2016 (11) TMI 1687 - AT - Income Tax

Income from house property - allowability of Maintenance charges against lease income - allowability of impugned charges/taxes from lease income which has been disallowed by revenue primarily on the ground that the assessee has offered income only against one property - HELD THAT - When Income is calculated under the head House Property, then besides statutory deduction of 30% u/s 24, an assessee is entitled only for deduction with respect to taxes levied by any local authority. Therefore, society maintenance charges levied by the Society which is not a local authority are not at all allowable to the assessee. Therefore, we held so and accordingly, maintenance charges of four flats are not allowable under the head Income from House Property . As assessee has contended that Godown has been used by assessee for business purposes and therefore, we restore this matter to file of AO for limited purpose of verifying assessee s claim that the godown was used for business purpose during impugned AY or not and if so, allow the deduction for municipal taxes under the head Business Income . So far as regarding, municipal taxes for four properties are concerned, a combined perusal of Statement of Total Income for AY 2006-07 2005-06 strengthens the claim the assessee that lease income has been offered on receipt basis as per TDS certificates to avoid mismatch of TDS credit. Therefore, we held that municipal taxes relating to four properties are allowable under the head Income from House Property. The appeal of the assessee against Ground Nos. 1 to 3 is partly allowed. Disallowance u/s 43B - We find that assessee had filed return of income for AY 2006-07 on 06/11/2006 whereas the 43B claim of the assessee for AY 2005-06 has been disallowed by AO vide order dated 05/12/2007 and affirmed by CIT(A) order dated 25/03/2009. Therefore, there was no occasion with the assessee to claim the same in statement of total income. Therefore, this matter is also restored to AO for limited purpose of verifying the 43B payment made by the assessee and allow the same to the extent of ₹ 7,70,986/-, if the same has not been allowed in AY 2005-06 consequent to Tribunal s order. The ground nos. 3 to 6 of the assessee is allowed for statistical purposes.

Summary

Issues involved:
1. Allowability of maintenance charges and municipal taxes against lease income.
2. Treatment of stamp duty expenditure under Section 43B.

Analysis:

Issue 1: Allowability of maintenance charges and municipal taxes against lease income:
The appeal pertains to the Assessment Year 2006-07 where the assessee, a Private Limited Company engaged in property development, contested the restriction of deductions on maintenance charges and municipal taxes while computing income under the head "Income from House Property." The Assessing Officer determined the loss at ?23,38,264, considering the lease income of ?5,50,433 but offered only ?3,00,000, claiming the balance was already taxed in earlier years. The maintenance charges of ?3,74,100 were disputed, with specific amounts allocated to different properties. The CIT(A) partially allowed the claim, considering only the lease income offered against one property for deduction. The Tribunal found errors in the CIT(A)'s calculations and disallowed the maintenance charges as they were not allowable under the head "Income from House Property." However, the Tribunal directed the Assessing Officer to verify if the godown was used for business purposes and allowed deduction for municipal taxes under "Business Income." The Tribunal also allowed the municipal taxes for four properties under the head "Income from House Property," aligning with the assessee's claim of offering lease income on a receipt basis.

Issue 2: Treatment of stamp duty expenditure under Section 43B:
The dispute regarding the stamp duty expenditure of ?7,70,986 debited in the Profit & Loss Account in the Assessment Year 2005-06 but remaining unpaid was claimed in the current year. The CIT(A) dismissed the claim as no direction for allowability was given in the previous year's order. The Tribunal found that the claim was disallowed in the earlier year, and thus, the matter was referred back to the Assessing Officer to verify the payment under Section 43B. The Tribunal allowed the grounds related to this issue for statistical purposes.

In conclusion, the Tribunal partly allowed the appeal, emphasizing the disallowance of maintenance charges under the head "Income from House Property" and the need for verification of stamp duty payment under Section 43B. The order was pronounced on 11th November 2016.