Case Law Details
Gopal Das Estates & Housing Pvt. Ltd. Vs DCIT (ITAT delhi)
Expenses incurred for earning rental income
In the Departmental appeal with reference to expenses incurred for earning rental income. The Assessing Officer sought an analytical detail of expenses incurred for earning the income from house property out of the total expenses during the year by the company. The assessee submitted that no direct or separate expenditure relatable to the income under the head ‘Income from house property’ was incurred. The Assessing Officer, however, averred that after availing statutory deduction u/s 2(24)(a) of the Act the stance of the assessee for rebate u/s 24(a) was not tenable and that pro rata allocation out of total expenses in the ratio of rental income to total income was required to be made and added to the assessed income. So he did. In appeal the Ld. ClT(Appeals) disagreed with the view of the Assessing Officer and in terms of the observations contained in page 52 of his order granted relief.
It is submitted that no similar disallowance had been made from the year of the establishment of the company in FY 1995-96 to the AY 2010-11. It is further submitted that no similar disallowance has ever been made in any assessments after AY 2010-11. The Ld. CIT(Appeals) has correctly decided this issue following the decision of the Tribunal at Bombay in the case of Damos Trading Co. Pvt. Ltd. in ITA. No. 1684/Mum/2010. It needs to be emphasized that there is no requirement in law for segment-wise segregation of business expenses source-wise. It is also a principle in law as postulated in by the Apex Court in CIT Vs. Chugandas & Co. (1965) 55 ITR 17 (SC) that even if a property is let out in business by an entity, the income from the property will have to be computed in terms of the principles applicable to the computation of income from house property Under Chapter IV-C of the Act. Being so the objection raised by the Assessing Officer that the deduction as claimed u/s 24(a) would be a duplication of the expenses is erroneous and unsustainable in law. It is only for this reason that in every year since FY 1995-96 to the last assessment u/s 143(3) for AY 2014-15 no such disallowance was ever made. The disallowance as made by the Assessing Officer is on a misconception of facts and law and being so merits to be annulled.”
Ld.Sr.DR supported the assessment order and submitted that Ld.CIT(A) was not justified in deleting the disallowance. However, he conceded the fact that no such disallowance was made in any other Assessment Year. However, he contended that every Assessment Year is an independent year.
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