2011 (6) TMI 499 - AT - Income Tax

Income from House property - deductions u/s 24 - dis-allowance of municipal taxes & Society charges on the ground that a flat deduction of 30% is allowable u/s.24(a) and no further deduction are allowed - Held that - Amount of deduction of municipal taxes is separately provided u/s 23(1) proviso hence AO is directed to allow the same. Further Society charges paid by the assessee in respect of the let out property are allowable while computing the annual letting value of the property u/s 23 - Decided in favor of the assessee Dis-allowance of 50% electricity charges - assessee is using his residence also as his office and accordingly claimed 75% of total electricity expenses as business expenditure allocating 25% towards personal use - Held that - In the absence of any contrary material placed on record by the Revenue to show that conferences with the producers & directors were not held at the residence of the assessee for the purpose of his profession or part of the residence was not used for business purposes and keeping in view the amount of income returned by the assessee Rs. 3.41 crores we are of the view that further disallowance of 25% over and above already disallowed by the assessee is without any basis and unreasonable and accordingly the same is deleted - Decided in favor of the assessee

Summary

Issues involved:
1. Disallowance of brokerage paid against rent received.
2. Disallowance of municipal taxes and Society charges from income from house property.
3. Disallowance of 50% electricity charges.

Analysis:
1. The appellant, a film artist, appealed against the disallowance of brokerage paid against rent received. The appellant decided not to press this ground during the hearing, leading to its rejection.
2. The dispute arose regarding the disallowance of municipal taxes and Society charges from the income from a property. The Revenue authorities disallowed the deduction based on the flat 30% deduction allowed under the Finance Act, 2001. However, the ITAT found that the law allowed for the deduction of municipal taxes as per Section 23(1) proviso, directing the AO to allow the deduction. Similarly, the ITAT allowed the deduction of Society charges based on precedents and the recent decision of the Delhi High Court in CIT vs. R.J. Wood P. Ltd.
3. The issue of disallowance of 50% electricity charges was raised due to the residential premises being used for both personal and office purposes. The AO allocated 50% of the expenses towards personal use, leading to an addition to the total income. The ITAT, after considering the nature of the appellant's profession and usage of the premises, found the additional disallowance unreasonable and deleted the same.

The ITAT's detailed analysis and application of legal provisions and precedents led to the resolution of the issues raised by the appellant in the appeal, resulting in adjustments to the disallowed deductions and charges.