2024 (10) TMI 663 - HC - Income Tax

Nature of expenses - treating land restoration expenses as Revenue expenditure - HELD THAT - Question no.(a) is admitted. Income from house property - Expenses of the building given on rent - AO disallowed the expenditure u/s 24 on the ground that in absence of specific details and to cover up the disallowance on account of the property given on rent, the standard deduction u/s 24 was disallowed - CIT (A) held that the standard deduction available under the income from house property is to be taxed under the said heads only and not in business head - HELD THAT - Considering the findings arrived at by the CIT (Appeals) which is upheld by the Tribunal, we are of the opinion that the assessee was entitled to get the deduction under Section 24, when the rent income is already taxed under the head income from house property and therefore no substantial question of law arises on that count. Disallowance of stamp duty - CIT (Appeals) deleted the addition following the earlier A.Y. 2009-10 and the Tribunal also upheld the same - HELD THAT - We are of the opinion that no question of law arises, so far as question no.(c) is concerned. The appeal stands dismissed qua the same question. Accrual of income - Reimbursement of Service Tax received from GAIL as per Arbitration award - ITAT deleted addition - HELD THAT - As reimbursement of the service tax received from GAIL was offered to tax in the subsequent year and therefore no question of law can be said to have arisen from the impugned order of the Tribunal as far as that question is concerned.

Summary

Issues:
1. Treatment of land restoration expenses as revenue expenditure.
2. Deletion of building expenses claimed as deduction leading to double deduction.
3. Deletion of disallowance of stamp duty and share capital expenses.
4. Deletion of addition in respect of reimbursement of Service Tax received.

Analysis:
1. The Tax Appeal involved substantial questions of law regarding the treatment of land restoration expenses as revenue expenditure. The Appellant-Revenue challenged the ITAT's decision to treat these expenses as revenue despite being capital in nature. The Respondent-Assessee had filed returns declaring income and the Assessing Officer made additions for various expenses, including land restoration expenses. The CIT (Appeals) and Tribunal had previously ruled in favor of the assessee based on project-wise particulars and income shown in the profit and loss account. The Tribunal upheld its earlier decision for the A.Y. 2009-10, leading to the admission of question (a) for further consideration.

2. The issue of deletion of building expenses claimed as deduction resulting in double deduction was raised. The Assessing Officer disallowed the expenditure under Section 24, alleging double deduction due to lack of specific details. The CIT (Appeals) allowed the deduction under Section 24 after taxing the rent income, a decision upheld by the Tribunal based on previous rulings. The court found that no substantial question of law arose in this regard.

3. The deletion of disallowance of stamp duty and share capital expenses was also contested. The Assessing Officer disallowed stamp duty without proper analysis, leading to penalties under Section 271. However, the CIT (Appeals) and Tribunal, following earlier decisions, deleted the addition without distinguishing facts on record. The court concluded that no question of law arose concerning this issue, and the appeal was dismissed accordingly.

4. The final issue concerned the deletion of an addition related to the reimbursement of Service Tax received. The reimbursement was offered for tax in a subsequent year, leading to no legal question arising from the Tribunal's order on this matter. The court admitted the appeal only concerning question (a) and dismissed the appeal on other grounds.