Charans Life Devices Private Limited, Hyderabad V. Dy. Commissioner of Income Tax, Circle-1(2), Hyderabad

ITA 1272/Hyd/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0957 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2013-2014
• Appeal Filed On: 21-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: A V RAGHURAM
• Section: 143(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B - SMC, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1272/HYD/2017 ASSESSMENT YEAR: 2013 - 14 M/S. CHARANS LIFE DEVICES PVT LTD., FLAT NO.102, ZAMRUDH RESIDENCY, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD. PAN: AACCC 0638 H VS. D.C.I.T, CIRCLE - 1(2), AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY: SRI NILANJAN DEY, DR DATE OF HEARING: 13/08/2019 DATE OF PRONOUNCEMENT: 0 5 /0 9 /2019 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS ASSESSEES APPEAL FOR THE ASST. YEAR 2013 - 14 AGAINST THE ORDER OF THE LD. CIT(A) - 1, HYDERABAD DATED 24/4/2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY ENGAGED IN THE BUSINESS OF TRADING OF HEART PACEMAKERS & STENTS, E - FILED ITS RETURN OF INCOME FOR THE A.Y. 2013 - 14 ON 30/09/2013 ADMITTING A TOTAL INCOME OF RS. 26,44,410/ - UNDER NORMAL PROVISIONS. INITIALLY, THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT . T HEREAFTER , THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. 2 PERUSED THE P & L ACCOUNT AND FOUND THAT UNDER THE HEAD OTHER EXPENSES THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS. 33,21,300/ - ON ACCOUNT OF RENT TO THE DIR ECTORS OF THE COMPANY VIZ., SRI G. RADHACHARAN REDDY AND SMT. G. NIVEDITA REDDY. FROM FIELD ENQUIRIES, THE LD. A.O. FOUND THAT THE RENTAL VALUE FOR FLAT IN ZAMRUD RESIDENCY, SOMAJIGUDA (FOR WHICH THE ASSESSEE HAS CLAIMED RENT) IS ONLY RS. 24,000/ - PER FL AT PER MONTH AS AGAINST RS. 2,46,750/ - CLAIMED BY THE ASSESSEE FOR THREE FLATS. DOCUMENTARY EVIDENCE IN SUPPORT OF THIS FINDING WAS OBTAINED U/S. 131 OF THE ACT AND PLACED ON RECORD. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED FOR THREE FLATS VIZ., FLAT NO. 101, 102 & 103 OF ZAMRUD RESIDENCY, SOMAJIGUDA, HYDERABAD @ RS. 89,250/ - PER MONTH FOR FLAT NO.103 AND RS. 1,57,500/ - PER MONTH FOR FLATS 101 AND 102 TOGETHER. THEREFORE THE ASSESSEE WAS ASKED TO SHOW - CAUSE AS TO WHY THE EXCESS RENT CLAIM SHOULD NOT BE DISALLOWED Y/S. 40A(2) OF THE ACT. IN RESPONSE, THE ASSESSEE FILED THE EXPLANATIONS BUT THE ASSESSING OFFICER WAS NOT SATISFIED AND ACCORDINGLY ARRIVED AT RS. 20,97,000/ - AS EXCESS CLAIM BY THE DIRECTORS OF THE COMPANY AND DISALLOWED THE SA ME U/S. 40A(2) OF THE ACT AND BROUGHT IT TO TAX. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO DISMISSED THE SAME AND THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL . 3 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E PROPERTIES HAVE BEEN LET OUT FOR COMMERCIAL PURPOSES AND THEREFORE, THE RENT WAS HIGH AS COMPARED TO THE RENT OF THE PROPERTY GIVEN FOR RESIDENTIAL USE IN THE LOCALITY. HE HAS DRAWN MY ATTENTION TO THE PROPERTY TAX RECEIPTS PAID BY THE ASSESSEE FOR THE RELEVANT PROPERTIES WHICH ARE PLACED AT PAGES 38 TO 60 OF THE PAPER BOOK AND PARTICULARLY PAGE 60 OF THE PAPER BOOK WHEREIN THE PROPERTY TAX FOR THE PROPERTY AT FLAT NO.103 HAS BEEN DETERMINED AT RS. 47,693/ - W.E.F 01/04/2011. SIMILARLY, AT PAGE 58 & 59 AR E THE PROPERTY TAX RECEIPTS AT RS. 51,854/ - AND RS. 42,167/ - FOR FLATS NO. 101 AND 102 RESPECTIVELY AND THESE PROPERTY TAX RATES ARE APPLICABLE W.E.F 01/04/2011. I FIND THAT THE ASSESSEE HAS BROUGHT THESE DOCUMENTS TO THE NOTICE OF THE LD. REVENUE AUTHORI TIES; BUT NEITHER THE A.O. NOR THE LD. CIT(A) HAS CONSIDERED THESE DOCUMENTS AND THEY COMPARED THE RENT OF THE PROPERTIES WHICH ARE GIVEN FOR COMMERCIAL PURPOSES WITH THAT OF THE RENTS OF THE RESIDENTIAL PROPERTIES IN THE LOCALITY. 5. THE LD. DR HOWEVER SU BMITTED THAT THE ASSESSEE HAD NOT PRODUCED THESE DOCUMENTS BEFORE THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD, I FIND THAT THE ASSESSEE HAD TAKEN THREE PROPERTIES ON RENT FROM THE DIRECTORS OF THE COMPANY AND HAS PAID RENT ALLEGEDLY AS COMMERCIAL PROPERTIES, WHEREAS THE A.O. HAS COMPARED THE RENT OF THE RESIDENTIAL 4 PROPERTIES IN THE LOCALITY WITH THE RENT PAID BY THE ASSESSEE. SINCE THE PROPERTY TAX RECEIPTS OF THE FLATS UNDER CONSIDERATION ARE FILED BEFORE U S AND ALSO THE GHMC NOTIFICATION DATED 01/02/2008 WHICH GIVES OUT THE INFORMATION FOR ASSESSING THE PROPERTY TAX OF A RESIDENTIAL AND COMMERCIAL PROPERTY AND THESE DOCUMENTS WERE NOT CONSIDERED BY THE AUTHORITIES BELOW, I DEEM IT FIT AND PROPER TO SET - ASID E THE ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO CONSIDER THESE DOCUMENTS AND IF THE PROPERTIES HAVE BEEN ASSESSED AS COMMERCIAL PROPERTIES BY THE MUNICIPAL AUTHORITIES, THEN THE A.O. SHALL CONSIDER THE COMMERCIAL RENT PAID DURING THE RELEVANT PERIO D IN THE SAID LOCALITY AND DECIDE THE ISSUE DENOVO IN ACCORDANCE WITH LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH SEPTEMBER , 2019. SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 05 TH SEPTEMBER , 2019 OKK COPY TO: - 1) M/S. CHARANS LIFE DEVICES PVT LTD., C/O. A.V. RAGHU RAM, P.VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 1. 2) DCIT, CIRCLE - 1(2), AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBAGH ROAD, HYDERABAD - 1. 5 3) THE CIT(A) - 1, HYDERABAD 4) THE PR. CIT - 1, HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE