M/s. Parivar Properties Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1016/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77811 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Assessee Lawyers: ABHISHEK VERMA
• Section: 2(14); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 1016 & 1017/DEL/2013 ASSTT. YR: 2008-09 & 2009-10 PARIVAR PROPERTIES PVT. LTD. VS. DCIT CEN. CIRCLE -12, 13-B, 3 RD FLOOR, NETAJI SUBHASH MARG, NEW DELHI. DARYAGANJ, NEW DELHI. PAN: AAACP 7755 Q ( APPELLANT ) ( RESPONDENT ) APPELLANTS BY : SHRI RAJIV SAXENA ADV. & SHRI ABHISHEK VERMA ADV. RESPONDENT BY : SHRI RAMESH CHANDRA CIT (DR) DATE OF HEARING : 16-07-2014 DATE OF ORDER : 25-07-2014. O R D E R PER S.V. MEHROTRA, A.M: THESE APPEALS, BY THE ASSESSEE, ARE DIRECTED AGAINS T CIT(A)-XXXI, NEW DELHIS SEPARATE ORDERS DATED 15-1-2013 RELAT ING TO A.YS. 2008-09 & 2009-10. IDENTICAL ISSUES HAVE BEEN RAISED IN BOTH THE APPEALS, THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS, FOR A.Y. 2008-09, ARE THAT SEARCH A ND SEIZURE OPERATIONS U/S 132 OF THE I.T. ACT WAS CARRIED OUT IN RAJDARBA R GROUP OF CASES ON 31-7- 2008. NOTICE U/S 153C WAS ISSUED TO THE ASSESSEE RE QUIRING IT TO FILE RETURN ITA 1016 & 1017/D/13 M/S PARIVAR PROPERTIES PVT. LTD. 2 FOR A.Y. 2008-09. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. AO OBSERVED THAT ASSESSEE COMPANY WAS ENGAG ED IN THE BUSINESS OF CONSTRUCTION, PURCHASE AND SALE OF PROPERTY. IT PUR CHASED THE OLD CONSTRUCTED PROPERTY, (JUBLI CINEMA), AT KORIA POOL, DELHI, IN F.Y. 1999-2000 AND SHOWN THE SAME AS FIXED ASSET. HE NOTED THAT IN THE YEAR UNDER CONSIDERATION NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSE E COMPANY. HOWEVER, IT HAD CAPITALIZED EXPENSES OF RS. 41,90,920/- IN THE VALUE OF FIXED ASSET. HE NOTED THAT THESE EXPENSES COMPRISED OF MAINLY HOUSE TAX, SECURITY EXPENSES, LEGAL & PROFESSIONAL EXPENSES, INTEREST PAID, TELEP HONE EXPENSES; AND ELECTRICITY EXPENSES. AS ASSESSEE DID NOT FILE ANY EXPLANATION REGARDING JUSTIFICATION OF CAPITALIZATION OF EXPENSES, THE AO CONCLUDED THAT U/S 48 THE EXPENSES INCURRED TO KEEP THE ASSET IN EXISTENCE IS NOT AN ALLOWABLE EXPENDITURE AND, THEREFORE, HE DID NOT ACCEPT THE A SSESSEES CONTENTION OF CAPITALIZING THE EXPENSES OF RS. 41,80,920/-. 2.1. BEFORE LD. CIT(A) IT WAS, INTER ALIA, SUBMITT ED BY ASSESSEE THAT THE ADDITION HAD BEEN MADE WITHOUT ANY INCRIMINATING MA TERIAL BEING FOUND IN COURSE OF SEARCH. LD. CIT(A) REJECTED THIS PLEA OF THE ASSESSEE, INTER ALIA, OBSERVING THAT THE LEGISLATURE IN THEIR WISDOM HAVE DEEMED IT FIT NOT TO RESTRICT THE ASSESSMENT U/S 153A TO DISCLOSED INCO ME FOUND DURING THE SEARCH. HE FURTHER OBSERVED THAT THERE IS NO REQUIR EMENT THAT ASSESSMENT CAN BE DONE ONLY IF EVIDENCES RELATING TO UNDISCLOSED I NCOME HAVE BEEN SEIZED. 2.2. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COM PANY HAD NOT DONE ANY BUSINESS ACTIVITY DURING A.Y. 2008-09 AND IT WAS ON LY ENGAGED IN RENEWAL OF BUILDING JUBLI CINEMA, AT KORIA POOL, DELHI, FOR WH ICH HE HAD INCURRED THE SUM OF RS. 41,80,920/-, AS UNDER: ITA 1016 & 1017/D/13 M/S PARIVAR PROPERTIES PVT. LTD. 3 S. NO. NATURE OF EXPENSES AMOUNT (RS.) 1. ELECTRICITY EXPENSE 25186.00 2. HOUSE TAX 3642474.00 3. INTEREST PAID 221290.00 4. PROFESSIONAL FEE 150000.00 5. SECURITY CHARGES 137160.00 6. TELEPHONE EXPENSE 4710.00 7. WATER CHARGES 100.00 TOTAL 4180920.00 2.3. IT WAS FURTHER, INTER ALIA, POINTED OUT THAT T HE CAPITALIZATION OF THE EXPENSES IS GOVERNED BY AS-10 AS DECLARED BY THE IN STITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THE COST OF AN ITEM OF FIX ED ASSET COMPRISES ITS PURCHASE PRICE, INCLUDING IMPORT DUTIES AND OTHER N ON-REFUNDABLE TAXES OR LEVIES AND ANY DIRECTLY ATTRIBUTABLE COST OF BRINGI NG THE ASSET TO ITS WORKING CONDITION FOR ITS INTENDED USE. IT WAS, THEREFORE, SUBMITTED THAT THE EXPENSES INCURRED BY THE ASSESSEE COMPANY QUALIFIED TO BE PA RT OF COST OF FIXED ASSET, WHICH WAS MEANT FOR THE PART OF THE BUSINESS WITHIN THE MEANING OF SEC. 2(14) OF THE ACT AND COULD NOT BE CONSIDERED U/S 48 OF THE ACT. THE ASSESSEE FURTHER POINTED OUT THAT COST OF IMPROVEMENT U/S 55 INCLUDES EVERYTHING BY DOING WHICH THERE IS AN ENHANCEMENT IN THE VALUE OF THE ASSET OR THERE IS A RISE IN THE PRICE OF THE ASSET. 2.4. LD. CIT(A) ALLOWED RS. 40,00,924/- OUT OF RS. 41,80,920/- AND REJECTED THE BALANCE AMOUNT FOR THE REASON THAT THE Y WERE MEANT FOR KEEPING THE COMPANY OR ASSET IN EXISTENCE AND HAD NO RELATI ON EITHER TO ACQUISITION OR IMPROVEMENT OF THE FIXED ASSET IN QUESTION. HENCE, THEY COULD NOT BE ADDED IN THE VALUE OF THE FIXED ASSET. 3. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US ON FOLLOWING COMMON GROUNDS FOR A.Y. 200 8-09 & 2009-10: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE WHETHER THE LD. CIT(A)-XXXI IS CORRECT IN DISMISSING THE GR OUNDS OF ITA 1016 & 1017/D/13 M/S PARIVAR PROPERTIES PVT. LTD. 4 APPEAL THAT THE ASSESSMENT HAS NOT BEEN FRAMED O TH E MATERIAL SEIZED PURSUANT TO AN ACTION TAKEN U/S 132 OF THE A CT BUT THE REASSESSMENT HAS BEEN MADE NOT BASED ON SEARCH MAT ERIAL FOUND IN THE ACTION TAKEN BY THE DEPARTMENT WHICH I S ILLEGAL IN LAW IN VIEW OF THE DECISION OF ITAT IN THE MATER OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT ITA NO. 5018 TO 5022 AND 5059/M/2010. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A)-XXXI HAS ERRED IN DISALLOWING THE CAPITA LIZATION OF EXPENSE OF RS. 179996/- IN A.Y. 2008-09 & 147921/- FOR A.Y. 2009-10 IN THE COST OF FIXED ASSETS ILLEGALLY AND THEREFORE IS LIABLE TO QUASHED. 4. AT THE HEARING LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 1, HENCE THE SAME STANDS DISMISSED, BEING NOT PRESSED. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THERE IS NO DISPUTE THAT THE ENTIRE AMOUNT HAD BEEN INCURRED TOWARDS THE RENOVATION OF BUILDING JU BLI CINEMA, AT KORIA POOL, DELHI. THE PART DISALLOWANCE HAS BEEN CONFIRM ED BY LD. CIT(A) ON THE GROUND THAT THE EXPENDITURE WAS MEANT FOR KEEPING T HE COMPANY OR ASSET IN EXISTENCE. THIS IMPLIED THAT HE WAS RATHER AGREEABL E THAT THE IMPUGNED AMOUNT WAS ELIGIBLE FOR CLAIMING DEDUCTION AS REVEN UE EXPENDITURE. SINCE ASSESSEE HAD ONLY CAPITALIZED THE EXPENSES, THEREFO RE, THERE WAS NO REASON TO SUSTAIN THE PART DISALLOWANCE. 6. LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE BECAUS E HE HAD CONSIDERED THE COST OF IMPROVEMENT OF THE FIXED ASSET U/S 55. SINCE FIXED ASSET WAS UNDER RENOVATION AND THAT WAS THE ONLY ASSET WHICH WAS BEING RENOVATED BY ASSESSEE COMPANY, THEREFORE, THE ASSESSEE HAD RIGHT LY CAPITALIZED THE ITA 1016 & 1017/D/13 M/S PARIVAR PROPERTIES PVT. LTD. 5 INCIDENTAL EXPENSES. WE, THEREFORE, DO NOT FIND ANY REASON TO SUSTAIN THE PART DISALLOWANCE CONFIRMED BY LD. CIT(A). GROUND IS ALL OWED. 7. IN A.Y. 2009-10 THE ASSESSEE HAD CAPITALIZED RS. 1,47,921/- IN THE VALUE OF FIXED ASSET ON ACCOUNT OF ELECTRICITY EXPE NSES, INTEREST PAID, SECURITY CHARGES, TELEPHONE EXPENSES; AND WATER CHARGES. TH E ASSESSING OFFICER DISALLOWED THE CLAIM BY OBSERVING THAT EXPENSES INC URRED TO KEEP THE ASSET IN EXISTENCE WAS NOT AN ALLOWABLE EXPENDITURE WITH THE PROVISIONS OF SECTION 48 OF THE I.T. ACT. IN APPEAL, LD. CIT(A) CONFIRMED TH E ACTION OF ASSESSING OFFICER. 8. FOR THE REASONS GIVEN BY US IN A.Y. 2008-09 ON T HE ISSUE IN QUESTION, HEREIN ALSO WE ALLOW THE CLAIM BY HOLDING THAT ASSE SSEE HAD RIGHTLY CAPITALIZED THE INCIDENTAL EXPENSES AND THERE WAS N O REASON TO DISALLOW THE EXPENSES. WE, THEREFORE, DELETE THE ADDITION IN QUE STION. 9. IN THE RESULT, BOTH THE APPEALS STAND PARTLY ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 25-07-2014. SD/- SD/- ( C.M. GARG ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25-07-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR