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TMI Blog2012 (5) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner of Income-tax (Appeals) was not justified in endorsing the aforesaid observations of the Assessing Officer. (c) The appellant submits that expenses claimed by it ought to be allowed as business expenditure and if the same are not allowed as business expenditure, the same ought to be reduced from rent received while computing annual value under section 23 of the Act. 2. The appellant submits that the Assessing Officer be directed : (i) to delete the disallowance of a sum of Rs. 1,19,55,318/- treating the same as business expenditure. (ii) Without prejudice to what is stated in (i) above, to reduce the expenses from the rent received for the purpose of section 23; and to modify the assessment in accordance with the provisions of the Act." 2. After hearing both the parties, we find that the assessee company was incorporated to carry on the business of builders, contractors & investment in immoveable properties for sale, lease, etc. During the year, the assessee company acquired units bearing Nos.401, 501, 601, 701 & 801 in the building known as "Magnus Towers" in Mumbai. The same were leased out during the year. The income from the lease was reflected in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenses should be allowed s business expenditure as these are incurred wholly and exclusively for the purpose of its business... Without prejudice to what has been stated above, the assessee submits that in case the said expenses are not allowed as business expenses, the same should be reduced from the rent received while computing annual value under Section 23 of the Act." The AO noted that 'income from house property' is to be assessed u/s.22 and the expenditure on brokerage and commission amounting to Rs. 52,98,936/-, professional & consultancy fees amounting to Rs. 50,19,594/-, maintenance expenses amounting to Rs. 15,78,742/- and other sundry expenses amounting to Rs. 58,046/- claimed under the head 'income from business and profession' is primarily related to the leasing out of the premises. He further noted that such kind of deductions are covered by the statutory allowance u/s.24. Therefore, the same cannot be claimed again as business expenditure and accordingly these expenses were disallowed. 3. On appeal before the ld. CIT(A), it was mainly submitted that expenses were incurred in the normal course of business and, therefore, the same were rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned under the head 'income from house property'. Under section 14 of the Act, five heads of income have been provided, namely: A. -Salaries B. - C. -Income from house property D. -Profits and gains of business or profession. E. -Capital gains. F. - Income from other sources. Total income of the assessee has to be assessed under the above heads. It is settled position of law that only those deductions can be allowed by computing the income which are provided under a particular head. Same proposition has been approved by the Hon'ble Delhi High Court in the case of H.G. Gupta & Sons (supra). Paragraph 5 of the judgment reads as under : "5. The annual value of the property, which is the subject of charge, was originally defined in s. 23(1) as "The sum for which the property might reasonably be expected to be let from year to year". The annual value is thus the sum for which a landlord could let the premises having regard to the condition of the property and of the prevailing circumstances as the language suggest. The taxes are charged on the artificial or notional income. It is based on the annual value of the property. The authorities under the Act, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified. The rent received in assessee's case for the full year is the annual letting value. As the commission is snot eligible as a deduction under s. 24 it shall not be allowed as an expenditure under house property income. 14. As regards question (iii), learned counsel for the assessee submits that rent to the extent of brokerage was an independent transaction envisaging payment to the broker. Wherever deductions out of income from property are permissible, the same have been specified in s. 24. De hors the said provision, deduction from income is not permissible." Therefore, it is clear that annual value cannot be reduced by the amount of expenses because sec. 23(1) clearly talks of annual rent received and the expenditure can be claimed only u/s. 24. It is to be noted that sec. 24 has been amended w.e.f. 01-04-2002. Before the amendment, various categories of expenditure like collection charges, insurance premium, ground rent, land revenue, etc., were allowable, but after the amendment, only two types of deductions are possible, namely, 30% of the total annual value and amount of interest paid for acquisition of property. No other deduction is possible and accordingly we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized; " The ld. CIT(A) has decided the issue vide para 11 which is as under : "11. I have carefully considered he submissions of the appellant and also perused the order of the assessing officer. The provisions of section 24 as extracted by the appellant in the submission for Ground No. 4 nowhere provides for deduction on account of processing fees for sanction of bridge loan as claimed by the appellant. The provisions of section 24 being specific and clear needs no further interpretation. However, the word 'interest' has been defined under section 2(28A) of the Act which is an inclusive definition and includes any service fees or other charges in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. This being so, the processing fees is also admissible for deduction under section 24 of the Income-tax Act. Accordingly, the Assessing Officer is directed to allow deduction on account of processing fees of Rs. 30,00,000/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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