The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) approved the claim for the company’s ongoing office maintenance expenses under Section 24(a) of the Income Tax Act, 1961, which the authorities had failed to realise.
The assessee, Armasol Properties is a private limited company and derives income from business as well as from house property. During the year the assessee did not have any business income albeit it needs to maintain its office and minimum staff in order to keep the office in a running condition. The assessee has only income from house property.
The AO held that the assessee was not entitled to claim the set off of these expenses against the house property income and consequently, a sum of Rs. 5,33,759/- was disallowed out of total expenses claimed of Rs. 5,53,684/- and added back to the income of the assessee.
The Commissioner of Income Tax ( Appeals ) [CIT(A)] observed that the assessee was engaged in the business of real estate and letting out of properties on rent and has shown only income from house property of Rs. 4,71,653/-. The first appellate authority noted that the assessee has claimed Rs. 5,53,684/- in the profit and loss account and since the same were not allowable under Section 24(a) of the Income Tax Act and rightly disallowed by the AO.
The tribunal of Sanjoy Sharma ( Judicial member ) and Rajesh Kumar ( Accountant member ) observe that both AO and CIT(A) have failed to appreciate and understand the fact that the assessee was a company and has to incur certain expenses to keep its office running. The assessee has rightly claimed the loss of Rs. 5, 66, 441/- which has to set off against the house property income.
Accordingly, ITAT set aside the order of CIT (A) and directed the AO to delete the addition by allowing loss from business and the appeal filed by the assessee was allowed.
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