2014 (9) TMI 1192 - AT - Income Tax

Electricity expenses paid while computing the income from house property - taking the ALV u/s 23 as gross rent - HELD THAT - ALV the relatable expenses that as in the present case the electricity charges paid by the assessee has to be deducted from the gross rent in view of the above proposition allowed by the Hon ble Calcutta High Court and various Benches of this Tribunal. One more aspect to this issue is that even for the sake of consistency from last 30 years, Revenue is allowing the payment of electricity charges from gross rent. To support this, assessee s ld. Counsel Shri Sunil Surana filed copy of the assessment order for the assessment year 2008-09 passed under section 143(3) vide order dated 30.09.2010, which was passed subsequent to the passing of the assessment order in the present case, whereby the deduction was allowed by the AO himself. Even for the sake of consistency also, the issue is decided in favour of the assessee.

Summary

Issues:
Disallowance of electricity expenses while computing income from house property and treating ALV as gross rent.

Analysis:
The appeal concerned the disallowance of electricity expenses by the Assessing Officer and the confirmation of this action by the CIT(A) in computing the income from house property. The Assessing Officer disallowed the electricity charges paid by the assessee, increasing the house property income by the amount of electricity expenses claimed. The CIT(A) upheld this decision, stating that there is no provision under the Act to allow such a deduction. The assessee argued that the provisions of section 23 mandate computing income from house property based on annual letable value. The assessee cited various case laws to support their claim that electricity charges should be deducted from the gross rent for computing the ALV under section 23.

The Tribunal analyzed the provisions of sections 23(1)(a) and 23(1)(b) of the Act, which state that the annual value of the property should be deemed as the sum for which the property might reasonably be expected to let from year to year. The Tribunal referred to a decision by the Calcutta High Court and various Tribunal benches, which allowed deductions related to expenses like electricity charges from the gross rent received in computing house property income. The Tribunal noted that even for consistency, the Revenue had been allowing the deduction of electricity charges from gross rent for the past 30 years. The Tribunal also considered an assessment order from a subsequent year where the deduction for electricity charges was allowed. Based on these considerations, the Tribunal allowed the appeal of the assessee, emphasizing the consistent practice and legal precedents supporting the deduction of electricity charges from gross rent for computing the ALV under section 23.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal and directing that the electricity charges should be deducted from the gross rent for computing the annual letable value of the property.