2024 (8) TMI 920 - AT - Income Tax

Non disclosure of income from 'maintenance charges' - assessee was following mercantile system of accounting and non-receipt of maintenance charges cannot be basis of not crediting income - CIT(A) deleted addition - HELD THAT - Revenue has not brought any evidence suggesting that the maintenance charges were actually received by the assessee. Therefore, in the absence of such material we do not see any infirmity into the order of learned CIT(Appeals). Revenue has not brought any material pointing any change into facts and circumstances in this year. AO has been allowing the claim of the assessee regarding maintenance charges in earlier years holding that such income was not received by the assessee. It is not brought before us that any suit for recovery of maintenance charges in this regard was pending before any court for adjudication. Thus, this ground of Revenue lacks any merit. Late deposit of ESI funds - HELD THAT - Assessee fairly conceded that the issue is well settled by the judgment of Checkmate Services P. Ltd 2022 (10) TMI 617 - SUPREME COURT holding that employees contribution, not paid within the due date specified under the relevant Act, is not allowable u/s 36(1)(va) of the Act. Accordingly, order of learned CIT(A) on the issue in question is set aside and that of Assessing Officer is restored. Ground is allowed. Disallowance u/s 14A - Addition to the extent of exempt income - CIT(A) restricted addition - HELD THAT - As decided in the case of Joint Investment Pvt. Ltd. 2015 (3) TMI 155 - DELHI HIGH COURT has categorically held that disallowance of expenditure u/s 14A of the Act is restricted only in relation to tax exempt income. We find that the learned CIT(A) in restricting the disallowance has correctly followed the judgment (supra). Therefore, no infirmity into the order of learned CIT(A) on the issue in question. The same is hereby affirmed. Ground is rejected. Addition made on account of income from house property - assessee argued Revenue has not made such addition in the subsequent years and in preceding year - CIT(A) deleted addition as relying on M/S CHENNAI PROPERTIES INVESTMENTS LTD 2015 (5) TMI 46 - SUPREME COURT and M/S ANSAL HOUSING FINANCE AND LEASING CO LTD OTHERS 2012 (11) TMI 323 - DELHI HIGH COURT - HELD THAT - DR has not been able to controvert the aforesaid factual position. In the absence of any contrary material, rebutting the contention that part of area was being used for self and rest of the area being incomplete could not have been let out, we do not find any infirmity. The order of learned CIT(A) on the issue in question is affirmed. Ground taken by the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of non-disclosure of maintenance charges.
2. Deletion of addition on account of late deposit of ESI funds.
3. Restriction of disallowance under Section 14A of the Income Tax Act.
4. Deletion of addition on account of income from house property.

Detailed Analysis:

1. Deletion of Addition on Account of Non-Disclosure of Maintenance Charges:
The Revenue challenged the deletion of an addition amounting to Rs. 17,97,330/- made by the Assessing Officer (AO) due to non-disclosure of maintenance charges. The AO had observed that the appellant had raised bills for maintenance charges but did not recognize the revenue. The appellant argued that the charges were never received as the shop owners/tenants refused to acknowledge the liability. The CIT(A) relied on the Supreme Court decisions in CIT vs. Excel Industries Pvt. Ltd. and P.G. & W. Sawoo Pvt. Ltd. to conclude that income cannot be considered accrued unless there is a corresponding liability acknowledged by the payer. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to provide contrary evidence that the maintenance charges were received or that there was a change in facts from previous years.

2. Deletion of Addition on Account of Late Deposit of ESI Funds:
The issue pertained to the deletion of an addition of Rs. 9,739/- due to the late deposit of ESI funds. The learned counsel for the assessee conceded that the Supreme Court's decision in Checkmate Services P. Ltd. v. CIT held that employees' contributions not paid within the due date are not allowable under Section 36(1)(va) of the Act. Consequently, the Tribunal set aside the CIT(A)'s order and restored the AO's addition.

3. Restriction of Disallowance Under Section 14A of the Income Tax Act:
The Revenue contested the CIT(A)'s decision to restrict the disallowance under Section 14A to the extent of the exempt income. The CIT(A) had followed the Delhi High Court's ruling in Joint Investment Pvt. Ltd. vs. CIT, which held that disallowance of expenditure under Section 14A should only relate to tax-exempt income. The Tribunal affirmed the CIT(A)'s decision, finding no infirmity in the order.

4. Deletion of Addition on Account of Income from House Property:
The Revenue appealed against the deletion of an addition of Rs. 4,75,75,902/- made by the AO on account of income from house property. The AO had determined the Annual Letting Value (ALV) for certain vacant and incomplete areas of two malls owned by the appellant. The CIT(A) found that these areas were either incomplete or used for the appellant's business purposes and thus could not be let out. The Tribunal noted that the CIT(A) had carefully considered the facts, including site inspections and architectural plans, and had relied on the Supreme Court's decision in Chennai Properties & Investment Ltd. vs. CIT. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any contrary material to rebut the factual findings.

Conclusion:
The Tribunal partly allowed the Revenue's appeal by restoring the AO's addition regarding the late deposit of ESI funds while upholding the CIT(A)'s deletions and restrictions on other grounds. The order was pronounced in open court on 14th August, 2024.