2018 (2) TMI 2066 - AT - Income Tax

Disallowance of deduction claimed u/s.24 in respect of income from House Property - AO disallowed assessee s claim of deduction u/s.24 on the plea that assessee is a Trust - HELD THAT - Income of the Trust is to be computed commercially keeping in view the provisions of the Act The Hon ble Punjab and Haryana High Court in the case of Tiny Tots Education Society 2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT held that assessee is entitled to claim depreciation even if entire amount of assets have been shown as utilization of funds. Jurisdictional High Court in case of Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY HIGH COURT has also held that claim of depreciation on fixed asset has to be allowed even if entire amount was shown as utilization of funds while computing surplus of the assessee s funds. This decision of the Bombay High Court has been recently affirmed by the Hon ble Supreme Court. Applying the proposition of law laid down in case of Institute of Banking Personnel Selection we do not find any merit for the disallowance of claim of deduction u/s.24 in respect of income of assessee-Trust from House property. - Decided in favour of assessee.

Summary

Issues:
Disallowance of deduction claimed by assessee u/s.24 in respect of income from House Property.

Analysis:
The appeal was filed against the order of CIT(A)-1, Mumbai for A.Y. 2012-13 regarding the disallowance of deduction claimed by the assessee u/s.24 in relation to income from House Property. The assessee, a trust registered with DIT (E), Mumbai, filed its return of income showing total income at Rs. Nil. However, the AO disallowed the claim of deduction u/s.24 in respect of income from house property. The assessee had shown rent income of Rs. 30,36,025 after claiming municipal taxes and deduction u/s.24(a) of the IT Act @ 30% of Rs. 13,01,154. The AO disallowed the claim, and the CIT(A) confirmed this decision.

The AO disallowed the deduction u/s.24 on the grounds that the assessee, being a trust, had to compute income commercially. However, the ITAT Mumbai, while considering the appeal, referred to judgments by various High Courts and the Supreme Court. The Hon'ble Punjab and Haryana High Court, in the case of Tiny Tots Education Society, held that depreciation can be claimed even if the entire amount of assets is shown as utilization of funds. Similarly, the jurisdictional High Court in the case of Institute of Banking Personnel Selection ruled that depreciation on fixed assets must be allowed even if the entire amount was shown as utilization of funds. The ITAT Mumbai applied these legal principles and directed the AO to allow the deduction u/s.24 as claimed by the assessee.

In conclusion, the ITAT Mumbai allowed the appeal of the assessee, directing the AO to allow the deduction u/s.24 in respect of the income from the House Property. The judgment was pronounced on 16/02/2018.