M/s. Jagatjit Industries Ltd., New Delhi V. DCIT, New Delhi

CO 53/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1373 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 01-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K MADAN
• Assessee Lawyers: S K CHAURASIA
• Keywords: Set aside
• Section: 115JB; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D, NEW DELHI BEFORE, SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.3631/DEL/2014 (ASSESSMENT YEAR-2011-12) DY. CIT, CENTRAL CIRCLE-7, NEW DELHI VS. M/S. JAGATJIT INDUSTRIES LTD. 4 TH FLOOR, BHANDARI HOUSE 91, NEHRU PLACE, NEW DELHI-19 PAN AAACJ 1525E (APPELLANT) (RESPONDENT) CROSS OB JECTION NO.53/DEL/2015 (ARISING OUT OF ITA NO.3631/DEL/2015) (ASSESSMENT YEAR-2011-12) M/S. JAGATJIT INDUSTRIES LTD. 4 TH FLOOR, BHANDARI HOUSE 91, NEHRU PLACE, NEW DELHI-19 PAN AAACJ 1525E VS. DY. CIT, CENTRAL CIRCLE-7, NEW DELHI (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY SH. S.K. CHAURASIA, SR. DR RESPONDENT BY SH. M.K.MADAN, CA DATE OF HEARING 17.02.2020 DATE OF PRONOUNCEMENT 19.05.2020 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST ORDER DATED 17.04.2014 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, 2 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. NEW DELHI {CIT (A)} AND PERTAINS TO ASSESSMENT YEAR 2011-12. THE SOLE ISSUE CHALLENGED BY THE DEPARTMENT IS DELETING THE DISALLOWANCE OF RS.2,11,03,333/- BY THE LD. CIT (A) WHICH HAD BEEN D ISALLOWED BY THE ASSESSING OFFICER (AO) UNDER THE HEAD MAINTENANCE EXPENSES. THE CROSS OBJECTION HAS ALSO BEEN PREFERRED BY THE ASSESSEE. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE COMPANY IS A COMPANY ENGAGED IN THE BUSINESS OF ALCOHOLIC BEVERA GES, MALTED MILK FOOD, DAIRY PRODUCTS AND GLASS CONTAINERS ETC. THE INCOME TAX RETURN WAS FILED DECLARING THE TOTAL INCOME AMOUNTING TO RS .3,66,95,928/- UNDER NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 (HERE INAFTER CALLED THE ACT) AND RS.35,52,52,312/- U/S 115JB OF THE ACT. IN THE RETURN OF INCOME, THE ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY IN WHIC H THE GROSS RENT RECEIVED WAS SHOWN AT RS.12,84,25,283/- AGAINST WHICH THE ASSESSEE HAD CLAIMED HOUSE TAX PAID AT RS.1,07,15,049/- AND HAD, THEREAFTER, CLAIMED DEDUCTION U/S 24 (A) OF THE ACT @ 30% OF THE ANNUAL VALUE WHICH CAME TO RS.3,53,13,070/-. THE NET INCOME FROM HOUSE PROPERT Y WAS DECLARED AT RS.8,23,97,163/-. SIMILARLY, INCOME FROM MAINTENANC E SERVICES WAS SHOWN AT RS.1,80,37,643/- AGAINST WHICH THE MAINTENAN CE EXPENSES CLAIMED WERE SHOWN AT RS.2,11,03,333/- AND A NET LOS S OF RS.30,65,691/- 3 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. WAS DECLARED IN THE RETURN OF INCOME. HOWEVER, THE A O HELD THAT MAINTENANCE INCOME SHOULD BE CHARGED AS INCOME FROM HOUSE PROPERTY ONLY AND THAT THE MAINTENANCE CHARGES WERE NOT DEDU CTIBLE AS EXPENDITURE ONCE THE BENEFIT OF STATUTORY DEDUCTION U/S 24 (A) HAD BEEN GIVEN. THE LD. CIT (A), HOWEVER, ON APPEAL, HELD TH AT MAINTENANCE EXPENSES WERE DEDUCTIBLE ALTHOUGH THE LOSS WAS TO B E DISALLOWED. AGGRIEVED, THE DEPARTMENT SEEKS RELIEF BY PRAYING F OR RESTORATION OF DISALLOWANCE OF MAINTENANCE EXPENSES WHEREAS THE ASSE SSEE SEEKS TAXING OF MAINTENANCE INCOME UNDER INCOME FROM OTHER SOUR CES AFTER DEDUCTION OF THE MAINTENANCE EXPENSES INCURRED THEREFROM. 3.0 THE LD. SENIOR DEPARTMENT REPRESENTATIVE SU BMITTED THAT THE LD. CIT(A) HAD ERRED IN DELETING THE DISAL LOWANCE OF RS.2,11,03,333/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF MAINTENANCE EXPENSES. THE LD. SR. DEPARTMENT REPRES ENTATIVE ALSO SUBMITTED THAT THE MAINTENANCE CHARGES RECEIVED IN RELATION TO THE PROPERTY SHOULD BE REGARDED AS PART OF THE COMPOSIT E RENT FOR COMPUTING THE INCOME TAXABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY AND NO FURTHER DEDUCTION TOWARDS REPAIRS AND MAINTENANCE EX PENSES ACTUALLY INCURRED SHOULD BE ALLOWED THEREAFTER BECAUSE THE S TATUTORY DEDUCTION @ 4 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. 30% U/S 24 (A) OF THE ACT HAS ALREADY BEEN ALLOWED ON THE GROSS RENTAL INCOME. IT WAS SUBMITTED THAT THERE WAS NO BASIS FOR THE LD. CIT (A) TO HAVE ALLOWED A FURTHER DEDUCTION OF RS.2,11,03,333/ - TOWARDS MAINTENANCE EXPENSES. IT WAS ARGUED THAT THE AMBIT O F THE TERM RENT IS VERY WIDE UNDER THE PROVISIONS OF THE ACT AND IT WOU LD INCLUDE ANY AMOUNT WHICH IS PAID IN CONSIDERATION OF THE PROPERTY BEING LET OUT. IT WAS SUBMITTED THAT THE MAINTENANCE CHARGES FORM PART OF THE RENT ITSELF. IT WAS SUBMITTED THAT IF MAINTENANCE CHARGE ARE NOT INC LUDED IN THE DEFINITION OF RENT, IT WOULD ENABLE THE ASSESSEE TO AVOID THE PAYING TAX ON THE TRUE ANNUAL VALUE OF THE PROPERTY. 4.0 IN RESPONSE, THE LD. AUTHORIZED REPRESENTATIV E SUPPORTED THE ORDER OF THE LD. CIT (A) ON ISSUE OF DELETION OF DI SALLOWANCE OF MAINTENANCE EXPENSES. THE LD. AUTHORIZED REPRESENTATIVE ALSO PL ACED ON RECORD COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2016-17 AN D SUBMITTED THAT THE ASSESSING OFFICER HAS IN THIS ASSESSMENT ORDER CHARGED INCOME FROM MAINTENANCE UNDER THE HEAD INCOME FROM OTHER SOURCE S AND HAD ALSO ALLOWED DEDUCTION OF CHARGES INCURRED FOR MAINTENAN CE FROM SUCH INCOME. THE LD. AUTHORIZED REPRESENTATIVE PRAYED THAT SIMIL AR TREATMENT MAY BE 5 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. GIVEN TO THE MAINTENANCE INCOME AND EXPENDITURE DUR ING THE YEAR UNDER CONSIDERATION. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAV E ALSO PERUSED THE MATERIAL ON RECORD. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. SR. DEPARTMENT REPRESENTATIVE THAT THE LD. CIT (A) COULD NOT HAVE DELETED THE DISALLOWANCE OF EXPENDITURE OF MAINTENANCE SERVI CES IF HE WAS TREATING THE ENTIRE INCOME FROM RENT AND MAINTENANCE CHARGES AS INCOME FROM HOUSE PROPERTY AND THEREAFTER WAS ALLOWING STATUTORY DEDUCTION U/S 24(A) OF THE ACT @ 30% OF THE ANNUAL VALUE. IT IS SETTLED LAW THAT NO OTHER EXPENDITURE APART FROM THE STANDARD STATUTORY DEDUC TION OF 30% AND THE MUNICIPAL TAXES ACTUALLY PAID CAN BE CLAIMED AS DED UCTION FROM INCOME FROM HOUSE PROPERTY. ON THE OTHER HAND WE ALSO NOTE THAT, SUBSEQUENTLY, IN ASSESSMENT YEAR 2016-17, ALTHOUGH THE ASSESSEE H AD AGAIN CLAIMED THE MAINTENANCE INCOME AS PART OF RENTAL INCOME AND HAD ALSO CLAIMED DEDUCTION OF MAINTENANCE EXPENDITURE AS PART OF THE GROSS RENT, THE ASSESSING OFFICER HAS TREATED THE MAINTENANCE INCOM E AND EXPENDITURE AS BEING CHARGEABLE TO TAX UNDER INCOME FROM THE OTHER SOURCES. THIS IS IN LINE WITH THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SHANTIKUMAR NARAYANA HOTEL PVT. LTD. REP ORTED IN 201 ITR 138 6 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. (KAR.) WHEREIN IT WAS HELD THAT EVEN IF THERE IS A CO MPOSITE AGREEMENT IN RESPECT OF BUILDING AND AMENITIES AND IF THE SERVIC ES PROVIDED ARE SEPARABLE THEN THE INCOME DERIVED FROM THE AMENIT IES CAN BE TREATED AS INCOME FROM OTHER SOURCES. WE ALSO NOTE THAT THE AS SESSING OFFICER AS WELL AS THE LD. CIT (A) HAVE DISALLOWED THE LOSS OF RS.3 0,65,690/- CLAIMED BY THE ASSESSEE UNDER LOSS FROM MAINTENANCE. IT IS OUR CONSIDERED OPINION THAT ONLY THE RENTAL INCOME SHOULD BE CHARGED TO TA X UNDER INCOME FROM HOUSE PROPERTY AFTER ALLOWING DEDUCTIONS IN RESPECT OF THE MUNICIPAL TAXES PAID AND OF THE 30% STANDARD STATUTORY DEDUCTION U/ S 24(A) OF THE ACT. ON THE OTHER HAND, THE INCOME FROM MAINTENANCE SERVICE S SHOULD BE BROUGHT TO TAX UNDER INCOME FROM OTHER SOURCES AFTER ALLOWIN G BENEFIT OF DEDUCTION TOWARDS EXPENDITURE INCURRED ON MAINTENANCE CHARGES. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (A) AND DIRECT T HE ASSESSING OFFICER TO CHARGE ONLY THE RENTAL INCOME UNDER INCOME FROM HOU SE PROPERTY AND ALLOW THE STATUTORY PERMISSIBLE DEDUCTIONS THERE FRO M. THE EXPENDITURE ON MAINTENANCE SERVICES IS NOT TO BE DEDUCTED FROM INC OME FROM HOUSE PROPERTY AND NEITHER THE INCOME FROM MAINTENANCE CH ARGES RECOVERED IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. THUS, THE APPEAL OF THE DEPARTMENT STANDS ALLOWED TO THAT EXTENT. HOWEVER, THE GROSS INCOME FROM 7 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. MAINTENANCE CHARGES AND THE EXPENDITURE INCURRED TH EREON WOULD HAVE TO BE CHARGED TO TAX UNDER INCOME FROM OTHER SOURCES A ND TO THAT EXTENT THE ASSESSEE ALSO GETS RELIEF AND THE CROSS OBJECTIONS STANDS ALLOWED TO THAT EXTENT. HOWEVER, THE QUANTUM OF THE MAINTENANCE CHA RGES RECEIVED AND THE MAINTENANCE EXPENSES INCURRED BY THE ASSESSEE, AS CLAIMED BY THE ASSESSEE, WOULD HAVE TO BE NECESSARILY VERIFIED BY T HE ASSESSING OFFICER AND THE COMPUTATION UNDER INCOME FROM OTHER SOURCES WOULD HAVE TO BE MADE ONLY AFTER DUE VERIFICATION OF THE INCOME AND EXPENDITURE BY THE ASSESSING OFFICER WITH RESPECT TO MAINTENANCE INCOME AND CHARGES. ACCORDINGLY, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO WILL RECOMPUTED THE ASSESSEES INCOME IN TERMS OF OU R DIRECTIONS AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESEN T ITS CASE. 5.1 WE ALSO NOTE THAT IN THE MEMORANDUM OF CROSS OBJECTION, THE ASSESSEE HAS ALSO RAISED A GROUND BEARING NO. 4 THA T THE LD. CIT(A) HAD NOT ADJUDICATED THE ASSESSEES GROUND AGAINST DISAL LOWANCE OF EXPENDITURE OF RS.1,43,91,119/- INCURRED ON BROKERAGE AND LEGAL AND PROFESSIONAL SERVICES. HOWEVER, THIS GROUND WAS NOT ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE AND ACCORDINGLY THE SAME IS DISMISSE D AS NOT PRESSED. 8 ITA NO.3631/DEL/2014 C.O. NO.53/DEL/2015 DCIT VS. JAGATJIT INDUSTRIES LTD. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE DEPAR TMENT STANDS ALLOWED AND C.O OF THE ASSESSEE STANDS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19/05/2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED:19/05/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI