Case Law Details
Ajay Enterprises Pvt. Ltd. Vs DCIT (ITAT Delhi)
The solitary ground raised by the assessee in this appeal pertains to disallowance of Rs. 10,47,025/- incurred by the assessee during the year as ground rent on lease hold properties to L& DO. According to the AO this amount is not allowable u/s 43B of the Income Tax Act and shall be allowed only in the year in which this is actually paid by the assessee. The Ld. CIT (A) has concurred with the views of the Ld. AO by holding that although the nature of payments specified is not covered by clause (b) to (f) of section 43B, but it may be covered under clause (a) of section 43B, which talks of any some payable by the assessee by way of tax, duty, cess or fee by whatever name called under any law for the time being in force. Thus, according to Ld. CIT (A) ground rent payable to L&DO falls in this clause and he has upheld the disallowance made by the AO.
66. Before us, the Ld. AR submitted that the provision of section 43B is not applicable to the said nature of payment. Reliance has been placed on the judgment of this Tribunal in the case of K. Narendra v/s ACIT as reported in 77 TTJ 76 (Del). A copy of this judgment has been filed before us. In that case also, the issue involved was whether the amount payable for misuse of premises and illegal construction was allowable or not. The nature of such amount, i.e., amount payable towards misuse of premises and illegal construction was held to be in the nature of ground rent by following the judgment of Hon’ble Delhi High Court in the case of Gulab Singh & Sons (P) Ltd. v. CIT 94 ITR 537 (Delhi). It was amongst others held that ground rent does not come under any items mentioned in the various clauses of section 43B. Although the main issue in that case was of allowability of such amount u/s 24 of the Income Tax Act but still the issue of allowability of ground rent from the perspective of section 43B was also considered and it was held that ground rent is not disallowable by applying the provision of section 43B. Relevant findings of the judgment of Hon’ble Delhi ITAT in the case of K. Narendra (Supra) on this issue are as under:-
We have also perused the provisions of section 43B of the Act. Under section 43B of the Act, certain deductions are allowable only if the sums have been actually paid. Such items are mentioned in clause (a) to (e) of this section. Ground-rent does not come under any of the items mentioned in various clauses of section 43B of the Act. So, no disallowance on account of damages demanded by L&DO for misuse of the premises could be made even under section 43B of the Act. Considering the facts as a whole, we hold that the assessee is entitled to deduction of amount payable to L&DO for misuse of the premises under section 24(1)(v) of the Act. The AO is, therefore, directed to allow the same in all the six appeal section. Thus, this ground of appeal for all the six years.
Respectfully following the said judgment of this ITAT in the case of K. Narendra (Supra) we hold that the provision of section 43B are not applicable to the ground rent and disallowance made by the AO and upheld by Ld. CIT(A) is hereby directed to be deleted.
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