TMI Blog2005 (11) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... prises and M/s. Tamil Nadu Raffles. While computing income from business, the assessee had claimed deduction of a sum of Rs. 7,24,120 being the Municipal Tax paid for the premises 16A/8, WEA, Karol Bagh, New Delhi, hereinafter referred to as "the property". The property consisted of Basement, Ground, 1st, 2nd and 3rd floors. The assessee occupied major portion of the third floor of 4,799.66 sq.ft. except for an area of 100 sq.ft. which was in occupation of a tenant viz. , LIC. 3. The property was owned by the assessee, his father, mother, brother, grand mother and wife i.e., by 6 co-owners. The assessee on the one side and the other co-owners on the other, entered into an MOU dated 1-4-1997, whereby it was agreed that the 3rd floor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire amount has been claimed as business expense whereas only 1/3rd space of the said building is being utilized by the assessee for the purpose of his business. In view of the same, 2/3rd house tax paid amounting to Rs. 4,82,747 is hereby disallowed and added to the assessable income for the assessment year 2000-01. 5. Before the CIT(A) the assessee contended as follows. That the payment of municipal taxes partakes the character of a rent since it satisfied the condition for being so called as it is a periodic payment paid for use and occupation of the premises demised. Reliance was placed on the following decisions. M. Subbiah Nadar v. CIT [1953] 23 ITR 58 (Mad.), Taj Mahal Hotel v. CIT [1967] 66 ITR 303 (AP). Alternativel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for business purposes, under section 30 of the Act. The disallowance made by the Assessing Officer is thus sustained and the appeal is dismissed. Moreover, this MOU has brought about a strange situation whereby the rental annual value of the said property has escaped incidence of tax. Since the appellant has paid house tax on behalf of the other co-owners and admittedly the fair market rent for the premises would be much higher, the Assessing Officer would be well within his rights to take recourse to legal proceedings under the Income-tax Act, 1961, and bring the income from the said house property in the hands of the other co-owners under the tax net, by taking the ALV based on the fair market rent and other incidental factors. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR relied on the order of the revenue authorities. We have considered the rival contentions. The assessee has filed application under rule 29 of the ITAT Rules praying that the lease deed between the owners of the property and M/s. LIC of India in respect of the 2nd floor of the property, be admitted as additional evidence. According to him the quantum of rent payable under this lease deed will be proper yardstick to measure the rent that the third floor of the property is likely to fetch. The ld. counsel for the assessee thus contended that the house tax paid for the whole property should be considered as a proper quantum of rent payable by the assessee for occupying the third floor portion of the property. The ld. DR opposed the prayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined - The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be rendered is called the rent." 10. As can be seen from the definition of rent it can be a price paid or promised or of money, a share of crops, service or any other thing of value to be rendered periodically or on specific occasions to the transferor by the transferee, who accepts the transfer of such terms. The MOU between the assessee one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure are - ( a ) section 37 of the Income-tax Act, 1961, is required to be construed liberally, ( b ) section 37 is of general nature and it operates in a wide range covering all expenditure laid out or expended wholly and exclusively for the purposes of the business or profession, which is not capital in nature or personal expenses of the assessee; ( c ) it may take into account not only the day-to-day running expenses of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process and assertion of hostile title; it may also comprehend payment of stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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