Case Law Details
Brief of the Case
ITAT Mumbai held In the case of M/s. Radiant Premises Pvt. Ltd. vs. ACIT that the phrase rent received and receivable u/s 23, contemplates the amount received for the enjoyment of the property and certain rights in the said property by the tenant. If there is charge directly related to the rental income or for the property without which the rights in the property cannot be enjoyed by the tenant then it can be construed as part and parcel of enjoyment of the property from where rent is received then such charges can be held to be allowable from the rent received or receivable. However, the brokerage paid to the third party has nothing to do with the rental income paid by the tenant for enjoying the property to the owner. Brokerage cannot be said to be a charge that has been created in the property for enjoying the rights and at best it is only an application of income received/receivable from rent. Hence, the payment of brokerage cannot be allowed as deduction either u/s. 23 or u/s. 24.
Facts of the Case
The assessee company is in the business of finance and leasing of premises. In the books of account the assessee had shown rental income of Rs.1,29,13,475/- on letting out of office premises to M/s. Dow Jones consulting India Pvt. Ltd. While working out the “House property income’’ the assessee had shown the annual value of the property at Rs.17,21,348/- after reducing an amount of Rs.1,11,92,127 being brokerage paid for procuring tenant. Thereafter, the assessee has claimed standard deduction of 30% u/s. 24 of Rs.5,16,404/- and, accordingly, the income from house property was shown at Rs.12,04,944/-. In response to the show cause notice to justify the claim of brokerage as allowable expenditure under sections 23/24, the assessee submitted that an amount of Rs.1,11,92,127/- being two months license compensation and 2% of the security deposit was paid as brokerage to M/s. C B Richard Ellies South Asia P. Ltd., for sourcing and securing a suitable licensee for its office.
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