2008 (6) TMI 207 - HC - Income Tax

Payment of electricity charges by the lessee claim of deduction on account of reimbursement of electricity charges by lessee held that - assesseee originally returned entire rental income of Rs.27,60,000/- and later filed a revised return claiming deduction of Rs.5,40,000/- being reimbursement of electricity charges paid to the lessee - if at all assessee s claim is bonafide, assessee could have produced documents in the form of assessment order completed in the name of the lessee showing inclusion of Rs.5,40,000/- being the reimbursement received from the appellant. Since rental income originally returned by the assessee is a deduction in the computation of business income of the lessee, the amount subsequently paid by the assessee in the form of reimbursement of electricity charges should have been assessed in the hands of the lessee. In the absence of any clear evidence towards this, we feel the Tribunal was justified in assuming that original agreement providing for payment of electricity charges by the lessee continue to be operative

Summary

Issues:
1. Disallowance of electricity charges reimbursement.

Analysis:
The judgment delivered by the High Court of Kerala involved the issue of whether the Tribunal was justified in confirming the disallowance of Rs.5,40,000/- towards electricity charges paid by the assessee for a theatre building leased out to another party. The original lease agreement stipulated that the lessee was liable to pay the electricity charges, and the assessee received rent net of these charges. However, during the relevant assessment year, there was a change in the agreement through correspondence, where the assessee agreed to reimburse the electricity charges paid by the lessee amounting to Rs.5,40,000/-. The Tribunal rejected the claim of the assessee due to lack of acceptable evidence. The court noted that if the assessee's claim was genuine, they could have provided documents such as the assessment order completed in the name of the lessee showing the inclusion of the reimbursement amount. Since the rental income originally returned by the assessee was a deduction in the lessee's business income, the reimbursement should have been assessed in the hands of the lessee. However, without clear evidence to support the change in terms, the Tribunal deemed the original agreement regarding payment of electricity charges by the lessee to be still in force. Despite the assessee having an opportunity to rectify the lack of evidence, the Tribunal upheld the disallowance and dismissed the appeal.