Case Law Details

Case Name : Areva India Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Appeal Number : ITA no. 4468/Mum./2015
Date of Judgement/Order : 13/03/2020
Related Assessment Year : 2010–11
Courts : All ITAT (6785) ITAT Mumbai (1992)

Areva India Pvt. Ltd. Vs ACIT (ITAT Mumbai)

Brief facts are, in the course of assessment proceedings the Assessing Officer while verifying the Profit & Loss account noticed that the assessee has debited an amount of Rs. 19,37,936 under the head “General and Administrative Expenses”. After calling for necessary details and examining them, he found that the amount represents property tax payable to the Municipal Authority through the landlord as per the terms of the leave and license agreement. Further, he observed, during the year under consideration, demand for depositing the same was made by the Municipal Authorities and the assessee has claimed the expenditure on estimate basis. Referring to the provisions of section 43B(a) of the Act, the Assessing Officer observed that tax, duty, cess or fee, if any, claimed by the assessee can be allowed as a deduction only on actual payment. He observed, since the amount in question has not been actually paid during the year, it has to be disallowed and added back to the income of the assessee. As against the aforesaid addition, the assessee raised objections before learned DRP. However, the the addition mad by the Assessing Officer was upheld.

ITAT have considered rival submissions and perused the material on record. Undisputedly, the amount of Rs 19,37,936 has been paid to the landlord towards reimbursement of property tax to be paid by the landlord / licensor on the property taken on lease by the assessee. On a perusal of the lease and license agreement, a copy of which has been submitted before us, it is seen that as per Para–6.2, the burden of paying the property tax is on the licensor. However, as per the mutual agreement between the parties, the licensee agreed to reimburse the property tax to the licensor save and except any late fee / charge for any statutory dues. Thus, as could be seen from the aforesaid terms of the agreement, the reimbursement of property tax by the assessee to the licensor is purely contractual and not a statutory liability. Even otherwise also, property tax levied by the Municipal Authority is a charge on the property. Undisputedly, the licensor is the owner of the property, hence, liable to pay the property tax. That being the case, the amount equivalent to the property tax reimbursed to the licensor cannot be treated as rate, tax, fee, cess, etc., as provided under section 43B(a) of the Act. Therefore, the disallowance made of Rs. 19,37,936, has to be deleted. Accordingly, we do so. Ground is allowed.

In the result, appeal is partly allowed.

FULL TEXT OF THE ITAT JUDGEMENT

The aforesaid appeal by the assessee is against the final assessment order dated 29th January 2015, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short “the Act”) in pursuance to the directions of the Dispute Resolution Panel–IV (DRP), Mumbai, for the assessment year 2010–11.

2. There is a delay of 124 days in filing the present appeal. Seeking condonation of delay, the assessee has filed an application accompanied by affidavit. After considering the rival submissions and the averments made in the affidavit, we are of the view that the delay in filing the present appeal is due to bonafide reasons. Therefore, condoning the delay, we admit the appeal for adjudication.

3. At the outset, Shri Nitesh Joshi, learned Counsel for the assessee submitted that since the assessee has already been allowed the desired benefit in the rectification order passed by the DRP, grounds no.2, and 3, having become infructuous are not to be pressed.

4. Considering the aforesaid submissions of learned Counsel for the assessee, we dismiss grounds no.2 and 3, as not pressed.

5. Thus, the only surviving ground which arises for consideration is ground no.1, relating to disallowance of Rs. 19,37,936 under section 43B of the Act.

6. Brief facts are, in the course of assessment proceedings the Assessing Officer while verifying the Profit & Loss account noticed that the assessee has debited an amount of Rs. 19,37,936 under the head “General and Administrative Expenses”. After calling for necessary details and examining them, he found that the amount represents property tax payable to the Municipal Authority through the landlord as per the terms of the leave and license agreement. Further, he observed, during the year under consideration, demand for depositing the same was made by the Municipal Authorities and the assessee has claimed the expenditure on estimate basis. Referring to the provisions of section 43B(a) of the Act, the Assessing Officer observed that tax, duty, cess or fee, if any, claimed by the assessee can be allowed as a deduction only on actual payment. He observed, since the amount in question has not been actually paid during the year, it has to be disallowed and added back to the income of the assessee. As against the aforesaid addition, the assessee raised objections before learned DRP. However, the the addition mad by the Assessing Officer was upheld.

7. The learned Counsel for the assessee submitted, as per the terms of the lease agreement, in addition to the lease rental the assessee also has to reimburse the Municipal Tax paid by the landlord to the Municipal Authority. He submitted, the amount reimbursed by the assessee to the landlord is nothing but part of the rent paid by the assessee to the landlord, hence, is allowable as expenditure. The learned Counsel submitted, even assuming that the amount paid is in the nature of property tax, still, it is allowable since the assessee has paid the amount to the licensor before the date of filing of return of income. In support of his contention, the learned Counsel relied upon the decision of the Hon’ble Delhi High Court in Oswal Agro Mills Ltd. v/s CIT, [2014] 42 taxmann.com 100 (Del.).

8. The learned Departmental Representative relied upon the observations of learned DRP.

9. We have considered rival submissions and perused the material on record. Undisputedly, the amount of Rs 19,37,936 has been paid to the landlord towards reimbursement of property tax to be paid by the landlord / licensor on the property taken on lease by the assessee. On a perusal of the lease and license agreement, a copy of which has been submitted before us, it is seen that as per Para–6.2, the burden of paying the property tax is on the licensor. However, as per the mutual agreement between the parties, the licensee agreed to reimburse the property tax to the licensor save and except any late fee / charge for any statutory dues. Thus, as could be seen from the aforesaid terms of the agreement, the reimbursement of property tax by the assessee to the licensor is purely contractual and not a statutory liability. Even otherwise also, property tax levied by the Municipal Authority is a charge on the property. Undisputedly, the licensor is the owner of the property, hence, liable to pay the property tax. That being the case, the amount equivalent to the property tax reimbursed to the licensor cannot be treated as rate, tax, fee, cess, etc., as provided under section 43B(a) of the Act. Therefore, the disallowance made of Rs. 19,37,936, has to be deleted. Accordingly, we do so. Ground is allowed.

10. In the result, appeal is partly allowed.

Order pronounced in the open Court on 13.03.2020

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