SAS Realtors Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 2038/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7757 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S RAMACHANDRA RAO
• Keywords: Depreciation; Commercial expediency
• Section: 14A; 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2038/MDS/2015 ' (' / ASSESSMENT YEAR : 2011-12 M/S SAS REALTORS PVT. LTD., 3, MANGESH STREET, T. NAGAR, CHENNAI - 600 017. PAN : AAFCS 7524 M V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE IV(2), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI S. RAMACHANDRA RAO, CA ,-*+ . / / RESPONDENT BY : SHRI A.B. KOLI, JCIT 0 . 1$ / DATE OF HEARING : 09.02.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 18.03.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-18, CHENNA I, DATED 21.07.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2 I.T.A. NO.2038/MDS/15 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SHRI S. RAMACHANDRA RAO, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER DISA LLOWED A SUM OF ` 8,90,786/- UNDER SECTION 14A OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, ALL THE INVESTMENTS WERE MADE IN AS SOCIATED COMPANIES, PARTNERSHIP FIRMS, ETC. FOR COMMERCIAL C ONSIDERATION. THEREFORE, THE DECISION OF THE CHENNAI BENCH OF THI S TRIBUNAL IN EIH ASSOCIATED HOTELS LIMITED IN I.T.A. NO.1503/MDS/201 2 IS SQUARELY APPLICABLE. ACCORDING TO THE LD. REPRESENTATIVE, I NVESTMENT IN THE ASSOCIATED COMPANIES ARE OUTSIDE THE PURVIEW OF SEC TION 14A OF THE ACT. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISION OF THIS TRIBUNAL IN ACIT V. M. BASKARAN (152 ITD 844). THE LD. REPRESENTATIVE FURTHER CLARIFIED THAT NO EXPENDITUR E WAS ACTUALLY INCURRED BY THE ASSESSEE-COMPANY FOR EARNING THE EX EMPTED INCOME. THEREFORE, THERE IS NO QUESTION OF ANY DIS ALLOWANCE. 4. ON THE CONTRARY, SH. A.B. KOLI, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT WHEN THE ASSESSEE CL AIMS THAT NO EXPENDITURE WAS INCURRED, IT IS FOR THE ASSESSING O FFICER TO COMPUTE 3 I.T.A. NO.2038/MDS/15 THE DISALLOWANCE UNDER SECTION 14A OF THE ACT BY AP PLYING THE PROCEDURE PRESCRIBED UNDER RULE 8D OF INCOME-TAX RU LES, 1962. EVEN THOUGH THE ASSESSEE CLAIMS THAT THERE WAS NO E XPENDITURE, THE ASSESSING OFFICER APPLIED RULE 8D(2)(II) OF THE INCOME-TAX RULES, 1962 FOR MAKING DISALLOWANCE OF ` 8,90,786/-. THEREFORE, IT IS OBVIOUS THAT THE ASSESSEE INCURRED CERTAIN INDIRECT EXPENSES BY WAY OF INTEREST. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY COMPUTED THE DISALLOWANCE BY FOLLOWING THE SECOND LIMB OF RU LE 8D(2). THE CIT(APPEALS) AFTER CONSIDERING THE RELEVANT FACTS O F THE CASE, CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS THAT THE INVESTMENTS MADE IN THE ASSOCIATED COMPANIES AND PARTNERSHIP FIRMS WERE FOR COMMERCIAL EXPEDIENCY. THIS CLAIM OF THE ASSESSEE WAS NOT CONSIDERED EITHER BY THE ASSESSING OFFICER OR BY THE CIT(APPEALS). THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE CLAIM OF THE ASSESSEE THAT THE INVESTMENTS WERE MADE FOR COMMERCIAL EXPEDIENCY IN THE ASSOCIATED COMPANIES A ND PARTNERSHIP FIRMS NEED TO BE CONSIDERED. THE ASSES SEE FAILED TO FILE THE DETAILS OF THE COMPANIES IN WHICH INVESTMENTS W ERE MADE AND 4 I.T.A. NO.2038/MDS/15 HOW THESE WERE ASSOCIATED COMPANIES OF THE ASSESSEE . IT ALSO NEEDS TO BE EXAMINED BY THE ASSESSING OFFICER HOW T HE INVESTMENT MADE IN THE PARTNERSHIP FIRM WAS FOR COMMERCIAL EXP EDIENCY. IT IS NOT KNOWN WHETHER THE ASSESSEE HAS BORROWED ANY LOA N FOR MAKING INVESTMENTS OR FOR OTHER BUSINESS PURPOSE. BY REFE RRING TO THE ORDER OF THE ASSESSING OFFICER, THE LD. REPRESENTATIVE FO R THE ASSESSEE CONTENDED THAT THE ASSESSEE INCURRED EXPENDITURE BY WAY OF INTEREST WHICH ARE NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. IN THE ABSENCE OF ANY DETAILS OF BORRO WAL OF FUNDS AND ITS APPLICATION, THIS NEEDS TO BE RECONSIDERED. IF THE ASSESSEE HAS BORROWED LOAN WHICH IS NOT ATTRIBUTABLE TO ANY PART ICULAR INCOME OR RECEIPT, THEN NATURALLY THE SECOND LIMB OF RULE 8D( 2) WOULD COME INTO OPERATION. HOWEVER, BEFORE APPLYING RULE 8(2) (II), THE FACTUAL SITUATION NEEDS TO BE BROUGHT ON RECORD. ACCORDING LY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE O F DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH AND BRING ON RECORD ALL THE RELEVANT MATERIAL FACTS AS INDICATED ABOVE AND THER EAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 5 I.T.A. NO.2038/MDS/15 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF 50% OF DEPRECIATION. 7. SHRI S. RAMACHANDRA RAO, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT A BUILDING SITUATED AT NO. 5, BOAT CLUB ROAD, CHENNAI, WAS ASSESSED FOR BUSINESS PARTLY. T HE MANAGING DIRECTOR OF THE ASSESSEE-COMPANY SHRI RAVI APPASWAM Y WAS USING A PART OF THE BUILDING FOR HIS PERSONAL PURPOSES. THEREFORE, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THA T 15% OF DEPRECIATION MAY BE DISALLOWED. HOWEVER, THE ASSES SING OFFICER DISALLOWED 25% OF DEPRECIATION. ACCORDING TO THE L D. REPRESENTATIVE, SINCE A SMALL PART OF THE BUILDING WAS USED FOR PERSONAL PURPOSE, ONLY PROPORTIONATE DISALLOWANCE C AN BE MADE AT THE BEST. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN RESTRICTING THE DEPRECIATION TO 25%. 8. ON THE CONTRARY, SH. A.B. KOLI, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT DEPRECIATION CAN BE ALLOWED ONLY IN RESPECT OF ASSET WHICH IS USED FOR BUSINESS PURPOSE . IN THIS CASE, THE ASSET WAS BEING USED FOR PERSONAL PURPOSE BY TH E MANAGING DIRECTOR. IN SPITE OF THIS, THE ASSESSING OFFICER RESTRICTED THE 6 I.T.A. NO.2038/MDS/15 DISALLOWANCE TO 25%, THEREFORE, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE BUILDING ON WHICH DEPRECIATION WAS SOUGHT FOR WAS B EING USED BY THE MANAGING DIRECTOR PARTLY. AS RIGHTLY SUBMITTED BY THE LD. D.R., FOR THE PURPOSE OF ALLOWING DEPRECIATION UNDER SECT ION 32 OF THE ACT, THE ASSET, NAMELY, THE PROPERTY HAS TO BE ASSESSED FOR BUSINESS PURPOSE. SINCE THE BUILDING WAS USED FOR PERSONAL PURPOSE, TO THE EXTENT OF UTILIZATION FOR PERSONAL PURPOSE, THE ASS ESSEE MAY NOT BE ELIGIBLE FOR DEPRECIATION. THEREFORE, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS R IGHTLY RESTRICTED THE DISALLOWANCE TO 25%. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. 7 I.T.A. NO.2038/MDS/15 ORDER PRONOUNCED ON 18 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 18 TH MARCH, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-18, CHENNAI 4. PRINCIPAL CIT, CENTRAL-1, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.