The Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) directed readjudication with respect to the liability of property tax paid on behalf of the collector. Further observed that the lower authority did not have opportunity to verify this additional evidence in support of the claim of the assessee regarding the liability of property tax .
The Assessee Rare Townships Private Limited is a limited company engaged in the business of building and constructing projects at Ghatkopar, Mumbai. After filing the return of income, the assessee case was selected for scrutiny . On the perusal of the computation of income the Assessing Officer (AO) noticed that the assessee has claimed deduction of Rs.1,74,00,780/- under section 43B of the Act towards Property Tax.
After verifying teh submission if the assessee submission AO noticed that the deduction has been claimed against the payments made during the previous year relevant to AY 2011- 12 and 2012-13 and therefore, concluded that the claim of Property Tax is not justifiable under section 43B of the Act. Accordingly, the AO disallowed the sum of Rs.1,74,00,780/-.
Aggrieved by the order the assessee filed an appeal before the CIT(A) who confirmed the disallowance and held that the payments towards the property tax is not made during the year under consideration and therefore, not allowable as per the provisions of section 43B of the Act. Hence the assessee filed another appeal before the tribunal.
During the adjudication Anuj Kisnadwala, the counsel for assessee submitted that assessee during the AY 2011-12 and 2012-13 made payments towards Property Tax on behalf of Collector, Bombay Suburban District (BSD) balance-sheet of the assessee.
Accordingly the assessee adjusted the above payments against its own property tax liability and claimed the same as a deduction under section 43B of the Income Tax Act
Mahita Nair, Counsel for Revenue argued that the provisions of section 43B are very clear that certain deductions need to be allowed only on payment basis and that book entries adjusting advances against the property tax liability could not be treated as actual payment for the purpose of deduction under section 43B of the Income Tax Act.
Further argued that adjustment of property tax claimed by the assessee was accepted by Collector, BSD in subsequent years only as submitted by the assessee and therefore even if the deduction should be allowed it can be allowed only during the year in which such adjustment was approved for adjustment.
The bench viewed that the only issue is that whether the adjustment of amount paid in earlier years on behalf of Collected BSD against the property tax liability of the assessee during the year under consideration would make the claim eligible for deduction under section 43B of the Act.
Further observed that the assessee claimed deduction under section 43B is made on the basis that the payment of property tax on behalf of Collector BSD in AY 2011-12 & 2012-13 is adjusted against its own liability of property tax during the year under consideration.
Furthermore the lower authorities did not have opportunity to verify this additional evidence in support of the claim of the assessee regarding the liability of property tax .
After reviewing the facts the ITAT bench of Narender Kumar Choudhry, (Judicial Member) and Padmavathy S (Accountant Member) directed readjudication with respect to the liability of property tax paid on behalf of the collector.
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