M/S. RASNA BEHL, MUMBAI V. THE ITO WD 12(2)(4), MUMBAI

ITA 1998/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2004 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 08-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 19-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C N VAZE

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE S/SHRI N.V.VASUDEVAN, JM & T.R.SOOD, AM I.T.A NO.1998/MUM/2008 ASSESSMENT YEAR: 2003-04 RASNA BEHL, V. THE I.T.O. WARD 12(2)(4), H-104, MAKER TOWER, CUFFE PARADE, MUMBAI. COLABA, MUMBAI-05. PA NO.AACPB 4360 Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI C.N.VAZE RESPONDENT BY : SHRI AARSI PRASAD O R D E R PER T.R.SOOD, AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 7.1.2008 OF LD CIT (A)-XII, MUMBAI FOR THE ASSESSMENT YEAR 2003 -04. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING TWO GROUNDS:- 1. THE CIT (A) HAS ERRED IN NOT ALLOWING THE SOCIE TY CHARGES PAID BY THE ASSESSEE, WHILE ARRIVING AT THE ANNUAL VALUE OF THE PROPERTY. 2. THE CIT (A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF MODELING FEES, PROFESSIONAL FEES AND SHOOTING FEES. 3. APROPOS GROUND NO.1, AFTER HEARING BOTH THE SIDE S, WE FIND THAT DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS REDUCED A SUM OF RS.32,855/- BEING AMOUNT OF SOCIETY CHARGES FROM THE RENT AND THEN CLAIMED 30% DEDUCTION. THE ASSESSING OFFICER RECOMPUTED TH E ANNUAL VALUE BY DENYING THE DEDUCTION OF RS.32,855/- AS THE SAME WAS NOT ALLOWA BLE EXPENDITURE WHILE WORKING OUT THE INCOME FROM HOUSE PROPERTY. 4. ON APPEAL BEFORE THE CIT (A), RELIANCE WAS PLACE D ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF SHARMILA TAGORE V JCIT, 93 TTJ 483 (MUM). HOWEVER, THE CIT 2 (A) NOTED THAT THERE WERE CONFLICTING DECISIONS OF THE MUMBAI BENCHES OF THE TRIBUNAL AND OBSERVED THAT THE DECISION IN THE CASE OF ITO V . BARODAWALA PROPERTIES LTD., 83 ITD 467(BOM) WAS AGAINST THE ASSESSEE. THE CIT (A) OBS ERVED THAT, IN ANY CASE, THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT V. H.G.GUPTA AND SONS, 149 ITR 253 (DEL) IS SQUARELY APPLICABLE. IN THAT CASE , THE ASSESSEE HAD CLAIMED STAMP DUTY CHARGES FOR EXECUTION OF LEASE DEED AS DEDUCTION, W HICH WAS HELD NOT TO BE ALLOWABLE BY THE HONBLE DELHI HIGH COURT. FOLLOWING THIS DE CISION, THE ACTION OF THE AO WAS CONFIRMED. 5. BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SOCIETY CHARGES WERE IN THE NATURE OF MANDATORY CHARGES WHICH HAVE BEEN PAI D TO THE SOCIETY DIRECTLY BY THE ASSESSEE AND, THEREFORE, THEY SHOULD BE REDUCED FRO M THE RENT RECEIVED BY THE ASSESSEE. IN THIS REGARD, HE RELIED ON THE DECISION OF ITAT M UMBAI IN THE CASE OF SHARMILA TAGORE(SUPRA), NANDITA BANERJEE V ITO, (ITA NO.1360 /M/2000), REALTY FINANCE & LEASING (P)LTD V. ITO, 5 SOT 348 (BOM) AND J.B.PATE L & CO V DCIT, 118 ITD 556 (AHD). 6. ON THE OTHER HAND, LD D.R. REFERRED TO THE SCHEM E OF THE ACT AND SUBMITTED THAT U/S.23, FIRST THE ANNUAL LETTING VALUE HAS TO BE DE TERMINED WHICH IS THE ACTUAL RENT RECEIVED OR RENT ON WHICH THE PROPERTY MIGHT BE LET OUT. AFTER DETERMINING THE GROSS RENT, MUNICIPAL TAX SHOULD BE REDUCED WHICH WILL FO RM THE ANNUAL VALUE. HE SUBMITTED THAT DEDUCTIONS HAVE BEEN PRESCRIBED U/S.24 AND AFT ER AMENDMENT BY THE FINANCE ACT 2001 W.E.F 1.4.2002, ONLY TWO TYPES OF DEDUCTION AR E ALLOWABLE I.E. INTEREST IF INCURRED FOR BORROWED CAPITAL FOR CONSTRUCTION OR RENOVATION OR REPAIRS OF THE PREMISES AND 30% OF THE ANNUAL VALUE. HE SUBMITTED THAT 30% WOULD C OVER ALL OTHER MINOR CHARGES AND THERE IS NO NEED TO GIVE FURTHER DEDUCTION OF ANY A MOUNT. AS FAR AS THE DECISIONS RELIED ON BY LD COUNSEL FOR THE ASSESSEE ARE CONCERNED, HE ARGUED THAT NONE OF THE DECISIONS HAVE CONSIDERED THE DECISION OF THE HONBLE DELHI H IGH COURT IN THE CASE OF H.G.GUPTA AND SONS (SUPRA), WHEREIN, IT WAS CLEARLY HELD THAT ONLY DEDUCTIONS MENTIONED IN SECTION 24 SHOULD BE ALLOWED. HE SUBMITTED THAT IN ANY CA SE, IN CASE OF REALTY FINANCE & LEASING LTD(SUPRA), THE SOCIETY CHARGES WERE HELD T O BE ALLOWABLE BECAUSE SUCH SOCIETY CHARGES MAINLY CONSISTED OF MUNICIPAL TAXES PAID BY THE SOCIETY ON BEHALF OF VARIOUS HOUSE OWNERS. SIMILARLY, IN CASE OF J.B.PATEL & CO . (SUPRA), WHAT WAS REDUCED FROM RENT WAS SALARY PAID TO PUMPMAN, SWEEPER AND LIFTMAN, WH ICH WAS HELD TO BE DIRECTLY RELATED TO RENTAL ACTIVITIES. THEREFORE, THESE DECISIONS C ANNOT BE FOLLOWED. HE ALSO SUBMITTED THAT THERE IS A DECISION OF MUMBAI TRIBUNAL IN THE CASE OF ITO V. BARODAWALA PROPERTIES 3 LTD (SUPRA), WHEREIN, SOCIETY MAINTENANCE CHARGES W ERE HELD TO BE NOT ALLOWABLE. HE SUBMITTED THAT IN ANY CASE THE MATTER IS COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF H.G.GUPTA (SUPRA). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD D.R. THERE ARE CONFLICTING DECIS IONS OF THE VARIOUS BENCHES OF THE TRIBUNAL. IN CASE OF ITO V. BARODAWALA PROPERTIES LTD (SUPRA), IT WAS HELD THAT SOCIETY MAINTENANCE CHARGES WERE NOT ALLOWABLE WHEREAS IN C ASE OF SHARMILA TAGORE (SUPRA) AND REALTY FINANCE & LEASING (P)LTD (SUPRA), IT WAS HELD THAT SUCH CHARGES ARE ALLOWABLE. BUT WE FEEL THAT IN THOSE DECISIONS, TH E DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF H.G.GUPTA (SUPRA), WHEREIN, IT WAS CLEARLY HELD THAT WHEN A PARTICULAR TYPE OF EXPENDITURE IS NOT SPECIFICALLY PROVIDED TO BE DEDUCTIBLE, DEDUCTION THEREOF CANNOT BE CLAIMED FROM OUT OF ANNUAL VALUE , HAS BEEN CONSIDERED. SINCE NEITHER SECTION 23 NOR SECTION 24 PROVIDES FOR STAM P DUTY CHARGES, DEDUCTION ON THE SAME ARE NOT HELD TO BE ALLOWABLE. SIMILARLY THESE PROVISIONS DO NOT PROVIDE FOR ALLOWANCE OF SOCIETY MAINTENANCE CHARGES AND, THERE FORE, THE SAME CANNOT BE REDUCED FROM ANNUAL VALUE. THEREFORE, RESPECTFULLY FOLLOWI NG THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF H.G.GUPTA (SUPRA), WE ARE OF THE VIEW THAT THE SOCIETY CHARGES CANNOT BE REDUCED FROM THE ANNUAL VALUE FOR THE PUR POSES OF DETERMINING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THERE FORE, WE CONFIRM THE ORDER OF LD CIT (A). GROUND NO.1 IS DISMISSED. 8. APROPOS GROUND NO.2, AFTER HEARING BOTH THE PART IES, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAS DEBITED MODELING FEES OF RS.3,80,100/-, PROFESSIONA L FEES OF RS.1,16,800/- AND SHOOTING MATERIAL OF RS.1,28,807/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE MODUS OPERANDI OF THE BUSINESS AND EXPLAIN THE UNDERSTANDING BETWEEN THE CLIENTS AND THE ASSESSEE REGARDING THE SHARING OF THE EXPENSES. HOWEVER, TH E ASSESSEE COULD NOT EITHER FURNISH ANY WRITTEN AGREEMENTS EXPLAINING FOR INCURRING SUC H EXPENSES AND COULD NOT ESTABLISH THE BASIS ON WHICH SUCH CLAIM HAD BEEN MADE. THERE FORE, 1/3 RD OF SUCH EXPENSES WERE DISALLOWED. 9. ON APPEAL, THE ASSESSEE COULD NOT IMPROVE UPON H ER CASE AND, THEREFORE, THE CIT (A) AGREED WITH THE ASSESSING OFFICER THAT THER E WAS NO BASIS FOR CLAIMING THESE EXPENSES. HOWEVER, AS THE ADDITION WAS MADE AS 1/3 RD OF THE EXPENSES WHICH IS ADHOC 4 IN NATURE, THE ADDITION WAS RESTRICTED TO 1/5 TH OF THE EXPENDITURE WHICH COMES APPROXIMATELY RS.1,25,000/-. 10. BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE WAS ENGAGING VARIOUS MODELS AND SUPPLYING THE SAME TO VARIOUS PA RTIES AND EXPENDITURE WAS INCURRED IN THAT CONNECTION. IT WAS NOT NECESSARY TO HAVE A WRITTEN CONTRACT FOR SUCH PROFESSIONAL EXPENSES. IN THIS REGARD, HE RELIED ON THE DECISIO N OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. ASSOCIATED ELECTRICAL AGENCIES A ND ANOTHER, 266 ITR 63 (MAD) AND CONTENDED THAT SUCH EXPENDITURE COULD NOT HAVE BEEN DISALLOWED. WHEN THE BENCH SPECIFICALLY ASKED WHAT ARE THE DETAILS OF THE EXPE NDITURE, HE ONLY REFERRED TO PAGES 15 & 16, WHICH IS COPY OF COMPUTATION OF INCOME AND PROF IT AND LOSS ACCOUNT. 11. ON THE OTHER HAND, LD D.R. SUBMITTED THAT THE A SSESSEE HAS MISERABLY FAILED TO FILE ANY DETAILS OF SUCH EXPENDITURE BEFORE THE LOW ER REVENUE AUTHORITIES OR EVEN BEFORE THE TRIBUNAL. THE CLAIM CANNOT BE MADE MERELY BY F ILING COPY OF PROFIT AND LOSS ACCOUNT STATING THAT IN THIS NATURE OF BUSINESS, SUCH EXPEN DITURE WAS TO BE INCURRED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THE DISALLOWANCE HAS BEEN MADE ON ADHOC BASIS BY THE AO AND ULTIMATELY D ISALLOWING THE EXPENDITURE BY 1/5 TH BY THE CIT (A). AT THE SAME TIME, THE ASSESSEE HAS NOT BEEN ABLE TO FILE ANY FURTHER DETAILS OF SUCH EXPENDITURE, WHICH WAS CLAIMED. TH EREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF THE VIEW THAT IF REASONABLE DISALLOWANCE IS SUSTAINED THEN IT WOULD MEET THE ENDS OF JUSTICE. CONSIDERING THE OVER ALL FACTS OF THE CASE, WE RESTRICT THE DISALLOWANCE TO 10% OF THE EXPENDITURE AND DIRECT THE AO TO DISALLO W ONLY 10% OF SUCH EXPENDITURE. THIS GROUND IS PARTLY ALLOWED. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MAY, 2010 SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (T.R.SOOD) (ACCOUNTANT MEMBER) MUMBAI, DATED 21 ST MAY, 2010 PARIDA 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XII, MUMBA I 4. COMMISSIONER OF INCOME TAX, CONCERNED. 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 6 DATE INITIALS 1. DRAFT DICTATED ON 17.5.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 17.5.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER 7