Sama International Pvt. Ltd., Hyd, Secunderabad V. DCIT, Circle-3(1), Hyderabad, Hyderabad

ITA 1473/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6192 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-11-2016
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: C AMARNATH; MRUDHULATHA DEVDAS
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1473/HYD/2016 ASSESSMENT YEAR: 2012-13 M/S. SAMA INTERNATIONAL PVT. LTD., HYDERABAD PAN AADCS4043F VS. THE DY INCOME TAX OFFICER CIRCLE- 3(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. AMARNATH & SMT M.S MRUDHULATHA DEVDAS REVENUE BY : SMT U. MINI CHANDRAN DATE OF HEARING : 19-01-2017 DATE OF PRONOUNCEMENT : 31-01-2017 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS THE ASSESSEES APPEAL FOR THE A.Y. 2012-13 , AGAINST THE ORDER OF THE CIT(A)-3, HYDERABAD, DATED 29-07- 2016. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS IN LA W AS WELL AS IN FACTS OF THE CASE. 2. THE LD. CIT (A) FAILED TO NOTE THAT THE APPELLAN T HAD CLAIMED MAINTENANCE CHARGES IN THE PREVIOUS YEARS AND THERE WAS NO DISALLOWANCE BY THE LD. ASSESSING OFFICER. 3. FURTHER, THE LD. CIT(A) DISMISSED THE ASSESSMENT ORDERS OF THE EARLIER YEARS SUBMITTED AS BEING 'ROUTINE' ASSE SSMENT ORDERS WITHOUT CONSIDERING THE FACT THAT THE MAINTE NANCE EXPENDITURE CLAIMED IN THE EARLIER YEARS WAS ALLOWE D AFTER A PROPER EXAMINATION OF THE CASE DURING THE COURSE OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2 ITA NO. 1473/HYD/2016 M/S SAMA INTERNATIONAL PVT., LTD., HYDERABAD. 4. THE LD. CIT (A) HAS ERRED IN RESTRICTING THE MAI NTENANCE EXPENSES TO THE MAINTENANCE RECEIPTS AS THE SAME CA NNOT BE ADJUSTED WITH INTEREST INCOME. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) H AS ALTERNATIVELY BROUGHT OUT IN THE ORDER THAT THE APP ELLANT OUGHT TO HAVE CHARGED MORE FROM MAINTENANCE AND LESS FROM LE ASE RENTALS WHICH CONTRADICTS THE DISALLOWANCE. 6. THE LD. CIT (A) FAILED TO NOTE THAT ON THE PRINC IPLES OF CONSISTENCY, MAINTENANCE EXPENSES WHICH WERE ALLOWE D FOR PREVIOUS YEARS OUGHT BE ALLOWED IN THE ASSMT. YEAR 2012-13 AS WELL. 7. THE APPELLANT MAY BE PERMITTED TO ADD, ALTER, AM END OR FURNISH ADDITIONAL GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF LETTING OF COMMERCIAL SP ACE / BUILDING, FILED ITS RETURN OF INCOME FOR THE ASSESS MENT 2010-11 ON 01-09-2012 DECLARING TAXABLE INCOME OF R S. 44,67,113, DURING THE ASSESSMENT PROCEEDINGS U/S 1 43(3) OF THE ACT, THE ASSESSEE FURNISHED THE INFORMATION CALLED FOR. TAKING THE SAME INTO THE ACCOUNT, THE A.O OBS ERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE IS HAVING INCOME FROM HOUSE PROPERTY AND ALSO INCOME F ROM OTHER SOURCES. HE OBSERVED THAT UNDER THE HEAD INCO ME FROM HOUSE PROPERTY, THE ASSESSEE HAS SHOWN A SUM O F RS. 46,41,480/- BEING RENTAL INCOME FROM VARIOUS TENANT S, AFTER CLAIMING THE STATUTORY DEDUCTIONS LIKE MUNICI PAL TAXES PAID AND ALSO DEDUCTION @ 30 % U/S 24(A) OF THE ACT. HE ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN INCOME FROM OTHER SOURCES AT RS. 10,54,818/- WHICH INCLUDES INT EREST INCOME OF RS. 6,79,177, THE MAINTENANCE CHARGES REC EIVED OF RS. 3,70,196, MISCELLANEOUS INCOME OF RS. 5,445. HE OBSERVED THAT THE ASSESSEE HAS CLAIMED OF EXPENDITU RE OF RS. 12,29,184 AGAINST THE INCOME FROM OTHER SOURCES , 3 ITA NO. 1473/HYD/2016 M/S SAMA INTERNATIONAL PVT., LTD., HYDERABAD. RESULTING INTO A LOSS OF RS. 1,74,336/-, UNDER THE HEAD OTHER SOURCES. THE ASSESSEE WAS THEREFORE ASKED TO SUBSTANTIATE ITS CLAIM OF EXPENDITURE UNDER THE HEA D INCOME FROM OTHER SOURCES. 3. THE ASSESSEE, VIDE LETTER DATED 12-01-2015, SUBM ITTED THAT THE COMMERCIAL COMPLEX LET OUT BY THE ASSESSEE HAS CERTAIN AMENITIES WHICH ARE COMMON TO ALL THE TENAN TS AND THESE INCLUDE MAINTENANCE OF COMMON AREAS, PROVISIO N OF LIFT AND ITS MAINTENANCE, PROVIDING SECURITY SERVIC ES BOTH AT THE ENTRY AND EXIT GATES ON 24/7 BASIS AND THAT THE EXPENSES ARE CLAIMED AGAINST THE MAINTENANCE CHARGE S RECEIVED FROM THE TENANTS. IT WAS SUBMITTED THAT T HE COST OF MAINTENANCE HAS REGISTERED A SUBSTANTIAL INCREAS E OVER THE YEARS DUE TO MARKET CONDITIONS AND ENTIRE COST OF MAINTENANCE CANNOT BE SHIFTED TO THE TENANTS. OBSE RVING THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE U/S 5 7 OF THE ACT, THE A.O HELD THAT THE EXPENDITURE TO BE DE DUCTED SHOULD BE AS A CHARACTER WHICH HAS CONNECTION WITH OR RELATION TO THE PARTICULAR ACTIVITY WHICH PRODUCED THE INCOME OR ITS SOURCES U/S 57 OF THE ACT. HE OBSERV ED THAT SINCE THE EXPENDITURE CLAIMED BY THE ASSESSEE IS NO T AT ALL RELATABLE TO EARNING THE INCOME EXCEPT ONE SPECIFIE D U/S 24 OF THE ACT. HE THEREFORE, DISALLOWED THE ENTIRE SU M OF RS. 12,29,184 AND BROUGHT IT TO TAX. AGGRIEVED, THE AS SESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO GRANTED P ARTIAL RELIEF TO THE ASSESSEE BY RESTRICTING THE DISALLOWA NCE TO RS. 8,58,988/- BY SETTING OF THE EXPENDITURE FROM THE MAINTENANCE CHARGES RECEIVED. AGGRIEVED, THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 4 ITA NO. 1473/HYD/2016 M/S SAMA INTERNATIONAL PVT., LTD., HYDERABAD. 4. THE LD. COUNSEL FOR THE ASSESSEE, WHILE REITERAT ING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW, SUBMITTED THAT THE ASSESSEE HAS BEEN FOLLOWI NG THIS METHOD OF ACCOUNTING FROM THE EARLIER YEARS AND THE ASSESSMENTS HAVE BEEN COMPLETED ACCEPTING THE CLAIM OF THE ASSESSEE. THEREFORE, ACCORDING TO HER, UNIFORM PROCEDURE SHOULD TO BE ADOPTED BY THE REVENUE. EVE N OTHERWISE, ACCORDING TO THE LD. COUNSEL FOR THE ASS ESSEE, MAINTENANCE EXPENDITURE CAN BE SET OFF AGAINST THE OTHER INCOME EARNED BY THE ASSESSEE U/S 57 OF THE ACT. 5. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 6. HAVING REGARD TO THE RIVAL CONTENTION AND MATERI AL ON RECORD, WE FIND THAT UNDISPUTEDLY, THE ASSESSEE HAS RECEIVED MAINTENANCE CHARGES AND HAS ALSO INCURRED THE EXPENDITURE TOWARDS SAID MAINTENANCE ACTIVITIES. THEREFORE, THE CIT(A) HAS RIGHTLY SET-OFF THE MAINT ENANCE CHARGES RECEIVED AGAINST THE EXPENDITURE INCURRED O N MAINTENANCE ACTIVITIES AS BOTH OF THEM HAVE NEXUS, BUT, THE EXPENDITURE CLAIMED CANNOT BE RESTRICTED TO THE INCOME EARNED AS WAS DONE BY THE CIT(A). THE CLAIM OF GEN UINE EXPENDITURE CANNOT BE RESTRICTED TO THE EXTENT OF I NCOME EARNED ALONE. THEREFORE, THE ENTIRE EXPENDITURE CL AIMED IS TO BE ALLOWED I.E THE EXPENDITURE CLAIMED HAS TO BE SET-OFF AGAINST THE INCOMES UNDER THE SAME HEAD FROM ANOTHE R SOURCE AND IF IT RESULTS IN LOSS, AGAINST INCOME UN DER OTHER HEADS. CONSEQUENTLY, AFTER THE COMPUTATION U/S 57 OF THE ACT, RELATED LOSS CAN BE SET-OFF AGAINST THE INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME U/S 70 OF 5 ITA NO. 1473/HYD/2016 M/S SAMA INTERNATIONAL PVT., LTD., HYDERABAD. THE ACT AND THEREAFTER LOSS UNDER ONE HEAD OF INCOM E CAN BE SET-OFF AGAINST INCOME FROM ANOTHER HEAD OF INCO ME U/S 71 OF THE ACT. WE THEREFORE DIRECT THE A.O TO RECOM PUTE THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH LAW PARTI CULARLY TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 70 & 71 OF THE IT ACT. ACCORDINGLY, THE ASSESSEES APPEAL I S ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY , 2017. SD/- SD/- (B. RAMAKOTAIH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 31 ST JANUARY, 2017 KRK 1) M/S SAMA INTERNATIONAL PVT. LTD. C/O SEKHAR & CO. 133/4,, RASHTRAPATHI ROAD, SECUNDERABAD - 03 2) DCIT, CIRCLE 3(1),HYDERABAD 3) CIT(A) -3, HYDERABAD 4) PCIT-3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE 6 ITA NO. 1473/HYD/2016 M/S SAMA INTERNATIONAL PVT., LTD., HYDERABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 03-01-17 P.S. 2. DRAFT PLACED BEFORE AUTHOR 04-01-17 P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS .P.S. 6. KEPT FOR PRONOUNCEMENT ON P S. 7. FILE SENT TO THE BENCH CLERK P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER