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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI C.N. PRASAD & SHRI ASHWANI TANEJA
आदेश / O R D E R
PER C.N. PRASAD, JM: These two appeals are filed by the Revenue against the order of the Ld. CIT(A)-23, Mumbai dated 7.5.2014 & 8.5.2014 pertaining to assessment year 2009-10 arising out of the order passed u/s. 143(3) and penalty u/s. 271(1)(c) of the Act respectively.
ITA No. 5140/M/2014 2. At the very outset, the Ld. Counsel for the assessee submits that the issue in appeal is as to whether the society maintenance charges paid by the assessee in respect of let out properties should be allowed as deduction from ‘Income from House property’ or not and this issue has been decided by the Tribunal for the assessment year 2005-06 in assessee’s own case in dated 10.3.2010. He submits that following the order of the Co-ordinate Bench for the assessment year 2005-06, the Ld. CIT(A) partly allowed the appeal against which the Revenue is in appeal.
The Ld. AR placed reliance on the decision of the Tribunal as well as the order of the Ld. CIT(A).
The Ld. Departmental Representative supports the order of the Assessing Officer.
Heard the rival contentions, perused the orders of the lower authorities and the decision of the Co-ordinate Bench for the assessment year 2005-06. The issue has been considered by the Ld. CIT(A) following the decision of the Co-ordinate Bench for assessment year 2005-06 and held that the income clubbed by the assessee towards society service charges should be considered as part of rent and the society maintains charges incurred by the assessee should be allowed as deduction from such rental income observing as under:
“I have considered the facts of the case and the submissions made by the assessee. I find that the assessee has disclosed income of Rs.63,14,015/- on account of society charges recovered. As against this, the assessee has claimed expenses of Rs. 71,87,089/- on account of society charges paid. Prima facie, it appears that the society charge collected by the assessee is towards providing various services to the tenants. For providing these services, the assessee has incurred expenditure of Rs.71 ,87,089/ - which it has paid to Nariman Bhavan Society for providing the various services to the tenants of the assessee. Hence, prima facie, the expenditure of Rs.71,87,089/- has been incurred against the income earned on account of service charges. The A.O. has not doubted the genuineness of the expenditure. No doubt the income earned on account of society charges is less than the expenditure incurred. However, the assessee has explained that society charges have not been charged from some of the tenants separately but are part of the lease rent which has been disclosed as rental income and, hence, these have not been separately.
2.1.8. I find that in the A.Y.2005-06, the Hon'ble ITAT has held the society charges to be deductible against the rental income for arriving at the Annual Value of the property for determining the income of the assessee under the head 'Income from House Property'. The ld.CIT(A) has also, on identical facts, in her appellate order for the A.Yr.2008-09 in Appeal No.CIT(A)- 23/ ACIT.12(2)/IT-341/2010-11 dt.07/03/2012, deleted the disallowance, and consequent addition on account of society service charges of Rs.78, 18, 389/-. The assessee has in its submission dt.23/04/2014, submitted that the amount of service charges collected may be treated as part of annual value and deduction may be treated as part of annual value and deduction may be allowed as per order of !TAT for the A. Yr.2005- 06 and order of ld.CIT(A) for the A.Yr.2008-09.
2.1.9 I find that the Assessing Officer has observed in the assessment order that in the earlier years, this service charge was being showing as income from house property but this year, the assessee has claimed the same under 'Income from Other Sources'. The assessee has also not furnished any evidence before me to show that this service charge collected was not part of the agreement relating to the lease rent and was not part of the rent itself. The assesse e has also requested in its submission dt. 23.04.2014 that the amount of service charges collected may be treated as part of annual rent. I also find that in the A. Y.2005-06, the Hon'ble ITAT has also held that the expenditure on account of society maintenance charges is to be deducted for arriving at the Annual Value of the property. Hence, from the order of the Hon'ble ITAT in assesses's own case for A.Yr.2005-06, what would be evident is that the society maintenance charge has to be deducted from the rent received to arrive at the Annual Value of the property. Therefore, the society maintenance charge received will also have to be added to the rent received before allowing any deduction of society maintenance charges. Otherwise, the expenditure on account of society maintenance charges will have to be allowed as deduction against the income on account of society maintenance charges. Hence, for the reasons given hereinabove and following the order the Hon'ble Tribunal in assessee's own case for the A. Yr.2005-06, the society maintenance charge will be allowed as deduction in the arriving at the Annual Value of the property in question after considering the income on account of society maintenance charges as part of the rent. The impact of the same and the consequent income under the head 'Income from House Property' would be as follows: -
Rent Income as disclosed Rs.16,96,54,091/- Add: Society Charges Rs. 63,14,015/- . Rs.17,59,68,106/- Less: Property Tax Rs. 2,41,33,626/- Rs.15, 18,34,480/- Less: Society Charges Paid Rs. 71,87,089/-
Annual Value Rs. 14,46,47,391/- Less: Deduction u/s 24(a) @ 30% Rs. 4,33,94,217/- Income from House Property Rs.10, 12,53, 174/-
2.1.10 The ground of appeal filed by the assessee is decided as above and is partly allowed”
7. On reading of the Ld. CIT(A)’s appeal, we do not find any infirmity in holding that the society maintenance charges incurred by the assessee should be allowed as deduction in arriving at the annual value of the property after considering the income on account of society maintenance charges received by the assessee as part of the rent. Thus, we sustain the order of the Ld. CIT(A).
In the result, the appeal filed by the Revenue is dismissed.
Since the quantum appeal is allowed by us upholding the order of the Ld. CIT(A) to allow the society maintenance charges as deduction against the rental income, the question of disallowance does not arise and consequently no penalty is leviable u/s. 271(1)(c) of the Act. Thus we confirm the deletion of penalty by the Ld. CIT(A).
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 27th April, 2016.