Case Law Details
Bagaria More Co. Ltd. Vs ADIT (ITAT Kolkata)
Introduction: The recent ruling of ITAT Kolkata in the case of Bagaria More Co. Ltd. Vs ADIT has raised crucial points regarding the treatment of the cost of amenities provided to tenants. The Tribunal deleted the addition of Rs. 99,73,966 initially made by the Assessing Officer, redefining the way income from house property is computed. The decision has potentially far-reaching implications for property owners and taxpayers.
Grounds for Appeal: The assessee contested the decision of the National Faceless Appeal Centre (CIT(A)), which had confirmed a double addition of nearly Rs. 1 crore. The sum represented the cost of amenities given to tenants. Initially, the amount was disallowed while calculating ‘Profit and gains from business’, leading to an appeal.
The Tribunal’s Attention on Past Rulings: The counsel for the assessee pointed out that this wasn’t the first time the issue of disallowance on amenities provided to tenants was brought before the Tribunal. Prior rulings, dating back to 1996-97, consistently supported the assessee’s claim for allowance on the cost of amenities.
The Tribunal’s Decision: The Tribunal noted that since there was no change in the facts or circumstances, the CIT(A) should have considered the binding decision of past Tribunal cases related to the same assessee. After thorough review, the Tribunal deleted the addition made by the lower authorities, citing that the amount had been wrongly assessed.
The Implication on Section 24: The Tribunal recognized that the amenities offered to the tenants, such as repair and maintenance of lifts and other electrical installations, were crucial and could not be ignored. These expenditures have been accepted as a standard deduction in relation to income from house property under Section 24 of the Income Tax Act.
Unjustified Disallowance: The Tribunal clarified that since the assessee did not claim the above amount as business expenditure, there was no basis for its disallowance from business expenditure. This aspect underscored the erroneous nature of the decision made by the lower authorities.
Conclusion: The ruling in Bagaria More Co. Ltd. Vs ADIT is a milestone that elucidates how income from house property should be calculated, especially when amenities are provided to tenants. It reemphasizes the validity of previous Tribunal rulings, ensuring that similar cases in the future have a strong precedent to rely upon.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against the order dated 21.03.2023 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. The assessee in this appeal has taken the following grounds of appeal:
“For that on the facts and circumstances of case and in law, ld. Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), erred in sustaining the double addition of Rs.9973966, on account of cost of amenities provided to tenants of appellant’s house property, made by ld. Assessing Officer, CPC u/s 143(1)(a) of the Income Tax Act, 1961 (Act) while computing income under the head ‘Profit and gains from business.”
3. At the outset, the ld. counsel for the assessee has invited our attention to the intimation passed u/s 143(1) of the Act to submit that the assessee had suo moto made disallowance of Rs. 9973966/- on account of cost of amenities to the tenants out of his business/professional income. However, the ld. CPC again disallowed the said amount and assessed the income from profit and gains from profession at Rs. 47,86,959/- after setting off the losses of Rs.51,87,007/- making the total addition of Rs. 9973966/-. The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) however considered the said disallowance out of the income from house property and confirmed the addition. The ld. counsel has submitted that so far as the disallowance out of the income from house property was concerned, the issue relating to the allowances of expenditure incurred on amenities provided to the tenants has been settled by the Tribunal in the own case of the assessee from A.Y 1996-97 onwards. He, in this respect, has relied upon the decision of the Tribunal dated 08.04.2004 passed in ITA No.995/Kol/2003 for A.Y 1996-97 and further on the decision of the Tribunal dated 07.03.2008 passed in ITA Nos.1511 to 1514/Kol/2007 for A.Ys 1998-99 to 2001-02. He has further relied upon the decision of the Tribunal dated 29.04.2016 passed in ITA No.1738/Kol/2013 for A.Y 2009-10. In all the said decisions, the Tribunal has consistently allowed the claim of the assessee in respect of expenditure incurred on amenities provided to the tenants duly considering the nature of services rendered to the tenants in the form of repair and maintenance of lift and other electrical installations apart from the standard deduction in relation to the income from house property u/s 24 of the Act.
4. Since, there is no change in the facts or circumstances of the case, the ld. CIT(A) ought to have applied the binding decision of the Tribunal in the case of the assessee in earlier assessment years on the same issue. So far as the disallowance by CPC is concerned, not claimed the above amount as business expenditure, there was no question of disallowance of the same from business expenditure. In view of the above discussion, the addition made by the lower authorities, in this case, is not justified and the same is accordingly ordered to be deleted.
5. In the result, the appeal of the assessee stands allowed.
