2021 (10) TMI 353 - AT - Income Tax

Income from house property - Computation of deduction allowed u/s 24(a) - deduction of expenditure claimed towards the rental income - HELD THAT - We deem it appropriate to hold that the issue should be re-adjudicated by the Ld. CIT(A) after giving a proper opportunity to the assessee to present its case in this regard. CIT(A) is also directed to consider and give benefit of the order of the ITAT Delhi Bench in the case of M/s Texaco Overseas Pvt. Ltd. 2010 (4) TMI 1066 - ITAT DELHI wherein it has been held that where quantification of charges for additional services was not readily available, annual rental value of the property should be determined after reducing the expenses incurred by the assessee for rendering such additional services. However, the assessee is also directed to demonstrate before the Ld. CIT(A) that the electricity expenses claimed by it were actually incurred and that the assessee held the electricity connection in its name before such expenditure is to be allowed by the Ld. CIT(A). Expenditure on repairs and maintenance expenses - The fact remains that the civil and electrical repairs which the assessee has carried out and are being claimed to the tune of ₹ 9,07,761/- is in addition to the deduction of 30% U/s 24(a) already allowed to the assessee on the gross rental income. We agree with the observation of the Ld. CIT(A) that the 30% statutory deduction U/s 24(a) of the Act would subsume all repairs and maintenance expenses - No force in the contention of the assessee on this issue and we dismiss the ground. Payment towards insurance policy - CIT(A) has made an observation that the copy of insurance policy was not made available. However, in paper book, insurance policy has been submitted and we note that it is a comprehensive insurance policy. However, since the Ld. CIT(A) did not have the benefit of examining this insurance policy, we again deem it fit to restore this claim of the assessee to the file of the Ld. CIT(A) to be considered afresh and to be allowed proportionately after giving proper opportunity to the assessee in this regard. Set off of brought forward business loss against income from other sources - As provision of section 72 are very clear that brought forward business loss can only be set off against business profit. The assessee itself has shown the interest income in its computation as income from other sources. It is not coming out from records that the fixed deposits were maintained by the assessee out of some business necessity and apparently the fixed deposits were made out of savings from rental income which the assessee has itself offered to tax under income from house property. Interest from electricity company and interest from income tax refund are essentially again income from other sources . Therefore, as per the provisions of section 72 of the Act, the Lower Authorities have rightly disallowed the set off of brought forward business losses. Appeal of the assessee stands partly allowed for statistical purposes.

Summary

Issues:
1. Assessment of rental and interest income discrepancy.
2. Disallowance of certain expenses related to rental income.
3. Set off of brought forward business losses against interest income.

Analysis:
1. The appeal was against the assessment order for AY 2014-15 where discrepancies in rental and interest income were noted. The Assessing Officer added back an amount to the total income due to discrepancies in rental income calculation and disallowed set off of business losses against interest income.

2. The assessee challenged the additions before the Ld. First Appellate Authority. The authority partially allowed relief, considering expenses incurred for earning rental income. The Tribunal was approached against the sustenance of additions/disallowances by the Ld. First Appellate Authority.

3. The Ld. Authorized Representative highlighted various expenses incurred by the assessee for rental income, emphasizing the necessity and justification for each expense. The Ld. CIT(A) partially allowed deductions but disallowed certain expenses without providing reasons, leading to the appeal before the Tribunal.

4. The Ld. Sr. Departmental Representative argued that further deductions for expenses were unwarranted, citing the statutory deduction already allowed. The Ld. CIT(A) sustained additions after careful consideration, noting lack of evidence for certain expenses and potential double benefits for the assessee.

5. The Tribunal observed discrepancies in the treatment of expenses, directing the Ld. CIT(A) to re-adjudicate the issue of electricity expenses, considering relevant details and precedents. The claim for repairs and maintenance expenses was dismissed as subsumed under statutory deduction, while the insurance claim was remanded for fresh consideration due to the submission of the insurance policy post the Ld. CIT(A)'s decision. The set off of brought forward business losses against interest income was upheld as per the provisions of section 72 of the Act.

6. Ultimately, the appeal was partly allowed for statistical purposes, with the Tribunal's decision pronounced on 30th September 2021.