2014 (5) TMI 771 - AT - Income Tax

Deletion of excess rent paid No fresh deed has been signed - Held that - CIT(A) was rightly of the view that the increase in rent from last year was due to taking more area on rent of 9000 sq.ft. as against 6000 sq.ft. the AO has not been able to bring anything on record that this is an inadmissible expenditure u/s 37 of the Act being capital or personal in nature and not incurred for the purpose of business - the rent paid by the assessee has been duly reflected by the holding company and the holding company has shown it as its income from house property paying the applicable tax fully, at the maximum rate and has been accepted in an assessment completed u/s 143(3) of the Act - the addition is not justified and the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues:
- Deletion of excess rent by Ld CIT(A)

Analysis:
The appeal was filed by the revenue against the order of Ld CIT(A) regarding the deletion of Rs. 28,35,000 on account of excess rent paid by the assessee. The Ld DR argued that the rent increase was unjustified as there was no fresh lease justifying the raise. On the other hand, the Ld AR contended that the rent increase was due to an increase in the sq. ft. area from 6000 sq.ft. to 15000 sq.ft. The AR presented a resolution supporting the rent increase and highlighted that the holding company had reflected the rent paid by the assessee in its P&L A/c, paying taxes at the maximum marginal rate. The Ld CIT(A) justified the rent payment in an elaborate order, emphasizing that the rent increase was for increased accommodation and not inadmissible expenditure under section 37 of the Act. The CIT(A) noted that the holding company had accepted the rent as income from house property, paying applicable taxes fully. Therefore, the CIT(A) directed the deletion of the addition, which was upheld by the ITAT.

The ITAT found no infirmity in the CIT(A)'s order and dismissed the appeal filed by the revenue. The decision was based on the fact that the rent increase was justified due to the increase in the area leased, and there was no evidence to suggest that the expenditure was inadmissible under the Act. The ITAT concurred with the CIT(A) that the rent paid was for business purposes and had been duly reflected and taxed by the holding company. Consequently, the ITAT upheld the deletion of the excess rent amount, concluding that the addition by the Assessing Officer was not justified.