Income Tax Appellate Tribunal - Ahmedabad
Tushar Shantilal Kothari, Ahmedabad vs Assessee on 20 December, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER
AND SHRI T.R. MEENA, ACCOUNTANT MEMBER
ITA No.2945/Ahd/2010
A.Y. 2007-08
Tushar Shantilal Kothari, Dy. Commissioner of
11, Parvatinagar, B/H, V/s. Income Tax Circle-5,
Shyamal Row House, Ahmedabad.
Satellite, Ahmedabad.
PAN: ABEPK 2434M
(Appellant) (Respondent)
Revenue by : Shri R.K. Dhanista & O.P.
Batheja, D.R.
Assessee(s) by : Shri P.R. Shah, A.R.
सुनवाई कᳱ तारीख/ Date of Hearing : 20/12/2013
घोषणा कᳱ तारीख /Date of Pronouncement: 21/02/2014
आदेश/O R D E R
PER SHRI T.R. MEENA, ACCOUNTANT MEMBER :
This Appeal has been filed by the assessee emanating from the order of learned CIT(A)-XVI, order dated 01.09.2010, for A.Y. 2007-08. The sole ground of Appeal is against not allowing the standard deduction of Rs.8,40,000/-.
2. The AO has observed that in A.Y.2006-07, Standard deduction was not allowed u/s.24 in the case of assesse by the then AO. The facts of the case is that assessee had shown the rent receipt from the house property and claimed deduction u/s.24 at Rs.8,40,000/- @ 30%. As per rent deed made with M/s.Rohan Automotive Equipment P. Ltd and M/s. Rutu Auto Gas P. Ltd. repair charges were to be borne by tenant. Thus, in this case ITA No.2945/Ahd/2010 Tushar Shantilal Kothari Vs. DCIT Cir-5, Ahmedabad.
A.Y.2007-08 -2- assessee was getting the repair charges from the tenant. Even then assessee was taking benefit of Section 24 on account of Standard deduction. The AO gave reasonable opportunity of being heard on this issue which was availed by the assessee vide his letter dated 22.10.2009 and it was claimed before the AO that the Standard deduction is allowable irrespective of the actual expenditure and the said deduction is standard deduction. Thus, AO made addition of Rs.8,40,000/- in the income of the assessee.
3. Being aggrieved by the order of the AO, assessee carried the matter before learned CIT(A) who had dismissed the assessee's appeal by observing as under:
"I have considered the submission made by the appellant and observation of the AO. The Hon'ble Calcutta High Court in the case of magma leasing Ltd. 129 taxman 651 has stated as under:
"A plain reading of the provisions of section 24 shows that if the lessor is liable for repair, in that event, he is entitled to deduction of one-sixth of annual value. If the tenant is responsible for repair, in that event, the assessee, shall be entitled to deduction of an amount being the difference between the annual value exceeding the annual rent or one-sixth of the annual value, whichever is less. This section does not provide for joint liability. Neither does it prove for any apportionment on account of such joint liability. Therefore, as soon as sub-clause (a) states that if the lessor undertakes to bear the cost of repairs of the property occupied by the lessee, then the lessor would be entitled to a deduction equivalent to one-sixth of the annual value. When the statute is silent, it has to be interpreted in a manner beneficial to the assessee."
In view of the above, it is clear that the Hon'ble High Court has stated that this section does not provide for joint liability. Neither does it prove for any apportionment on account of such joint liability. In the present case, the repairs are to borne by the tenant and hence the standard deduction has been rightly denied by the AO. In view of this reason, this ground of appeal is dismissed."
4. Now assessee is before us. It was submitted by the learned AR, Mr. P.R. Shah that deduction @ 30% is like a Standard ITA No.2945/Ahd/2010 Tushar Shantilal Kothari Vs. DCIT Cir-5, Ahmedabad.
A.Y.2007-08 -3- deduction as prescribed u/s.24, not necessarily incurred towards repairs of the house property as held in the case of J.B. Patel and Co., 118 ITD 556. Therefore, the allegation of AO that at the same time this expenditure would have not been claimed both by the owner as well by the tenant has no legal basis. He further argued that Hon'ble ITAT had not appreciated the fact that this amount is includable in the annual letting value of property as held in the case of Mukesh D. Ambani, (2006) 7 SOT 521 (Mum). The assessee's own case, for A.Y.2006-07, is also squarely applicable. He further drawn our attention to the order of learned CIT(A) for A.Y.2008-09, wherein learned CIT(A) allowed the appeal in favour of the assessee. At the outset, learned DR relied upon the case of Magma Leasing Ltd. Vs. CIT, (2003) 129 Taxman 651 (Cal), wherein Assessment Year 1990-91 was involved and it was held that (lessor) assessee was liable to repair exterior together with maintenance of supply lines of electricity, water and sewerage and other essential services in demised premises, which were integral parts of premises, as well as of interior other than those undertaken by lessee. Therefore, assessee was not entitled to get benefit of sub section (a) of Section 24.
5. We have considered the rival submissions of both the sides and perused the material available on record. The case law cited by the Revenue is relevant to Assessment Year 1990-91 but Section 24 had been amended w.e.f. 01.04.2002 and deduction u/s.24 will be allowable to sum equal to 30% of annual value. The explanatory note to budget is reproduced as under:
ITA No.2945/Ahd/2010Tushar Shantilal Kothari Vs. DCIT Cir-5, Ahmedabad.
A.Y.2007-08 -4- "The existing provision contained in section 23 of the Income-tax Act provides for determination of annual value of the property in certain circumstances including where the property is let, or is self-occupied, or is vacant, or is partially let, or is let for part of the year. The annual value so determined is subject to deductions allowable under section 24, including deductions on account of vacancy for any part of the year in respect of the property let, and on account of rent which cannot be realized. With the various amendments made over the years in this section, the provisions have become quite complicated and difficult for the taxpayer to understand.
It is therefore proposed to substitute the said section so as to provide for a simplified determination of annual value in certain circumstances specified in the proposed new section, after allowing deductions in computing the annual value on account of vacancy and unrealised rent.
Under the existing provisions contained in section 24, the income chargeable under the head "Income from house property"
is, in certain cases, computed after making deductions of one- fourth of the annual value in respect of repairs or collection charges. Interest on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing the property, and other deductions on account of insurance premium, ground rent, annual charge, etc. It is proposed to substitute the said section so as to provide for only two deductions, namely an amount equal to thirty percent of the annual value, and the interest paid on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing the property.
It is also proposed to make consequential amendments by inserting a new section 25AA and amending section 25, 25A, 25B, 27 and 80GG of the Income-tax Act.
These amendments will take effect from 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years."
It is unambiguous that the deduction @ 30% is not for repairs. Therefore, the deduction u/s.24 is allowable irrespective of the fact whether any expenses towards repair or other related activity is ITA No.2945/Ahd/2010 Tushar Shantilal Kothari Vs. DCIT Cir-5, Ahmedabad.
A.Y.2007-08 -5- incurred or not by the tenant. Accordingly, we allow the appeal of the assessee.
6. In the result, the assessee's appeal is allowed.
Sd/- Sd/- (MUKUL Kr. SHRAWAT) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 21/02/2014 Prabhat Kr. Kesarwani, Sr. P.S. आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT
4. आयकर आयुᲦ(अपील) / The CIT(A)-III, Ahmedabad
5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाडᭅ फाईल / Guard file.
आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad