SIMTO PROPERTY DEVELOPRS LTD, THANE V. ITO WD 5(3)(2), MUMBAI

ITA 1578/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1823 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 15-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 06-03-2012
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER I.T.A. NO.1578/M/2012 (ASSESSMENT YEAR: 2001 - 2002) I.T.A. NO.1579/M/2012 (ASSESSMENT YEAR: 2002 - 2003) M/S. SIMTO PROPERTY DEVELOPERS LTD., PLOT NO.80, WALIV, VASAI (E), DIST. THANE 401108. / VS. ITO, WARD 5(3)(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. ./ PAN : AAACS5299L ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI C.V. JAIN / RESPONDENT BY : SHRI AKHILENDRA YADAV, DR / DATE OF HEARING : 07.11.2016 / DATE OF PRONOUNCEMENT : 18 .11.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE AP PEALS ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE OF THE CIT (A) - 9, MUMBAI COMMONLY DATED 8.12.2011 FOR THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03. CONSIDERING THE CONNECTIVITY OF THE APPEALS AS WELL AS THE IDENTICALNESS OF THE ISSUES RAISED IN THESE APPEALS, BOTH THE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN T HE FOLLOWING PARAS OF THIS ORDER. 2. SINCE, THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF REFERENCE AND ADJUDICATION PURPOSE, GROUNDS RAISED IN THE APPEAL ITA NO.1578/M/2012 FOR THE ASSESSMENT YEAR 2001 - 02 ARE EXTRACTED AND THEY READ AS UNDER: - 1. THE LD CIT (A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE AO HAD ERRED IN NOT FOLLOWING THE DIRECTION OF HONBLE ITAT AND ERRED IN NOT PASSING A JUST & PROPER ORDER. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN UPHOLDING THE DECISION OF THE AO OF DISALLOWING DEPRECIATION OF RS. 5,77,283/ - IN RESPECT OF FIXED ASSETS OF THE APPELLANT WHICH WERE ALREADY PUT TO USE IN BUSINESS IN THE PRECEDING PREVIOUS YEAR, ON THE PRETEXT OF THERE BEING NO BUSINESS DURING THE YEAR UNDER APPEAL AND HAS FURTHER FAILED TO APPRECIATE THAT THE APPELLANT HAD COMMENCED THE BUSINESS IN PRECEDING YEAR AND WAS HOLDING STOCK FOR SALE DURING THE YEAR. 3. THE LD CIT (A) HAS FURTHER ERRED IN UPHO LDING THE DECISION OF THE LD AO TO DISALLOW TOTAL BUSINESS EXPENSES AMOUNTING TO RS. 1,70,280/ - OF THE APPELLANT COMPANY ON THE PRETEXT OF THERE BEING NO BUSINESS DURING THE YEAR MERELY ON THE BASIS OF DOUBT, SURMISES AND CONJECTURES. 4. WITHOUT PREJUDICE TO OTHER GROUNDS, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (QA) HAS FURTHER ERRED IN UPHOLDING THE INCOME DERIVED FROM AN INTEGRAL COMMERCIAL ACTIVITY OF LETTING OUT FURNITURE ETC ALONG WITH A PART OF FACTORY PREMISES AS IN COME FROM HOUSE PROPERTY. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE STARTED HIS ARGUMENT RELATING TO THE APPEAL FOR THE AY 2001 - 02. SUMMARIZING THE GROUNDS, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT GROUND NO.1 IS LEGAL IN NATURE AND THE SAME CAN BE DISMISSED. AFTER HEARING THE LD REPRESENTATIVES OF BOTH THE PARTIES THE GROUND NO.1 IS DISMISSED. 4. REGARDING GROUND NO.2, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE CASE OF DENIAL OF DEPRECIATION ON THE FIXED ASSETS ON THE GROUND OF ASSESSEES FAILURE TO USE THOSE ASS ETS FOR BUSINESS IN THE YEAR UNDER CONSIDERATION. FURTHER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT BY SEEING MERE ABSENCE OF SALES AND PURCHASES IN THE P & L ACCOUNT, THE ASSESSING OFFICER CAME TO THE CONCLUSION, WHICH IS CONFIRMED BY THE CIT (A), THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS ACTIVITY IN THE YEAR UNDER CONSIDERATION. IN THE PROCESS, REVENUE AUTHORITIES FAILED TO APPRECIATE THAT THE ASSESSEE MADE EFFORTS TO MAKE SALES. RELYING ON THE PAGE 51 OF THE PAPER BOOK, WHICH IS AN LC OPENING WIT H INDUSIND BANK LIMITED AND IN RESPONSE TO THE SALE OF GOODS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EFFORTS WERE MADE BY THE ASSESSEE TO MAKE SALES ALTHOUGH THE SAME DID NOT MATERIALIZE EVENTUALLY. HE ALSO MENTIONED THAT THE ASSESSEE MADE SALE OF SCRAP AND EARNED INCOME IN THE YEAR UNDER CONSIDERATION. REFERRING TO THE BUILDING AND OTHER EXPENDITURE INCURRED BY THE ASSESSEE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SAID PREMISES WERE USED FOR PARKING THE CLOSING STOCK WORTH ABOUT RS. 4 LAKH S. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS CHANGED ITS BUSINESS ACTIVITY IN THE YEAR UNDER CONSIDERATION AS PER THE MEMORANDUM OF ASSOCIATION AND THE EFFECTS OF THE SAME ARE SEEN IN THE SUCCEEDING ASSESSMENT YEARS. FURTHER, LD COUNSEL FOR THE 3 ASSESSE E BROUGHT OUR ATTENTION TO VARIOUS DOCUMENTS IN THE PAPER BOOK TO DEMONSTRATE THE BUSINESS ACTIVITY, WHICH MATERIALISE IN THE LATER TIMES. BRINGING OUR ATTENTION TO THE EXPENDITURE AMOUNTING TO RS. 1,70,280/ - , LD COUNSEL FOR THE ASSESSEE MENTIONED THAT TH E SAID EXPENDITURE IS BASICALLY RELATED TO THE OVERHEADS AND MINIMUM REQUIREMENTS FOR UP KEEPING AND MANAGEMENT OF THE EXISTING ASSETS AND OFFICE ACTIVITIES. IN SUCH CIRCUMSTANCES, AS PER THE LD COUNSEL FOR THE ASSESSEE DENIAL OF THE DEPRECIATION AND EXP ENDITURE IS NOT IN TUNE WITH THE PROVISIONS OF THE ACT. 4. ON HEARING BOTH THE PARTIES, WE FIND IT IS THE DECISION OF THE AO AND THE CIT (A) IN DENYING THE DEPRECIATION ON THE FIXED ASSETS WHICH ARE ALREADY FORM PART OF THE BLOCK OF ASSETS IS NOT SUSTAINAB LE. IT IS A SETTLED PROPOSITION IN LAW THAT ONCE SUCH ASSETS ARE ENTERED IN BLOCK OF ASSETS, THERE ARE NO PROVISIONS TO DENY THE DEPRECIATION ON THE WDV BROUGHT FORWARD FROM EARLIER YEARS. WE FIND, THIS IS THE CASE WHERE THERE WAS A BUSINESS ACTIVITY IN EARLIER YEARS AS WELL AS IN THE LATER YEARS AND NO SALES AND PURCHASES IN THE YEAR UNDER CONSIDERATION. IN OUR VIEW, THIS IS NOT THE REASON FOR DENIAL OF DEPRECIATION AND ALSO THE EXPENDITURE WHICH ARE FOUND TO BE BASICALLY MINIMUM EXPENDITURE FOR MAINTEN ANCE OF THE BUSINESS AND ASSETS OF THE BUSINESS. IN OUR CONSIDERED OPINION, THE DECISION OF THE CIT (A) ON THIS ISSUE NEEDS TO BE REVERSED AND THE CLAIM OF THE ASSESSEE IN THE MATTERS OF DEPRECIATION AS WELL AS EXPENDITURE SHOULD BE ALLOWED IN FULL. WE O RDER ACCORDINGLY. THUS, ALL THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE PARTLY ALLOWED. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2016. SD/ - S D/ - ( C.N. PRASAD ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; .11 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 4 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI