MANISHA AJAY SHAH,MUMBAI vs. ITO 24(2)(4), MUMBAI

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ITA 5785/MUM/2012Status: DisposedITAT Mumbai09 December 2015AY 2008-093 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal held that maintenance charges are allowable deductions against rental income, following previous case laws. Regarding the interest deduction, the tribunal found that interest expenditure is allowable against interest income if incurred for earning it and restored the issue to the AO for fresh adjudication.

What were the facts?

The assessee claimed deductions for maintenance charges against rental income from two office premises. The Assessing Officer disallowed these deductions, and the CIT(A) confirmed the disallowance. The assessee also claimed a deduction for interest paid against house property income, which was disallowed by the AO due to lack of evidence of fund utilization for property acquisition.

What were the issues?

Whether maintenance charges are deductible expenses against rental income. Whether interest paid on borrowed funds is deductible against house property income when the funds were not directly used for property acquisition.

Which sections of the Income-tax Act were involved?

Section 23,Section 24

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “B”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM

Hearing: 10/09/2015Pronounced: 09/12/2015

O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the revenue against the order of CIT(A), for the assessment year 2008-2009, in the matter of order passed u/s.143(3) of the I.T. Act.

2.

First grievance of the assessee relates to disallowance claimed for deduction of expenses at Rs.1,752/- against rental income. Similarly in ground 2, assessee raised objection against the order of Assessing Officer disallowing a claim for deduction of expenses at Rs.1,69,559/- against rental income of Palm Spring Office Premises.

3.

Rival contentions have been heard and record perused. During the year, Assessee had offered rental income in respect of Sukh Sagar Office 2 (Assessment year 2008-2009) Premises and Palm Spring Office Premises. However, the Assessing Officer declined the assessee’s claim of deduction in respect of maintenance charges paid to society. By impugned order CIT(A) confirmed the Assessing Officer’s action against which, assessee is in further appeal before us.

4.

We have considered the rival contentions and found that issue of deduction on account of local taxes, society charges, while computing income from house property have been considered and allowed in favour of assessee in the following case laws: - i. Sharmila Tagore v/s Jt. CIT (2005) 93 TTJ (Mumbai) 483 ii. Realty Finance & Leasing (P) Ltd. v/s ITO (2006) 5 SOT 348 (Mum) iii. J.B. Patel & Co. v/s. Dy. CIT 118 ITD 556 (Ahd.) 5. Expenses claimed by the assessee pertains to society maintenance charges which are covered by the orders of the above benches. Respectfully, following the same, we direct the AO to allow the same while computing Income from house property.

6.

Next grievance relates to disallowance of Rs.4,11,473/- by way of interest claimed as a deduction against income under the head income from house property. The Assessing Officer was of the view that the assessee had not taken any specific loan for the purpose of acquisition of the property though the assessee had taken loans but there were no evidence to show that borrowed funds have been utilized to acquire the above property. Since the onus has not been discharged, the Assessing 3 (Assessment year 2008-2009) Officer did not allow the deduction of interest payment while computing the income under the head house property.

7.

We have considered the rival contentions and found that while computing the income from house property Assessee claimed deduction of interest on funds borrowed. The Assessing Officer found that the funds were not utilized for acquiring the house; therefore, deduction of interest was not allowed from house property income. However, we found that interest was actually paid and assessee also earned interest income. Therefore, interest expenditure is allowable against interest income so earned if it is found that interest expenditure was incurred for earning interest income. In the interest of justice, we restore back this issue to the file of the Assessing Officer for deciding afresh as per law.

8.

As a result, appeal of the assessee is allowed in part. Order pronounced in the open court on this 09/12/2015.

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