Autofin Limited , Secunderabad V. Income Tax Officer, Ward-1(2), Hyderabad

ITA 1791/Hyd/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3711 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 19-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 05-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: K A SAI PRASAD
• Section: 143(3); 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1 791 /HYD/20 18 ASSESSMENT YEAR: 20 13 - 14 M/S. AUTOFIN LIMITED, SECUNDERABAD - 500 011. PAN: AACCA 9402 F VS. THE INCOME TAX OFFICER, WARD - 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.A. SAI PRASAD REVENUE BY: SRI NILANJAN DEY, DR DATE OF HEARING: 19/1 2 /2019 DATE OF PRONOUNCEMENT: 25 /02/2020 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 1, HYDERABAD IN APPEAL NO.0035/CIT(A) - 1,HYD/2016 - 17/2018 - 19, DATED 11/06/2018 PASSED U/S. 143(3) R.W.S 250(6) OF THE ACT FOR THE A.Y. 2013 - 14. 2. T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: 1. THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2. THE LD. FIRST APPELLATE AUTHORITIES NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS. 2,51,477 MADE U/S. 36(1)(VA) R.W .S 2(24)(X) OF THE ACT. 3. THE FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE LEGAL POSITION THAT EVEN THE EMPLOYEES SHARE OF PROVIDENT FUND 2 CONTRIBUTION PAID BEFORE SPECIFIED DATE MENTIONED U/S. 139(1) IS AN ALLOWABLE DEDUCTION. 4. THE LD FIRST APPELL ATE AUTHORITY IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 14,70,182 MADE BY THE A.O. 5. THE LD FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF RS . 14,70,182 WITHOUT BRINGING ON RECORD THE COMPARABLE CASES AND WITHOUT ESTABLISHING THE FACT THAT THE RENT PAID IS EXCESSIVE ESPECIALLY WHEN THE RECEIPT IS AN UNRELATED PARTY. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS A T THE TIME OF HEARING OF APPEAL. 3. AT THE OUTSET, THE LD. AR SUBMITTED BEFORE US THAT GROUNDS NO.2 AND 3 ARE NOT PRESSED. GROUNDS NO. 1 AND 6 ARE GENERAL IN NATURE. ACCORDINGLY, GROUNDS NO. 1, 2, 3 AND 6 ARE DISMISSED. 4. AS REGARDS GROUNDS NO.4 AND 5, THE CRUX OF THE ISSUE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 14,70,182/ - MADE BY THE LD. A.O. TOWARDS EXCESS RENT PAID INVOKING THE PROVISIONS OF SECTION 40A(2B)(II) OF THE ACT . 5. BRIEF FACTS OF THE CASE ARE THAT DURING THE A.Y. 2013 - 14 THE ASSESSEE HAD PAID RS. 18,00,00 LEASE RENT TOWARDS LAND AND BUILDING TO SRI GOUTAM CHAND JAIN (HUF) A RELATED PARTY . DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, T HE LD. A.O. OBSERVED THAT AS PER THE MARKET RATE THE ALLOWABLE RENT FOR THE PREMISES IS RS. 3,29,868 AND SRI GOUTAM CHAND JAIN IS ONE OF THE DIRECTOR IN THE APPELLANT COMPANY. SINCE, THE ASSESSEE HAD PAID EXCESS RENT TO A RELATED PARTY, THE LD. A.O. INVOKED THE PROVISIONS OF SECTION 40A(2B)(II) OF THE ACT AND DENIED THE CLAIM OF 3 EXCESS RENT PAID OF RS. 14,70,182/ - (RS. 18,00,000 RS. 3,29,868) AS DEDUC TION . ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE LD. AO BY AGREEING WITH HIS VIEW . AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS NOW ON APPEAL BEFORE US. 6 . AT THE OUTSET, THE LD. AR POINTED OUT THE LEASE DEED PLACED IN PAGE 6 - 9 OF THE PAPER BOOK WHICH WAS ALSO BEFORE THE LD. REVENUE AUTHORITIES AND ARGUED BY STATING THAT THE PREMISES RENTED OUT BY THE ASSESSEE COMPANY WAS 3000 SQ.FT RCC BUILDING ALONG WITH ADJOINING VACANT LAND ADMEASURING APPROXIMATELY 692 SQ UARE M E T ER S SIT UATED AT BOWENPALLY VILLAGE, SECUNDERABAD CANTONMENT WHICH IS IN A PRIME LOCALITY. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD PAID ONLY NOMINAL RENT TO THE HUF WHEREIN ONE OF THE DIRECTOR IS A COPARCENER OF THE HUF. IT WAS THEREFORE PLEADED THAT THE ADDITION MADE AND SUSTAINED BY THE LD. REVENUE AUTHORITIES MAY BE DELETED AS THE R ENT PAID WAS REASONABLE . THE LD. DR THOUGH ARGUED VEHEMENTLY IN SUPPORT OF THE ORDERS OF THE LD. REVENUE AUTHORITIES, HE COULD NOT SUCCESSFULLY CONTROVERT TO THE SUBMISSION OF THE LD. AR. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. ON A CURSORY GLANCE ON THE ISSUE, IT IS OBVIOUS THAT , THE MARKET RENTAL VALUE OF THE PREMISES CAN BE UNDISPUTEDLY ESTIMATED AT RS. 50/ - PER SQ. FT. , WHICH WORKS OUT TO APPROXIMATELY RS.1,50,000 PER MONTH , I.E., RS. 18 LAKHS PER ANNUM. IN THIS SITUATION, 4 IT CANNOT BE PRESUMED THAT THE ASSESSEE HAD PAID EXCESS RENT TO THE LANDLORD VIZ., THE HUF WHEREIN ONE OF THE DIRECTORS IN THE ASSESSEE - COMPANY IS A COPARCENER OF THE HUF. THEREFORE, WE HEREBY DIRECT THE LD. AO TO DELETE THE ADDITION MADE FOR RS. 14,70,182/ - TOWARDS EXCESS RENT PAID. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2020 . SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 25 TH FEBRUARY, 2020 OKK COPY TO: - 1) M/S. AUTOFIN LIMITED, C/O. CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOKNAGAR, HYDERABAD. 2) THE INCOME TAX OFFICER, WARD - 1(2), 7 TH FLOOR, A - BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 3) THE CIT(A) - 1 , HYDERABAD 4) THE PR. CIT - 1 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE