Basp Enterprise Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 2011/AHD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5802 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 19-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P R GHOSH
• Assessee Lawyers: M J SHAH
• Keywords: Depreciation; Principle of natural justice

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER BASP ENTERPRISE PVT. LTD., C.N. SOMANI & ASSOCIATES, 91, HIRABHAI MARKET, AHMEDABAD. PANAAACB 8804 E VS. INCOME-TAX OFFICER, WARD 192), AHMEDABAD. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI M. J. SHAH, AR REVENUE BY:- SHRI P. R. GHOSH, DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX HAS ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX HAS AGAIN ERRED IN CONFIRMING THE DISALLOWANCE OF RS.21,232/- ALLEGEDL Y BEING THE INTEREST RECEIVED FROM BANK ON FDR NOT SHOWN AS INC OME. SUCH DISALLOWANCE FOR THE ALLEGED NOT SHOWING THE INCOME CAN NOT BE SUSTAINED WHEN THE ENTIRE INTEREST INCOME RECEIVED ARE SHOWN ON CASH BASIS SYSTEM OR ACCOUNT BY THE APPELLANT COMPA NY. 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A) HAS AGAIN ERRED IN CONFIRMING THE ADDITION OF RS.92863/- ALLE GEDLY BEING THE 80% OF THE BUILDING PREMISES HAS BEEN GIVEN ON RENT . SUCH DISALLOWANCE FOR THE ALLEGED ASSUMPTION MADE BY THE LOWER AUTHORITY CAN NOT BE SUSTAINED WHEN THE ENTIRE HALF PORTION OF THE BUILDING PREMISES LOCATED IN BASEMENT IS USED BY TH E APPELLATE ITA NO.2011/AHD/2009 ASST. YEAR :2005-06 2 COMPANY FOR ITS OWN BUSINESS AND THE THIRD FLOOR PO RTION HAS BEEN GIVEN ON RENT TO THREE PARTIES. THAT THE REPAIRS AN D MAINTENANCE EXPENSES INCURRED BY THE APPELLANT COMPANY FUR ITS OWN PREMISES AND THE 80% OF SUCH DISALLOWANCE IS AGAINST THE PRI NCIPAL OF NATURAL JUSTICE. 4. THAT THE LEARNED COMMISSIONER OF INCOME-TAX HAS FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF RS.96643A O F MUNICIPAL TAX ALLEGEDLY BEING THE 80% OF THE BUILDING PREMISE S HAVE BEEN GIVEN ON RENT. SUCH DISALLOWANCE OF PAYMENT OF MUNI CIPAL TAX CAN NO BE SUSTAINED WHEN THE ENTIRE PAYMENTS OF MUNICIP AL TAXES HAVE BEEN MADE ON ACCOUNT OF RENTED PROPERTY WHICH IS TO BE PAID BY THE OWNER AND RS.216279/- HAS BEEN PAID BY THE APPELLAN T COMPANY FOR THE PREMISES USED BY THE COMPANY. 5. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (A) FURTHER CONFIRMED THE ADDITION O1 RS,3490/- ON ACCOUNT OF S HARES NOT SHOWN IN BOOKS OF ACCOUNT 2. THE LD. AR FOR THE ASSESSEE DID NOT PRESS GROUND NOS.1,2 & 5 DURING THE COURSE OF HEARING AND HENCE THEY ARE REJ ECTED AS NOT PRESSED. 3. GROUND NO.3 & 4 RELATE TO THE COMMON ISSUE OF AL LOWANCE OF DEPRECIATION AND MUNICIPAL TAXES IN RESPECT OF THE PORTION OF THE BUILDING OWNED BY THE ASSESSEE AND USED FOR ITS OWN PURPOSES . 4. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE SHOWED RECEIPTS OF RS.2,95,000/- FROM RENT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT ACCORDINGLY CLAIME D DEDUCTION U/S 24 AT RS.68,500/-. IT ALSO CLAIMED DEPRECIATION OF RS.93, 762/- ON THIS BUILDING IN ADDITION TO REPAIRS AND MAINTENANCE. THE LD. AO POINTED OUT THAT ASSESSEE IS OWNING BASEMENT (CELLER AND THIRD FLOOR OF AMAR COMPLEX AT C.G. ROAD, AHMEDABAD). IT RECEIVED RENTS FROM DIFFE RENT PARTIES DURING THE YEAR AS UNDER :- 3 SL. NO. NAME OF THE PARTY DETAILS OF PROPERTY PERIOD OF RENT RENT AMOUNT 1. DILIP MEHTA OUTSIDE MARGIN OF CELLER 02 MONTHS 20,000/- 2. GIRISH FASHIONS (P) LTD. TF-1 12 MONTHS 60,000/- 3. MEHTA BROTHERS CELLER 1 08 MONTHS 96,000/- 4. THE GOLDEN TIME TF-2 09 MONTHS 99,000/- 5. WONDER SHOES OUTSIDE MARGIN OF CELLER 02 MONTHS 20,000/- FROM THE ABOVE DATA AO INFERRED THAT CELLER AND THI RD FLOOR OF THE BUILDING ARE GIVEN ON RENT AND THUS ONLY A SMALL PA RT OF THE TOTAL AREA COULD HAVE BEEN OCCUPIED BY THE ASSESSEE COMPANY FO R ITS BUSINESS PURPOSES. THE BUSINESS OF TWO DIVISIONS OF THE COMP ANY HAD DISCONTINUED. THE AO ACCORDINGLY RESTRICTED THE PER CENTAGE OF DEPRECIATION CLAIMED AND 20% OUT OF REPAIRS AND MAI NTENANCE WHICH IN ALL RESULTED IN ADDITION OF RS.92,863/-. THE AO ALS O FOUND THAT ASSESSEE HAS PAID MUNICIPAL TAXES OF RS.1,20,804/-. HE DISAL LOWED 80% OF SUCH MUNICIPAL TAXES AS NOT USED FOR BUSINESS PURPOSES A ND THUS PROPOSED AN ADDITION OF RS.96,643/-. 5. THE LD. CIT(A) CONFIRMED THE ORDER BY UPHOLDING THE REASONS GIVEN BY THE AO. 6. THE LD. AR SUBMITTED THAT AO CANNOT DECIDE HOW M UCH SPACE ASSESSEE WOULD REQUIRE FOR ITS BUSINESS AND MERELY BECAUSE SMALL PART OF CELLER HAS GIVEN ON RENT FOR COUPLE OF MONTHS WOULD NOT MEAN THAT CELLER WAS NOT USED BY THE ASSESSEE FOR BUSINESS PURPOSES OR THAT RECEIPT THERE- FROM WOULD BE TAXED UNDER THE HEAD INCOME FROM HOU SE PROPERTY. THE LD. AR HOWEVER, EXPRESSED HIS INABILITY TO SHOW ANY LEASE-AGREEMENT SO 4 AS TO VERIFY HOW EACH PART OF THE BUILDING HAS BEEN GIVEN ON RENT AND FOR WHAT PERIOD. 7. THE LD. DR ON THE OTHER HAND, SUBMITTED THAT ENT IRE CELLER IS ALMOST GIVEN ON RENT, THEREFORE, PRACTICALLY ENTIRE INCOME FROM THE PROPERTY SHOULD BE TAXED UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. THEREFORE, THERE IS NO QUESTION OF ALLOWING DEPRECIATION. WHAT EVER STATUTORY ALLOWANCES ARE REQUIRED TO BE GIVEN CAN BE GIVEN BY COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LD . DR, HOWEVER, COULD NOT SAY DEFINITELY AS TO WHAT PERCENTAGE OF T OTAL AREA ASSESSEE WOULD BE KEEPING FOR ITS OWN PURPOSES. 8. I HAVE HEARD THE PARTIES AND CAREFULLY PERUSED T HE MATERIAL ON RECORD. WHERE INCOME IS COMPUTED UNDER THE HEAD IN COME FROM HOUSE PROPERTY ONLY STATUTORY DEDUCTION PROVIDED U/S 24 CAN BE ALLOWED. WHEN INCOME IS COMPUTED UNDER THE HEAD INCOME FROM HOUS E PROPERTY THEN DEPRECIATION ON THE BUILDING, ACTUAL REPAIRS AND MA INTENANCE COULD BE ALLOWED AS DEDUCTION FROM PROFITS AND LOSS ACCOUNT. BUT NO DATA IS AVAILABLE AS TO HOW MUCH SPACE IS GIVEN ON RENT AND HOW MUCH SPACE IS USED BY THE ASSESSEE FOR ITS OWN PURPOSES. LD. AR F INALLY PROPOSED THAT OUT OF TOTAL AREA OF 3.700 SFT. APPROXIMATELY OWNED BY ASSESSEE, AN AREA OF ABOUT 1,500 SFT. SHOULD BE TREATED AS USED BY THE A SSESSEE FOR ITS OWN BUSINESS PURPOSES AND REST IS GIVEN ON RENT FOR ENT IRE AREA. 9. LD. DR COULD NOT POINT OUT ANY OBJECTION TO THIS . ACCORDINGLY, I HOLD THAT OUT OF TOTAL AREA UNDER THE OWNERSHIP OF ASSESSEE 1,500SFT. IS TREATED AS USED BY THE ASSESSEE FOR ITS OWN BUSINES S PURPOSES AND THE REST IS TREATED AS GIVEN ON RENT. THE INCOME FROM HOUSE PROPERTY COULD BE COMPUTED BY TREATING TOTAL AREA LESS 1500 SFT. AS ON RENT AND AN AREA OF 1500 SFT AS UNDER THE HEAD BUSINESS AND ACCORDINGLY DEPRECIATION, REPAIRS, 5 MAINTENANCE AND MUNICIPAL TAXES COULD BE ACCORDINGL Y PROPORTIONATELY ALLOWED. ACCORDINGLY, I RESTORE THE MATTER TO THE F ILE OF AO FOR WORKING OUT THE INCOME UNDER TWO HEADS. THUS THE APPEAL FIL ED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 7/7/2010 SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER AHMEDABAD, DATED : 7/7/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD