ITAT Deletes Expense Disallowance as CAM Charges Were Taxed as Business Income

DCIT-CC-8(4) Vs Offbeat Developers Private Limited (ITAT Mumbai)

The Mumbai Income Tax Appellate Tribunal examined Revenue appeals involving disallowances made on various expenses claimed by a mall developer engaged in leasing property and providing related services, where income was offered under both “Income from House Property” and “Profits and Gains from Business or Profession.” The Assessing Officer had proportionately allocated several expenses to house property income based on the ratio of rental income to total income and made disallowances on repairs and maintenance, legal and professional charges, employees’ remuneration, advertisement and sales promotion, miscellaneous expenses, and security charges.

On repairs and maintenance, the Tribunal upheld the appellate finding deleting the disallowance, noting that expenditure related to upkeep of common areas of the mall, not the leased premises, and such common area maintenance obligations were contractually undertaken by the assessee. Charges recovered from tenants as Common Area Maintenance (CAM) charges were offered as business income, and corresponding expenses were held allowable as business expenditure.

Regarding legal and professional expenses, the Tribunal observed that the assessee had already made suo motu disallowance for common expenses in proportion to income heads. It held that the Assessing Officer had no tangible basis to further apportion expenses merely because income was taxed under two heads, and therefore upheld deletion of the further disallowance.

For employees’ remuneration, the Tribunal accepted that staff costs related substantially to mall management, maintenance of common areas, and contractual obligations connected with CAM services, income from which was taxed as business income. It found no reason to disturb the appellate authority’s deletion of the further addition beyond the assessee’s own disallowance.

On advertisement and sales promotion expenses, the Tribunal noted that expenditure was incurred to promote the mall as a whole, attract footfalls, support events, and discharge obligations for which recoveries were also made from tenants. While the appellate authority retained a limited disallowance of ₹24 lakh, the balance deletion was upheld because the expenditure was linked with business income and mall operations rather than solely rental income.

For miscellaneous and general expenses, the Tribunal accepted that many expenses were administrative and day-to-day business expenses unrelated to earning rental income. However, since no suo motu allocation had been made in respect of office and general expenses, proportionate disallowance for those specific items was sustained, while the remaining disallowance was deleted.

On security charges, the Tribunal held that security services were provided for common areas of the mall, not inside individual leased units, and corresponding recoveries formed part of CAM charges taxed as business income. It therefore upheld deletion of the entire proportionate disallowance made by the Assessing Officer.

In addition, for Assessment Year 2021-22, the Tribunal upheld the appellate direction allowing verification of an additional deduction claim for property tax, holding that while the Assessing Officer could not entertain a revised claim during assessment proceedings, appellate authorities had power to consider such claims arising from the record and direct verification in accordance with law. On these findings, all Revenue appeals were dismissed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These appeals have been preferred by the Assessee against the orders even dated 25.08.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Ys. 2016-17, 2017-18, 2018-19 & 2021-22.

2. In the appeals under consideration, the issues/additions involved are based on the identical facts and circumstances, except variation in amounts as made by the AO and deleted by the ld. Commissioner in part and thus, for the sake of brevity and convenience, the same were heard together and are being disposed by this composite order, taking into consideration the ITA No.6797/M/2025 as a lead case and result of the same should be applicable mutatis mutandis to the appeals under consideration.

3. Coming to ITA No.6797/M/2025 it is observed that in this case, the Assessee by filing its original return of income on dated 29.11.2016 declared a loss of (-) Rs.87,39,38,861/- which was subsequently revised vide revised return dated 21.03.2018 declaring total income at (-) Rs.87,39,38,861/-. The return filed by the Assessee was selected for scrutiny and accordingly statutory notices were issued to the Assessee, in response to which the Assessee filed the relevant details.

4. Perusing the details filed by the Assessee, the Assessing Officer (AO) observed that the Assessee was formed with a primary objective of real estate development and during the year under consideration was engaged in the business of providing its property on lease and various services. Further, the Assessee continues the developing commercial, retail and entertainment complexes and offered its income on sale of property development on the basis of ‘percentage completion method’.

5. The AO by perusing the profit and loss account observed that the Assessee during the year under consideration has claimed following expenditures:

6. The AO in order to examine the aforesaid expenses, show caused the Assessee to explain, why the additions made in the earlier years should not be made in the year under consideration.

7. The Assessee in response to the aforesaid show-cause, filed its contentions, vide letter dated 10.10.2018.

8. Considering the contentions of the Assessee and the expenses claimed with respect to the repairs and maintenance expenses, the AO observed that the Assessee has used its premises for letting out and offered income under the head ‘income from house property’ and therefore, the repairs and maintenance cannot be allowed under the head ‘business income’, as the Assessee has already availed the benefit of standard deduction with respect to the same. However, since the Assessee has used its office under same premises and therefore, 10% of the total repairs may be allowable under the heads of ‘business income’.

9. With regard to the balance expenses, the AO observed that the Assessee in its profit and loss account has included dual income i.e. income from house property and income from business profession and therefore the allocation of expenditure has to be done in the ratio of receipts offered under business and lease income. The revenue of the company during the year under consideration was of Rs.234,41 crores. The revenue comprises of income from house property was Rs.95.38 crores and other than income from house property was Rs.139.03 crores. Therefore, the ratio of house property income to total income is 40.69% and therefore, as such the expenditure under various heads mentioned above is required to be allocated in the ratio of 40.69%.

10. Thus, AO while applying the above rational worked out the disallowances as under: –

11. The AO thus, on the aforesaid reasons, disallowed the amount of 17,67,46,525/- in total by passing the assessment order.

12. The Assessee therefore, being aggrieved with the decision of the AO in making the aforesaid disallowance, challenged the same by filing first appeal before the ld. Commissioner, who vide impugned order deleted the additions in part, and therefore, Revenue being aggrieved has preferred the instant appeal.

13. The ld. D.R. in support of Revenue’s appeal, more or less claimed that the decision of the AO in making the aforesaid additions/ disallowances, is based on the peculiar facts and circumstances and due verification and also considering the specific fact that decisions of the Hon’ble Coordinate Benches of the Tribunal in the case of Phoenix Mills Ltd. are sub-judice before the Hon’ble High Court, as the appeals filed against such orders, as relied on by the ld. Commissioner are still pending for adjudication before the Hon’ble High Court. Even otherwise, the decision of the Hon’ble Tribunal in the case of another entity, which is otherwise not finally adjudicated upon by the Hon’ble High Court and therefore, cannot override the AO’s factual findings in the present case and therefore, the decision of the ld. Commissioner is not acceptable on merit as well.

13.1 On the contrary, the Assessee supported the order passed by the ld. Commissioner by contradicting the decision of the AO and contending that the additions/disallowances made by the AO were bad in-law and facts. Further, the ld. Commissioner not only relied on the judgments of the Hon’ble Tribunal in the Assessee’s sister concern i.e. Phoenix Mills Ltd. but also considered the factual aspects of the case in hand. Further, it is not in denial by the Revenue that facts and circumstances as involved in Phoenix Mill’s case and the present one, are factually similar, except variation in amounts. Further, as on today, the orders of the Hon’ble Tribunal as relied on by the ld. Commissioner subsists and have not been stayed or set aside by the Hon’ble High Court. Thus, on the aforesaid reasons, the order passed by the ld. Commissioner, is liable to be upheld.

14. Having heard the parties and perusing the material available on record and considering the rival contentions of the parties and the decisions of the authorities below, it is observed that the Revenue Department has raised following grounds of appeal:

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 4,15,24,749/- made by the Assessing Officer on account of repairs and maintenance additionally claimed by the assessee, without appreciating the fact that rental income being assessed under the head “Income from House Property” and the assessee has already been granted statutory deduction w/s 24(a) of the Act and additional claim of repair & maintenance will under business head amount to impermissible double deduction claim of expense & thereby violating provisions of I.T. Act, 1961?.

2. Whether on the facts and in the circumstances of the care and in law, the La CIT(A) was justified in deleting the disallowance of Rs. 1,01,89.874/- on account of legal & professional fees, ignoring the fact that these expenses were directly relatable to leasing activity and appropriately allocable to income from house property?

3. Whether on the facts and in the circumstances of the case und in law, the Id CIT(A) was justified in deleting the disallowance of 3,82,35,433/- on account of salary and director’s remuneration, without appreciating that staff were primarily engaged in property management and tenant-related functions, intrinsically linked to rental income for which assessee has already claimed standard deductions u/s 24(a) of the Act?

4. Whether on the facts and in the circumstances of the case and in law, the Lit. CITA was justified in restricting the disallowance on account of advertisement und soles promotion expenses to Rs. 24 lakh only, without appreciating the fact that these expenses were incurred mainly for tenant acquisition, occupancy retention and enhancing rental streams, and therefore rightly attributable to “House Property” activity for which assessee has already claimed standard deduction u/s 24(a) of the Act?

5. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in deleting the disallowance of Rs. 37.98.195/- on account of miscellaneous and general expenses, without appreciating that these are common in nature and benefit both leasing and business activities?

6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 1.58.68,460/- on account of security charges, ignoring the fact that security of the mall premises is essential for earning lease income and therefore proportionate allocation to house property head was justified?”

15. For the sake of brevity and convenience, we deem it appropriate to decide this appeal ground wise.

16. Thus, coming to the Ground no.1, which pertains to the disallowance of 4,15,24,749/- on account of repairs and maintenance made by the AO, mainly on the reason that the Assessee has used its premises for letting out and offered the income under the head ‘income from house property’ and therefore, ‘repairs and maintenance’ cannot be allowed under the head ‘business income’ as the Assessee has already availed the benefit of standard deduction with respect to the same. The AO further held that since the Assessee has used its office under the same premises and therefore, 10% of total repairs may be allowable under the head of ‘business income’. The AO by considering the revenue of the Assessee during the year under consideration to the tune of Rs.234.41 crores, which comprises of income from house property at Rs.95.38 crores and other than income from house property at Rs.139.03 crores, worked out the ratio of house property income to the total income at 40.69% and accordingly, made the disallowance of Rs.4,15,24,749/- on account of repairs and maintenance, in addition to the disallowance of Rs.2,43,27,789/- suo moto made by the Assessee.

17. The Assessee before the ld. Commissioner, with regard to the aforesaid disallowance, has claimed as under: –

“1. Repairs and maintenance amounting to Rs.7,31,69,487/-

The applicant in its profit and loss account has debited Rs.7,31,69,487 towards repairs and maintenance charges. Out of the said amount the Assessee has suo moto disallowed a sum of Rs.2,43,27,789 as the same was pertaining to building and the balance expenses is claimed under the head “Income from Business or Profession”. The rationale behind claiming the balance expenses under the head “Income from Business or Profession” are as follows:

These are all legitimate business expenses incurred by the applicant for various business purposes;

The applicant is in receipt of maintenance recoveries as CAM charges from the tenants, which have been duly offered to tax under the head business income and accordingly, the corresponding expenditure incurred to provide such CAM services should also be allowable under the head “Income from Business or Profession”. Further it is also important to note that the applicant is not responsible for the repairs inside the leased premise i.e. the shop in the mall.”

18. The ld. Commissioner by considering the peculiar facts of the case, submissions of the Assessee and the observations of the AO in the context of the addition under consideration, observed that the similar issue has also arose in the case of Assessee’s holding company ‘the Phoenix Mills Ltd.’ for the AYs 2009-10 to 2014-15 cases and travelled up to the Hon’ble Tribunal, who vide composite order dated 06.10.2016 in ITA Nos.51/M/2025 (AY 2009-10) and No.52/M/2025 (AY 2010-11) decided the issue in favour of the Assessee by observing and holding as under:

“83. We have carefully gone through the Lease agreement so placed in paperbook which clearly provides for common area maintenance to include regular cleaning of the common areas of Courtyard, including the said Mall and elevation of the building outside the Licensed Premises. Regular repairs and maintenance of the said mall. Thus, it is clear from various clauses of lease agreement that the assessee is responsible for-regular upkeep of the common areas of the mall. However, the assessee is not responsible for the repairs inside the leased premises ie the shop in the mall. It is the portion other than leased portion which is the responsibility of the assessee. And the assessee eams CAM charges for the same. Accordingly, no portion of the repairs is allocable to income from house property as the repairs to the lease house property is no way responsibility of the appellant. Eg.if M/s Pantallons (lessee) carries out expenditure for repairing of lights in its rented premises than M/s Pantallons (lessee) will pay for the same and not the assessee. So the question of assessee incurring repair expenses for the rental income doesn’t arise at all.

84. As per our considered view disallowance of any expense under business and profession can only be made if such expense is carried out for earning income from any other head or earning exempt income. However, in the assessee’s case the same does not hold true. The assessee has incurred repairs and maintenance in order to keep its mall in an arrangement which will attract customers and for general maintenance of common area. Further the said expenses are carried out for maintenance of common area which is part of the mall and not of shops/premises from which rental income is earned….”

19. We further observe that the ld. Commissioner also taken into consideration the peculiar fact that his predecessor CIT (A) has also followed the aforesaid judgment of the Hon’ble Tribunal and allowed the identical claim in the appeals filed by the Assessee’s holding company in AYs 2011-12 to 2014-15 cases and therefore, the Department has also challenged the said order of the then CIT (A) before the Hon’ble Tribunal, who vide order dated 15.01.2019 passed in ITA nos. 3991-3994/Mum/2018, ultimately upheld the order of the then ld. CIT (A), by observing and holding as under:-

“29. As the facts and circumstances during the year under consideration are parimateria, respectfully following the order of the Tribunal in assessee’s own for the A.Y. 2009-10 and 2010-11, which has also been relied by the Id. CIT(A) while deleting the addition, we do not find any reason to interfere in the order of the id. CIT(A) in deleting the said addition. Accordingly, we uphold the same.”

20. We further observe that the Hon’ble Coordinate Bench of the Tribunal in the Assessee’s holding company as observed by the ld. Commissioner in the impugned order, has perused the leave and license agreement of the said holding company and noted its observations in para 54 of the order passed for the AYs 2009-10 and 2010-11, which clearly substantiates that the holding company of the Assessee has made recoveries in relation to regular cleaning of common areas, security services for the common areas, repairs and maintenance of the common areas, cost of the Mall management staff, etc. The Hon’ble Bench further observed that the holding company also recovered costs related to marketing and promotion expenses. Further, income from common area maintenance was also offered to tax by the holding company, as business income. As per contractual obligation, the Assessee is required to incur a lot many expenses, which would be significantly higher than the expenses, which would have been incurred, if the Assessee would stop its activities and be just a mere lessor.

21. We further observe that the ld. Commissioner also perused the leave and license agreement of the Assessee, specifically the relevant clauses related to or meaning assigned to ‘common area maintenance’ or ‘CAM’ and ‘CAM Charges’. The ld. Commissioner observed from the definition that ‘CAM charges’ will also reflect the cost associated with consumption of electricity for common areas (excluding electricity consumed for Air conditioning), routine marketing and promotional activities, security services for common areas and cost of management staff, exclusively working for the said Mall.

22. The Ld. Commissioner also observed from the definition of ‘common area’ that the ‘common area’ does not include the area of the licensed premises. Thus, the genesis of the agreement entered into by the Assessee’s holding company and that by the Assessee is on the same footing. Further, the similar recovery of charges has also been made by the Assessee, vide the leave and license agreement entered into by the Assessee with its tenants. Further, the nature of activities by both the companies are identical in all aspects. The AO has also made the disallowance in the case of Assessee on similar lines, as that made in the case of holding company and therefore, the order of the Hon’ble Tribunal is squarely applicable to the Assessee as well.

23. The ld. Commissioner also observed that the AO has made addition involved, on the similar grounds, as that in the case of the holding company, without establishing contrary findings in the Assessee’s case, in this regard.

24. Thus, the ld. Commissioner on the factual findings and respectfully following the orders of the Hon’ble Tribunal and his predecessor, ultimately decided the issue in favour of the Assessee.

25. We have given thoughtful consideration to the peculiar facts and circumstances of the case and observe that facts and issues as involved in the Assessee’s holding company were pari-materia with the case of the Assessee and the AO merely made the addition on the ground that each year is a distinct and separate and the Department has already challenged the decisions of the Hon’ble Tribunal in the Assessee’s holding cases and therefore, the addition on the basis of previous assessments, is liable to be made. Whereas, it is a fact that the Hon’ble Tribunal has also dealt with identical issue and decided in favour of the Assessee’s holding company and by taking cognizance of such fact/decision of the Hon’ble Tribunal, the predecessor of the ld. Commissioner has also decided the issue in favour of the Assessee’s holding company in the cases pertaining to AYs 2011-12 to 2014-15. Further, the ld. Commissioner in the instant case not only respectfully followed the decision of the Hon’ble Tribunal but also arrived at factual findings in the context of the issue involved, independently. We even otherwise, do not find any material and/or reason to contradict the decision of the ld. Commissioner in allowing the claim of the Assessee qua expenditure on account of ‘repairs and maintenance’, which is under consideration. As the decision of the ld. Commissioner is based on the legal precedents as well as factual findings, thus the decision of the ld. Commissioner in deleting the addition of Rs.4,15,24,749/- on account of ‘repairs and maintenance’ and /or issue under consideration, is upheld. Resultantly, Ground no.1 raised by the Revenue stands dismissed.

26. Coming to the 2^nd Ground of appeal/issue/addition of Rs.1,01,89,874/- made by the AO on account of disallowance of ‘legal and professional expenses’ apportioning it to the income from the house property, it is observed that during the appellate proceedings before the ld. Commissioner, the Assessee has claimed as under:

“Applicant had claimed a sum of Rs.2,83,54,596 as Legal and Professional fees as being incurred for business purposes. Out of the same the assessee has paid Rs.24,47,665 to Market City Resources towards business support service and Rs.8,64,418 as professional charges. The said amount incurred was incurred for common purposes such as for earning house property Income as well as other than house property. Therefore, the assessee has suo-moto disallowed in totality a sum of Rs 13,47,611 in the ratio of income earned from house property and other than house property. Hence, we submit that there is no need to make further disallowance in relation to the same.”

27. It is observed that the Hon’ble Coordinate Bench of the Tribunal in the Assessee’s holding company for the AYs 2009-10 and 2010-11 cases, also dealt with similar facts and issue/addition as involved in this case and ultimately allowed in favour of the Assessee’s holding company by observing and holding as under:

“69. We found that the headings for the bifurcation i.e. the expenses specifically no related to rental Income as well as Income mandatory for running of business clearly reflects the rationale for not allocating the expenses to earning of income from the house property. The nature of expenses clearly establishes the purpose for the incurrence of the expense and it is self-evident that the same doesn’t relate to the earning of income from house property. Only on the basis of the rationale that the income of the assessee is taxed in two heads of income, there is no justification in the AO’s stand to apportion the expenses between income from house property and income from business and profession. There was no tangible evidence before the Assessing Officer to show that the above expenses were specifically incurred for earning income from house property. However, expenses in relation to the property consultant M/s Jones Lang Lasalle Meghraj Pro Consultants Pvt Ltd may be considered as related to the renting as well as the business income of the assessee as being held by the CIT(A) Mumbai in the case of assessee for AY 2008-09 It is tobe noted that the said expense has been completely disallowed by the AO in the order. Thus in the ratio of income receipts, we allocate expenses paid Jones Lang Lasalle Meghraj Property Consultants Pvt. Ltd., as attributable for earning income from house property.

70. From the record, we found that during the year under consideration, the Ld. AO had disallowed the 38.16% of expenditure treating the same incurred towards House Property Income. Accordingly, we direct the Assessing Officer to allocate the professional expenses relating to M/s Jones Lang Lasalle Meghraj Pro Consultants Pvt. Ltd in the same ratio. Accordingly, we direct the Assessing Officer to disallow an amount of Ps. 44,82,146/­(38.16% of Rs. 1,17,45,666) out of said expenses relating to Jones Lang Lasalle. Thus we allow balance expenditure of Rs. 72,63,520 out of the totalexpenditure of Rs. 1,17,45,666 paid to Mis Jones Lang. The same is as per the consistent view followed by the Mumbai ITAT & CIT(A) in the appellants own case for the previous years.”

28. Further, the predecessor of the ld. Commissioner in the Assessee’s holding subsequent cases, for the AYs 2011-12 to 2014­15, has also followed the aforesaid judgment of the Hon’ble Tribunal and allowed the issue in favour of the Assessee. Therefore, the Revenue being aggrieved also challenged the said order passed by the then ld. CIT (A) {predecessor of the ld. Commissioner} before the Hon’ble Tribunal, who vide order dated 15.11.2019 passed in ITA Nos.3991 to 3994/M/2018, upheld the said order of then Ld. CIT(A) by observing and holding as under:

23. As the facts and circumstances during the year under consideration are pari-materia, respectfully following the order of the Tribunal in assessee’s own for the A.Y. 2009-10 and 2010-11, which has also been relied by the Id. CIT(A) while restricting the addition, we do not find any reason to interfere in the order of the Id. CIT(A) in restricting the said addition. Accordingly, we uphold the same.”

29. Thus, the ld. Commissioner by considering “the facts of the present case, and the reason for making the addition by the AO on the similar grounds, as that made in its holding company without establishing any contrary findings, the fact that Assessee has suo-moto identified the expenditure to be allocated between the income from house property and other than house property and by following the order of the Hon’ble Tribunal in its holding company’s case, suo-moto disallowed the amount of Rs. 13,47,611/- on account of ‘legal and professional expenditure’ “ and respectively following the aforesaid orders, decided the issue in favour of the Assessee, and in effect deleted the aforesaid addition of Rs.1,01,89,874/- made by the AO on account of disallowance of ‘legal and professional expenses’.

30. Thus, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon’ble Tribunal in the Assessee’s holding company cases were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs.1,01,89,874/- on account of ‘legal and professional expenses’ and /or issue under consideration is upheld. Resultantly, Ground no.2 raised by the Revenue stands dismissed.

31. Coming to the Ground no.3/ issue /addition of 3,82,35,433/- on account of ‘Employees Remuneration, it is observed that the AO made such addition, applying the proportion received on the house property income to the total income @ 40.69% and therefore, the Assessee being aggrieved also challenged the said addition before the ld. Commissioner and during the appellate proceedings, has claimed as under:

“The applicant has also employed various supervisory staff for maintaining the Mall. As per terms of the sample agreement discussed above, the liability to maintain mall arises out of the contractual obligations. The same is also recovered by the applicant. The relevant para as follows” cost of the management staff exclusively working for the said Mall”. Thus, the applicant clearly earns CAM charges inclusive of staff cost which are offered under business head. Accordingly, it is stated that how the same can even remotely be considered for the purposes of house property. The entire mall management exercise arises after the activity of leasing has ended and hence we submit that there is no further disallowance needs to be made in this regard.”

32. The ld. Commissioner by considering the aforesaid claim of the Assessee in the context of the addition made by the AO and/or determination made by the AO on the issue under consideration, observed that the similar issue has also arisen in the Assessee’s holding company cases for the AYs 2009-10 and 2010­11, which travelled upto the Hon’ble Tribunal, who vide order dated 10.2016 passed in ITA No.51 & 52/M/2015 (supra) decided the issue restricting the addition / disallowance to the extent of Rs.12,00,000/- by observing and holding as under:-

“76. In view of the above discussion, we found that the assessee has proved the entire gamut of the appellants business activities which is a composite one. Expenses on account of director remuneration are indivisible cost which cannot be linked to any particular activity of the assessee company. Directors of the company are managers who form the strategic vision of the company and they are responsible for the overall growth of the company. Their remuneration is incurred irrespective of nature of income earned by the assessee company. The said expenses cannot be said to be incurred for any particular activity of the assessee company.

77. We also found that the assessee has a combined financial and admin team. The major focus of the staffs was upon the actual recovery of common facility as per facility provided to the tenants. Practically what is required for the house property income is to recover the rent and account the same. For working the same, there is no requirement of highly qualified person the same can be done by the any lay man. Keeping in view these peculiar facts and circumstances of the case, we direct the AO to restrict the disallowance of staff cost to the extent of Rs. 12.00 lacs being incurred for earning rental income. Accordingly, disallowance under the head staff cost is restricted to Rs. 12.00 lacs. “

33. It is also a fact that, the Hon’ble Tribunal in the Assessee’s holding company, vide order dated 15.11.2019 in ITA nos. 3991 to 3994/Mum/2018 restricted the addition by following the judgment of the Hon’ble Tribunal in Assessee’s holding company for the AY 2009-10 and 2010-11, by observing and holding as under:

“26. As the facts and circumstances during the year under consideration are pari-materia, respectfully following the order of the Tribunal in assessee’s own for the A.Y. 2009-10 and 2010-11, which has also been relied by the Id. CIT(A) while restricting the addition, we do not find any reason to interfere in the order of the Id. CIT(A) in restricting the said addition, Accordingly, we uphold the same.”

34. The ld. Commissioner further observed that the Hon’ble Tribunal in the Assessee’s holding company, also noted its observation in para 54 of such order, which clearly substantiates that the holding company of the Assessee has made recoveries in relation to the regular cleaning of the common areas, security services for the common areas, repair and maintenance of the common areas, cost of the Mall management staff, etc. Further, the holding company has also recovered costs related to the marketing and promotion expenses. It is also the finding of the Hon’ble Tribunal that the common area maintenance income was offered to tax by the holding company as business income. Further, as per contractual obligation, the Assessee was required to incur a lot money expenses, which would be significantly higher than the expenses that would have been incurred, if the Assessee would stop its activities and just be a mere lessor.

35. The ld. Commissioner also perused the leave and license agreement of the Assessee and its relevant clauses related to common area maintenance or CAM, and CAM charges and from the definition of ‘CAM charges’ observed that ‘CAM charges’ will also reflect the cost associated with consumption of electricity for common areas (excluding electricity consumed for Air conditioning), routine marketing and promotional activities, security services for common areas and cost of management staff, exclusively working for the said Mall.

36. The Ld. Commissioner also observed from the definition of ‘common area’ that the ‘common area’ does not include the area of the licensed premises. Thus, the genesis of the agreement entered into by the Assessee’s holding company and that by the Assessee is on the same footing. Further, the similar recovery of charges has also been made by the Assessee, vide the leave and license agreement entered into by the Assessee with its tenants. Further, the nature of activities by both the companies are identical in all aspects. The AO has also made the disallowance in the case of Assessee on similar lines, as that made in the case of holding company and therefore, the order of the Hon’ble Tribunal is squarely applicable to the Assessee as well.

37. We further observe that the ld. Commissioner also taken into account the peculiar fact that the AO has made the addition on the basis of similar ground, as that made in the case of Assessee’s holding company, without establishing any contrary findings and it is a fact that the Assessee has already made suo-moto disallowance of Rs.86,76,864/- and the Hon’ble Tribunal has already decided the issue in favour of the Assessee. Thus, the ld. Commissioner followed the aforesaid decisions and ultimately allowed the issue in favour of the Assessee.

38. Hence, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon’ble Tribunal in the Assessee’s holding company and by the predecessor of the ld. Commissioner in the Assessee’s cases, were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs. 3,82,35,433/- on account of ‘Employees Remuneration’ and/or issue under consideration is upheld. Resultantly, Ground no.2 raised by the Revenue stands dismissed.

39. Coming to next Ground no.4/issue/addition of Rs.6,51,29,823/- being disallowance of ‘advertisement and sales promotion expenses’, we observe that the Assessee before the ld. Commissioner in the context of the aforesaid addition, has claimed as under:

“22.1. The appellant had claimed a sum of Rs. 16,12,42,680 as advertisement and sales promotion as being incurred for business purposes. Out of the same, the assessee has paid Rs.7,12,871 towards Lease brokerage services to Jones Lang Lasalle Meghraj Pro Consultants Pvt. Ltd. Further, it has also incurred brokerage expenditure of Rs. 4,66,411. The said amount incurred was incurred for common purposes such as for earning house property income as well as other than house property. Therefore, the appellant has suo-moto disallowed in totality a sum of Rs.4,79,823 in the ratio of income eamed from house property and other than house property and therefore there is no need to make further disallowance in relation to the same.

22.2 These are the expenses in relation to advertising and promoting the mall which are also recovered from the tenants. In relation to non-allocation of such expenditure, we would like to submit as under:

These are all legitimate business expenses incurred by the appellant for various business purposes;

It is submitted that the appellant promotes its mall as a lifestyle destination to attract footfalls. The entire expenditure is to promote the mall as a whole. Further, the expenses debited under the head advertisement and sales promotion also Include expenses related to the events and signage put up at various places, the income from which has been booked as Income from Events and offered to tax under the head “Business Income”. The said head also includes various expenses incurred towards various promotional activities undertaken in the common premises of the mall.

It is also important to note the said expenditure is also recovered from the tenants as service charges. The same can be verified by the agreement submitted before your Honor at page no. 1 to 64 of the paper book II. Therefore, it is contented that if an income is earned under one head, then how can expenses related to such income be disallowed / allowed under any other head.”

4. We further observe that the ld. Commissioner by considering the peculiar facts and circumstances and the above submission of the Assessee and the decision of the AO, analyzed the issue under consideration and observed that Hon’ble Tribunal in the Assessee’s holding company, vide order passed in ITA no. 51 & 52/M/2015 (supra) has also dealt with identical issue and addition and ultimately, restricted the disallowance to the extent of 12,00,000/- by observing and holding as under:

“Thus as per clause of lease agreement, the assessee is responsible for advertising its mall as over and above of rental charges, Rs. 5 per sq feet is collected from the licensee. Further the recovery of such charges are offered for tax under the head business and profession in form of security charges. Therefore, if an income is earned under one head, then how can expenses relate to such income be disallowed and allowed under any other head. Accordingly, we do not find any justification for the disallowance of advertisement and sales promotion expenses. However, keeping in view the fact that such advertisement also helps the A.O. in getting regular tenants, we direct the AO to restrict the disallowance to the extent of Rs. 12 lacs. We direct accordingly.”

41. We also observe that in the Assessee’s holding company for the cases pertaining to AY 2011-12 to 2014-15, the similar issue arose and travelled up to the Hon’ble Tribunal, who vide order dated 11.2019 passed in ITA Nos. 3991 to 3994/M/2018 (supra) allowed the identical relief to the Assessee by following the aforesaid judgment/order passed, in ITA No. 51 &52/M/2015 (supra).

42. Further, the Hon’ble Tribunal in the Assessee’s holding company also perused the leave and license agreement and noted its observation, which substantiates that the Assessee had made recovery in relation to regular cleaning of common areas, security services for the common areas, repair and maintenance of common areas, cost of Mall management staff, etc. Further the holding company has also recovered costs related to marketing and promotion expenses. Further, the income generated form common area maintenance was ‘offered to tax’ by the holding company as ‘business income’ and as per the contractual obligation, the Assessee was required to incur a lot expenses, which would be significantly higher than the expenses that would have been incurred, if the Assessee would stop its activities and be just a mere lessor.

43. The ld. Commissioner also examined the definition of common area maintenance or CAM and CAM charges and observed that definition of common area as mentioned in the agreement, does not include the area of the licensed premises thus, the genesis of the agreement entered into by the Assessee’s holding company and that by the Assessee is on the same footing. Further, similar recoveries of charges have also made by the Assessee through leave and license agreement entered into by the Assessee with the tenants. Further, the nature of the activities connected by both the companies are identical in all aspects. The AO made the disallowance in the case of the Assessee, on similar lines as that made in the case of the holding company and therefore the order of the Hon’ble Tribunal, is squarely applicable to the Assessee as well.

44. Thus, the ld. Commissioner by considering the peculiar fact that the AO has made the addition under consideration on similar grounds that made in the case of Assessee’s holding company, without establishing any contrary findings, ultimately came to conclusion to restrict the addition to the tune of Rs. 12,00,000/- as restricted by the Hon’ble Tribunal however, considering the present economic condition, restricted the addition to the tune of Rs.24,00,000/-.

45. Thus, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon’ble Tribunal in the Assessee’s holding company were/are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid analyzations, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs.6,51,29,823/- being disallowance of ‘advertisement and sales promotion expenses’ except as upheld to the extent of Rs. 24,00,000/- and/or issue under consideration, is upheld. Resultantly, Ground no.4 raised by the Revenue stands

46. Coming to the Ground no.5/issue/addition of 37,98,195/-, which pertains to the disallowance made qua ‘miscellaneous and other expenses’, it is observed that the Assessee also challenged the instant addition and during the course of first appellate proceeding before the ld. Commissioner has claimed as under:

“23.1 The appellant had claimed a sum of Rs.1,42,49,680 in its Profit and Loss account towards Miscellaneous Expenditure & General charges. The rationale behind claiming said expenses under the head Income from Business or Profession, we would like to state that the said expenses are incurred for smooth functioning of CAM services provided in the mall against which the appellant is under a contractual obligation to provide such service. Therefore, the income earned by the appellant as CAM charges are offered to tax as a business income. A copy of the breakup of the said expenses is enclosed in the paper book II at page no. 130.

23.2 Further, the aforesaid expenses incurred by the appellant are the day to day expenses which any business organization would incur for conducting the business operations on a daily basis such as administrative expenses, personnelexpenses etc. These are the expenses one has to incur even if no income is earned which is in relation to house property. Hence, it is very much crystal clear that these expenses have no nexus with the earning of Rental income. Such expenses have been incurred for the general administration of the company, which is irrespective of any income being earned by the assessee company and hence no disallowance of such expenses is required.”

47. The ld. Commissioner duly considered the aforesaid submission of the Assessee and determination by the AO on the issue under consideration and the peculiar fact and circumstances that the Hon’ble Co-ordinate Bench of the Tribunal in the Assessee’s holding company, vide order dated 06.10.2016 in ITA Nos. 51 & 552/M/2025 has also dealt with identical issue and found no justification in sustaining the identical addition by observing and holding as under:

“101. On perusal of the details of expenses so incurred we found that the assessee has debited expenses for Books, subscription & periodicals, conveyance, vehicle, secretarial expenses which are solely for business purpose. Moreover, these expenses cannot be said to have anything to do with earning of rental income. Further the assessee has already suo-moto disallowed office expenses and general expenses in the ratio of Income earned and therefore no further disallowance is called for.

102. In view of the above discussion, we do not find any justification for further disallowance of miscellaneous expenses by the Assessing Officer amounting to Rs.31,38,876/-.”

48. Further, it is also a fact that the aforesaid judgment of the Tribunal has subsequently been followed by the Hon’ble Coordinate Bench of the Tribunal in the Assessee’s holding company for the AYs 2011-12 to 2014-15 cases, in ITA Nos.3991 to 3994/Mum/2015 (supra) and allowed the identical claim/issue in favour of the Assessee by deleting the identical addition.

49. Thus, the ld. Commissioner, by considering the peculiar facts that the AO has made the addition under consideration on the identical grounds, as in the case of Assessee holding company, without establishing any contrary facts and findings. Further, the Hon’ble Tribunal in the Assessee’s holding company has also considered the peculiar fact that the Assessee’s holding company has made suo-moto disallowance qua office expenses and general expenses, in the ratio of income earned and therefore, no further disallowance was called for.

The Ld. Commissioner further by considering peculiar facts that Assessee’s holding company has made suo-moto disallowance qua office expenses and general expenses, in the ratio of income earned and therefore, no further disallowance was called for. However, in this case he found that no such suo moto disallowance has been made. Thus, he respectfully following the orders as mentioned supra, directed the AO to disallow office expenses and general expenses in the ratio of income earned. Accordingly, the Ld. Commissioner ultimately sustained the addition to the extent of office expenses and general expenses in the ratio of income earned and deleted the remaining part of the Addition.

50. Thus, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon’ble Tribunal in the Assessee’s holding company are dissimilar to the present case of the Assessee. We otherwise, do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration, as the Ld. Commissioner by considering peculiar facts of the case and in the line of decision in holding company, restricted the disallowance to the extent or in respect of office expenses and general expenses, in the ratio of income earned.

51. Hence, the decision of the ld. Commissioner in deleting the addition of Rs. 37,98,195/-, except as sustained to the extent of disallowance qua office expenses and general expenses in the ratio of income earned, is upheld in favour of the Assessee. Resultantly, Ground no.5 raised by the Revenue also stands dismissed.

52. Coming to the next Ground no. 6 or addition of 1,58,68,460/- on account of disallowance ‘qua security charges’ made by the AO on proportionate basis, the Assessee before the ld. Commissioner on this particular issue/addition has claimed as under:

“24.1 During the year under consideration, the appellant had debited in the profit & loss account a sum of Rs.3,89,98,426 as security charges. The Ld. AO applied the ratio of allocation and disallowed Rs.1,58,68,460 as being proportionate towards earning of house property income.

24.2 It is submitted that the security charges were also recovered from the tenants and such recoveries were included under the CAM Charges. Thus, the expenditure is an allowable deduction and no part thereof could be apportioned against house property income. The same is evident from the agreement submitted before your Honor at page nos. 1 to 64 of the paper book II.

24.3 It is also submitted that appellant is responsible for providing security in the common areas of the mall i.e. providing overall general security to the mall as a whole. It is to be noted that the appellant is not responsible for providing security inside the leased premises i.e. individual shops in the mall. It is the portion other than leased portion which is the responsibility of the appellant. And the appellant earns CAM charges for the same. Accordingly, the appellant vehemently contends that no portion of the security charges is allocable to income from house property, as the same to the lease house property is in no way responsibility of the appellant.”

53. The ld. Commissioner by considering the peculiar facts and circumstances, the submission of the Assessee and decision of the AO on the issue under consideration and the judgment of the Hon’ble Tribunal in the Assessee’s holding company cases decided on 06.10.2016 in ITA No.51 and 52/Mum/2015, ultimately decided the issue in favour of Assessee and /or deleted the identical addition by observing and holding as under:

“105. We found that the said expenditures were recovered from the tenants and such recoveries were included under the CAM Charges.

Thus, the expenditure is an allowable deduction and no part thereof could be apportioned against house property income.

111. In view of the above facts and circumstances, the Assessing Officer has not justified in disallowing the security charges by reallocating the same to income from house property.”

54. It is also a fact that subsequently, the Hon’ble Tribunal in the Assessee’s holding company has also followed the aforesaid decision of the tribunal, vide order dated 11.2019 passed in ITA Nos.3991 to 3994/Mum/2018 (supra).

55. Further it is a fact that in the Assessee’s holding company, the Hon’ble Tribunal has also perused the leave and license agreement of the holding company and noted its observations in paragraph 54 of the Order for AY 2009-10 and AY 2010-11, which clearly substantiates that the holding company of the appellant has made recoveries in relation to regular cleaning of the common areas, security services for the common areas, repair and maintenance of the common areas, cost of the mall management staff etc. Further, the holding company has also recovered costs related to marketing and promotion expenses. It is also the finding of the Hon’ble Tribunal that the Common Area Maintenance income was offered to tax by the holding company as business income. Further, at paragraph 55, the Hon’ble Tribunal has observed that as per the contractual obligation, the Assessee is required to incur a lot many expenses, which would be significantly higher than the expenses that would have been incurred, if the Assessee would stop its activities and be just a mere lessor.

56. Further, the ld. Commissioner also perused the leave and license agreement of the Assessee, specifically the relevant clauses related to or meaning assigned to ‘common area maintenance’ or ‘CAM’ and ‘CAM Charges’. The ld. Commissioner observed from the definition that ‘CAM charges’ will also reflect the cost associated with consumption of electricity for common areas (excluding electricity consumed for Air conditioning), routine marketing and promotional activities, security services for common areas and cost of management staff exclusively working for the said Mall.

57. The Ld. Commissioner also observed from the definition of ‘common area’ that the ‘common area’ does not include the area of the licensed premises. Thus, the genesis of the agreement entered by the Assessee’s holding company and that by the Assessee is on the same footing. Further, similar recoveries of charges have been made by the Assessee vide leave and license agreements entered into by the Assessee with its tenants. Further, the nature of activities by both the companies are identical in all aspects. The AO has also made disallowance in the case of Assessee on similar lines as that made in the case of holding company and therefore, the order of the Hon’ble Tribunal, is squarely applicable to the Assessee’s case as well.

58. Thus, the Ld. Commissioner on the aforesaid peculiar facts and circumstances, and respectfully following the judgments of the Hon’ble Tribunal, ultimately allowed the issue in favour of the Assessee and for deleted the addition. Hence, in our considered view, the order of the ld. Commissioner in deleting the addition under consideration is not only based on the factual findings but also based on the legal precedents. Even otherwise, the Revenue has failed to establish that the facts and issues involved in the cases dealt with by the Hon’ble Tribunal in the Assessee’s holding company and by the predecessor of the ld. Commissioner in the Assessee’s cases are dissimilar to the present case of the Assessee. Even otherwise, we do not find any material and/or reason to contradict the findings of the ld. Commissioner on the issue under consideration. Thus, on the aforesaid reasons, the decision of the ld. Commissioner is liable to be upheld. Hence, the decision of the ld. Commissioner in deleting the addition of Rs.1,58,68,460/- on account of disallowance ‘qua security charges’ and /or issue under consideration, is upheld. Resultantly, Ground no.6 raised by the Revenue also stands dismissed.

59. Thus, in view of the above, considerations, analyzations and determinations, the lead appeal/case i.e. ITA No. 6797/Mum/ 2025 filed by the Revenue, stands dismissed.

60. As observed above, that the additions/issues/ grounds involved in all the appeals are common, except variations in amounts and thus in view of our decision in ITA No. 6797/Mum/2025, all remaining appeals are also dismissed on the similar footings, in the context of similar issues/additions.

61. Now, coming to the additional issue involved in the case pertaining to AY 2021-22 (ITA No.6800/Mum/2025) , which relates to the decision of the Ld. Commissioner directing the AO to verify the additional claim of deduction of 1,56,97,023/- under the head ‘income from house property’, we observe that before the ld. Commissioner the Assessee had sought for additional deduction of Rs.1,56,97,023/- under the head ‘income from house property’ and Rs.1,48,41,106/- under the head ‘profit and gains from business or profession’, which were not allowed by the AO, rejecting a revised computation in the course of assessment proceedings.

However, on appeal, the ld. Commissioner by considering the judgments of the Hon’ble Apex Court in the case of Jute Corporation of India Ltd. vs. CIT (187) ITR 688 (SC) and the Hon’ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders [(23) taxmann.com 23 (BOM) (High Court)], ultimately directed the AO to verify the additional claim qua deduction on account of property tax, as lodged by the Assessee and allow the same in accordance with the provisions of law.

62. We have given thoughtful consideration to the determinations made by the authorities below on the additional claim of deduction. Admittedly, the AO has no power to entertain the additional claim by considering the revised computation however, the power of the appellate authority is not restricted and/or the ld. Commissioner is not precluded from exercising the power to entertain the fresh/additional claim, if emanates from the record and thus, in our considered view, the ld. Commissioner has rightly exercised its power in its true sense by directing the AO to verify the additional claim of deduction ‘on account of property tax’ lodged by the Assessee and allow the same in accordance with the provisions of law. As the decision of the ld. Commissioner is fortified with the aforesaid judgments of the Hon’ble Apex Court and the High Court and therefore, deserves no interference and hence, the decision of the ld. Commissioner on the issue qua additional claim of deduction in respect of ‘property tax’ is upheld.

Resultantly, the respective Ground no. 7 raised by the Revenue in the appeal under consideration, stands dismissed.

In the result, all Revenue’s appeals under consideration, stands dismissed.

Order pronounced in open court on 24.04.2026.