Sh Surendra Kumar Zhazhanria, V. The ITO 2 (3),

ITA 128/IND/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47764 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2011
• Assessment Year: misc
• Appeal Filed On: 24-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, IDNORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. I.T.A.NO. 128/IND/2006 A.Y. : 2002-03 SHRI SURENDRA KUMAR JHANJHARIA, INCOME-TAX OFFICER, 104-105, SITLAMATA BAZAR, VS 2(3), INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ANIL KAMAL GARG, C. A. RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 13.1.2006 FOR THE ASSES SMENT YEAR 2002-03. 2. GROUNDS NO. 1, 4, 5 AND 6 AS TAKEN IN THE GROUNDS O F APPEAL HAVE NOT BEEN PRESSED BY THE LD. AUTHORIZED REPRESENTATIVE DURING THE COURSE OF HEARING, THE SA ME ARE THEREFORE DISMISSED IN LIMINE, AS NOT PRESSED. -: 2: - 2 3. GROUND NO. 2 RELATES TO ADDITION OF RS. 58,282/- MA DE BY THE ASSESSING OFFICER BY ESTIMATING NOTIONAL INT EREST ON RENT DEPOSIT TAKEN BY THE ASSESSEE. BY THE IMPUGNED ORDE R, THE LD. CIT(A) REMANDED THE MATTER BACK TO THE FILE OF AO. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE AO HAS COMPUTED NOTIONAL INTEREST ON THE INTEREST FREE DEPOSIT TAKEN BY THE ASSESSEE IN RESP ECT OF THE HOUSE PROPERTY LET OUT BY IT AND AN ADDITION OF RS. 58,282/- WAS MADE IN A.L.V. IN THIS RESPECT, WE FOUND THAT H ON'BLE DELHI HIGH COURT IN THE CASE OF MANI KUMAR SUBBA, 2 35 CTR 132 HAS REFERRED THE MATTER TO THE LARGER BENCH ON THE QUESTION WHETHER NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT IS TO BE TAKEN INTO CONSIDERATION TO ARRIVE AT THE ANNUAL VALUE OF THE PROPERTY. RECENTLY, THE FULL BE NCH OF THE DELHI HIGH COURT HAVE HELD THAT FOR DETERMINING ANN UAL VALUE U/S 23, NOTIONAL INTEREST ON DEPOSIT IS NOT INCLUDI BLE. 5. IN VIEW OF FULL BENCH DECISION OF THE DELHI HIGH C OURT, WE DO NOT FIND ANY JUSTIFICATION FOR TAKING NOTIONA L INTEREST ON SECURITY DEPOSIT AS PART OF THE ANNUAL VALUE U/S 23 . ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDIT ION SO MADE. -: 3: - 3 6. NEXT GROUND OF THE ASSESSEE RELATES TO PART DISALLOWANCE OF TRAVELLING EXPENSES AMOUNTING TO RS .20,000/-. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT DURING THE YEAR, THE ASSESSEE HAS INCURR ED TOTAL TRAVELLING EXPENSES OF RS. 98,468/-, WHICH WAS MUCH LOWER THAN THE EXPENDITURE INCURRED IN EARLIER YEAR AMOUN TING TO RS. 1,26,095/-. DURING THE COURSE OF HEARING BEFORE THE AO, SOME OF THE FILES CONTAINING VOUCHERS WERE GOT MIS-PLACE D, THEREFORE, SAME COULD NOT BE PRODUCED. HOWEVER, SUCH FILES WER E PRODUCED BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF RS. 20,000/- OUT OF TOTAL ADDITION OF RS. 47,361/- MADE BY THE ASSESSING OFFICER. WE FOUN D THAT THE ASSESSEE HAS MAINTAINED DETAILS OF VARIOUS TOURS, W HICH WERE PLACED BEFORE THE LOWER AUTHORITIES. KEEPING IN VIE W NATURE OF ASSESSEES BUSINESS AND THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE DIRECT THE AO TO RESTRICT THE DIS ALLOWANCE TO THE EXTENT OF 10 % OF THE EXPENSES CLAIMED FOR WANT OF VOUCHERS. SIMILARLY, WE DIRECT THE AO TO RESTRICT T HE DISALLOWANCE ON TELEPHONE EXPENSES TO THE EXTENT OF 1/10 TH OF THE TOTAL EXPENSES CLAIMED. -: 4: - 4 8. LAST GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWA NCE OF RS. 89,652/-, OUT OF INTEREST EXPENDITURE CLAIME D BY THE ASSESSEE. 9. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 10. WE FOUND THAT THE AO HAS NOTIONALLY COMPUTED INTEREST ON THE INTEREST FREE ADVANCES. BY THE IMPU GNED ORDER THE LD. CIT(A) DIRECTED THE AO TO WORK OUT NOTIONAL INTEREST ON LOAN ADVANCED BY THE ASSESSEE AND TO SET OFF THE SA ME AGAINST THE INTEREST PAID. FROM THE RECORD, WE FOUND THAT T HE LD. CIT(A) HAS WORKED OUT AMOUNT OF RS. 5,46,986/- ON WHICH IN TEREST IS TO BE DISALLOWED. IN THIS REGARD, WE FOUND THAT BES IDES OWN CAPITAL OF RS. 39.50 LAKHS, THE ASSESSEE WAS ALSO H AVING RENT FREE DEPOSIT FROM TENANTS AT RS. 3,86,620/-. SINCE SUCH RENT FREE DEPOSIT WAS NOT HAVING ANY NEXUS WITH THE BUSI NESS AND SINCE THE ASSESSEE WAS NOT REQUIRED TO PAY ANY INTE REST ON SUCH DEPOSIT, THE SAME IS, THEREFORE, REQUIRED TO B E REDUCED FROM RS. 5,46,986/- AS COMPUTED BY THE LD. CIT(A) O N WHICH INTEREST IS TO BE COMPUTED AND DISALLOWED, OUT OF T OTAL INTEREST EXPENSES CLAIMED BY ASSESSEE. ACCORDINGLY, IF AT AL L, NOTIONAL -: 5: - 5 INTEREST IS TO BE COMPUTED OR INTEREST EXPENDITURE WAS TO BE DISALLOWED, THEN THE AMOUNT OF INTEREST FREE LOAN S HOULD HAVE BEEN RESTRICTED TO RS. 1,60,366/- ( RS. 5,46,986/- (-) RS. 3,86,620/-). WE DIRECT ACCORDINGLY. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST APRIL, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :21 ST APRIL, 2011. CPU* 2021