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Issues involved: Interpretation of deductions u/s 23 and u/s 24 of the Income Tax Act, 1961 regarding stamp duty and registration charges for a leased property.
Summary: The case involved a reference made u/s 256(2) of the Income Tax Act, 1961 regarding the treatment of stamp duty expenses in determining the annual letting value of a property. The assessee, a registered firm, owned a property leased to M/s. Voltas Ltd. The dispute arose from the assessee's claim of deducting Rs. 5,977, being its share of stamp duty expenses, from the gross annual rental value. The Income Tax Officer disallowed the claim, which was upheld by the Appellate Authority. The matter was then brought before the Income-tax Appellate Tribunal (the Tribunal). The Tribunal found that the stamp duty expenses were incurred to secure the rent over a long period and were necessary for determining the annual letting value of the property. It allowed the deduction of Rs. 5,977 from the gross rent to arrive at a reasonable annual letting value. However, the High Court noted that the Income Tax Act specifies exhaustive deductions u/s 24 and does not include expenses like stamp duty and registration charges. The Court emphasized that the annual value is a notional income based on the property's letting potential, which should remain consistent over the lease period. Therefore, the High Court ruled in favor of the Department and against the assessee, stating that the stamp duty expenses cannot be deducted from the annual letting value. The parties were left to bear their own costs as the assessee did not appear in the proceedings.
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