Vishwaroop Infotech Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has partially allowed an appeal filed by Vishwaroop Infotech Pvt. Ltd. concerning disallowances related to unrealized rental income and expenses claimed against exempt income for Assessment Year 2012-13. The case, Vishwaroop Infotech Pvt. Ltd. Vs ACIT, centered on two primary disputes: the taxability of rent not received by the assessee despite TDS deduction by the tenant, and the disallowance of administrative expenses under Section 14A of the Income Tax Act, 1961, read with Rule 8D.
Unrealized Rent: A Key Contention
Vishwaroop Infotech Pvt. Ltd., engaged in the business of leasing commercial properties, filed its original return of income for AY 2012-13 declaring a total income of Rs. 26,78,27,560, later revised to Rs. 26,90,54,370. The dispute arose when the Assessing Officer (AO) added Rs. 3,85,85,341 to the assessee’s income, treating it as unrealized rent from M/s Spanco BPO Services Ltd. and M/s Spanco Respondez BPO Pvt. Ltd.
The assessee argued that despite the tenants deducting and depositing Tax Deducted at Source (TDS) on the rent, no actual rent was received due to the tenants’ severe financial distress. The company had initially leased four floors in Infotech Park, Vashi, Navi Mumbai, to Spanco Telesystems and Solutions Ltd. in FY 2007-08. Subsequently, Spanco Telesystems underwent a slump sale, and the new entities, Spanco BPO Services Ltd. and Spanco Respondez BPO Pvt. Ltd., took over as licensees. These new licensees ceased rent payments from FY 2010-11.
