TMI Blog2017 (6) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasonable annual letting value, then the annual letting value would be different in the first year as compared to the subsequent years, The expenditure incurred on a lease for a period of 5 years towards the stamp duty and registration charges is only in the first year. The annual value of any property is deemed to be the same for which the property might reasonably be expected to let from year to year. It is a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis. The annual value cannot be left to fluctuate when the lease is for a period of 5 years. Answer the reference in the negative, i.e., in favour of the department and against the assessee. - ITA No. 3480/MUM/2014 - - - Dated:- 19-4-2017 - SHRI SAKTIJIT DEY (JUDICIAL MEMBER), AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For The Assessee : Shri Vimal Punmiya, AR For The Revenue : Ms. R.M. Madhavi, Sr. DR ORDER PER N.K. PRADHAN, AM This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order Commissioner (Appeals) 23, Mumbai and arises out of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The assessee preferred an appeal against the order of the AO before the learned CIT(A). We find that the learned CIT(A) followed the order of the ITAT in the case of Sharmila Tagore 93 TTJ 483 and allowed the claim of 3 maintenance charges paid by the assessee to the Society. However, in view of the specific provisions of the Act, the learned CIT(A) disallowed the claim of the assessee of brokerage expenses, legal and professional fees, bank charges and electricity charges. 5. Before us, the learned counsel of the assessee submits that brokerage expenses, legal and professional fees, bank charges and electricity charges were necessarily required to be incurred for the enjoyment / use of the relevant property by the tenant and therefore, the annual value of the property should be taken after reducing such expenses which are directly attributed to the earning of rental income. It is further stated that in the assessee s own case for the assessment year 2001-02 and 2002-03, the learned CIT(A) has allowed the above expenses . Hence, once the expenses are allowed by the learned CIT(A) in the earlier years, disallowance in the subsequent year is not warranted. Reliance is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually received or receivable after excluding unrealised rent but before deducting loss due to vacancy Step 3 Find out which one is higher: amount computed in Step 1 or Step 2 Step 4 Find out loss because of vacancy Step 5 Step 3 minus Step 4 is gross annual value We find that from the gross annual value, municipal taxes (including service taxes) levied by any local authority in respect of the house property are deducted. Municipal taxes are deductible only if (a) these taxes are borne by the owner, and (b) are actually paid by him during the previous year. The remaining amount left after deduction of municipal taxes is net annual value. As per provisions of section 24, the following two deductions are available:- a) Standard deduction b) Interest on borrowed capital The list of allowance of section 24 is exhaustive. In other words, no deduction can be claimed in respect of expenses on insurance, ground rent, land revenue, repairs, collection charges, electricity, water supply, salary of liftman etc. 7.1 Now we turn to the decisions relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed at para 7.3 infra. In Bombay Oil Industries Ltd. (supra), the issue before the Tribunal was capital gains and tax planning. This is not so in the instant case. In Neelam Cable Mfg. Co.(supra), the Tribunal held that the amount of security service charges claimed by the assessee was deductable from gross rent received while computing annual value u/s 23. Also it held that in view of proviso to section 23, entire amount of house tax actually paid by the assessee in year under consideration should be allowed as deduction. In Lekh Raj Channa (supra), the Tribunal has held in respect of collection charges that the assessee can claim only that part of the expenditure which is referable to collection; other expenses on security and services to tenants can be deducted from ALV. The learned counsel of the assessee has not filed a copy of the unreported order in Saif Ali Khan (supra) and Blue Mellow Investment Finance (P) Ltd. (supra). Therefore, we are not in a position to analyse the said decisions. In Sir Sobha Singh Sons (P) Ltd. (supra), for the assessment year 1985-86 the assessee claimed deduction of ₹ 74,372/- on account of salaries paid to watchman, swee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll outgoings such as electrical charges and depreciation of furniture and fixtures would be allowable therefrom. In Sunil Kumar Agarwal (supra), the assessee had purchased commercial space in a society which had been let out to a company. The agreement with the tenant stipulated that the property tax and the maintenance charges payable to the society would be borne by the owner as the same was duly compensated in the gross rent. In his return of income, the assessee had shown gross rent and claimed deduction on account of charges paid to the society for maintenance. The Assessing Officer disallowed the claim holding that 30 per cent deduction allowed under section 24 takes care of such expenses. On appeal, the Commissioner (Appeals) deleted the addition. The Tribunal held that the assessee was paying the charges to the society for the common area amenities which were deductible from the gross rent received by the assessee. The charges paid to the society by the assessee were not covered in the allowable deduction as enumerated under section 24 since the gross rent received by the assessee also included the society charges which were to be paid by the assessee. Therefore, the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nakarlinga vs. CIT 4 ITC 226, 241 (FB). Therefore we are not addressing to the decisions relied on by the learned counsel of the assessee that consistency should be made. 7.3 The learned counsel of the assessee has relied on the orders of the Tribunal as discussed at para para 7.1 here-in-above. There is only one judgment of the High Court he has relied on i.e R.J. Wood (P) Ltd. (supra) . In that case, the assessee had leased out its premises to five tenants. Lease agreements were entered into in this behalf wherein rent to be received by the assessee from those tenants was specified. The tenancies became operative with effect from October, 1992. However, dispute arose about payment of the said rent. Said premises were in a multi-storey building and maintenance charges were payable by the occupier to the agency/builder maintaining the building. The tenants claimed that the rent payable by them to the assessee included maintenance charges and, therefore, it was the obligation of the assessee to pay the maintenance charges. The assessee, on the other hand, wanted these tenants to pay the maintenance charges exclusive of contractual rent. Because of this dispute, the tenants filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sum for which a landlord could let the premises having regard to the conditions of the property and of the prevailing circumstances, as the language suggests 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, have to make the assessment on the basis of the notional annual value. Section 23 lays down how the annual value is to be determined. Section 24 provides that income chargeable under the head Deductions from Income from house property shall, subject to the provisions of sub-section (2), be computed after making the deductions specified therein. The Legislature has used the word 'namely' and this shows that the heads of expenditure where for deduction can be claimed are exhaustive. The expenses incurred in providing the proper stamp paper in case of a lease or agreement to lease is by virtue of the provisions contained in section 23 of the Indian Stamp Act, 1899, and is on the lessee or intended lessee, in the absence of an agreement to the contrary. It may be for this reason, that the Legislature did not include such expenses in the permissible deductions under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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