2011 (4) TMI 1277 - AT - Income Tax

Denial of deduction of society charges - Income from house property - deductions claimed u/s 023 - the assessee submitted that he has paid society charges and non-occupancy charges as per clause 7 of Leave and Licence Agreement and same has been claimed as deduction while computing annual letting value. HELD THAT - We find the Mumbai Bench of the Tribunal in the case of Gopichand P. Godhwani 2004 (10) TMI 542 - ITAT MUMBAI , after considering the decision of the Hon ble Bombay High Court in the case of J.K. Investors 2000 (6) TMI 9 - BOMBAY High Court has held that for the purpose of determining annual value of the property all taxes, cesses and outgoings being liabilities of the assessee, have to be excluded from assessable income in view of s. 023(1)(b). So far as the decision of the Tribunal in the case of Barodawala Properties Ltd. 2001 (12) TMI 875 - ITAT MUMBAI is concerned, we find that the Tribunal in subsequent judgments have held that while calculating annual value of the let out property, maintenance charges paid to the society by the assessee is admissible deduction from the annual let out value u/s 023(1)(b). In view of the series of decisions relied on by the ld. counsel for the assessee supporting the deductibility of society charges from the gross rent for the purpose of determining the annual let out value u/s 23(1)(b), we hold that the assessee is entitled to deduction of society charges from the rent so received for the purpose of determining ALV u/s 023(1)(b). The ground raised by the assessee is accordingly allowed.

Summary

Issues:
Denial of deduction of society charges for A.Y. 2005-06 and 2006-07.

Analysis:
The appeals were filed against orders passed by the ld. CIT(A)-10, Mumbai for A.Yrs 2005-06 & 2006-07. The main grievance of the assessee was the denial of deduction of society charges amounting to Rs. 1,26,000/- for A.Y. 2005-06 and Rs. 1,32,000/- for A.Y. 2006-07. The AO disallowed the deduction, stating that only municipal taxes can be deducted for arriving at the annual value of the property. The AO rejected the concept of real income theory and recomputed the income from house property by disallowing the society charges deduction. The ld. CIT(A) upheld the AO's decision, relying on relevant case laws. However, the assessee contended that society charges are deductible for arriving at annual letting value and cited various decisions to support this argument.

The ITAT considered the submissions, orders of the AO and ld. CIT(A), and various decisions cited. The dispute centered on the allowability of deduction of society charges from rental income for calculating annual letting value u/s 23(1)(b). The ITAT referred to precedents like Varma Family Trust, Bombay Oil Industries, and Sharmila Tagore cases, which supported the deductibility of society charges. The ITAT distinguished the decisions relied on by the ld. CIT(A) and held that the assessee is entitled to the deduction of society charges from the rent received for determining the annual letting value u/s 23(1)(b). The ITAT allowed the ground raised by the assessee for both A.Y. 2005-06 and 2006-07, granting the deduction of society charges.

In conclusion, the ITAT allowed both appeals filed by the assessee, holding that society charges were deductible for determining the annual letting value. The ITAT's decision was based on the interpretation of relevant provisions and supported by precedents, ultimately granting the assessee the entitlement to the deduction of society charges for the respective assessment years.