Annual Mixed Charges paid to Municipal Corporation of Delhi cannot treated as ‘Tax’, not Deductible from Rental Income: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the annual mixed charges paid to the Municipal Corporation of Delhi would not amount to ‘tax’ and allowable under section 23 of Income Tax Act, 1961.

In the present case, the collection of ‘mixed used charges’ is for the purpose of regularizing the usage of residential premises for certain commercial purposes as prescribed under the Delhi Development Authority (Fixation Of Charges For Mixed Use And Commercial Use Of Premises) Regulations, 2006.

The bench comprising Accountant Member N K Billaiya and Judicial Member Yogesh Kumar held that the said charges is in the nature of regularization of the usage of the property, which cannot be construed as tax levied by the local authority/Municipal Corporation of Delhi.

“Further, the collection of the annual mixed used charge will not make any difference in the annual let out value of the property, therefore the same is not allowable as per the proviso under section 23(1) of the Income Tax Act, 1961,” the bench said.

Concluding the order, the bench observed that “For the above discussions, we are of the view that, the CIT (A) has rightly upheld the disallowance of Rs. 2,91,270/- made by the A.O. in respect of the claim made by the assessee for deduction of annual of mixed use charges paid by the assessee to Municipal Corporation of Delhi, in respect of the property of the Assessee.”

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