J.K. Bros Constrafin Ltd., Hyd, Hyderabad V. ACIT, Circle-2(1), Hyderabad, Hyderabad

ITA 175/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6342 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2016
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 175/HYD/2016 ASSESSMENT YEAR: 2009-10 M/S. J.K. BROS CONSTRAFIN LTD., HYDERABAD [PAN: AABCJ2139H] VS THE ACIT, CIRCLE-2(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM, AR FOR REVENUE : SHRI A. SITARAMA RAO, DR DATE OF HEARING : 03-08-2016 DATE OF PRONOUNCEMENT : 10-08-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, HYDERABAD D ATED 23-12-2015, CONFIRMING DISALLOWANCE OF RS. 9 LAKHS PAID TOWARDS SALARIES AND DEPRECIATION OF RS. 1,10,564/- ON THE REASON THAT ASSESSEE HAS NOT STARTED THE BUSINESS. 2. BRIEFLY STATED, ASSESSEE, A COMPANY, IS ENGAGED IN THE BUSINESS OF FINANCE AND CONSTRUCTION ACTIVITY. IT F ILED RETURN I.T.A. NO. 175/HYD/2016 :- 2 -: OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARIN G TOTAL INCOME OF RS. 99,24,435/- MAINLY CONSISTING OF RENT S WHICH ARE OFFERED UNDER THE HEAD HOUSE PROPERTY INCOME AND INTERESTS WHICH ARE OFFERED UNDER THE HEAD BUSINES S. ASSESSING OFFICER (AO) WHILE ACCEPTING THE INCOMES UNDER THE RESPECTIVE HEADS, HOWEVER, WAS OF THE OPINION T HAT ASSESSEE HAS NOT STARTED THE BUSINESS, THEREFORE, T HE SALARIES PAID AMOUNTING TO RS. 9,00,000/- IS NOT RE LATED TO BUSINESS ACTIVITY. FURTHER, HE HAS ALSO DISALLOWED THE DEPRECIATION AMOUNTING TO RS. 1,10,564/- FOR THE SA ME REASON ON THE ASSETS USED IN THE OFFICE. WHEN CONT ESTED BEFORE THE LD. CIT(A) THAT ASSESSEE IS A COMPANY AN D IS IN THE BUSINESS OF FINANCE AND CONSTRUCTION AND EXPEND ITURE INCURRED IS FOR THE PURPOSE OF BUSINESS AND RELIED ON VARIOUS CASE LAW, LD. CIT(A) UPHELD THE ORDER OF TH E AO. HENCE, THE PRESENT APPEAL. 3. LD. COUNSEL MAINLY CONTESTED THAT ASSESSEE BEING A COMPANY AND IS INVOLVED IN THE BUSINESS OF FINANCIN G HAS EMPLOYED STAFF FOR WHOM THE AMOUNT OF RS. 9 LAKHS W AS PAID. FURTHER, THE DEPRECIATION ON THE ASSETS USED IN THE OFFICE WAS ALSO CLAIMED. REFERRING TO THE P&L A/C AND THE COMPUTATION OF INCOME FILED, IT IS SUBMITTED THAT EXPENDITURE IS FOR THE PURPOSE OF BUSINESS AND SHOU LD HAVE BEEN ALLOWED BY THE AO. 4. LD. DR HOWEVER, SUPPORTED THE ORDERS OF THE AO A ND CIT(A) THAT BUSINESS HAS NOT COMMENCED AND ACCORDIN GLY, THE SAID EXPENDITURE CANNOT BE ALLOWED. I.T.A. NO. 175/HYD/2016 :- 3 -: 5. ON PERUSING THE DOCUMENTS PLACED ON RECORD AND T HE ORDERS OF THE AUTHORITIES, WE ARE OF THE OPINION TH AT THE EXPENDITURE CLAIMED BY ASSESSEE IS AN ALLOWABLE EXP ENDITURE U/S. 37(1). WE ARE UNABLE TO UNDERSTAND HOW AO COU LD GIVE A FINDING THAT ASSESSEE HAS NOT STARTED THE BUSINES S ACTIVITY WHEN THE ENTIRE INTEREST INCOME EARNED BY ASSESSEE- COMPANY WAS ASSESSED UNDER THE HEAD INCOME FROM BUSINESS. IF THE INTEREST INCOME IS NOT BY WAY OF BUSINESS ACTIVITY, EVEN THEN, THE SALARIES PAID TO THE STAFF FOR DAY-TO- DAY OPERATIONS OF THE COMPANY IS CERTAINLY ALLOWABL E AS IT RELATES TO EARNING OF THE INCOMES. SINCE ASSESSEE S INCOME BY WAY OF INTEREST IS ASSESSED UNDER THE HEAD BUSI NESS, WE DO NOT SEE ANY REASON TO DISALLOW THE EXPENDITURE O N SALARIES AND DEPRECIATION HOLDING THAT ASSESSEE HAS NOT STARTED BUSINESS ACTIVITY. THE ACTION OF THE AO IS NOT JUSTIFIABLE ON THE FACTS OF THE CASE. IN VIEW OF T HAT, WE DIRECT THE AO TO ALLOW THE EXPENDITURE AS CLAIMED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 10 TH AUGUST, 2016 TNMM I.T.A. NO. 175/HYD/2016 :- 4 -: COPY TO : 1. M/S. J.K. BROS CONSTRAFIN LTD., HYDERABAD. C/O. K. VASANT KUMAR, A.V. RAGHU RAM, P. VINOD & M. NEEL IMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. THE ACIT, CIRCLE-2(1), HYDERABAD. 3. CIT (APPEALS)-2, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.