Rs. 7,70,986/-.

Facts qua the dispute are that the assessee is a Private Limited Company who filed its Return of Income for impugned AY declaring loss of Rs.26,22,364/-. The assessee is engaged in the business of Property Developers / Civil Engineers. The case was taken up for scrutiny assessment u/s. 143(3) wherein loss was determined at Rs.23,38,264/- vide Assessing Officer [AO] order dated 26/12/2008. The assessee has credited ‘leave and license fees’ [in short ‘lease income’] of Rs.5,50,433/- to Profit & Loss Account but offered only an amount of Rs.3,00,000/- on the premises that balance amount of Rs.250,433/- was already offered to tax on ‘receipt basis’ in earlier years. Qua this income, assessee claimed maintenance charges of Rs.3,74,100/-. AO relying upon various judicial pronouncements treated the same as assessable under the head ‘Income from House Property’ against which assessee was eligible for statutory deduction of 30% only under Section 24. The assessee agitated the matter before CIT(A) which was partly allowed vide order dated 19/01/2015. The assessee Sterling & Wilson Property Developers P. Ltd. Assessment Year 2006-2007 contended that maintenance charges are admissible as deduction. CIT(A) noted that these charges pertained to four properties as per details given below: Flat No. Amount(Rs.) 704 0 (since recovered from tenant) 1101 1,22,956 1102 46,000 1202 1,22,956 Godown 82,188 Total 3,74,100 CIT(A) concluded that since the assessee offered lease income of Rs.3.00 Lacs against Flat No. 1101 only during the year in question, he was entitled for deduction of Rs.1,22,956/- only. Accordingly, he partly allowed the claim of the assessee. Similar proportionate relief was provided from Municipal Taxes totaling Rs.1,23,000/-. Another ground agitated by assessee was with respect to stamp duty expenditure of Rs.7,70,986/- debited to Profit & Loss Account in AY 2005-2006 but being remaining ‘un-accrued’ and unpaid, hence not allowed in AY 2005-06 as per provisions of Section 43B. The same, since been incurred and paid, was claimed before CIT(A) but dismissed by CIT(A) on the ground that no such directions for allowability were given by predecessor CIT(A) in order for AY 2005-2006. Aggrieved, the assessee is in appeal before us.

Ground No. 1 to 3 pertains to claim of the assessee with respect to maintenance charges against lease income. The assessee has not contested the assessability of lease income under the head ‘Income from House property’ and hence, the only dispute is with respect to allowability of impugned charges/taxes from lease income which has been disallowed by revenue primarily on the ground that the assessee has offered income only against one property. First of all, to delve into the matter properly, we find that the assessee has debited a sum of Rs.3,74,100/- in Profit & Loss Account under the head ‘Sterling Seaface Maintenance Charges’, the break-up of which is as follows:-