TaxTMI 
TaxTMI 
2022 (3) TMI 1673
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....nd circumstances of the case and in law, the learned CIT(A) ought to have directed the learned AO that the property tax of Rs. 2,96,42,384/- which has been paid during the year be deducted in terms of first proviso to section 23(1) of the Act from the rentals, in determining the annual value in terms of section 23 of the Act and the income from house property ought to have been determined accordingly. 3. It is humbly prayed that the reliefs as prayed for hereinabove should be granted. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. The assessee had filed its return of income electronically on 30.09.2015 declaring total loss of Rs. 2,22,164/-. The case was selected for scrutiny and assessment was completed u/s 143(3) vide order dated 26.12.2017 assessing total income at Rs. 16,11,209/-. 4. The brief facts are that the assessee is engaged in the business of real estate development, had constructed a shopping complex with cinema theatre (Milan Mall) which was given under a Leave and License Agreement dated 23.12.2006 to M/s Pantaloon Retail (I) Ltd (Subsequently called Future Retail Ltd) which Agreement....
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.... and in the year under consideration, no rental income has been returned by the assessee. The provisions of section 25AA provides for taxability of receipt of unrealized rent, whereas the deduction on account of property tax is contemplated while calculating the 'Annual Lettable Value' and not unrealized arrears of rent. On the said reasoning the AO has held that unrealized rent is to be taxed directly without allowing any benefit of deduction. In respect of claim of service tax, it has been held by the AO that only specific deductions are allowed which are mentioned in sections 23 & 24 of the Income Tax Act, 1961. The list of deductions is exhaustive and it does not include deduction in respect of service tax. Service tax is a liability that is to be collected from the tenant and paid to the Government and it has no impact or is in any manner concerned /connected with computation of House Property income. 8. Aggrieved, assessee preferred an appeal before CIT(A) and The Ld CIT (A) has upheld the action of the AO. The Ld CIT(A) has confirmed the disallowance made by the AO in respect of property tax on the ground that in the instant case, what is chargeable to tax is the rent rec....
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.... the assessee is the owner of that property in that previous year." 10. It is the contention of the Ld AR that as per section 25AA the words "the amount so realised shall be deemed to be income chargeable under the head Income from house property" tantamount to providing the same treatment as normal rent received by the assessee and thus, the computation has to be in accordance with the provisions of section 23 and 24 of the Act. Accordingly, the unrealised rent is also subject to claim of deduction as provided for under section 23 and 24 of the Act. If the intention of legislation was otherwise it would have explicitly provided in the Section 25AA of the Act that no deduction of whatsoever nature would be available for such arrears of rent and in absence thereof, the provisions cannot be interpreted in such manner. Section 22 is the substantive provision which deals with annual value and Section 23 provides for the manner of computing the annual value. Section 24 provides for deduction in computing the income from house property, therefore one has to pass through this machinery provision for computing the income under the head income from house property. The provisions of Secti....
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....or unrealized rent. As per the scheme of this amendment i.e., 1st day of April 2017, when unrealised rent pertaining to assessment year 2018-19 or any earlier year, which was earlier allowed as deduction is subsequently received, then amount so received will be brought to tax under the head 'House Property'. The natural corollary is that such amount will be charged to tax without allowing any deduction. However, when unrealised rent pertaining to assessment year 2018-19 or any subsequent year is realised, the amount to the extent to which it has not been included in the annual value earlier, shall be deemed to be income from House Property as per section 23 of the Act and will be chargeable to tax in the previous year in which it is received. It therefore follows that in such case, the assessee will be entitled to claim deduction from House Property from the 'annual value' of the property. 14. There is no doubt that any tax paid to Government is to be allowed as deduction from the annual value as computed. In the case of the assessee, it is observed that all conditions have been satisfied for claiming and allowing property tax paid. It has been borne by owner of property and pai....