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Case Law Details

Case Name : Tube Rose Estates Pvt. Ltd. Vs ACIT (ITAT Delhi)
Appeal Number : ITA No. 4530/Del/2004
Date of Judgement/Order : 30/05/2008
Related Assessment Year : 2001- 2002


2.6 A careful perusal of the various items of expenditure specified in section 24 which have been reproduced in para 2.4 earlier shows that there is no provision for deduction on account of brokerage paid in connection with renting out of the property. Brokerage could be claimed as collection charges if as per the agreement, it is the responsibility of the broker to collect the rent but provision relating to deduction on account of collection charges in sub-clause (viii) of section 24 stand deleted from Assessment year 1993-94 and collection charges are included in the lump-sum deduction of 1/4th of annual value allowable as deduction under sub-clause (i). It has been argued on behalf of the assessee that the claim could be allowed as annual charge under sub-clause (iv) of section 24, which was in operation during the relevant year. As per the said sub-clause, annual charge on the property not being a capital charge or charge created voluntarily by an assessee is allowable as deduction Annual charge is amount payable annually on account of any liability, which is secured by creation of a charge on the property. The charge should be involuntary charge in respect of some existing liability of assessee, which is enforceable by law. Involuntary charge means that the assessee has no option in the matter and would include cases such as charge created or thrust upon the assessee by operation of law or by a decree of a court or by the act of his predecessor in title, or by the reason of the property coming into his hand by an existing and overriding charge. In this case, there is no case made out that the brokerage payable was a charge created on the property. The brokerage payable is the expenditure of the assessee incurred during the year, which can be allowed only if the same is allowable under the provisions of section 24. This is not an annual charge nor there is any other provision for allowing the same in computation of income from house property. Merely because the brokerage may have been paid out of the rental income, it cannot be said that a charge has been created in the property, much less an involuntary charge. It is only an application of income. The claim for deduction under section 24(1)(iv) has, therefore, to be rejected.

2.7 It has also been argued by the LD. A. R. for the assessee that the brokerage is the amount payable at the time of renting out of the property and this has the effect of reducing the rental income and therefore, has to be deducted from rent while computing the annual value u/s 23. The annual value is required to be determined u/s 23 of the Act and the said provisions are reproduced below as a ready reference:

” 23:- Annual value how determine d(1) for the purpose of section 22 the annual value of any property shall be deemed to be

(a) the sum for which the property might reasonably be expected to let from year to year, or

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July 2024