Society maintenance charges’ paid by assessee could not be held to be taxes paid to local authority.

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Society maintenance charges’ paid by assessee could not be held to be taxes paid to local authority.

(2021) 62 CCH 0174 MumTrib
Short Overview of the case:
Issue was with regard to taxation of Income from house property
it was regarding the Rental income from commercial property
Assessee being resident corporate assessee has been assessed u/s 143(3) wherein it transpired that it earned rental income from a commercial property which is situated in a condominium
Assessee credited an amount as rental income in Profit & Loss Account as against receipts
Differential mount was due to fact that assessee credited rental receipts net of ‘society maintenance charges’
AO opined that same is not allowable since assessee is already allowed deduction of 30% u/s 24(a)
CIT(A) action of AO was upheld
ITAT held as under:
Assessee as a licensor was liable to pay municipal taxes and any outgoings and any further increase thereof to respective and appropriate local authority / organizations save and except electricity, water and telephone connection / usage charges in respect of licensed premises
Licensee is obligated to pay lump sum license fees to assessee
Assessee is also providing certain amenities and facilities of varied nature to users under separate agreement against lump sum monthly payment as well as against interest free security deposit
All these charges have been offered as well as accepted under head ‘Income from House Property’
Payment of municipal taxes and other outgoings was liability of assessee
Any increase was also to be borne by assessee—Licensee was required to pay fixed monthly lump sum payment to assessee as license fees irrespective of assessee’s outgoings
Therefore, to say that actual rent received by assessee was net of ‘society maintenance charges’, would not be correct as per terms of agreement entered into by assessee
As per provisions of Section 23(1)(b), annual value shall be deemed to be actual rent received or receivable by assessee
Proviso provides for deduction of municipal taxes levied by any local authority
As per Explanation, actual rent received or receivable would not include amount of rent which owner could not realize
Statutory provisions are quite clear and provide for deduction of only specified items i.e. taxes paid to local authority and amount of rent which could not be realized by assessee, from expression ‘actual rent received or receivable
No other deduction is permissible
Allowing other deduction would amount to distortion of statutory provisions and such a view could not be countenanced
To accept plea that rent which actually goes into hands of assessee is only to be considered, would enable assessee to claim any expenditure from rent actually received or receivable since same would ultimately reduce amount which actually goes into hands of assessee
Same is not intention of legislatures
Statutory provisions, as noted earlier, provide for deduction of specified items only
Society maintenance charges’ as paid by assessee, by no stretch of imagination, could be held to be taxes paid to local authority
There is no infirmity in impugned order
Assessee’s appeal dismissed.

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