Lysa Trading LLP Vs ITO (ITAT Ahmedabad)
In a recent judgment, the Income Tax Appellate Tribunal (ITAT), Ahmedabad bench, ruled in favor of Lysa Trading LLP, asserting that the recovery of common area maintenance charges (CAMC) from a sub-tenant, when demonstrably offset against expenses incurred by the assessee, should not be treated as rental income taxable under “income from house property.” The tribunal’s decision overturned the orders of both the Assessing Officer (AO) and the Commissioner of Income-Tax (Appeals) (CIT(A)), National Faceless Appeal Centre (NFAC), Delhi.
The dispute arose during the assessment for the Assessment Year 2022-23. Lysa Trading LLP had reported a lower rental income in its Income Tax Return (ITR) compared to the amount reflected in the TDS (Tax Deducted at Source) schedule. The discrepancy, amounting to Rs. 17,08,908, was attributed by the assessee to the recovery of CAMC from M/s Sleek Electrics Pvt. Ltd. (SEPL), to whom Lysa Trading LLP had sub-leased 50% of its rented property.
Background of the Case
Lysa Trading LLP, the assessee, had incurred a total of Rs. 34,29,816 towards CAMC for the entire property. As per an agreement with SEPL, 50% of these charges, i.e., Rs. 17,08,908, were to be recovered from SEPL as reimbursement. The assessee’s contention was that this recovered amount was merely a reimbursement of expenses and not income. Consequently, Lysa Trading LLP netted off the recovered amount against the total CAMC paid, debiting the balance of Rs. 17,08,908 in its books and not claiming it as a deduction against “income from house property.”
