Business expenditure on separately assessed service charges cannot be disallowed solely because section 24 relief was claimed on rent.

Where service charges are separately assessed as business income, the related expenditure must be examined under the rules for business deductions, not disallowed merely because deduction under section 24 has been allowed on rental income. The assessee's tenancy agreements and returns showed rent and service charges were separately stipulated and separately realised, so the receipts were not composite rent. In the absence of material showing the expenses were fictitious, already allowed under house property income, or that the Assessing Officer's view was impermissible in law, revision under section 263 could not be sustained. The revisional order was therefore held unsustainable.

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Issues: Whether the revisional order under section 263 of the Income-tax Act, 1961 was justified in holding that, after allowing deduction under section 24, the expenses claimed against service charges were not allowable and in setting aside the assessment for fresh consideration.

Analysis: The assessee had consistently shown rent as income from house property and service charges as business income. The tenancy agreements and the return of income showed that rent and service charges were separately stipulated and separately realised, so the receipts were not composite rent. Once the service charges were assessed under the head profits and gains of business or profession, the related expenditure had to be tested under the provisions applicable to business income. In the absence of any material showing that the expenses were fictitious, not incurred, already allowed under the head house property, or that the view taken by the Assessing Officer was not a permissible view in law, the order could not be treated as erroneous merely because the Commissioner preferred another view.

Conclusion: The revisional order under section 263 was not sustainable and the assessee succeeded.

Ratio Decidendi: Where service charges are separately assessed as business income, allowable business expenditure cannot be disallowed on the sole ground that deduction under section 24 has been granted on the rental income, and revision under section 263 is impermissible in the absence of an unsustainable view or demonstrable prejudice to revenue.

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