INCOME TAX ACT, 1961

--Income from house property--Annual value Computation--AO disallowed the claim of deduction of municipal taxes and society charges on the ground that a flat deduction of 30 per cent is allowable under section 24(a) and therefore, no further deduction in respect of municipal taxes and society charges was allowable. Held: Section 23(1) clearly provides that taxes levied by any local authority in respect of the property shall be deducted in determining the annual value of the property. Therefore, municipal taxes and society charges paid by assessee in respect of the let out property were allowable while computing the annual letting value of the property under section 23. This will be over and above the deduction under section 24.

The charges paid to the society are not covered in the allowable deductions as enumerated under section 24. The claim of the assessee is that the said society charges are to be allowed as deduction from annual letting value (ALV) as in the case of Municipal taxes. It is an admitted fact that the gross rent receipt by the assessee also include the society charges which are to be paid by the assessee. Thus while computing the annual value the amount of rent which actually goes to the hands of the owner in respect of leased property should be taken into consideration. As per the provisions of section 23 the annual value of any property is to be determined on the basis of actual rent received by the owner. In Realty Finance & Leasing (P) Ltd. v. ITO (2006) 11 (II) ITCL 455 (Mum-Trib) : (2006) 5 SOT 348 (Mum-Trib) : 2006 TaxPub(DT) 0697 (Mum-Trib).

Income Tax Act, 1961 Section 23

INCOME TAX ACT, 1961

--Business expenditure--Ad hoc disallowance Electricity expenses--Assessee was using residence also as his office and accordingly claimed 75 per cent of total electricity expenses as business expenditure, allocating 25 per cent towards personal use. Assessing officer considered the personal use of electricity at 50 per cent and accordingly made disallowance. Assessee argued that he being one of the leading film artistes held all the conferences with his producers and directors at his residence and having regard to his busy schedule, the use of residential premises was minimal. Held: In the absence of any contrary material placed on record by assessing officer to show that conferences with the producers and directors were not held at the residence of assessee as claimed, the Tribunal view that further disallowance of 25 per cent over and above already admitted by assessee was without any basis and had to be deleted.