M/S CIMSYS RESEARCH (I) PVT. LTD.,KOLKATA vs. ITO, WD-11(4), KOLKATA, KOLKATA

The assessee in the present case is a company. A piece of land belonging to the West Bengal Electronics Industries Development Corporation Ltd. (WBEIDC) was taken by it on lease. On the said land, a building was constructed by the assessee company and the same was let out to MNCs and other companies. Since this letting out was not permitted as per the terms of the lease deed, a permission was sought by the assessee from WBEIDC for the same. Although the permission as sought by the assessee company was given by WBEIDC, it was subject to a sum of rs.2/- per sq.ft. to be charged by the assessee company from the tenants, which was to be paid to WBEIDC. During the year under consideration, the assessee company collected a total rent of Rs.1,06,28,435/-, which was inclusive of an amount of Rs.6,24,376/- 2 M/s. Cimsys Research (I) Pvt.Ltd. Assessment Year: 2010-11 received from the tenants towards charges to be paid to WBEIDC. In the return of income filed for the year under consideration, while computing the income from house property, the said amount of Rs.6,24,376/- was reduced by the assessee to determine the annual value of the property under section 23(1)(b) of the Act. According to AO, the only deduction permissible under section 23(1)(b), while determining the annual value of the property, was payment made towards taxes levied by any local authority. He, therefore, disallowed the deduction claimed by the assessee under section 23(1)(b) on account of “permission fees” of Rs.6,24,376/- paid to WBEIDC.

The disallowance made by the AO on account of permission fees was challenged by the assessee in the appeal filed before the ld. CIT(A). Although it was brought to the notice of the ld. CIT(A) by the assessee during the course of appellate proceedings that a similar issue was decided by his predecessor in favour of the assessee in earlier years, the ld. CIT(A) noted that the appeal filed by the department against the order of his predecessor in assessee’s own case for the A.Y.2004-05 was pending before the Tribunal. He further noted that the deduction permissible under section 23(1)(d) was very limited and the permission fees paid by the assessee to WBEIDC was not falling within the limited scope of section 23(1)(b). He, therefore, upheld the action of the AO in disallowing the claim of the assessee for deduction on account of permission fees under section 23(1)(b). Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and perused the relevant records. At the time of hearing, the ld. Counsel for the assessee has placed on record before me the copies of the orders of the ld. 3 M/s. Cimsys Research (I) Pvt.Ltd. Assessment Year: 2010-11 CIT(A) passed in assessee’s own case for A.Y. 2004-05 to A.Y. 2007- 08 allowing the claim of the assessee for deduction on account of permission fees under section 23(1)(b). He has also placed on record a copy of the order of the Tribunal dated 21.05.2013 passed in ITA No.576/Kol/2012 dismissing the appeal of the Revenue for A.Y. 2004- 05, although on a technical ground of low tax effect. It is thus clear that a similar deduction claimed by the assessee on account of permission fees under section 23(1)(b) has been allowed in the earlier years i.e. from A.Y. 2004-05 and 2007-08 and the matter has reached its finality. Keeping in view this position borne out from the record and following the principles of consistency, I hold that the similar deduction claimed by the assessee for permission fees for the year under consideration deserves to be allowed. I accordingly set aside the impugned order of the ld. CIT(A) on this issue and direct the AO to allow deduction on account of the permission fees.