2004 (10) TMI 542 - AT - Income Tax

Determination of house property income u/s 23(1)(a) and 23(1)(b) - Disallowance of car parking charges, water charges, municipal and other charges paid by the Bank - rent agreement entered into between the assessee and Bank of India - HELD THAT - It is not disputed by revenue that only section 23(1)( b ) is applicable to the present case as it is also not the case of Assessing Officer as he has computed the house property income as per actual rent received. In this view of the situation, if the outgoings in respect of which additions have been deleted by CIT(A) were the liability of the assessee, the same should be excluded from the assessable income as the net amount only can be considered which is received by the assessee or is receivable by the assessee as per express provisions of section 23(1)( b ). However, this fact has not been ascertained that whether the amounts claimed by the assessee and disallowed by the Assessing Officer in respect of car-parking, water charges and municipal charges and other charges were the actual liability of the assessee or not. This factual aspect has to be examined as per the terms of agreement as well as keeping in view the factual aspect of the matter. We, therefore, consider it necessary to restore these appeals as well as Cross Objections to the file of Assessing Officer to determine the fact that whether expenses claimed by the assessee on account of car parking, water charges, municipal charges and other charges were the liability of the assessee and were outgoings from the assessee s rental income shown in respect of the property. If it is so, the same are rightly allowed by the CIT(A) as the assessee is entitled to get the same. The Assessing Officer will determine the house property income of the assessee in accordance with the above directions. We may point out here that the learned A.R. of the assessee also accepted that for the purpose of examining this factual aspect, the matter may be restored to the Assessing Officer. We order accordingly. The appeals filed by the revenue and Cross Objections filed by the assessee are considered allowed for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer.
2. Determination of Annual Letting Value (ALV) and allowable deductions u/s 23 and 24.
3. Applicability of precedents followed by CIT(A).

Summary:

Issue 1: Deletion of Addition Made by the Assessing Officer
The revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 4,19,068 made by the Assessing Officer for the assessment year 1997-98 and Rs. 4,13,660 for the assessment year 1998-99. The CIT(A) had deleted these additions, leading to the revenue's grievance.

Issue 2: Determination of Annual Letting Value (ALV) and Allowable Deductions u/s 23 and 24
The Assessing Officer computed the income from house property by deducting only municipal taxes from the rent received, disallowing other expenses such as maintenance charges and lease rent. The CIT(A) disagreed, allowing these expenses. The revenue contended that the CIT(A) failed to appreciate that only specified deductions u/s 24 are permissible. The assessee argued that the actual rent received exceeded the fair rent or standard rent under rent control legislation, thus invoking section 23(1)(b). The tribunal noted that if the actual rent received is more than the fair rent, the income should be determined u/s 23(1)(b). However, it was not ascertained whether the disallowed expenses were the actual liability of the assessee. The tribunal restored the matter to the Assessing Officer to determine if the expenses were indeed the assessee's liability and to compute the house property income accordingly.

Issue 3: Applicability of Precedents Followed by CIT(A)
The revenue argued that the decisions followed by the CIT(A) were distinguishable on facts and not applicable to the instant case. The tribunal did not delve deeply into this issue, focusing instead on the need to ascertain the factual liability of the expenses claimed by the assessee.

Conclusion:
The tribunal restored the appeals and cross objections to the file of the Assessing Officer to determine whether the expenses claimed by the assessee were the actual liability and to compute the house property income in accordance with the directions provided. The appeals filed by the revenue and the cross objections filed by the assessee were allowed for statistical purposes.