Case Law Details
Dream Motels (P) Ltd. Vs ITO (ITAT Mumbai)
The issue under consideration is whether treating municipal taxes paid is considered as a part of rent liable to be taxed u/s 23 of the act?
ITAT states that, upon due consideration of factual matrix, the crystal-clear position that emerges is the fact that as per the terms of lease and license agreement, the licensee alone was liable to pay all taxes / outgoings with respect of leased premises. However, the same could be paid by the assessee and the same were reimbursable by licensee. This position has also been reiterated by the assessee in its submissions. However, the liability to pay the taxes was with respect of licensed premises only which was approx. 19% (232 Sq.Meters out of 1246.66 Sq. Meters) of total area of the building. Therefore, 19% of BMC taxes amounting to Rs.7,99,519/- could be attributed to licensed premises. The proportionate amount comes to Rs.1,51,900/-. In our opinion, this amount shall be added back to the rental income of Rs.76 Lacs earned by the assessee. Consequently, the deduction of Rs.1,51,900/- shall be allowable to the assessee. The rental income, after statutory deduction of 30%, would work out to Rs.53.20 Lacs. Hence where municipal taxes were paid by assessee for full building and out of the same, only some area on ground floor was given on rent, thus, the deduction in respect of the municipal taxes paid on the remaining area that was not leased out, would be allowable. Accordingly, the appeal is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
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