The Cochin bench of Income Tax Appellate Tribunal in the case of The Asst.Commissioner of Income-tax versus M/s.Janapriya Builders where the bench ruled that diesel expenses can’t be deducted from House Property Income.
The Tribunal bench comprising of Judicial Member George George K and Accountant Member Chandra Poojari was held so while considering the appeal of Revenue. In instant case Respondent, Assessee is a firm filed its return of Income to the tune of Rs. 1,45,84,800 wherein the total income was assessed at Rs.1,54,08,981.
After the completion of Assessment proceedings, 1/3rd of diesel expenditure claimed by Assessee was disallowed by considering the lease deed where it is proposed to disallow 1/3rd of the Diesel Expenditure. Subsequently, notice under section 148 of the Income Tax Act was issued proposing to reopen the order for the reason that AO while completing the Assessment disallowed the 1/3rd claim of diesel expenditure.
The Assessee approached CIT (A) by alleging the said reopening and disallowance wherein CIT (A) held that when the property was let out without having an electricity Connection, then it is the responsibility of the Assessee to provide electrical connection. For this purpose tenant had incurred diesel generator expenditure for running its store. The Authority also noticed that the tenant provide rental income by deducting the diesel expenditure. Thereafter it was concluded that diesel expenditure was an allowable expenditure.
Aggrieved by the order of the CIT (A), the Revenue has filed the present appeals before the Tribunal. The Revenue before the Tribunal contended that diesel expenditure is not an allowable expenditure under the provision of Income Tax while computing the House Property Income.
On contrary to this, counsel for Assessee argued that tenant had deducted diesel expenditure from the rent payable to the Assessee towards additional cost of generating part through diesel generator.
Tribunal while hearing both the recitals observed that “The assessee, on our directions, have now produced the confirmation of the tenant stating therein they have paid the rent minus the diesel expenses incurred by it”.
The bench also noticed that the crucial supplementary agreement was not produced before the AO but at the same time confirmation of the tenant produced before the tribunal. Accordingly, bench decided to allow the appeal of Revenue regarding the disallowance of diesel expenditure from House Property Income.
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