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TMI Blog2021 (12) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the assessee in his submission as discernible from the submissions noted above. Therefore, it is not justifiable at the end of the AO to make an addition of 5,19,051/- as against claim of 2,78,858/-. In the present case, the assessee was under obligation to bear the expenditure as per the tenancy agreement. Therefore, we are of the view that the ld. CIT(A) has erred in disallowing claim of the assessee. We allow this ground and delete the impugned addition - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ber_05_to 06 of Paper Book for your immediate reference. The Assessee has accounted for the said expenses in its books of account to the tune of ₹ 519,051/-, However the Assessee has claimed and also recovered ₹ 240,193/- from the owner of the premises and balance of ₹ 278,858/- is claimed the said as a revenue expense under Section 30 of the Income tax Act. The statement of impact fee and other expenses are set out in Annexure 3 on Page Number 07 to 07 of Paper Book for your immediate reference. The table is also produced hereunder for ready reference; Statement of Impact Fee and Other Expenses for Office GF 31 and UGF 36 at City Centre for the Previous Year 2015-16 Particulars Total Payable Already Paid Balance Impact Fee 4000 4000 0 Parking Fee 182930 45375 137555 Administrative charge 18693 5445 13248 205623 54820 150803 UFG 36 Particulars Total Payable Already Paid Balance Impact Fee 16000 8000 8000 Parking Fee 463469 125625 337844 Administrative charge 47947 15075 32872 527416 148700 378716 Total Particulars Total - Payable Already Paid Balance Impact Fee 20000 12000 8000 Parking Fee 646399 171000 47539 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner only. Such payments are capital expense only and have to be capitalized in the books of account of the owner. Even the bills are raised in the name of owners. The owner also takes the benefit of such cost for the purpose of capital gains indexation. In the case, the Assessee relied upon the copy of rent agreement which even does not specifically mention that as per the agreement it was to be borne by the tenant. 2. Impact fees are actually in the nature of penalty For removing the defect to the title of the property. Since, the title of the property belongs to the owner it has to be added to the title of the property of the owner. The tenant has nowhere comes in picture with regard to the title of the property. 3. Since, the nature of payment for removing the defect to the title of the property is of penal nature, it is also not allowable for the owner as per provisions of Section 37 of the Act. In view of the above it is evident that the claim made by the Assessee was not admissible as per law. Hence, the same is disallowed and added to the total income of the Assessee of ₹ 519,051/-. No disallowance under section 68 as it was the basis of SCN It is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises to provide hassle free work atmosphere to my staff. Appreciate that normally impact fees as stated in your notice is borne by owner but for the reason stated above, I have agreed to bear all such expenses, taxes, charges and fees for smooth and uninterrupted working and hence, I have claimed the expenses considering of "repair" nature for tenant and debited to Profit and Loss Account. This is my contractual obligation & a revenue expense. Further, as decided by Honorable Courts, expenses incurred whether on capital account or revenue account by Tenant should be considered as "Repairs" u/s. 30 (a) (i) and same should be allowed as revenue expenses. I attach here-with the relevant case laws for your reference. Thus the claim of assessee is under section 30 of the Act, same is reproduced hereunder for your ready reference; Rent, rates, taxes, repairs and insurance for buildings: 30. In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business or profession, the following deductions shall be allowed- (a) where the premises are occupied by the assessee- (i) as a tenant, the rent paid for such premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pense in its Profit and Loss Account. The balance amount is reimbursed by the Owner of the premises, thus it has effectively incurred ad claimed only net amount of ₹ 278,858/-. The Learned ITO grossly erred in disallowing figure appearing in Balance sheet her than referring to profit and loss account of the Assessee. Profit and Loss Account of the Assessee is enclosed as Annexure Son Page Number 09 to 10 of Paper Book for your immediate reference. The last contention of the Learned AO, to disallow the said expenses, is that the said expenses are disallowable under Explanation 1 to Section 37(1) of the Income tax Act. Section 37 is re-produced here-under for your reference; 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t out of Total amount payable of ₹ 519051/-, impact fee amounts to ₹ 8000/- only. Further the/Assesses has only contributed part of the said expenses. Thus even otherwise the Impact fee is of ₹ 8000/- only. The balance amount is towards Parking Charges and Administrative Expenses. These expenses do fall in the purview of section 37 (1) of the Act and do fall outside the purview of Explanation 1 to Section 37(1). Under the circumstances, your good office is requested to take into account all the above submissions and pass the speaking order on merit of the case and oblige. Thanking you, For Sanjay Shah CA Kalpesh Shah M/s PR Shah & Associates Chartered Accountants (Partner/Authorised Representative) End: Letter of Authority Paper Book (Annexure 1 to 8 Page 1 to 19) To The Commissioner of Income Tax CIT Appeals-5, Aayakar Bhavan, Near Sachin Tower, Room No. 504, 5th floor, Vastrapur, Ahmedabad Respected Sir, Sanjay Shah - PAN: ABVPS 5484J Reg: Assessment Year: 2016-17 Sub: Appeal against Assessment order of under Section 143 (3) of the Act Written Submissions - 2 Respected Sir, Apropos hearing in the above appeal matte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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