Pressman Realty Limited, Kolkata V. DCIT, Cir. 12(1), Kolkata

ITA 186/KOL/2022

AI Insights

Pressman Realty Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi, which affirmed the AO's decision disallowing a business loss of Rs. 1,11,05,357 and other disallowances under section 14A read with Rule 8D(2)(iii). The Tribunal found that the AO and CIT(A) had erred in not allowing the business expenses which were consistently incurred over the years in the real estate business. The Tribunal noted that similar expenses had been allowed in earlier years and that the assessee was engaged in real estate business, which necessitated incurring certain expenses regardless of the income generated in the year under consideration.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127285 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 21-04-2022
• Other Referred Cases: AY 2009-10, AY 2011-12, AY 2016-17
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Earning of tax free income; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

आयकर अपील य अ धकरण, कोलकाता पीठ ‘‘बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA ी राजेश क ु मार, लेखा सद य एवं ी संजय शमा या यक सद य के सम [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] I.T.A. No. 186/Kol/2022 Assessment Year: 2013-14 Pressman Realty Ltd. (PAN: AABCP 6865 C) Vs. DCIT, Circle-12(1), Kolkata Appellant / (अपीलाथ ) Respondent / ( !यथ ) Date of Hearing / स ु नवाई क$ त&थ 15.12.2022 Date of Pronouncement/ आदेश उ)घोषणा क$ त&थ 15.03.2023 For the Appellant/ नधा /रती क$ ओर से Shri S. M. Surana, Advocate For the Respondent/ राज व क$ ओर से Shri Vijay Kumar, Addl. CIT ORDER / आदेश Per Rajesh Kumar, AM: This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 09.03.2022 for the AY 2013-14. 2. In the ground no. 1 and 2, the assessee has challenged the confirmation of disallowance of loss of Rs. 1,11,05,357/-as claimed by the assessee under the head business which included administrative expenses of the company by disregarding the 2 I.T.A. No. 186/Kol/2022 Assessment Year: 2013-14 Pressman Realty Ltd. fact that the expenditure was consistently incurred over the years and AO himself admitting that the assessee was carrying on real estate business. 3. Facts in brief are that the assessee filed return of income on 28.09.2013 declaring total income of Rs. 90,61,890/-. The case of the assesse was selected for scrutiny. During the course of assessment proceedings ads also in the assessment order , the AO noted in para 3, the assessee is engaged in the business of real estate, trading/investment in shares and also disclosed income returned by the assessee under various heads in para 4. Finally the AO rejected the claim of expenses by the assessee and consequently the loss claimed under the head business was also rejected by holding that the assessee has debited expenses relating to house property. The AO further noted that the assesse has claimed standard deduction @ 30% from the rental income under the head house property. The expenses claimed by the assesse included remuneration and service charge, miscellaneous expenses, office upkeep and maintenance charges etc. According to AO, in view of the service charges being treated as unexplained income, this expenditure should not be charged to the profit and loss account as all these expenses related to house property and were wrongly charged into the profit and loss account. Finally the AO rejected the claim of the assessee in respect of loss of 1,11,05,354/- in the assessment framed u/s 143(3) of the Act vide order dated 18.03.2016. 4. The Ld. CIT(A) affirmed the order of AO on this issue by holding that the assessee has not filed any details in respect of these expenses. The ld. CIT(A) also distinguished the decisions of the Tribunal in assessee’s own case for AY 2009-10 and 2016-17 and thus upheld the order of AO. 5. After hearing the rival contentions and perusing the material on record, we find that undisputedly the AO has recorded a inding a fact in para 3 that the assessee is engaged in the business of real estate which is a common feature in the earlier assessment years also vis-à-vis the instant assessment year. We note that the assessee had incurred similar expenses in real estate business in the earlier years also and 3 I.T.A. No. 186/Kol/2022 Assessment Year: 2013-14 Pressman Realty Ltd. there is no dispute that the issue in the earlier years has been allowed by the Co- ordinate Benches of the Tribunal by allowing these expenses as business loss. Though the purchase and sale of shares have been shown under the head capital gain and claimed STT gain as exempt being long term capital gain but the fact remains that the assessee is doing real estate business and any expenses incurred during the year has to be allowed to the assessee irrespective of the fact that assesse has not received any substantial income from real estate business. In our opinion once the assessee carries on some business this is immaterial whether received any income or not as the assessee needs to maintain his office to run the business which required incurring of certain expenses. Considering these facts we are of the view that the Tribunal has rightly taken a correct view in AY 2009-10 and 2011-12 by allowing these expenses as business expenses. We are also mindful the decision of ITAT in AY 2016-17 in assessee’s own case wherein the AO rejected the loss from the business and Ld. CIT(A) allowed 50% of the expenses on the ground of non-submission of details by the assesse. The Co-ordinate Bench has given a finding that 98.7% of the total area of the building has been let out for earning rental income and only 1.3% is available otherwise and thus upheld the order of ld. CIT(A). We respectfully disagree from the said view of the Hon’ble Co-ordinate Bench on the ground thatthe admissibility of the business expenses can not be determined on the basis portion of building/ property let out vis a vis portion used for carrying on real estate business. Accordingly we are not following the said decision of the tribunal passed in A.Y. 2016-17. In our considered view the expenses need to be allowed as this is undisputed the assesse is doing real estate business. Accordingly we set aside the order of Ld. CIT(A) and direct the AO allow these expenses as business expenses and allow the business loss to be carried forward. The ground nos. 1& 2 are allowed. 6. Issue raised in ground no. 3 is against the confirmation of disallowance of Rs. 14,23,899/- u/s 14A read with Rule 8D(2)(iii) by the Ld. CIT(A) as made by the AO. 7. Facts in brief are that the AO observed that the assessee has earned exempt income of Rs. 5,84,097/- but did not disallow any expenses relating to such income. 4 I.T.A. No. 186/Kol/2022 Assessment Year: 2013-14 Pressman Realty Ltd. When the assessee did not furnish any details before the AO , he computed the disallowance under section 14A of the Act read with Rule 8D and added the same to the income of the assesse. The Ld. CIT(A) has affirmed the said disallowance on the ground that the assessee has not furnished any evidences. 8. After hearing the rival contentions and perusing the material on record, we find that while computing the disallowance the AO has taken into account all the investments i.e. investments which yielded dividend income as well as those investments did not yield any dividend during the year. The Ld. A.R made a prayer that the AO may be directed to consider only those investments which yielded exempt income during the year while calculating disallowance which in our opinion is the correct position of law as on date. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to re-compute the disallowance after taking into account only those investments which yielded dividend/exempt income during the year. The ground no. 3 is allowed. 9. Issue raised in ground no. 4 is the confirmation of disallowance of Rs. 2,65,020/- on account of miscellaneous expenses incurred for the purpose of business by the ld. CIT(A). Since we have decided this issue in ground nos. 1 and 2, our findings in that ground would, mutatis mutandis, apply to this ground as well. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance. The ground no. 4 is allowed. 10. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 15 th March, 2023 Sd/- Sd/- (Sonjoy Sarma /संजय शमा ) (Rajesh Kumar/राजेश क ु मार) Judicial Member/ या यक सद य Accountant Member/लेखा सद य Dated: 15 th March, 2023 SB, Sr. PS 5 I.T.A. No. 186/Kol/2022 Assessment Year: 2013-14 Pressman Realty Ltd. Copy of the order forwarded to: 1. Appellant- Pressman Realty Ltd., Pressman House, 10A, Lee Road, Bhowanipore, Kolkata-700020. 2. Respondent – DCIT, Circle- 12(1), Kolkata 3. Ld. CIT(A)-NFAC, Delhi 4. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata