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TMI Blog2005 (4) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee-company has claimed deduction of Rs. 16,54,000 on account of commission paid in computation of its income under the head 'Income from house property'. He, therefore, required the assessee to explain the deduction so claimed and in reply, it was submitted on behalf of the assessee-company that the deduction on account of commission has been claimed under the charging section of 'Income from house property' and since the rent actually received or receivable by the assessee was only the net amount after payment of commission, such net income was chargeable to tax under the head 'Income from house property'. The Assessing Officer, however, did not find merits in the submission made on behalf of the assessee-company and disallowed the claim of the assessee for deduction of Rs. 16,54,000 on account of commission. The matter was carried before the learned CIT(A) in an appeal preferred by the assessee-company and it was submitted on its behalf before him that it could manage to let out its property only with the help of property agents and since the actual rent received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of computation of total income and since such classification is a matter of convenience, the same cannot override the basic charging provisions contained in section 4. He also contended that since the property agent was having overriding title on the rental income to the extent of his commission, income from rent to the extent of such commission payment did not accrue to the assessee at all. In support of this contention, he relied on the decisions of Hon'ble Supreme Court in the case of CIT v. Imperial Chemical Industries (India) (P.) Ltd. [1969] 74 ITR 17, CIT v. Travancore Sugars & Chemicals Ltd. [1973] 88 ITR 1, CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 and on the decision of Hon'ble Calcutta High Court in the case of CIT v. Jhanzie Tea Association [1989] 179 ITR 295. He further contended that there is no dispute about the fact that expenditure amounting to Rs. 16.54 lakhs was actually incurred by the assessee-company on payment of commission and the same could alternatively be allowed under the head 'Income from other sources' and resultant loss could be allowed to be set off against income from other heads. 5. The learned counsel for the assessee also subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deducted even while computing the annual value under the above-mentioned provision. 8. The learned DR, on the other hand, submitted that the Income-tax Act is a self-contained code wherein subject-matter as well as rights and liabilities are well defined and computation methods are specifically provided. He submitted that there is no dispute about the position that rental income earned by the assessee-company is chargeable to tax under the head 'Income from house property'. He contended that such income, therefore, has to be computed in accordance with the provisions of section 22 to 27. Referring to the provisions of section 23, he submitted that the annual value of the property has to be taken as the sum for which the property might reasonably be expected to let from year to year or where the property is let and if the annual rent received or receivable by the owner in respect thereof is in excess of the said sum, the amount so received or receivable. He submitted that the property in question was actually let out by the assessee company in the year under consideration and the rent actually received was required to be taken as annual value without allowing any deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der five different heads and the income chargeable to tax under these heads has to be computed as per the relevant provisions applicable to the respective head of income. Sections 22 to 27 falling under Chapter IV-C deal with assessment of income under the head 'Income from house property' and sections 22 to 24 particularly provide the manner and method of computing the income chargeable to tax under the said. Section 22 lays down that the 'annual value' of house property shall be chargeable to income-tax under the head 'Income from house property'. The expression 'annual value' has been defined in section 2(2) which lays down that 'annual value' in relation to any property means its annual value as determined by section 23. Section 23 as is applicable to the year under consideration provides that actual rent received would represent the annual value if such actual rent received exceeds the sum for which the property might reasonably be expected to let from year to year. The sum called 'annual value' in section 23(1) is really gross annual value because deductions mentioned in the first and second proviso to subsection (1) and in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, we derive support from the decision of Hon'ble Delhi High Court in the case of CIT v. H.G. Gupta & Sons [1984] 149 ITR 253 wherein it was held that deduction of expenditure incurred on stamp duty and registration in connection with execution of lease deed is not allowable as neither section 23 nor section 24 provides for such deduction. Explaining further, their Lordships of Delhi High Court have observed that use of the word 'namely' in section 24 shows that heads of expenditure whereof deduction can be claimed in the computation of income from house property are exhaustive. In the case of Indian City Properties Ltd. v. CIT [1965] 55 ITR 262, Hon'ble Calcutta High Court has held that deduction specified in section 24(1) are exhaustive and in order that a particular expenditure may be claimed as permissible deduction, it should come within the ambit of one of the clauses of section 24(1). It was also held by the Hon'ble Calcutta High Court that deduction cannot be claimed under any general principle of law or on the considerations of equity. 12. Before us, the learned counsel for the assessee has contended that the commission payable to the property agent b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich constituted its income at the point when it reached or accrued to it whereas commission was paid separately to the property agents to discharge its contractual liability. In the case of Imperial Chemical Industries (India) (P.) Ltd. cited by the learned counsel for the assessee, the Hon'ble Supreme Court has held that an obligation to apply income which has accrued or arisen or has been received amounts merely to application of such income. In the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172, the Hon'ble Supreme Court has observed that the tax is attracted at the point when the income is earned and taxability of income is not dependent upon its destination or manner of its utilization. Keeping in view these decisions of Hon'ble Supreme Court, we hold that the payment of commission by the assessee-company to property agents did not amount to diversion of income by overriding title and the contentions raised by the learned counsel for the assessee in this regard are not acceptable being devoid of any merits. 13. The contention based on the supposed principle of accounting namely the 'act of balancing' cannot also be, with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces' and also to allow the resultant loss under the said head to be set off against income from other heads, it is observed that section 57 specifies deductions allowable in computing the income chargeable under the head 'Income from other sources' and clause (iii) thereof is a residuary provision which lays down in express terms that in respect of every item of income chargeable under section 56, revenue expenditure which is laid out wholly and exclusively for earning that income would be allowable. In the present case, the commission expenditure in question was laid out for earning rental income arid since the said income admittedly was chargeable to tax under the head 'Income from house property' and not under the head 'Income from other sources', we are of the view that the same could not be allowed under section 57. In that view of the matter, we find it difficult to accept even the alternative contention raised by the learned counsel for the assessee before us. 16. As such, considering all the facts of the case as well as keeping in view the legal position emanating from the interpretation of relevant provisions as well as aforesaid judicial prono ..... X X X X Extracts X X X X X X X X Extracts X X X X
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