ITAT allows the claim of Standard Deduction on Income from Letting out Property

The Income Tax Appellate Tribunal (ITAT), Delhi Bench allowed the claim of standard deduction in respect of income from letting out property.

The assessee, Tube Rose Estates Pvt. Ltd. is the company engaged in the business of real estate. It is a builder. During the course of assessment Assessing Officer noted that assessee is getting rent from the office premises let out as well as maintenance charges for building, reimbursement for air conditioning charges and house-keeping.

The assessee stated that entire expenditure is allowable under the head income from business. The Assessing Officer held that it is not acceptable because the assessee is collecting rental income of Rs.4,56,70,064/- by owning 34.72% of the total area.

Assessing Officer held that out of the total gross receipt of Rs.7,53,33,894/- being Rs.4,54,70,064/- as rental income and Rs.2,96,63,830/- as maintenance income. Assessee has shown only Rs.24,84,568/- as interest.

The Assessing Officer refused to accept the claim of the assessee that under area of 52,101/- there is no expenditure incurred. The Assessing Officer noted that assessee has shown expenditure of Rs.4,42,00,476 in the profit and loss account and has disallowed assessee himself Rs.55,18,715.

Thus, against the income from maintenance and reimbursement expenses the assessee has claimed expenditure of Rs.3,86,85,361/-. Since 34.70% of maintenance and reimbursement income is treated by the assessee as income from house property, he disallowed 34.72% of expenditure of Rs.3,86,85,361 i.e. Rs.1,34,31,551 as expenses related to the income from maintenance and reimbursement related to the property owned by the assessee.

Out of this disallowance of Rs.55,18,715 Assessing Officer further granted 30% of standard deduction of Rs.30,89,784 and made the net disallowance of Rs.1,03,41,773 in the hands of the assessee. Accordingly, he assessed the total income of the assessee at Rs.27,14,580 against the returned income of Rs.3,23,72,809. Assessment order was passed under Section 143(3) of the Act.

The Coram of Sudhanshu Shrivastava and Prashant Maharishi while allowing the appeal of the assessee said that the and CIT was not justified in rejecting the claim of the standard deduction under section 24 in respect of income from letting out of the property by the classified under the head income from business and profession.

“Further the maintenance and service income are backed by the agreement with reference to the left out properties, the characterization of the same cannot be disturbed without any cogent reasons,” the ITAT said.

To Read the full text of the Order CLICK HERE

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