BHARAT A DOSHI, MUMBAI V. ITO 17(1)(2), MUMBAI

ITA 1664/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8023 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR MISHRA LD
• Assessee Lawyers: NISHIT GANDHI LD
• Keywords: Business income; Depreciation; Opportunity of being heard
• Section: 37; 143(3); 37(1)

Judgement Text

ITA NO.1664/MUM/2017 SHRI BHARAT A. DOSHI ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1664/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) SHRI BHARAT A . DOSHI GF, SIR VITTHALDAS CHAMBER HOMI MODI STREET MUMBAI-400 023. / VS. INCOME TAX OFFICER - 17 ( 1 )(2) MUMBAI. ! ./ ./PAN/GIR NO. AACPD-0328-A ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : NISHIT GANDHI- LD. AR REVENUE BY : RAJESH KUMAR MISHRA - LD.DR / DATE OF HEARING : 13/12/2018 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-28, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-28/IT-133/ITO-17(1)(5)/2015-16 D ATED 07/12/2016 QUA CONFIRMATION OF CERTAIN DISALLOWANCES. ITA NO.1664/MUM/2017 SHRI BHARAT A. DOSHI ASSESSMENT YEAR :2012-13 2 2.1 THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED IN THE BUSINESS OF LETTING OUT WAREHOUSES UNDER PROPRIETORSHIP CONCERN NAMELY AMAR PROPERTIES WAS ASSESSED IN SCRUTINY ASSESSMENT U/S 143(3) FOR IMPUGNED AY ON 25/03/2015 BY LD. INCOME TAX OFFICER -17(1)(2), MUMBAI [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.122.62 LACS AFTER CERTAIN ADDITIONS / DISALLOWAN CES AS AGAINST RETURNED INCOME OF RS.11.98 LACS E-FILED BY THE ASS ESSEE ON 29/09/2012. THE SUBJECT MATTER OF PRESENT APPEAL IS TO DETERMINE THE NATURE OF REPAIRS & MAINTENANCE EXPENSES INCURRED BY THE ASSESSEE DURING IMPUGNED AY AND THE ALLOWABILITY OF MUNICIPAL TAXES. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE SUB-LET CERTAIN WAREHOUSES TAKEN ON RENT FROM HIS MOTHER T O CERTAIN ENTITIES AND ACCORDINGLY, REFLECTED THE AFORESAID I NCOME AS BUSINESS INCOME. AGAINST RENTAL RECEIPTS OF RS.272 LACS, THE ASSESSE E CLAIMED VARIOUS EXPENDITURE, ONE OF WHICH WAS AN AMOUNT OF RS.89.19 LACS STATED TO BE INCURRED BY THE ASSESSEE TOWARDS REPAIRS & MAINTENANCE. THE PERUSAL OF THE SAME REVEALED THAT IT WAS INCURR ED TOWARDS BREAKING & ERECTION OF BRICK-WALLS, EXCAVATION OF SOIL, LEVE LING, RCC WORK, PLASTERING, INTERLOCK PAVERS, RAISING OF HEIGHT OF CHAMBERS, FABRICATION WORKS, PURCHASE OF RIVER SAND ETC . THE LD. AO PROCEEDED TO DISALLOW THE SAME U/S 37(1) BY HOLDING THE SAME TO BE IN CAPITAL IN NATURE AS AGAINST THE SUBMISSIONS OF THE ASSESSEE THAT THE EXPENDITUR E WAS TOWARDS UPKEEP OF THE PROPERTY AND NO ADDITIONAL STRUCTURE OR EXTENSION OF PERMANENT STRUCTURE WAS CARRIED OUT AND THE BENEFIT WAS NOT OF ENDURING IN NATURE. THE ATTENTION WAS DRAWN TO THE FACT THAT THE EXPENDITURE WAS A REGULAR FEATURE AND SIMILAR EXPENDITURE WAS BEING C LAIMED & ALLOWED IN ITA NO.1664/MUM/2017 SHRI BHARAT A. DOSHI ASSESSMENT YEAR :2012-13 3 PRECEDING YEARS. HOWEVER, REJECTING THE SAME, LD. A O TREATED THE SAME THE EXPENDITURE TO BE CAPITAL IN NATURE AND ALLOWED DEPRECIATION AGAINST THE SAME @5%. THE SECOND ADDITION OF MUNICIPAL TAXE S OF RS.234.72 LACS HAS BEEN DISALLOWED ON THE PREMISE THAT THE AS SESSEE WAS NOT THE OWNER OF THE BUILDING AND FURTHER, THE ASSESSEE COU LD NOT PROVE THAT THE AFORESAID EXPENDITURE WAS THE LIABILITY OF THE ASSE SSEE. ALTHOUGH, THE ASSESSEE HAD MADE DISALLOWANCE OF RS.208.87 LACS AG AINST THE SAME U/S 43B, HOWEVER, LD. AO DISALLOWED THE SAME U/S 37 (1). THE STAND OF LD. AO, UPON CONFIRMATION BY LD. CIT(A), IS UNDER A PPEAL BEFORE US. 3. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK. UPON DUE CONSIDERATION, WE FIND THAT THE ASSESSEE IS NOT THE OWNER OF THE BUILDING AND IT ONLY SUB-LETS THE BUILDING TO VARIO US ENTITIES AND RENTAL RECEIPTS ARE ASSESSED AS BUSINESS INCOME . THEREFORE, LETTING OUT IS THE BUSINESS OF THE ASSESSEE AND ANY EXPENDITURE INCURR ED AGAINST THE SAME WAS ALLOWABLE TO HIM PROVIDED IT WAS WITHIN TH E STATUTORY FRAMEWORK. IN OUR OPINION, BOTH THE LOWER AUTHORITI ES HAVE FELL IN ERROR IN VIEW OF THE FACT THAT THE AFORESAID EXPENDITURE WAS IN THE NATURE OF BUILDING REPAIRS AND MAINTENANCE, WHICH IS GENERALL Y CAPITAL IN NATURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT THE OWNER OF THE BUILDING & SUB-LETTING WAS THE BUSINESS FOR THE ASS ESSEE AND ANY UPKEEP OF THE BUILDING WOULD NOT HAVE BROUGHT ENDURING BEN EFIT FOR THE ASSESSEE. THIS BEING THE CASE, THE STAND OF LOWER AUTHORITIES COULD NOT BE SUSTAINED. WE HOLD THAT THE ASSESSEE WAS ENTITLED F OR FULL DEDUCTION OF IMPUGNED EXPENDITURE. AS A LOGICAL CONSEQUENCE, THE DEPRECIATION ITA NO.1664/MUM/2017 SHRI BHARAT A. DOSHI ASSESSMENT YEAR :2012-13 4 ALLOWED BY THE LOWER AUTHORITIES STAND REVERSED. TH IS GROUND OF APPEAL STANDS ALLOWED. 4. SO FAR AS THE DEDUCTION OF MUNICIPAL TAXES IS C ONCERNED, IT IS DIFFICULT TO ACCEPT THE FACT THAT THE ASSESSEE HAD HUGE LIABILITY OF RS.234.72 LACS ON ACCOUNT OF MUNICIPAL TAXES AS AGA INST ANNUAL RENTAL RECEIPTS OF RS.272 LACS. NOTHING ON RECORD SUBSTANT IATE THAT THE PAYMENT OF THE MUNICIPAL TAXES WAS THE LIABILITY OF THE ASSESSEE. THIS ISSUE, IN OUR OPINION, REQUIRE DEEPER DELIBERATIONS AND THEREFORE, RESTORED BACK TO THE FILE OF LD. AO WITH A DIRECTIO N TO THE ASSESSEE TO SUBSTANTIATE HIS STAND AS TO ADMISSIBILITY OF THE E XPENDITURE U/S 37(1). THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. NEEDLESS TO ADD THAT REASONABLE OPPORTUNITY OF BEING HEARD SHALL BE PROV IDED TO THE ASSESSEE. 5. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. &. , . , / DR, ITAT, MUMBAI 6. /01 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.