reimbusement of repairs and maintennance exp

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Querist : Anonymous

Querist : Anonymous (Querist)

31 August 2010 whether reimbursment of repairs and maintennance expenses by tenants to landlords would taxable at all,and if taxable under what head,income from house property or income from other sources

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

01 September 2010 If it is reimbursment against actual expenses, it will not taxable,

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Querist : Anonymous

Querist : Anonymous (Querist)

02 September 2010 would appreciate some case laws supporting the issue

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

20 July 2025 Your query concerns the taxability of reimbursement of repair and maintenance expenses by tenants to landlords — specifically, whether such reimbursements are taxable, and if so, under which head:

Income from House Property, or
Income from Other Sources.
Let’s break it down clearly:

✅ Key Question:

Is reimbursement of repair and maintenance expenses by tenant to landlord taxable in the hands of landlord?

🔹 Answer:
It depends on the nature of reimbursement and the terms of the lease agreement.

📌 Two Scenarios:

✅ 1. Reimbursement is for actual expenses incurred by landlord (on tenant’s behalf), supported by bills:
If the landlord pays for repairs, and the tenant reimburses the exact cost, this does not constitute income.
Treated as a pass-through transaction, not taxable, as there's no income or gain.
Not included under "Income from House Property" or "Other Sources".
BUT: The reimbursement must be clearly evidenced and should not include any markup/profit.
❌ 2. Reimbursement is beyond actual costs or part of overall lease arrangement:
If reimbursement is:
Lump-sum
Part of the lease contract
Or considered in lieu of higher rent,
...then the amount could be seen as income.
In such a case:

It will be treated as additional rent, hence taxable under:
Income from House Property, if it relates to the tenancy and ownership
Or Income from Other Sources, if not directly linked to tenancy
🔍 Judicial Precedents / Case Law:

CIT v. J. K. Investors (Bombay) Ltd. [(2001) 248 ITR 723 (Bom)]
Held: Reimbursement of actual expenses incurred (like property tax or maintenance) by the tenant to landlord was not taxable, as there was no income element.
CIT v. Indian Bank Ltd. [(1991) 190 ITR 91 (Mad)]
Reimbursement of expenses (like repairs) made without any profit element is not income, hence not taxable.
Birla Gwalior Pvt. Ltd. v. CIT [(1973) 89 ITR 266 (SC)]
Emphasized that substance over form should be considered. If reimbursements form part of consideration for property use, they may be taxed as rental income.

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