A.R.Holdings & Electronics P. Ltd., CHENNAI V. ITO Corporate Ward 1(1), CHENNAI

ITA 1341/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8391 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation

Judgement Text

, / SMC , IN THE INCOME TAX APPELLATE TRIBUNAL A / SMC BENCH: CHENNAI ... , , ! | BEFORE SHRI N.R.S. GANESAN , JUDICIAL MEMBER ./ ITA NO.1341/CHNY/2018 $ $ /ASSESSMENT YEAR: 2005-06 M/S.A.R.HOLDINGS & ELECTRONICS- PVT. LTD., C/O. SHRI S. SRIDHAR, A.S.SRIRAMAN, ADVOCATES, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI-600 020. [PAN: AAECA 5650 K] VS. THE INCOME TAX OFFICER, CORPORATE WARD-1(1), CHENNAI. ( ( /APPELLANT) ( )*( /RESPONDENT) ( + / APPELLANT BY : MR.S.SRIDHAR, ADV. )*( + /RESPONDENT BY : MR. AR.V.SREENIVASAN, JCIT + /DT. OF HEARING : 15.07.2019 + /DT. OF PRONOUNCEMENT : 16.07.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI, DA TED 23.03.2018, AND PERTAINS TO THE AY 2005-06. 2. THIS APPEAL OF THE ASSESSEE WAS DISPOSED OFF EARLI ER BY AN ORDER DATED 30.10.2018. THE ASSESSEE FILED A MISCELLANEO US PETITION ON THE GROUND THAT THE RENTAL INCOME EARNED ON LETTING OUT OF THE PROPERTY WAS ITA NO.1341/CHNY/2018 :- 2 -: OUTSIDE THE SCOPE OF THE PRESENT APPEAL. THE TRIBU NAL BY AN ORDER DATED 07.05.2019 ACCEPTED THE CLAIM OF THE ASSESSEE AND R ECALLED ITS EARLIER ORDER DATED 30.10.2018. THE ASSESSED INCOME IS LESS THAN RS.50.00 LAKHS, THEREFORE, IT IS POSTED BEFORE THE SINGLE MEMBER FO R FINAL DISPOSAL. 3. SHRI S.SRIDHAR, LD.COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE FIRST ISSUE RAISED REGARDING THE VALIDITY OF THE RE-OPENI NG U/S.147 IS NOT PRESSED. THE LD.COUNSEL FOR THE ASSESSEE ALSO SUBMI TTED THAT HE WILL MAKE AN ENDORSEMENT TO THAT EFFECT ON THE APPEAL FOLDER. HOWEVER, THE LD.COUNSEL HAS NOT MADE ANY ENDORSEMENT ON THE FILE AND ALSO NOT ARGUED THE ISSUE REGARDING THE RE-OPENING. THEREFORE, I P ERUSED THE MATERIALS AVAILABLE ON RECORD. THE AO RE-OPENED THE ASSESSME NT BY ISSUING A NOTICE U/S.148. INITIALLY, THE RETURN WAS PROCESSED U/S.1 43(1) OF THE ACT. THERE IS NO DOUBT THAT THE ASSESSMENT WAS RE-OPENED WITHI N A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, THE LD.CIT(A) BY PLACING A RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS LTD., [2007] 161 TAXMAN 316 (SC) FOUND THAT THE ASSESSMENT WAS RIGHT LY RE-OPENED. THIS TRIBUNAL AFTER CAREFULLY GONE THROUGH THE RECORDS F OUND THAT THE LD.CIT(A) HAS RIGHTLY CONFIRMED THE ORDER OF THE AO. ACCORDI NGLY, THE SAME IS CONFIRMED. 4. NOW COMING TO THE MERIT OF THE APPEAL, THE ONLY IS SUE ARISES FOR CONSIDERATION IS THAT THE APPORTIONMENT OF EXPENDIT URE BETWEEN THE RENTAL INCOME AND THE INCOME FROM AMENITIES. ACCORDING TO THE LD. ITA NO.1341/CHNY/2018 :- 3 -: REPRESENTATIVE, THE RENTAL INCOME HAS TO BE ASSESSE D AS INCOME FROM HOUSE PROPERTY AND THE INCOME FROM AMENITIES HAS TO BE ASSESSED AS INCOME FROM BUSINESS. REFERRING TO THE ORDER OF TH E AO MORE PARTICULARLY PARA NO.4, LD.REPRESENTATIVE SUBMITTED THAT THE AO HIMSELF TREATED THE AMENITIES INCOME AS BUSINESS INCOME. THEREFORE, TH ERE IS NO QUESTION OF APPORTIONMENT OF EXPENDITURE BETWEEN THE BUSINESS I NCOME AND THE INCOME FROM HOUSE PROPERTY. THE ENTIRE EXPENDITURE HAS TO BE ALLOWED ONLY FROM THE BUSINESS INCOME. THEREFORE, THE LD.C IT(A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO APPORTION THE EXPENDITURE. LD.COUNSEL HAS PLACED RELIANCE ON THE ORDERS OF THE TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE AYS 2006-07, 2007-08 & 2008-09 IN ITA NOS.1741, 174 2 & 1743/MDS/2013 DATED 13.11.2015 AND SUBMITTED THAT T HIS TRIBUNAL FOUND THAT THE AMENITIES CHARGES HAS TO BE CLASSIFIED AS BUSINESS INCOME. 5. ON THE CONTRARY, SHRI AR.V.SREENIVASAN, DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THE EXPENDITURE INCLU DES DEPRECIATION. REFERRING TO THE ORDER OF THE LD.CIT(A) MORE PARTIC ULARLY AT PARA NOS.11 & 12, THE LD.DR SUBMITTED THAT THE DEPRECIATION CLAIM ED BY THE ASSESSEE AS EXPENDITURE INCLUDES DEPRECIATION ON BUILDINGS. AC CORDING TO THE REPRESENTATIVE, DEPRECIATION ON BUILDING RELATABLE ONLY TO THE PROPERTY WHICH WAS LET OUT AND THE INCOME THERE FROM WAS ASS ESSED AS INCOME FROM HOUSE PROPERTY. THEREFORE, THE LD.CIT(A) HAS RIGHTLY FOUND THAT THE EXPENDITURE RELATES TO BOTH RENTAL INCOME AS WELL A S INCOME FROM AMENITY CHARGES. HENCE, THE AO WAS DIRECTED BY THE LD.CIT( A) TO APPORTION THE ITA NO.1341/CHNY/2018 :- 4 -: TOTAL EXPENDITURE IN THE SAME RATIO AS RENTAL INCOM E TO THE AMENITIES INCOME. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE INCO ME FROM AMENITIES CHARGES WAS ADMITTEDLY CLASSIFIED AS INCOME FROM HO USE PROPERTY BY THE AO. THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR T HE AYS 2006-07, 2007- 08 & 2008-09 FOUND THAT AMENITIES INCOME HAS TO BE CLASSIFIED AS INCOME FROM BUSINESS. SEC.37 OF THE INCOME TAX ACT CLEARL Y SAYS THAT THE EXPENDITURE WHOLLY AND EXCLUSIVELY RELATABLE FOR TH E PURPOSE OF BUSINESS SHALL BE ALLOWED IN COMPUTING THE INCOME UNDER THE HEAD PROFIT & GAINS OF BUSINESS. THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THERE IS NO QUESTION OF APPORTIONMENT OF THE EXPENDITURE BETWEEN THE BUSINESS INCOME AND THE INCOME FROM HOUSE PROPERTY. IN OTHE R WORDS, THE ENTIRE EXPENDITURE RELATABLE TO BUSINESS INCOME HAS TO BE CONSIDERED WHILE COMPUTING THE BUSINESS INCOME AND NOT WHILE COMPUTI NG THE INCOME FROM HOUSE PROPERTY. THEREFORE, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET-ASIDE AND THE ENTIRE ISSUES RAISED BY THE ASSES SEE ARE REMITTED BACK TO THE FILE OF THE AO. THE AO IS DIRECTED TO EXAMI NE AND FIND OUT THE EXPENDITURE CLAIMED FOR EARNING THE BUSINESS INCOME WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE FROM AMENITIES CHAR GES. 7. THE LD.DR CLAIMS THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE RELATES TO THE BUILDING THAT CANNOT BE BUSINESS EXP ENDITURE. THERE IS A MERIT IN THE CONTENTION OF THE LD.DR. THE ASSESSEE IS NOT USING THE ITA NO.1341/CHNY/2018 :- 5 -: BUILDING FOR ITS OWN BUSINESS. THE ASSESSEE SIMPLY LET OUT THE BUILDING AND THE RENTAL INCOME IS ASSESSED AS INCOME FROM HOUSE PROPERTY. THEREFORE, WHAT IS TO BE ALLOWED WHILE COMPUTING THE INCOME FR OM HOUSE PROPERTY IS A STANDARD DEDUCTION AS PROVIDED IN SEC.24 OF THE I T ACT AND NOT THE EXPENDITURE AS CLAIMED BY THE ASSESSEE. MOREOVER, WHEN THE PROPERTY WAS LET OUT FOR RENT THE ASSESSEE IS NOT ELIGIBLE F OR ANY DEPRECIATION. THEREFORE, THE DEPRECIATION CLAIMED BY THE ASSESSEE WHICH IS RELATABLE TO THE BUILDING CANNOT BE TREATED AS A BUSINESS EXPEND ITURE AND CANNOT BE ALLOWED WHILE COMPUTING THE INCOME FROM HOUSE PROPE RTY. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW HAD MODIFIED. T HE AO IS DIRECTED TO ALLOW ONLY THE EXPENDITURE WHILE COMPUTING THE INCO ME FROM BUSINESS WITH RESPECT TO AMENITIES. 8. IN THE RESULT, WITH THE ABOVE OBSERVATIONS, THE A PPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 16 TH DAY OF JULY, 2019, IN CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 16 TH JULY, 2019. TLN + )34 54 /COPY TO: 1. ( /APPELLANT 4. 6 /CIT 2. )*( /RESPONDENT 5. 4 ) /DR 3. 6 ( ) /CIT(A) 6. $ /GF