Expenses incurred by a tenant on repairs of the house property cannot be included in ALV of the house property:

Assessee received rent in respect of let out house property which was offered to tax after claiming standard deduction @ 30% u/s 24(a). According to AO, standard deduction was nothing but allowance for repairs expenses. He found that the repairing charges were to be borne by the tenant and not the assessee. He was of the view that in such a scenario, benefit of same expenditure shall be taken by both, tenant and the assessee, at a time. Hence, he disallowed the said standard deduction. Ld. CIT(A) was of the view that ALV (Annual Letting Value) of a property in case where tenant takes the responsibility of repairs shall be less than ALV of a property in case where owner undertakes such responsibility and if tenant undertakes such responsibility, then such expenses shall be included in ALV of such property. Even though Ld. CIT(A) deleted the said disallowance, he directed AO to determine ALV as per his aforesaid view. Hon’ble ITAT held that deduction @ 30% is a standard deduction which need not be necessarily towards repairs of the house property. It was further held that amount of expenditure incurred by the tenant on repairs shall not be includible in ALV of the property in light of order pronounced by Hon’ble ITAT, Mumbai in the case of Mukesh D. Ambani – (2006) 7 SOT 521 (Mum).

[TUSHAR SHANTILAL KOTHARI Vs. DCIT – ITA NO.1727/Ahd/2010]