|CORAM:||Sandeep Gosain (JM), Shamim Yahya (AM)|
|CATCH WORDS:||ALV, annual value, Income from house property, Maintenance charges, non-occupancy charges|
|COUNSEL:||Dr. K. Shivram|
|DATE:||November 1, 2017 (Date of pronouncement)|
|DATE:||December 29, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 23 House Property Income: Common Area Maintenance Charges and non-occupancy charges paid by the assessee to the Society are deductible from the rent while computing the 'Annual Letting Value' u/s 22|
The Tribunal had to consider the following grounds of appeal in an appeal filed by the Department:
1. “On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to allow the claim of deduction of Common Area Maintenance Charges of Rs. 11,36,069/-, while computing the Annual Letting Value ignoring the fact that the said expenses are not allowable u/s 23 while computing the Annual Letting Value.
2. “On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to allow the claim of deduction of Common Area Maintenance Charges of Rs. 11,36,069/- , while computing the Annual Letting Value ignoring the fact that the computation of house property is governed by self contained code and no other expenditure other than what is specified u/s 23 is allowable while computing the Annual Letting Value.
3. “On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to allow the claim of deduction of Common Area Maintenance Charges of Rs. 11,36,069/-, while computing the Annual Letting Value ignoring the fact that the assessee himself had disallowed the proportionate expense and treated the same as income in Asst. Year 2011 —2012 and offered the same for taxation.
4. On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to treat the amount of Rs. 81,59,061/- received from K Raheja Universal Construction Pvt. Ltd., as capital receipt and exempt it from tax, ignoring the fact that the amount of Rs. 81,59,061/- was compensation received by the assessee towards loss of rental income, which is a revenue receipt.
5. On the facts and in the circumstances of the case and in law, the Ld. C.I.T. (A) erred in directing the Assessing Officer to treat the amount of Rs. 81,59,061/- as capital receipt relying on the judgment of CIT V/s. Abhasbhoy V Dehgamwali, the facts of which are distinguishable from the facts of the present case.
The CIT(A) allowed the claim on the following basis:
“Deduction of Cam Charges and other charges from house øroperty income.
a The Appellant has let out two properties. As far as agreement is concerned with MSCI services Pvt. Ltd, the license fee is inclusive of CAM (including Municipal Taxes) charges. In other words, CAM charges is payable by the Appellant.
b. In the return, the Appellant has claimed CAM charges alongwith municipal taxes as deduction from the rent for computing the annual value of the premises let out.
C. The basis of Annual letting value is to be computed on the basis of rent received or receivable u/s 23(1)(b). The. Muncipal Taxes and other common maintenance charges which are to be borne by the owner out of such rent, the ALV is to be computed after deducting such CAM charges from the rent received or receivable by the owner.
d. The expenses where incurred to let out the property without which the rent would not have been received and hence same should be allowed.
e. In fact the expenses are nothing but reimbursement of the expenses incurred on behalf of the tenants of the building.
f. In the recent decision of Hon’ble Delhi High court in the case of CIT Vrs. R.J. Woods P. Ltd 334 ITR 358, it has been held that the maintenance & other charges are deductible from rent while calculating the Annual Letting value of the property.
g. The Ahemdabad Tribunal in case of J.B. Patel & Co. (Co-owners) Vs DCIT (2009) 118 ITD 556 (Ahd) para 5.2 held that
“What s. 22 attempts to assess is the annual value of the property consisting of any building or land appurtenant thereto, of which the appellant is the owner,, and which has not been put to use for the purposes of its business or profession by it. The rent being charged by the appellant, if so, is only a surrogate measure of the said annual value. The expenditure on the aforesaid items, i.e., the salary (including bonus) to the maintenance staff of the facilities as electric motors, lift, caning, etc., as well as that on the electricity consumed in respect of any common area and the electric motors, is not attributable directly to the house property as such, but to its enjoyment by the tenants/users thereof. In a given case it may well be that the said expenditure is incurred, by the tenant or tenants (collectively), with the landlord having no locus standi or role therein, so that who incurs the same in the first instance, is only a matter of mutual arrangement or convenience and, thus, of no consequence where the bona fides thereof are, as in the present case, not in doubt. The rent being charged by the appellant, which represents the measure of its annual value, would, being only decided under the said arrangement, in such a case, stand correspondingly reduced. As such, though the appellant, being entitled only to the deductions in respect the said expenditure in the computation of the income under the.said head’ of income only in terms of its provisions, would not be entitled to the impugned deductions, the annual value of its house property be assumed at the reduced’ value, i.e., after deducting the impugned amounts (from the rental), being only in relation to the expenditure required to be necessarily incurred for the enjoyment/user of the relevant property and, therefore, can only be considered as having been included – at the said amount, i.e., at cost, by the two parties in the reckoning/determining of the same (rental).”
h. The Mumbai Tribunal in case of Realty Finance & Leasing (P.) Ltd. vs. ITO (2006) 5 SOT 348 (Mum) held that society charges paid by appellant in respect of its let out properties are allowable while computing annual value. This was followed in case of ITO vs. Farouk D. Vevaina (2009) 121 Ui 510 (Mum).
i. The Gauhati Tribunal in case of ITO vs. Vijay Kumar Bawari 19 1TJ 562 (Gau) held that where electricity charges payable by the tenants are borne by the landlord by an agreement, such charges will have to be reduced from the actual rent received or receivable.
j. The Delhi Tribunal in case of Neelam Cable Manufacturing Co. vs. CIT (1997) 63 lTD 1 (Del) held that security service charges borne by the owner of the property should be deducted to arrive at the ALV to be determined with rexe to actual rent.
k. The Mumbai Tribunal in case of Sharmila Tagore vs. JCIT (2005) 93 UJ 483 (Mum) held that maintenance charges and non-occupancy charges paid to the society is to be deducted from the rent received by the Appellant.
L. The appellant therefore submits that the expenses may be deducted while computing the net annual rental, income under section 22.”
2.3. I have carefully considered the submissions made by the appellant and the impugned assessment order on this issue. I find force in the arguments “of the appellant. The ITAT Mumbai Bench ‘D’ in the case of Sharmila Tagore vs. JCIT relied on by the appellant supports the case of the appellant in which it was held that held that maintenance charges and non-occupancy charges paid to the society is to be deducted from the rent received by the Appellant. In view of the above, this ground of appeal is allowed.
HELD by the Tribunal dismissing the appeal:
After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and hearing the parties at length, we find that Ld. CIT(A) while deciding these grounds have taken into consideration the facts of the present case as well as judgments passed by the Coordinate Bench of Hon’ble ITAT in the case of Sharmila Tagore Vs. JCIT wherein it has been held that the maintenance charges and non-occupancy charges paid to the society is to be deducted from the rent received by the assessee. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the revenue stands dismissed.