TaxTMI 
TaxTMI 
2018 (4) TMI 495
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....s and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of the Hon'ble ITAT in the case of Mukesh D. Ambani vs. ACIT, SpI. Cir-18(1), Mumbai (7 SOT 521) (Mum) as this decision was on account of determination of ALV while in this case assessee is claiming deduction u/s.24(a) on account of repairs and reducing contribution to sinking fund from its income. 1.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the contribution to sinking fund is not income of the assessee without appreciating the fact that the tenants has deducted tax at source on the payment u/s. 194I treating the payment as rent. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deduction of interest of Rs. 33,86,952/- without appreciating the fact that the assessee has taken loan for the working capital requirements and not for the purpose of acquiring/constructing the property in question. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 57,20,603/- relying on the judgement in the case of CIT vs. J....
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....und from 5 tenants as per the agreement entered into with them. Any shortfall in the liability to contribute to ITPL for Sinking Fund is borne by Altitus. The intention of the company is to collect sinking fund from its tenants on behalf of ITPL as per the rental agreement with its tenants, for the space teased out to them. Wherever the company is not able to recover from its tenants or in respect of the space not leased out, the unrecovered amount is borne by the company and charged to its Profit & Loss. Account as an expense. The rebate of 30% of revenue given under the head "Income from House Property" is solely meant for regular repairs and maintenance to keep the assets functioning. Such expenses are always revenue in nature. However, Sinking Fund is created to meet capital expenditure for replacing an asset and not to meet any routine running and maintenance expenses. Therefore, any collection of Sinking Fund on behalf of ITPL does not form part of income of Altitus. Further, the provision of section 23(1) of the Income Tax Act, 1961 defines the annual value of a rented property as higher of reasonable expected rent of the property and rent actually....
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.... sinking fund payment on behalf of the assessee company to ITPL, therefore, the same was to be treated as the rental income of the assessee and liable to be assessed as the income of the assessee from house property under Sec.24 of the Act. The A.O in the backdrop of his aforesaid conviction added the contribution of Rs. 33,86,952/- made by the tenants towards sinking fund to the rental income of the assessee. 3. The assessee assailed the aforesaid treatment of the contribution by the tenants to the sinking fund as its rental income by the A.O before the CIT(A). The assessee submitted before the CIT(A) that as the sinking fund was a fund collected to undertake carrying out of repairs of the building and was usually spent for the upkeep of the property, therefore, the same could not be considered as part of the rental income. The assessee in support of its aforesaid contention relied on the order of the coordinate bench of the Tribunal, viz. ITAT, Mumbai Bench, "J", Mumbai in the case of Mukesh D. Ambani Vs. ACIT, Special Circle 18(1), Mumbai, (7 SOT 521) (Mum). The CIT(A) after deliberating on the contentions of the assessee was persuaded to be in agreement with same. The CIT(A)....
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....considered the facts and circumstances of the case. Appellant's main business is acquiring the property and leasing them on rent. For acquiring the property appellant had borrowed the amounts from TCG Urban Infrastructure. This borrowal was mentioned as unsecured loan in balance sheet and also in the clauses of agreement it is stated that borrowal is for the working capital purposes of the appellant. However, if we consider the main activity of the appellant it is only purchase of properties and letting them on rent. Appellant has also offered the whole income from house property. For borrowal of the amount purchase of any property is u/s. 24(b) of the I. T. Act. Sec. 24(b) of the I. T. Act reads as-under: "Sec. 24(b) - Income chargeable under the head Income from house property shall be computed after making the following deductions namely: (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. In Sec. 24(b) it is clearly stated that where the property has been acquired, constructed, repaired, renewed or reconstructed with the borrowed capita....
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....uential interest element of Rs. 57,20,603/- to the income of the assessee from house property. 7. The CIT(A) during the course of the appellate proceedings observed that the A.O had made an addition of the notional interest of Rs. 57,20,603/- by relying on the decision of ITAT, Delhi in the case of Fizz Drinks (2005) 95 ITR 429 (Del). The CIT(A) observed that a similar issue had came up in the assessee's own case for A.Y 2010-11 before his predecessor, wherein the latter relying on the following judicial pronouncements:- (i) Gagan Trading Company Ltd. Vs. ACIT-5(2), Mumbai (2012) 28 taxman.com 78 (Mum). (ii) ACIT, 19(3) Vs. Monisha R. Jaysingh (2012) 21 taxman.com 9 (Mum). (iii) DCIT-10(1), Mumbai Vs. Reclamation Realty India (P) Ltd. (2011) 9 taxman 35 (Mum). (iv) J.K. Investor Ltd. Vs. DCIT (2000) 74 ITD 274 (Mum). , had concluded that if the income was offered by the assessee under Sec. 23(1)(b) then the notional interest on the interest free deposits received from the lessees cannot be added to the income of the assessee. The CIT(A) observed that the order passed by the Tribunal in the case of J.K. Investor Ltd. (supra) was confirmed by....
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....ative (for short 'A.R') for the assessee submitted that the CIT(A) following the order of the jurisdictional Tribunal in the case of Mukesh D. Ambani Vs. ACIT Special Circle 18(1), Mumbai (2006) 7 SOT 521 (Mum) and the judgment of the Hon'ble High Court of Bombay in the case of J.K. Investors (Bom) Ltd. (2000) 112 taxman.com 107 (Bom) and CIT-12 Vs. Tip Top Typography (368 ITR 330) (Bom), had deleted the addition of Rs. 33,86,952/- made by the A.O in respect of the sinking fund reimbursement recovered by the assessee from its tenants. It was thus submitted by the ld. A.R that as the issue involved was squarely covered in favour of the assessee, therefore, no infirmity did emerge from order of the CIT(A), who by following the aforesaid judicial pronouncements had decided the issue in favour of the assessee and deleted the addition so made by the A.O. 9. The ld. A.R further adverting to the deletion of the addition of Rs. 33,10,656/- (wrongly mentioned in the ground of appeal as Rs. 33,86,952/-) in respect of interest on borrowed capital claimed as deduction under Sec. 24(b) of the Act by the assessee, submitted that the CIT(A) observing that a similar disallowance of interest exp....
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....d that the CIT(A) after deliberating on the facts of the case had relied on the order of the coordinate bench of the Tribunal, viz. ITAT, Mumbai Bench "J", Mumbai in the case of Mukesh D. Ambani Vs. ACIT, Special Circle-18(1), Mumbai (2006) 7 SOT 521 (Mum), wherein the Tribunal being of the view that as the contributions of the occupants of the property towards sinking fund cannot be treated as the rental income of the assessee, had observed as under: "2. In brief the facts as enumerated by the Assessing Officer are that the appellants are owners of their respective flats in a building known as Usha Kiran, let out on leave and licence basis to M/s Aveshesh Mercantile Ltd. by Smt. Kokila D. Ambani and other appellant namely Shri Mukesh D. Ambani has let out his flat to M/s. Averan Textiles Ltd. on a monthly rent of Rs. 5,000 per month. So the rent was declared at Rs. 60,000 per month. The dispute is in respect of the following payments made by the said tenants to the said co-operative housing Society, reproduced by Assessing Officer as follows: Sr. No. Nature of payment Amount (Rs.) 1. Contribution for plumbing, rectification, painting and structural repairs ....
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....ty as determined: Rs.2,31,997/- Less: Income from house property as returned: Rs.48,000/- Difference by which returned income needs to be increased: Rs.1,83,997/- (Figures as per file of Shri Mukesh D. Ambani) 3. Being aggrieved the issue was carried before the first appellate authority and after reiterating the facts as referred hereinabove ld. CIT(A) has concluded that the reimbursement incurred by the licensee on behalf of the licensor were nothing but indirect rent paid by the licensee to the licensor. According to him as well for the purpose of calculating any rent received or receivable as per the provisions of section 23(1)(b) have to be considered hence, upheld the view of the Assessing Officer that the sum paid by M/s. Aveshesh Mercantile Ltd., the tenant, to the housing society on behalf of the appellant was in fact rent receivable in the hands of the appellant under section 23(1)(b) of IT Act. He has also rejected the alternate clam in respect of the said income to be taxed under the head "Other sources" under section 56 of I.T Act on the ground that the rental income was earned by virtue of being the owner of the house property hence to ....
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....ably be expected to let from year to year. The only finding thus left is in respect of the actual rent received by the owner. On one hand it is abundantly clear that the terms of the agreement were explicit and unambiguous that the licensor was under an obligation to maintain the said premises and bear the cost of maintenance. It is also not doubted that the licensee was under obligation to reimburse the proportionate share in respect of the monthly outgoings in respect of maintenance charges etc. On the other hand, it is not clear why the said amount was treated by the Assessing Officer as rent receivable in the hands of the assessee specially when the expenditure were nothing but outgoings in respect of the said flat. How an expenditure can be treated as rent received by the owner is not clear from the order of the revenue authorities. Whether an expense can be treated as an income has also not been clarified by the revenue authorities. From the clauses it can be observed that the licensee had paid the said amount against or raised by the society though in the name of the owners. The Assessing Officer has not raised, any doubt in respect of the genuineness of the bills raised. In....
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....ddition of Rs. 33,86,952/- on the said count by the CIT(A). The Ground of appeal No. 1 raised by the revenue before us is dismissed. 13. We now advert to the disallowance by the A.O of the claim of the assessee in respect of interest expenditure under Sec. 24(b) of Rs. 33,10,656/-, which was deleted by the CIT(A). We find that the CIT(A) observed that the issue pertaining to disallowance of interest on borrowed capital had came up before his predecessor in the assessees own case for A.Y 2010-11, wherein the said disallowance was vacated by the CIT(A) for the reason that the revenue had failed to establish that the borrowed funds were utilized by the assessee for purposes other than for acquiring the property under consideration. The CIT(A) observed that as the funds borrowed by the assessee were utilized for acquiring of property, therefore, following the order passed by his predecessor involving identical facts, deleted the disallowance of Rs. 33,10,656/- which was made by the A.O on the said count in the hands of the assessee. We find that though the A.O while framing the assessment was not oblivious of the fact that the identical issue was decided by the CIT(A) in the assesse....