ITAT Delhi: Ground Rent Not Allow Under Section 43 of I-T Act

There have been Consecutive Appeals for allowing Provision of Ground Rent in next year but the answer has always been no.

The Delhi Bench of Income Tax Appellate Tribunal in a recent ruling held that the provision of the ground rent shall not be allowed as per section 43B of the Income Tax Act 1961.

What the Section 43B Says of Income Tax ACt 1961?

As per section 43B, certain specific statutory expenses can be claimed in a year of the payment only.

What Was the Issue?

The assessee company had not been satisfied by the order of the I-T department that disallowed Rs10,47,025 as ground rent. As per the Assessing Officer,

• The aforesaid amount cannot be allowed as per section 43 B of the I-T Act.
• Can be allowed in the year in which this was actually paid by the assessee.

Thereafter the assessee appealed to the Commissioner of Income Tax (Appeals) who upheld the ruling.

This was not the full stop. The assessee contended the issue before the tribunal considering the judgment of K. Narendra v/s ACIT and claimed that the provision of section 43 B is not applicable to the aforesaid nature of the payment.

What Was the Ruling by the Tribunal?

After hearing the arguments from both sides and after considering the judgment of Delhi High Court in the case of Gulab Singh & Sons (P) Ltd. v. CIT., the tribunal bench that comprised Judicial Member Amit Shukla and the Accountant member BRR Kumar held that the nature of such an amount i.e. the amount payable for the misuse of the premises and illegal construction was upheld in the nature of the ground rent.

“It was amongst others held that ground rent does not come under any items mentioned in the various clauses of section 43B. Although the main issue, in that case, was of allowability of such amount u/s 24 of the Income Tax Act but still the issue of allowability of ground rent from the perspective of section 43B was also considered and it was held that ground rent is not disallowable by applying the provision of section 43B, the bench added.”