Own-Occupancy and Usage of Office Space: ITAT Remands Matter for Production of Lease Agreement and other Evidences [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam in a recent case regarding self-occupancy and usage of office, proceeded to remand the matter back to the Commissioner of Income Taxes (Appeals), National Faceless Appeal Centre, Delhi ( CIT(A) ) while calling for the production of lease agreement among other evidence,

Three Income Tax Appeals pertaining to the same subject matter were filed against the Assistant Commissioner of Income Taxes -Circle 2(1) by the Assessee, Ace Urban Developers Private Limited, a developer of smart urban infrastructure aimed at ensuring sustainability, eco-friendly practices and resource optimization.

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The Returns of Income filed by the Assessee for the Assessment Year (A.Y.) 2018-19, admitting a total loss of Rs.11,32,51,419/- was selected for complete scrutiny by the Revenue Department.

Following assessment under Section 143(3) of the Income Tax Act, 1961, the Assessing Officer (AO) made disallowances of Rs.2,02,37,996/- under Section 14A of the Income Tax Act, 1961 on account of expenditure incurred in relation to exempted income; and disallowance of Rs.1,06,30,187/- on account of rental expenses.

The disallowance was upheld in appeal before the CIT(A) following which the present Appeal was lodged before ITAT against the disallowance of rent and failure of CIT(A) to appreciate that part of the leased building had been kept by the Appellant for office use among other grounds.

Authorized Representative for the Assessee, SK Gupta submitted that the total office space of 94,700 Square Feet in Cyber Towers, Hitech City, Hyderabad leased out by the Appellant had been sub-leased in parts; rental income derived from the sub-leased portion has also been disclosed in the Profit & Loss Account of the Assessee.

The Assessee submitted that the remaining area of 17,112 Square Feet was submitted to have been put to office use, thereby praying for deletion of the disallowance thereof.

The two-member Bench of Income Tax Appellate Tribunal, constituted by Duvvuru RL Reddy, Judicial Member and S Balakrishnan, Accountant Member appreciated the argument that the Assessee had taken on lease the office space for their own use and paid Tax Deducted at Source (TDS) on the rental payments, hence qualifying it as an allowable deduction under Section 37 of the Act.

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However, the Bench alluded to the observation of CIT(A) that the Assessee failed to adduce any documentary evidence such as lease agreement to substantiate the own-occupancy and usage of the remaining 17,112 Square Feet by the Assessee themselves. In light of such finding, the Tribunal remitted the case back to the file of the CIT(A) to reconsider its decision on the allowability of rental expenditure, while directing the Assessee to produce the lease agreement and other documentary evidence to substantiate their use of the office space

To Read the full text of the Order CLICK HERE

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