2021 (5) TMI 589 - AT - Income Tax

Income from house property - allowability of society maintenance chares from rental income - as urged that gross rent received by the assessee included society maintenance charges which were to be paid by the assessee, thus in computing the annual value, the amount of rent which actually goes into the hands of the owner should be taken into consideration since the provisions of Sec. 23(1)(b) uses the expression actual rent received or receivable by the owner - AO opined that the same is not allowable since the assessee is already allowed deduction of 30% u/s 24(a), consequently, the rental income was taken on gross basis. HELD THAT - Upon perusal of the agreements, it could be gathered that the payment of municipal taxes and other outgoings was the liability of the assessee. Any increase was also to be borne by the assessee. The licensee was required to pay fixed monthly lump sum payment to the assessee as license fees irrespective of assessee s outgoings. Therefore, to say that the actual rent received by the assessee was net of society maintenance charges , would not be correct as per the terms of the agreement entered into by the assessee. We find that as per the provisions of Section 23(1)(b), annual value shall be deemed to be the actual rent received or receivable by the assessee. The proviso provides for deduction of municipal taxes levied by any local authority. As per Explanation, the actual rent received or receivable would not include the amount of rent which owner could not realize. We find that the statutory provisions are quite clear and provide for deduction of only specified items i.e. taxes paid to local authority and the amount of rent which could not be realized by the assessee, from the expression actual rent received or receivable . No other deduction is permissible. Allowing the other deduction would amount to distortion of the statutory provisions and such a view could not be countenanced. To accept the plea that rent which actually goes into the hands of the assessee is only to be considered, would enable the assessee to claim any expenditure from rent actually received or receivable since the same would ultimately reduce the amount which actually goes into the hands of the assessee. The same is not the intention of the legislatures. The statutory provisions, as noted earlier, provide for deduction of specified items only. Proceeding further, we are of the considered opinion that the society maintenance charges as paid by the assessee, by no stretch of imagination, could be held to be taxes paid to local authority. See TOWNSHIP REAL ESTATE DEVELOPERS (INDIA) (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX-2 (3) 2012 (5) TMI 143 - ITAT MUMBAI - Decided against assessee.

Summary

Issues:
Claim of 'society maintenance charges' from rental income disallowed by CIT(A) for AY 2012-13.

Analysis:
1. The assessee claimed 'society maintenance charges' from rental income, contending it should be considered in computing annual value as per Sec. 23(1)(b). Assessee's argument relied on Tribunal decisions. Revenue opposed, stating the claim is inadmissible as per statutory provisions.
2. The AO disallowed the claim, citing the allowance of 30% deduction u/s 24(a) to the assessee. Ld. CIT(A) upheld the AO's action, referencing various judicial decisions. The agreements showed the liability of municipal taxes and outgoings on the assessee, not the licensee.
3. The Tribunal noted that as per Sec. 23(1)(b), annual value is the actual rent received or receivable by the assessee, allowing deductions only for specified items. 'Society maintenance charges' were not held to be taxes paid to the local authority. Previous Tribunal decisions supported this view.
4. The Tribunal dismissed the appeal, finding no infirmity in the impugned order. The decision was pronounced on 18th May, 2021.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the arguments presented and the Tribunal's decision.