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2020 (8) TMI 812 - AT - Income TaxIncome from House Property - Payment made to Mumbai Port Trust claimed by assessee u/s 23 - d eduction of taxes levied by the local authorities - assessee is the owner of the property in question and the rent received by assessee - HELD THAT - CIT(A) has observed that, the term local authority cannot be rigidly interpreted to mean only a local government as has been interpreted by the AO in this case. As such the Mumbai Port Trust has to be treated as a local authority u/s 23 of the Act. It is specifically held that the payment made to the DPT is nothing to akin to the service tax levied by a local authority. CIT(A) has considered the decision of M/s Dwarkadas Marfatia and Sons Vs. Board of Trustees of the Port of Bombay 1989 (4) TMI 315 - SUPREME COURT in which it is specifically held that the ground rent paid to the BPT in the nature of service tax levied by local authority and therefore eligible for deduction u/s 23 r.w.s. 27(vi) of the Act. Moreover, the issue has been dealt by the revenue for previous year also relevant to the A.Y. 2010-11. The claim of the assessee was allowed specifically in the circumstances when the assessment order was passed u/s 143(3) of the Act. CIT(A) has examined number of aspects of the cases and by going through all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Decided in favour of the assessee against the revenue.
Issues Involved:
1. Deletion of addition made towards payment to Mumbai Port Trust claimed by assessee under Section 23 of the Income Tax Act as a deduction from House Property Income. 2. Verification of the allowability of interest paid to BPT under Section 24 of the Income Tax Act. Detailed Analysis: Issue No. 1: Deletion of Addition towards Payment to Mumbai Port Trust The revenue contested the CIT(A)'s decision to delete the addition of ?3,38,00,000 towards payment made to Mumbai Port Trust (BPT), which the assessee claimed as a deduction under Section 23 of the Income Tax Act. The assessee filed its return of income declaring a total loss of ?1,66,15,745. The Assessing Officer (AO) scrutinized the return and disallowed the claimed deduction, adding ?3,38,00,000 to the income of the assessee. The CIT(A) allowed the deduction, prompting the revenue to appeal. The CIT(A) found that the assessee, being the owner of the property, had paid ground rent to BPT as mandated by a Supreme Court order. The CIT(A) noted that the Income Tax Act allows only real income to be taxed, and since the rent received was burdened with ground rent payments, the real income theory justified the deduction. The CIT(A) also considered the ground rent akin to service taxes levied by a local authority, citing the Supreme Court judgment in the case of M/s Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay, which recognized BPT as a local authority. Furthermore, the CIT(A) referred to previous assessments where similar deductions were allowed, reinforcing the principle of consistency. The Tribunal agreed with the CIT(A)'s findings, emphasizing that the payment to BPT was akin to service taxes levied by a local authority and eligible for deduction under Section 23 read with Section 27(vi) of the Act. The Tribunal upheld the CIT(A)'s decision, affirming that the deduction was rightly allowed and dismissing the revenue's appeal. Issue No. 2: Verification of Allowability of Interest Paid to BPT The AO had considered the interest of ?4,30,751 as having been paid to BPT on arrears. However, the assessee contended that this interest was related to loans taken for payments made to BPT, thus qualifying as interest paid on capital borrowed for the purpose of renewing tenancy with BPT. The CIT(A) directed the AO to verify this claim and decide the allowability under Section 24 of the Act. The Tribunal did not interfere with this directive, allowing the AO to verify and decide the matter in accordance with the law. Delay in Pronouncement of Order: The Tribunal acknowledged the delay in pronouncement of the order due to the nationwide lockdown imposed by the Government of India on 24/03/2020, in response to the COVID-19 pandemic. The lockdown caused unprecedented disruption in judicial work, justifying the exclusion of the lockdown period from the 90-day limit for pronouncement of orders. The Tribunal referenced a similar decision by a co-ordinate bench in DCIT v. JSW Limited, which also excluded the lockdown period for pronouncement of orders. Consequently, the Tribunal pronounced the order after the reopening of offices, considering the exceptional circumstances. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the deduction of ?3,38,00,000 towards payment made to Mumbai Port Trust under Section 23 of the Income Tax Act. The Tribunal also directed the AO to verify the allowability of interest paid to BPT under Section 24, in accordance with the law. The delay in pronouncement of the order was justified due to the COVID-19 lockdown.
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