ORDER
Jaidev, A.M.
1. This appeal of the assessee is directed against CIT(A)’s order dated 28-4-1998.
2. The first ground of appeal is raised as under –
“The learned Commissioner of Income-tax (Appeals) XXXII, Mumbai has erred in confirming disallowance of expenses of Rs. 1,11,376/- incurred in relating to Khandala Property and claimed as deductible from the rental income.”
3. The assessee is stated to be in the business of letting out properties and earning rental income thereof. One of the properties at Khandala of which the assessee was the owner was given on rent to Swadi Chemicals Pvt. Ltd. as per the agreement dated 29-7-1992 between Mukesh Taxtiles (proprietary concern of the assessee) and M/s Swaid Chemicals Pvt. Ltd. As per this agreement the tenant was responsible to pay monthly outgoings such as water charges, electricity charges and maintenance etc., but the AO noticed that the assessee has claimed in its profit & loss account water charges, electricity charges and telephone charges aggregating Rs. 2,22,376/-. When asked to explain the reason for claiming the expenses in violation of the agreement entered into with the tenant, it was explained by the assessee that there was some dispute with the tenant which was settled in the accounting year relevant to the assessment year 1997-98 and hence the assessee company being owner of the property had to pay the expenses relating to the year of account. It was further stated that the tenant paid a sum of Rs. 98,741/- which was offered by the assessee as his income for that year. The AO observed that since no evidence regarding the dispute its settlement was furnished by the assessee, the assessee was not entitled to claim the impugned expenditure as the liability was of the tenant and not of the assessee. In the first appeal, the Id. CIT(A) upheld the order of the AO.
4. The Id. counsel of the assessee contended that though as per agreement the liability was of the lessee or tenant, yet, as the necessary payment was not made by it, assessee had to make the payment being the owner of the property. Therefore, according to the Id. counsel, expenditure is allowable as business expenditure.
5. On the other hand, the Id. DR relied upon the orders of the AO as well as the CIT(A) and vehemently contended that as per the agreement this was not the liability of the assessee through payment was in fact made by the assessee. The Id DR submitted that the assessee made the payment on behalf of the tenant and the major part of the expenditure was reimbursed to the assessee in assessment year 1997-98.
6. We have given a careful consideration to the rival submissions. We are of the opinion that assessee made the payment of water, electricity and telephone charges on behalf of the tenant and these expenses were reimbursed to the assessee by the tenant subsequently. It is clear that as per agreement the liability was of the tenant only and not of the assessee. We, therefore, hold that order of the CIT(A) is fair and reasonable and no interference is called for in the same. Appeal of the assessee on this issue is dismissed being without any substance.
7. Ground of appeal No. 2 was not pressed and the same is, therefore, dismissed.
8. Ground of appeal No. 3 is of general nature and is not required to be dealt with.
9. In the result, appeal of the assessee stands dismissed.