2012 (2) TMI 532 - AT - Income Tax

Deduction of maintenance charges for the purpose of computing net annual value u/s.23 - CIT (A) held that maintenance charges are eligible for deduction within the limit of 30% u/s.24 - Held that - ITAT, Mumbai in the case of Sharmila Tagore (2004 (6) TMI 591 - ITAT MUMBAI) in the said case it is held that the maintenance charges paid by the assessee have to be deducted even determining the annual value of the property u/s.23. We, accordingly, following the decision of the co-ordinate Bench allow the grounds taken by the assessee and direct the A.O. to re-compute the income under the head income from house property . Assessee s appeal is allowed.

Summary

Issues:
Challenge to order of Ld. CIT (A)-29, Mumbai for A.Y. 2006-07 regarding deduction of maintenance charges for computing net annual value u/s.23 of the Income-tax Act, 1961 and eligibility of maintenance charges for deduction within the limit of 30% u/s.24.

Issue 1: Deduction of Maintenance Charges for Computing Net Annual Value (NAV) u/s.23:
The appellant challenged the order of Ld. CIT (A)-29, Mumbai dated 29.04.2010 for A.Y. 2006-07, arguing that maintenance charges should be allowed as a deduction for computing the net annual value u/s.23 of the Income-tax Act, 1961. The appellant contended that the maintenance charges, claimed to have been paid to the society, were for NOC charges and maintenance over and above municipal taxes, making them deductible. Both the Assessing Officer (A.O.) and Ld. CIT (A) rejected the appellant's claim. The appellant relied on the decision of the ITAT in the case of Sharmila Tagore vs. JCIT 93 TTJ 483 and ITO vs. Gopichand P. Godwani 1 SOT 374 (Mum) to support their argument. The ITAT, Mumbai, following the precedent set in the case of Sharmila Tagore, held that maintenance charges paid by the assessee should be deducted when determining the annual value of the property u/s.23. Consequently, the ITAT allowed the appellant's appeal and directed the A.O. to re-compute the income under the head 'income from house property.'

Issue 2: Eligibility of Maintenance Charges for Deduction within the Limit of 30% u/s.24:
The appellant also contested the decision of Ld. CIT (A) regarding the eligibility of maintenance charges for deduction within the limit of 30% u/s.24 of the Income-tax Act, 1961. The appellant argued that the maintenance charges should be fully deductible and not subject to the 30% limit. The ITAT's decision in favor of allowing the deduction of maintenance charges for computing the net annual value u/s.23 also indirectly addressed this issue, as it implied that the maintenance charges should be fully deductible without being restricted to the 30% limit under u/s.24. The ITAT's ruling in favor of the appellant's claim effectively resolved this issue in the appellant's favor, as the maintenance charges were allowed as a deduction without reference to the 30% limit under u/s.24.

In conclusion, the ITAT Mumbai, comprising SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, and SHRI R.S. PADVEKAR, JUDICIAL MEMBER, allowed the appellant's appeal challenging the order of Ld. CIT (A)-29, Mumbai for A.Y. 2006-07. The ITAT directed the A.O. to re-compute the income under the head 'income from house property' by allowing the deduction of maintenance charges for computing the net annual value u/s.23 of the Income-tax Act, 1961. The decision indirectly addressed the issue of the eligibility of maintenance charges for deduction within the 30% limit u/s.24, as the maintenance charges were held to be fully deductible based on the precedent set in the case of Sharmila Tagore.