Maintenance Charge Recovery: proportionate disallowance of expenses met from CAM or tenant recoveries is not justified, appeals allowed.

Disallowances of proportionate expenses relating to rented portions were examined on the basis that power, fuel and repair costs were met from and matched against tenant recoveries/maintenance (CAM) receipts recorded as business income; co ordinate bench precedents and subsequent assessment treatment were relied on. The Tribunal concluded that where such expenditure is funded by and reflected against CAM or tenant recoveries treated as business income, a proportionate disallowance against rental income is not justified, and accordingly the challenged disallowances were deleted and the appeals allowed in favour of the assessee.

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Issues: (i) Whether the disallowance of Rs. 71,59,544 being proportionate power and fuel expenses relating to rented portion is sustainable; (ii) Whether the disallowance of Rs. 1,71,25,129 being proportionate repair and maintenance expenses relating to rented portion is sustainable.

Issue (i): Disallowance of Rs. 71,59,544 as proportionate power and fuel expenses.

Analysis: The recurring nature of the claim and evidence showing power charges recovered from tenants and recorded as income were examined; reliance was placed on co-ordinate bench decisions and on assessment proceedings in subsequent years where similar disallowance proposals were not sustained. The unit-wise statements and challans demonstrating recovery from tenants and accounting as business income were taken into account.

Conclusion: The disallowance of Rs. 71,59,544 is deleted in favour of the assessee.

Issue (ii): Disallowance of Rs. 1,71,25,129 as proportionate repair and maintenance expenses.

Analysis: The facts showed that repair and maintenance expenditure for the rented portions was met from maintenance/Common Area Maintenance (CAM) charges received from tenants and accounted as business income; the matter is a recurring issue and co-ordinate bench decisions for related assessment years favoured deletion of similar disallowances. The unit-wise repair expenditure and corresponding CAM receipts were considered to determine that expenses were matched by business income.

Conclusion: The disallowance of Rs. 1,71,25,129 is deleted in favour of the assessee.

Final Conclusion: Both issues were decided in favour of the assessee and the appeals are allowed, following the reasoning that expenses incurred for rented portions which are met from and reflected against CAM or tenant recoveries accounted as business income cannot be proportionately disallowed.

Ratio Decidendi: Where expenditure for common facilities or rented portions is met from and accounted against maintenance/common area charges or tenant recoveries treated as business income, proportionate disallowance of such expenses against rental income is not warranted and earlier co-ordinate bench decisions on identical recurring issues shall be followed.

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