Deputy Commissioner of Income tax, V. M/s Rajmal Lakhichand Jewellers Pvt. Ltd, Jalgaon

ITA 19/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2807 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-06-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N O N E
• Keywords: Depreciation; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 19 /PUN/201 7 / ASSESSMENT YEAR : 20 1 2 - 13 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, JALGAON ....... / APPELLANT / V/S. M/S. RAJMAL LAKHICHAND JEWELLERS PVT. LTD., 169, BALAJI PETH, JOHARI BAZAR, JALGAON 425001 PAN : AAECS0061L / RESPONDENT ASSESSEE BY : N O N E REVENUE BY : SHRI RAJESH GAWALI / DATE OF HEARING : 1 0 - 06 - 2019 / DATE OF PRONOUNCEMENT : 13 - 06 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK DATED 2 4 - 10 - 2016 FOR THE ASSESSMENT YEAR 201 2 - 13. 2 ITA NO . 19/PUN/2017, A.Y. 2012 - 13 2. THE NOTICE OF APPEAL FOR 04 - 04 - 2019 WAS SENT TO THE ASSESSEE THROUGH RPAD ON THE ADDRESS MENTIONED IN FORM NO. 36. HOWEVER, NEITHER THE NOTICE NOR THE ACKNOWLEDGMENT WAS RECEIVED BACK UNSERVED. ON 10 - 04 - 2019 FRESH NOTICE WAS ISSUED TO THE ASSESSEE FOR 10 - 06 - 2019 THROUGH THE OFFICE OF DR. SHRI RAJESH GAWALI REPRESENTING THE DEPARTMENT HAS FILED A COPY OF SER VICE REPORT OF THE NOTICE. DESPITE SERVICE , NONE HAS APPEARED TO REPRESENT THE ASSESSEE. IT SEEMS THAT THE ASSESSEE IS NOT KEEN TO DEFEND IMPUGNED ORDER , T HEREFORE, THE APPEAL IS TAKEN UP FOR ADJUDICATION WITH THE ASSISTANCE OF LD. DR AND THE MATERIAL AV AILABLE ON RECORD. 3. THE LD. DR SUBMITTED THAT IN APPEAL , THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE EXPENDITURE O N TELEPHONE AND ELECTRICITY RELATING TO ASSESSEES FLAT S AT KHAR, MUMBAI AND ALSO THE D EPRECIATION O N THE AFORESAID FLAT S . THE LD. DR POINTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED ASSESSEES CLAIM BY PLACING RELIANCE ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08. 4. W E HAVE HEARD THE SUBM ISSIONS MADE BY LD. DR AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE IN APPEAL HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE OF DEPRECIATION, TELEPHONE AND ELECTRICITY EXPENDITURE RELATING TO ASSESSEES FLAT S AT KHAR, MUMBAI. THE CONTENTION OF THE ASSESSEE IS THAT THE FLATS AT KHAR, MUMBAI ARE BEING USED FOR BUSINESS PURPOSES. WE FIND THAT IDENTICAL ISSUE IN RESPECT OF ALLOWABILITY OF EXPENDITURE AND DEPRECIATION QUA THE FLATS OF ASSESSEE AT KHAR, MUMBAI HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 IN ITA 3 ITA NO . 19/PUN/2017, A.Y. 2012 - 13 NO. 891/PUN/2013. THE CO - ORDINATE BENCH DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL ON THIS ISSU E READS AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE DISALLOWED INTEREST OF RS.38,87,288 AND TELEPHONE/ELECTRICITY CHARGES OF RS.48,154/ - IN RESPECT OF THE PROPERTY AT KHAR, MUMBAI ON THE GROUND THAT THE INTEREST AND OTHER EXPENSES CLAIMED HAS NO RELATION WITH THE BUSINESS OF THE ASSE SSEE COMPANY. WE FIND IN APPEAL THE LD.CIT(A) NOT ONLY UPHELD THE ACTION OF THE AO BUT HE FURTHER ENHANCED THE DISALLOWANCE BY RS.31,71,672/ - BEING THE INTEREST ON LOAN AMOUNT OF RS.2,64,30,607/ - DIVERTED FOR NON BUSINESS PURPOSES. THE REASONING FOR SUCH ENHANCEMENT HAS ALREADY BEEN REPRODUCED IN THE FINDINGS GIVEN BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE FLATS HAVE ALREADY ENTERED INTO THE BLOCK OF ASSET AND DEPRECIATION CLAIMED IN THE ORIGINAL RETURN HAS BE EN ALLOWED AND THE SAME HAS NOT BEEN WITHDRAWN, THEREFORE, IT IS TO BE HELD THAT THE FLAT AT KHAR IS A BUSINESS ASSET AND UTILIZED FOR THE PURPOSE OF BUSINESS. IT IS ALSO HIS SUBMISSION THAT IN VIEW OF VARIOUS DECISIONS THE FLATS NEED NOT TO BE REGISTERED IN THE NAME OF THE ASSESSEE COMPANY. 12. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE FLATS PURCHASED AT KHAR HAS BEEN SHOWN IN THE ASSET SIDE OF THE BALANCE SHEET AND THE LOAN OBTAINED FRO M BANK IN THE NAME OF THE DIRECTORS HAS BEEN SHOWN AS LIABILITY IN THE LIABILITY SIDE OF THE BALANCE SHEET. THE BOARD OF DIRECTORS VIDE RESOLUTION DATED 10 - 02 - 2006 HAVE APPROVED FOR THE PURCHASE OF THE FLATS IN THE NAME OF THE 2 DIRECTORS. DEPRECIATION I N THE COMPUTATION STATEMENT IS AS PER FORM NO.3CD ENCLOSED ALONG WITH RETURN OF INCOME. IN THE SCHEDULE OF DEPRECIATION ENCLOSED ALONG WITH FORM 3CD WE FIND DEPRECIATION HAS BEEN CLAIMED AT RS.2,18,73,103/ - WHICH INCLUDES THE DEPRECIATION OF RS.62,39,688/ - ON BUILDING/FLATS AMOUNTING TO RS.5,98,28,719/ - (PAGE 35 OF THE PAPER BOOK). THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEES CLAIM FOR DEPRECIATION HAS BEEN ACCEPTED FOR THE A.Y. 2007 - 08 IS ALSO NOT DISPUTED BY THE CIT(A). WE FIND BEFORE CIT(A) THE ASSESSEE HAS INTER ALIA MADE FOLLOWING SUBMISSIONS : IT WAS ONLY FOR THE SAKE OF CONVENIENCE THAT THE SAID FLATS WERE REGISTERED IN THE NAME OF THE DIRECTORS. THE FACTS OF THE CASE CLEARLY SHOW THAT THE COMPANY IS THE REAL OWNER OF BOTH THE FLATS NOTWITHSTANDING THEIR REGISTRATION IN THE NAMES OF DIRECTORS. IT IS THE DEFACTO AND BENEFICIAL OWNERSHIP WHICH IS MATERIAL AND RELEVANT. IN THE CONTEXT OF DEPRECIATION THE COURTS HAVE ACCEPTED THE ASSESSEES CLAIM FOR THE SAME EVEN WHEN PROPERT Y/VEHICLES ARE NOT REGISTERED IN THE NAME OF COMPANY/FIRM BUT IN THE NAMES OF DIRECTORS/PARTNERS. ADDL.CIT VS. MANJEET ENGG. IND. 154 ITR 509 DELHI CIT VS. FAZILKA DABWALI 270 ITR 398; P&H 4 ITA NO . 19/PUN/2017, A.Y. 2012 - 13 RATIO OF THE SAID DECISIONS WOULD ALSO APPLY TO THE FACTS OF OUR CA SE ALSO. IT IS ALSO IMPORTANT TO NOTE THAT THE APPELLANTS CLAIM FOR DEPRECIATION HAS BEEN ACCEPTED ALSO FOR THE A.Y. 2007 - 08. WE ARE ENCLOSING HEREWITH A COPY OF OUR SALES TAX REGISTRATION CERTIFICATE WHEREIN THE PARTICULARS OF OFFICES AND ITS ADDRESSES ARE MENTIONED. 13. FROM THE ABOVE IT IS CLEARLY SEEN THAT THE ASSESSEES CLAIM OF DEPRECIATION WHICH HAS BEEN ACCEPTED BY THE AO IN THE ORIGINAL ASSESSMENT HAS NOT BEEN WITHDRAWN. THIS OTHERWISE IMPLIES THAT THE AO HAS ACCEPTED THE FLAT AS BUSINESS ASSET USED FOR THE PURPOSE OF BUSINESS. WE FIND THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. FAZILKA DABWALI TPT COMPANY PVT. LTD. FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT PVT. LTD. AND OTHERS REPOR TED IN 226 ITR 625 HAS ALLOWED THE CLAIM OF DEPRECIATION ON BUSES PURCHASED IN THE NAME OF ITS DIRECTORS. ALTHOUGH THE BUSES WERE NOT REGISTERED IN THE NAME OF THE COMPANY IT WAS HELD THAT REGISTRATION OF THE SAME IN THE NAME OF THE COMPANY IS NOT RELEVAN T AND THE COMPANY IS ENTITLED TO DEPRECIATION IN RESPECT OF THE BUSES. 14. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT PVT. LTD. (SUPRA) HAS HELD THAT UNDER THE COMMON LAW, OWNER MEANS A PERSON WHO HAS GOT VALID TITLE LEGALLY CONVEYED TO HIM AFTER COMPLYING WITH THE REQUIREMENTS OF LAW SUCH AS THE TRANSFER OF PROPERTY ACT, REGISTRATION ACT, ETC. BUT, IN THE CONTEXT OF SECTION 22 OF THE INCOME TAX ACT, 1961 HAVING REGARD TO THE GROUND REALITIES AND FURTHER HAVING REGARD TO THE OBJECT OF THE INCOME TAX ACT, NAMELY, ' TO TAX THE INCOME', ' OWNER ' IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT. THE HONBLE DELHI HIGH COUR T IN THE CASE OF ADDL.CIT VS. MANJEET ENGINEERING INDUSTRIES (SUPRA) HAS HELD THAT WHEN A PARTNER BRINGS HIS PROPERTY TO THE PARTNERSHIP FIRM AND THE FIRM TREATS HIS PROPERTY AS BELONGING TO THE FIRM ONLY, IT HAS THE EFFECT OF TRANSFERRING THE PROPERTY TO THE FIRM. DOCUMENT IN WRITING AND REGISTRATION IS NOT NECESSARY. FOLLOWING THE ABOVE PRINCIPLES AND CONSIDERING THE FACT THAT THE COMPANY HAS ALREADY SHOWN THE ASSET IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND THE LOAN OBTAINED BY THE DIRECTORS FOR PURCHASE OF THE FLATS HAS BEEN SHOWN AS LIABILITY IN THE LIABILITY SIDE OF THE BALANCE SHEET AND THE DEPRECIATION CLAIMED BY THE ASSESSEE ON SUCH FLAT HAS NOT BEEN REJECTED IN THE ASSESSMENT COMPLETED U/S.143(3), THEREFORE, DISALLOWANCE OF INTEREST AND THE TELEPHONE/ELECTRICITY EXPENSES ON ACCOUNT OF FLAT AT KHAR, MUMBAI IN OUR OPINION IS NOT JUSTIFIED. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE AND TELEPHONE A ND ELECTRICITY EXPENDITURE RELATING TO THE FLATS AT MUMBAI . WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 5. THE DR HAS NOT BROUGHT BEFORE US ANY MATERIAL TO SHOW CHANGE IN FACTS IN THE ASSESSMENT YEAR UNDER APPEAL . THUS, IN VIEW OF FINDINGS OF CO - ORDINATE BENCH ON IDENTICAL SET OF FACTS , WE FIND NO REASON TO INTERFERE WITH 5 ITA NO . 19/PUN/2017, A.Y. 2012 - 13 THE FINDINGS OF FIRST APPELLATE AUTHORITY ON THE ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE APPEAL OF REVENUE IS DISMISS ED BEING DEVOID OF ANY MERIT. 6. IN RESULT, THE APPEAL OF REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON THURSDAY, THE 13 TH DAY OF JUNE, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 13 TH JUNE, 2019 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 2, NASHIK 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE