The Chennai bench of Income Tax Appellate Tribunal ( ITAT ) has held that no deduction of actual expenditure incurred on house property besides 30% statutory deduction on Income from House Property.
The assessee, M/s. Egberts India Pvt. Ltd., is engaged in the business of real estate and property development. During the course od assessment the Assessing Officer noted that assessee shows income from house property and bank interest but no business income was reflected in the Profit and Loss Account. As against this, the assessee claimed business expenditure. Hence, the AO disallowed business expenditure.
On appeal CIT(A) holds that the business expenditure represent expenditure relating to other business activities and accordingly, allowed the appeal of the assessee. Aggrieved, the revenue is in further appeal before ITAT.
The Coram of Mr. Mahavir Singh, Vice President and Mr. Manoj Kumar Aggarwal, AM has observed that the assessee had two properties and the property at Anna Nagar has been let out by the assessee and the rental income has been offeredas Income from House Property. Under this head, the assessee is entitled to claim statutory deduction of 30% and interest expenditure irrespective of actual expenditure incurred by the assessee. However, it emerges that besides 30% deduction, the assessee is claiming actual expenditure incurred on Anna Nagar property as business expenditure which is not permissible. The assessee is entitled for those expenditure which fulfil the tests of Sec.37(1).
The Tribunal has held that “we set aside the impugned order and restore the matter back to the file of AO with a direction to the assessee to bifurcate the business expenditure. The expenditure incurred on Anna Nagar property would not be allowable expenditure as Business expense whereas other expenditure incurred for business purposes and to maintain corporate personality would be admissible expenditure”.
Advocate Mr. G. Vardini Karthik and Mr. Varuvooru Sreedhar appeared on behalf of the assessee and revenue respectively.
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