INCOME TAX ACT, 1961

--Income from house property--Annual value Computation--Assessee was carrying on business of buying and selling of property. During the relevant year, it acquired certain units in a building and same were leased out. In the return filed for relevant year, assessee had treated the rent received as income from house property and had claimed brokerage and commission, professional and consultancy fees, maintenance expenses and other sundry expenses as business expenses. Assessing officer noted that these expenses were primarily related to leasing out of premises and such expenses claimed were basically covered by reduction of 30 per cent allowance from ratable value under section 24. Therefore, same could not be claimed again as business expenditure and accordingly, disallowed these expenses. On appeal Commissioner (Appeals) confirmed the order of assessing officer. Being aggrieved, assessee filed an appeal before the Tribunal contending that since these expenses had been incurred directly for the purpose of letting out of the property, therefore, assessee never received the full rent and, therefore, the same should be allowed to be reduced from the annual value under section 23, in case same were not allowed as business expenditure.

The annual value cannot be reduced by the amount of expenses because section 23(1) clearly talks of annual rent received and the expenditure can be claimed only under section 24. Since under section 24 only 30% of standard allowance and further deduction only on account of interest is provided, therefore, no further deduction can be allowed. Therefore, expenditure incurred on account of brokerage, professional consultancy, maintenance, etc., relating to the property was not allowed to be reduced from computation of annual value under section 23. [Para 6]

Income Tax Act, 1961 Section 23

Income Tax Act, 1961 Sections 24 & 37(1)

INCOME TAX ACT, 1961

--Income from house property--Deduction under section 24Processing fee paid for sanction of bridge loan --During assessment proceedings, assessing officer noticed that assessee had claimed a certain sum on account of processing charges for the bridge loan availed from a bank. According to assessing officer, processing charges could not be equated with interest expenses and same was inadmissible for deduction under section 24. On appeal, Commissioner (Appeals) held that the word 'interest' has been defined under section 2(28A) which is an inclusive definition and includes any service fees or other charges in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. This being so, the processing fees was also admissible for deduction under section 24. Being aggrieved, revenue challenged the order of the Tribunal. Held: Commissioner (Appeals) had correctly interpreted that processing charges has to be construed as part of interest in view of the definition of interest and consequently, processing fee paid for sanction of bridge loan was eligible for deduction under section 24, thus, order of Commissioner (Appeals) was uphelearned