2012 (7) TMI 237 - AT - Income Tax

Disallowance of Society Charges paid in respect of property given on leave and license - amount is being claimed as deduction from profit of his business by assessee - Held that - As per the provisions of section 23 the Annual Letting Value of the property is determined, and as per the fiction created in section 23(1)(a) the fair market value also can be treated as the annual letting value if the same is more than actual rent received or receivable. Section 24 provides the rights of the assessee to claim the deduction on some equal to 30% of the annual value and Interest on the borrowed capital if the same is used for acquiring, constructing or renovating the property and other than this, no other deduction is allowed - rightly denial of deduction claim of assessee - against assessee. Disallowance of Generator Running Expenses - no evidence was produced by the appellant for expenses having incurred genuinely for the diesel expenditure - Held that - Considering submissions made by assessee that Diesel Generator was for the warehouse of appellant, that all bills were produced before the AO and (DR) relied upon the orders of the lower authorities - from the details filed by the assessee and admitted that payments were made in violation of Sec. 40A(3) for purchasing diesel disallowance is restricted to Rs. 1,51,315/- out of the disallowance upheld by the CIT - partly in favour of assessee.

Summary

Issues involved:
1. Disallowance of Society Charges as deduction in computing Income from House Property.
2. Disallowance of Generator Running Expenses made on an adhoc basis.

Detailed Analysis:

Issue 1: Disallowance of Society Charges
The Assessing Officer (AO) disallowed Rs. 1,01,717/- claimed as Society Charges by the Assessee under the head 'Repairs & Maintenance' for a property rented out, stating it had no connection with the Assessee's business and was not allowed as a deduction under the Income Tax Act. The CIT(A) upheld this disallowance, emphasizing that the claim was not admissible under any head of income and that no deduction was prescribed for society charges under Section 24 of the IT Act. The AR of the appellant relied on the decision in the case of Sharmila Tagore but failed to establish the relevance of the case to the present situation. The Tribunal rejected the appeal, affirming the disallowance of the society charges as deduction under any head of income.

Issue 2: Disallowance of Generator Running Expenses
The AO disallowed Rs. 6,29,081/- claimed by the Assessee as Generator Running Expenses on an adhoc basis, citing abnormal increase in diesel consumption without adequate proof. The CIT(A) also upheld this disallowance, noting discrepancies in the diesel consumption pattern and lack of evidence for the claimed expenses. The Tribunal considered the submissions of both parties, where the AR argued that the generator was for the warehouse and bills were produced, while the DR relied on lower authorities' orders. It was revealed that payments were made in violation of Sec. 40A(3) for purchasing diesel. The Tribunal restricted the disallowance to Rs. 1,51,315/-, partially allowing the appeal filed by the Assessee.

In conclusion, the ITAT Mumbai upheld the disallowance of Society Charges and restricted the disallowance of Generator Running Expenses, partially allowing the appeal while considering the facts and circumstances of the case.