M/s KHT Agencies Pvt Ltd , Bangalore V. The Income Tax Officer Ward-4(1)(2), Bangalore

ITA 201/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2209 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-03-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 22-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R PREMI J BENGALURU
• Assessee Lawyers: HARSHA K M
• Keywords: Business income; Depreciation; Opportunity of being heard; Revenue expenditure; Set aside
• Section: 201; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER ITA NO. 201 /BANG/201 8 ASSESSMENT YEAR: 20 1 4 - 1 5 M/S KHT AGENCIES PVT. LTD. NO.10, PALLAVI COMPLEX SUBBAIAH CIRCLE, MISSION ROAD, BANGALORE - 560027 PAN: AAACK 6822R VS. THE INCOME TAX OFFICER, WARD 4(1)(2). BANGALORE. APPELLANT RESPONDENT APPELLANT BY : S HRI HARSHA K.M, CA . RESPONDENT BY : S MT R. PREMI , J CIT(DR)(ITAT),BENGALURU. DATE OF HE AR ING : 1 1 .0 3 .2020 DATE OF PRONOUNCEMENT : 20 .0 3 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 29.11.2017 OF THE CIT(APPEALS)-12, BENGALURU RELATING TO ASSES SMENT YEAR 2014-15. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF ACTING AS AUTHORISED DEALERS IN AUTOMOBILES. FOR THE AY 2014 -15, THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.6,0 2,588. THE ASSESSMENT WAS, HOWEVER, COMPLETED BY THE AO BY ADDING A SUM O F RS.57,68,536 TO THE INCOME DECLARED BY THE ASSESSEE. THE SUM SO AD DED WAS LIABILITY ITA NO.201/BANG/2018 PAGE 2 OF 4 SHOWN IN THE BALANCE SHEET UNDER THE HEAD DEFERRED REVENUE EXPENDITURE. THIS WAS REDUCED FROM THE BUSINESS INCOME DECLARED BY THE ASSESSEE. THE PLEA OF THE ASSESSEE WAS REJECTED. IT WAS THE PLEA OF THE ASSESSEE THAT THE AFORESAID SUM WAS INCURRED FOR CARRYING OU T IMPROVEMENTS OF THE ASSESSEES SHOWROOM WHICH IS A LEASED PREMISES. IT WAS THE PLEA OF ASSESSEE THAT SINCE THE EXPENSES WERE NOT CAPITAL I N NATURE BEING LAYING OF TILES, CUPBOARD, CIVIL WORK AND INTERIOR, THE SAME WAS REVENUE EXPENDITURE AND SHOULD BE ALLOWED AS A DEDUCTION. THE ASSESSEE ALSO POINTED OUT THAT IN ITS BOOKS OF ACCOUNT, THE ASSESSEE CAPITALISED T HESE EXPENSES AND WANTED TO CLAIM IT OVER A PERIOD OF FIVE YEARS, BUT WHILE COMPUTING TOTAL INCOME FOR THE PURPOSE OF INCOME-TAX ACT, 1961 [THE ACT], THE ENTIRE EXPENDITURE BEING REVENUE EXPENDITURE WAS CLAIMED A S DEDUCTION. THE AO, HOWEVER, HELD THAT EXPENSES WERE CAPITAL IN NAT URE AND CANNOT BE ALLOWED AS A DEDUCTION. 3. THE ASSESSEE CLAIMED DEPRECIATION UNDER EXPLANAT ION 1 TO SECTION 32 OF THE ACT ON THE EXPENDITURE INCURRED BY IT IN CARRYING OUT RENOVATION, BUT THAT WAS ALSO DENIED BY THE AO FOR THE REASON T HAT DURING THE PREVIOUS YEAR, THE ASSET WAS NOT PUT TO USE. 4. AGAINST THE ORDER OF THE AO, THE ASSESSEE PREFER RED APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) PASSED EX PARTE ORDER AND CONFIRMED THE ORDER OF AO. IT IS AN ADMITTED POSITION THAT I N AY 2013-14, SIMILAR ITEM OF EXPENDITURE WAS DISALLOWED BY THE AO AND CONFIRM ED BY THE CIT(APPEALS) IN HIS ORDER DATED 20.1.2017. THE CIT (A) ALSO REFUSED TO ALLOW DEPRECIATION AS THE ASSESSEE DID NOT ESTABLIS H USER OF THE PREMISES FOR THE PURPOSE OF BUSINESS DURING THE RELEVANT PRE VIOUS YEAR. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE A FORESAID ORDER OF THE CIT(APPEALS). ITA NO.201/BANG/2018 PAGE 3 OF 4 5. THE CRUX OF THE SUBMISSION MADE BEFORE US WAS RE STRICTED TO ALLOWANCE OF DEPRECIATION ON EXPENDITURE INCURRED I N RENOVATION UNDER EXPLANATION (1) TO SECTION 32 OF THE ACT. IT WAS T HE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE ORDER OF CIT(APPEAL S) WAS AN EX PARTE ORDER, NECESSARY EVIDENCE TO SHOW THE USER OF PREMI SES FOR THE PURPOSE OF BUSINESS COULD NOT BE FILED BEFORE THE CIT(A). 6. ACCEPTING THE SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE ACROSS THE BAR, WE ARE OF THE VIEW THAT THE ASSESSE E SHOULD BE AFFORDED AN OPPORTUNITY OF BEING HEARD BY THE CIT(APPEALS) TO T HE LIMITED EXTENT OF ESTABLISHING THE ASSESSEES CLAIM FOR DEPRECIATION. THE ORDER OF THE CIT(APPEALS) IS ACCORDINGLY SET ASIDE AND RESTORED BACK TO THE CIT(APPEALS) TO DECIDE THE AFORESAID LIMITED ISSUE AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2020. SD/- SD/- ( A.K.GARODIA ) ( N V VAS UDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 20 TH MARCH, 2020. / DESAI S MURTHY / ITA NO.201/BANG/2018 PAGE 4 OF 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.