Case Law Details

Case Name : Assistant Commissioner of Income Tax Vs Texool Limited (ITAT Mumbai)
Appeal Number : I.T.A. No. 7457/Mum/2012
Date of Judgement/Order : 28/04/2017
Related Assessment Year : 2009- 10

Assessee claimed certain amount under the head ‘rent’ which included an amount of Rs. 3,10,000/- paid to ‘Regional Office Pay & Accounts’ on behalf of an entity namely Shanlok Enterprises. The same was also disallowed on the premises that the same was incurred on behalf of a third party and not incurred for the assessee’s business. Aggrieved, the assessee contested  the additions before Ld. CIT(A) successfully vide order dated 14/08/2012 wherein the Ld. CIT(A) after considering the various contentions deleted the additions against which the revenue is in appeal before us.

Rent was paid on behalf of a third person purportedly for the use of his premises. However, the assessee could not produce any lease agreements with the said party and also could not substantiate the fact whether he has used the premises for his business purposes and hence rightly suffered dis allowance at the hands of AO.

Regarding rental payment, it was contended that the assessee was operating in Kandla Special Economic Zone and was allotted land by the authority. However the allotted premises was not sufficient to fulfill the requirements of the assessee and therefore, the assessee took an adjacent premises from Shanlok Enterprises on rent under oral agreement and paid the said amount directly to the authority on behalf of this entity. Nevertheless, the premises was used for the business purposes of the assesse and hence, he was eligible to claim the same.

Regarding rental payments, we find no illegality in direct payment by assessee to the authority on behalf of the lessor under an oral agreement. However, the payment by assessee on behalf of lessor constitutes ‘rental income’ in the hands of the lessor. Therefore, if the lessor has offered the same in his return of income, the assessee’s claim gains strength and becomes admissible. Therefore, this matter is also restored back to the file of Ld. AO to verify whether the stated entity has offered the impugned payments made by the assessee in his return of income or not. If yes, then the claim of the assessee becomes admissible. The assessee is also directed to provide necessary documents in this regard and substantiate his claim failing which the Ld. AO shall be at liberty to decide the same in accordance with law. This ground of assessee’s appeal also stands allowed for statistical purposes.

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