Smt. Rachna Surotia, Ahmedabad V. The Dy. CIT, Circle-6, Ahmedabad

ITA 1170/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6321 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 1170/AHD/2015 (ASSESSMENT YEAR: 2011-12) SMT. RACHNA SUROTIA VINIT MOONDRA, C.A. 201, SARAP, OPP. NAVJIVAN PRESS, ASHRAM ROAD, AHMEDABAD-14 APPELLANT VS. DCIT, CIRCLE-6, AHMEDABAD RESPON DENT PAN: AKJPS7736G /BY ASSESSEE : SHRI VINIT MOONDRA, A.R. /BY REVENUE : SHRI V. K. SINGH, SR. D.R /DATE OF HEARING : 13.12.2017 /DATE OF PRONOUNCEMENT : 10.01.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE CIT(A)-13, AHMEDABADS ORDER DATED 17.03.2015 IN CA SE NO. CIT(A)- 13/AHD/CIRCLE-6/170/2014-15, UPHOLDING ASSESSING OF FICERS ACTION INTER ALIA DISALLOWING/ADDING COMMISSION EXPENSES OF RS.10,39, 443/, DEPRECIATION OF RS.2,40,180/-, LICENSE FEE OF RS.1,83,450/- AND PER SONAL EXPENDITURE OF RS.1,50,587/-; RESPECTIVELY, IN PROCEEDINGS U/S.143 (3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 1170/AHD/15 [SMT. RACHNA SUROTIA VS. DCIT] A.Y. 2011-12 - 2 - 2. WE COME TO THE FIRST SUBSTANTIVE GROUND OF COMMI SSION EXPENDITURE DISALLOWANCE AMOUNTING TO RS.10,39,443/- IN CASE OF SIX PAYEES NAMELY UMESH P. SUROTIA, RITA D. BRAHMBHATT, SMITA J. DESAI, MARKET ING ASSOCIATES, NEW DELHI, PRASHANT KALANTRI, DIXITA C. GNADHI INVOLVING PAYME NTS OF RS.5,05,000/-, RS.1,28,000/-, 1,28,000/- RS.69,002/-, RS.38,801/- AND RS.1,70,640/-; RESPECTIVELY. BOTH THE LOWER AUTHORITIES ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE IMPUGNED PAYMENTS TO HAVE BEEN MADE WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF ITS BUSINESS. LEARNED COUNSEL FILES BEFORE US THIS TRIBUNALS ORDER IN ASSESSEES CASE ITSELF DATED 13.07.2017 (PAGE 159 OF THE PAPER BOOK) DELETING IDENTICAL DISALLOWANCES IN CASE OF FIRST AND FOURTH PAYEES. WE THEREFORE ADOPT CONSISTENCY IN THE IMPUGNED ASSESSMENT YEAR AS WELL TO DELETE T HE IMPUGNED DISALLOWANCE IN CASE OF TWO PAYEES SHRI UMESH P. SUROTIA AND MARKET ING ASSOCIATES, NEW DELHI. THE SAID CO-ORDINATE BENCHS ORDER HAS UPHOLD IDENT ICAL DISALLOWANCE IN CASE OF SECOND, FIFTH AND SIXTH PAYEES. THE ASSESSEE FAILS TO PROVE BEFORE US THE RELEVANT SERVICES RENDERED BY FIFTH PAYEE NAMELY PRASHANT KA LANTRI. WE THEREFORE SEE NO REASON TO REVERSE THE CORRESPONDING DISALLOWANCE OF RS.38,801/-. THE ASSESSEES INSTANT FIRST SUBSTANTIVE GROUND IS THEREFORE PARTL Y ACCEPTED ONLY QUA FIRST AND FOURTH PAYEES. REST OF THE FOUR PAYEES DISALLOWANC ES STAND CONFIRMED. 2. WE NOW ADVERT TO THE SECOND ISSUE OF DEPRECIATIO N DISALLOWANCE AMOUNTING TO RS.2,40,180/-. THE CIT(A)S FINDINGS UNDER CHAL LENGE READ AS UNDER: 6. DISALLOWANCE OF DEPRECIATION: THE AO HAS STATED IN HIS ORDER AS FOLLOWS: DURING COURSE OF ASSESSMENT, IT WAS OBSER VED THAT THE ASSESSEE PURCHASED TWO NEW OFFICES DURING THE PREVIOUS YEAR, ON WHICH HE HAS CLAIMED DEPRECIATION OF RS.60,000/- AND RS. 1,80,180/- RESP ECTIVELY. THE ASSESSEE WAS REQUESTED TO GIVE DETAILS OF POSSESSION AGREEMENT AND B.U. PE RMISSION OF THESE OFFICES ALONG WITH COPY OF BILLS FOR ELECTRICITY EXPENSES TO PROVE THE DATE ON WHICH THE ASSETS WERE PUT TO USE BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THE AS SESSEE SUBMITTED THAT OFFICE AT 708, ABHISHREE AVENUE WAS PURCHASED ON 27.12.2010 AND OF FICE AT RAJSHREE ENCLAVE WAS PURCHASED ON 12.01.2011. THE ASSESSEE HAS OBTAINED POSSESSION OF THESE ASSET S BUT, THE SAME HAS NOT BEEN PUT TO USE . THE COPY OF B.U. PERMISSION IS NOT PROVIDED. BESI DES, IN RESPECT OF ELECTRICITY EXPENSES, THE ASSESSEE HAS S UBMITTED THAT NO ELECTRICITY EXPENSE HAS BEEN INCURRED FOR THESE OFFICES. THE DETAILS OF TEL EPHONE EXPENSES ALSO REVEALS THAT NO TELEPHONE LINE HAS BEEN INSTALLED AND AT THE ABOVE OFFICES. IN VIEW OF THE SAME, IT IS CLEAR THAT THE OFFICES MENTIONED ABOVE HAVE NOT BEEN PUT TO USE BY THE ASSESSEE DURING THE PREVIOUS YEAR FOR THE PURPOSE OF BUSINESS WHICH IS ESSENTIAL FOR CLAIM OF DEPRECIATION. ITA NO. 1170/AHD/15 [SMT. RACHNA SUROTIA VS. DCIT] A.Y. 2011-12 - 3 - THE TOTAL DEPRECIATION OF RS.2,40,180/- ON THESE OF FICES IS THEREFORE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE APPELLANT HAS RELIED ON JUDGEMENTS WHICH ARE NO T APPLICABLE TO THIS CASE BECAUSE IN THOSE CASES REFERRED, THERE WAS A RUNNIN G BUSINESS AND TRIAL RUM WAS ALSO DONE IN ONE OF THE CASES (CIT V/S SHAHABAD COOP SUG AR MILL). IN THE CASE OF THE APPELLANT, THE NEW OFFICES HAVE NOT BEEN PUT TO BUS INESS USE AND HENCE DEPRECIATION CANNOT BE ALLOWED IN THESE CASES DURING THE YEAR UN DER CONSIDERATION. HENCE, THE ADDITION MADE BY AO IS CONFIRMED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. BOTH THE LOWER AUTHORITIES ARE OF THE OPINION THAT ALTHOUGH THE ASSESSEE HAS OBTAINED POSSESSION OF THE RELEVANT ASSET (S), THE SAME HAVE HOWEVER NOT BEEN PUT TO USE. WE SEE NO REASON TO CONCUR WITH THE SAME AS ONCE TH E ASSESSEE HAS STARTED AND ENJOYING POSSESSION OF THE TWO OFFICES, IT CAN SAFE LY BE PRESUMED THAT THE SAME HAD BEEN DULY PUT TO USE. CASE RECORDS QUA THIS IS SUE IS INDICATE THAT THE ASSESSEE HAD INDEED OCCUPIED ITS OFFICE. WE THEREFORE OBSER VE THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING CORRESPONDING DEPRECIATION CLAIM IN QUESTION. THIS SUBSTANTIVE GROUND IS ACCORDINGLY A CCEPTED. 4. THE ASSESSEES THIRD GRIEVANCE IS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS IN DISALLOWING ITS LICEN SE FEE EXPENSES OF RS.1,83,450/-. WE NOTICE THAT THE CIT(A)S FINDINGS QUA THE INSTAN T ISSUE READ AS UNDER: 7. DISALLOWANCE OF LICENSE FEE: DURING THE COURSE OF ASSESSMENT, IT WAS OBSERVED BY THE AO THAT THE APPELLANT CLAIMED MEMBERSHIP FEES PAID TO HEAT TRANSFER RESEA RCH INC, USA. THE ASSESSEE PAID US DOLLAR 9391.51 TOWARDS LICENSE FEES. ON VERIFICA TION OF VOICE DATED 12.08.2010, IT WAS OBSERVED THAT THE FEES HAVE BEEN PAID FROM THE PERIOD FROM 01.09.2010 TO 31.08.2011. THE PERIOD FROM 01.04.2011 TO 31.08.201 1 PERTAINS TO ASSESSMENT YEAR 2012-13. THE PROPORTIONATE EXPENDITURE OF RS.1 ,83,450/- PERTAINING TO A.Y. 2012-13 WAS DISALLOWED BY THE AO. THE APPELLANT HAS CONTENDED THAT THE PAYMENT MADE I S AN ANNUAL EXPENSE PAYABLE EVERY YEAR AND SO THERE IS NO QUESTION OF P RE-PAID EXPENSES. THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND HENCE THE EXPENSES PAID FOR THE NEXT YEAR CANNOT BE ALLOWED A S AN EXPENSES FOR THE YEAR UNDER CONSIDERATION, AS THE SAME ARE NOT RELATED TO YEAR UNDER CONSIDERATION. THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS CONFIRMED ON THIS ACCOUNT. 5. HEARD BOTH THE PARTIES REITERATING THEIR RESPECT IVE STANDS. THERE IS NO DISPUTE QUA GENUINENESS OF ASSESSEES PAYMENTS. BO TH THE LOWER AUTHORITIES ARE OF ITA NO. 1170/AHD/15 [SMT. RACHNA SUROTIA VS. DCIT] A.Y. 2011-12 - 4 - THE OPINION THAT THE RELEVANT PERIOD PERTAINS TO AS SESSMENT YEAR 2012-13 AND NOT THE IMPUGNED ASSESSMENT YEAR 2011-12 SINCE THE FEE PERTAINS TO 01.04.2011 TO 31.08.2011. THEY FAIL TO DISPUTE THE FACT THAT THE ASSESSEE HAS BEEN RENEWING ITS SUBSCRIPTION OF LICENSE FEE WELL IN ADVANCE. WE FU RTHER FIND THAT THERE IS NO REVENUE IMPLICATION IN CLAIMING THE EXPENDITURE IN QUESTION IN THE IMPUGNED ASSESSMENT YEAR AS THE ASSESSEE IS ASSESSED ON THE SAME RATE IN TWO ASSESSMENT YEARS IN QUESTION. WE ACCORDINGLY DELETE THE IMPUG NED DISALLOWANCE AS WELL. 6. MR. MOONDRA IS FAIR ENOUGH IN NOT PRESSING FOR A SSESSEES NEXT SUBSTANTIVE GROUND CHALLENGING PERSONAL EXPENDITURE ADDITION OF RS.1,50,587/-. THE SAME IS ACCORDINGLY REJECTED. 7. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 10 TH DAY OF JANUARY, 2018.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 10/01/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0