FEM CARE PHARMA LTD, MUMBAI V. ADDL CIT RG 5(1), MUMBAI

ITA 2123/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8765 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 17-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: SUBHASH SHETTY
• Keywords: Business income; Depreciation; Rectification of order; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI P.M. JAGTAP, A.M I.T.A. NO.2123/MUMBAI/2010 ASSESSMENT YEAR: 2004-05 M/S. FEM CARE PHARMA LTD. A/63-65 MITAL TOWER, NARIMAN POINT MUMBAI-400 021 PAN NO: AAACF0515A ADDL. COMMISSIONER OF INCOME TAX RG 5(1) AAYKAR BHAVAN, MUMBAI-400 020 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI SUBHASH SHETTY RESPONDENT BY : SHRI SUMEET KUMAR ORDER PER P.M. JAGTAP (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LEARNED CIT (APPEALS)-IX, MUMBAI DATED 19.01.2010 W HEREBY HE PARTLY SUSTAINED THE PENALTY IMPOSED BY THE AO U/S. 271(1) (C). 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO T HIS APPEAL ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF COSMETICS, HEALTH CARE PRODUCTS, PHARMACEUTICALS AN D SPECIALITY CHEMICALS. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 29.10.2004 DECLARING TOTAL INCOME OF RS.6,08,75,710/-. THE SAID RETURN W AS SUBSEQUENTLY REVISED ON 30.01.2006 DECLARING TOTAL INCOME OF RS.6,09,98,490 /-. DURING THE COURSE OF 2 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DEPRECIATION OF RS.8,43,750/- WAS CLAIMED BY THE ASSESSEE ON TENANC Y RIGHTS. WHILE JUSTIFYING THE SAID CLAIM BEFORE THE AO DURING THE COURSE OF ASSES SMENT PROCEEDINGS, ASSESSEE SUBMITTED THAT TENANCY RIGHTS ARE IN THE NATURE OF ANY OTHER BUSINESS OR COMMERCIAL RIGHTS AS SPECIFIED IN CLAUSE NO. (II) OF SUB SECTION (1) OF SUB SECTION (32) AND IT WAS THEREFORE, ENTITLED TO CLAIM DEPREC IATION THEREON AS PER THE SAID PROVISIONS. ACCORDING TO THE AO, THE TENANCY RIGHTS HOWEVER WERE NOT IN THE NATURE OF ANY BUSINESS OR COMMERCIAL RIGHTS WHICH C AN BE UTILISED / EXPLOITED COMMERCIALLY FOR THE PURPOSE OF ASSESSEES BUSINESS . ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEPRECIATION THEREON WAS DISALLOWE D BY HIM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD GIVEN PORTION OF ITS OFFICE PREMISES AT NARIMAN POINT, MUMBAI ON RENTAL BASIS TO ITS SUBSID IARY COMPANY M/S. MIRASU MARKETING LIMITED AND THE RENT RECEIVED FROM THE SA ID TENANT AMOUNTING TO RS.19,20,000/- WAS DECLARED BY IT UNDER THE HEAD I NCOME FORM HOUSE PROPERTY AFTER CLAIMING DEDUCTION AT THE RATE OF 30% FOR REP AIRS AND MAINTENANCE CHARGES U/S. 24(A). WHILE COMPUTING ITS BUSINESS INCOME, TH E ASSESSEE COMPANY HOWEVER HAD CLAIMED DEPRECATION AMOUNTING TO RS.26,64,445/- IN RESPECT OF ITS ENTIRE OFFICE PREMISES. WHEN THE ASSESSING OFFICER SOUGHT EXPLANATION TO THE ASSESSEE IN RESPECT OF THE SAID CLAIM FOR FULL DEPRECIATION, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE COMPANY THAT THE RENTAL INCOME RECEIVED FR OM M/S. MIRASU MARKETING LIMITED CONSTITUTED ITS BUSINESS INCOME AND NOT INCOME FORM HOUSE PROPERTY. THIS STAND OF THE ASSESSEE HOWEVER WAS N OT ACCEPTED BY THE AO AND KEEPING IN VIEW THE TERMS AND CONDITIONS OF THE REN TAL AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S. MIRASU MARKETING LIMITED AND RELYING ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF SHAMBH U INVESTMENT PVT. LTD 263 ITR 143, HE HELD THAT THE RENTAL INCOME WAS ASSESSE D TO TAX IN THE HANDS OF THE ASSESSEE UNDER THE HEAD INCOME FORM HOUSE PROPERTY . FROM THE APPORTIONMENT 3 OF ELECTRICITY EXPENSES MADE IN RESPECT OF ITS OFFI CE PREMISES BETWEEN THE ASSESSEE COMPANY AND M/S. MIRASU MARKETING LIMITED, THE AO F OUND THAT 40% PORTION OF ITS OFFICE PREMISES WAS GIVEN BY THE ASSESSEE ON RE NT TO M/S. MIRASU MARKETING LIMITED. ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON ITS OFFICE PREMISES WAS DISALLOWED BY HIM TO THE EXTENT OF RS. 10,65,778/- BEING 40% OF RS.26,64,445/-. HE ALSO ADDED INTERALIA THE SUM OF RS.3,40,075/- TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S.143(3) ON ACCOUNT OF VALUE OF UNDISTRIBUTED FREE SAMPLES LYING IN THE CL OSING STOCK. 3. ON CONFIRMATION BY THE LEARNED CIT (APPEALS) OF THE VARIOUS ADDITIONS MADE IN THE ASSESSMENT TO THE TOTAL INCOM E OF THE ASSESSEE, PENALTY PROCEEDINGS U/S.271(1)(C) WERE INITIATED BY THE AO AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN REPLY TO THE SHOW CAUSE NOTICE ISSUED DURING THE COURSE OF SAID PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY HIM , THE AO IMPOSED A PENALTY OF RS.11,85,929/- U/S.271(1)(C). THE PENALTY SO IMP OSED BY THE AO WAS CHALLENGED BY THE ASSESSEE IN APPEAL FILED BEFORE T HE LEARNED CIT (APPEALS). DURING THE COURSE OF APPELLANT PROCEEDINGS BEFORE T HE LEARNED CIT (APPEALS), THE ASSESSEE HOWEVER DID NOT COMPLY WITH THE NOTICES IS SUED BY THE LEARNED CIT (APPEALS) FIXING THE HEARING FROM TIME TO TIME. THE LEARNED CIT (APPEALS), THEREFORE, PROCEED TO DISPOSE OF THE APPEAL OF THE ASSESSEE EXPARTE ON MERIT SUSTAINING THE PENALTY IMPOSED BY THE AO U/S.271(1) (C) TO THE EXTENT THE SAME WAS IN RESPECT OF THE FOLLOWING THREE ADDITIONS :- 1. DISALLOWANCE OF DEPRECIATION ON TENANCY RIGHTS - RS .8,43,750/-. 2. DISALLOWANCE OUT OF DEPRECIATION CLAIMED ON OFFICE PREMISES- RS.10,65,778/-. 4 3. ADDITION ON ACCOUNT OF VALUE OF UNDISTRIBUTED FREE SAMPLE LYING IN THE CLOSING STOCK - RS.3,40,075/-. 4. AS REGARDS THE CLAIM OF THE ASSESSEE FOR DEPREC IATION ON TENANCY RIGHTS, THE LEARNED CIT (APPEALS) HELD THAT THE TEN ANCY RIGHTS WERE NOT IN THE NATURE OF ANY BUSINESS OR COMMERCIAL RIGHTS. KEEPIN G IN VIEW THE NATURE OF BUSINESS UNDERTAKEN BY THE ASSESSEE AND CLAIM OF TH E ASSESSEE FOR DEPRECIATION THEREON THUS WAS NOT A BONAFIDE CLAIM. HE ALSO HELD THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEE FOR THE PORTION OF ITS OFF ICE PREMISES LET OUT TO THE SUBSIDIARY COMPANY WAS CHARGEABLE TO TAX IN ITS HAN DS UNDER THE HEAD INCOME FORM HOUSE PROPERTY AND THE CLAIM OF THE ASSESSE E FOR DEPRECIATION ON THE SAID PORTION OF THE OFFICE PREMISES WHILE COMPUTING THE BUSINESS INCOME WAS NOT IN ACCORDANCE WITH LAW. HE THEREFORE, HELD THAT BY MAK ING THE WRONG CLAIM FOR DEPRECIATION ON TENANCY RIGHTS AND ON LET OUT PORTI ON OF THE OFFICE PREMISES AS WELL AS BY NOT DECLARING THE VALUE OF UNDISTRIBUTED FREE SAMPLE LYING IN CLOSING STOCK, THE ASSESSEE HAD FURNISHED INACCURATE PARTIC ULARS OF ITS INCOME AND IT WAS LIABLE FOR PENALTY U/S.271(1)(C) IN RESPECT OF THE ADDITIONS MADE ON THESE THREE ISSUES. AGGRIEVED BY THE ORDER OF THE LEARNED CIT ( APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET SUBMITTED THAT THE ADDITION OF RS.3,40,075/- MADE BY THE AO AND CONFIR MED BY THE LEARNED CIT (APPEALS) ON ACCOUNT OF VALUE OF UNDISTRIBUTED FREE SAMPLE LYING IN THE CLOSING STOCK HAS ALREADY BEEN DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 09.04.2010 PASSED IN ITA NO.6051/MUM/2007 IN THE QUANTUM PROCE EDINGS AND, THEREFORE, THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED CIT (APPEALS) IN RESPECT OF THE SAID ADDITION IS LIABLE TO BE CANCEL LED. AS REGARDS THE ADDITION OF 5 RS.8.43,750/- MADE ON ACCOUNT OF DISALLOWANCE OF DE PRECIATION ON TENANCY RIGHTS, HE INVITED OUT ATTENTION TO PARAGRAPH 4 OF THE TRIB UNALS ORDER PASSED IN THE QUANTUM PROCEEDINGS AND SUBMITTED THAT THE SAID DIS ALLOWANCES HAS BEEN CONFIRMED BY THE TRIBUNAL RELYING ON THE DECISION O F HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. TECHNO SHARES AND STOCKS L IMITED. HE CONTENTED THAT THE SAID DECISION OF HONBLE BOMBAY HIGH COURT HAS ALREADY BEEN OVERRULED BY THE HONBLE SUPREME COURT WHICH IS SUFFICIENT TO SH OW THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON TENANCY RIGHTS WAS BAS ED ON A POSSIBLE VIEW OF THE MATTER. HE CONTENTED THAT ALTHOUGH THE SAID CLAIM O F THE ASSESSEE HAS BEEN DISALLOWED IN THE QUANTUM PROCEEDINGS, PENALTY U/S. 271(1)(C) CANNOT BE IMPOSED IN RESPECT OF SUCH DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION ON TENANCY RIGHTS WHICH WAS CLAIMED BY THE ASSESSEE BY ADOPTIN G A POSSIBLE VIEW. HE SUBMITTED THAT THE AO HIMSELF HAD ALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON TENANCY RIGHTS IN ASSESSMENT YEAR 2 002-03 IN THE ASSESSMENT ORIGINALLY MADE ON 17.02.2005 AND ALTHOUGH THE SAME HAS BEEN SUBSEQUENTLY DISALLOWED BY RECTIFYING THE ASSESSMENT ORDER U/S.1 54, IT SHOWS THAT THE CLAIM MADE BY THE ASSESSEE FOR DEPRECIATION ON TENANCY RI GHTS WAS BONAFIDE. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASS ESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETRO PRO DUCTS LTD. 322 ITR 158 AND SUBMITTED THAT ALL THE PARTICULARS RELATING TO ITS CLAIM FOR DEPRECIATION ON TENANCY RIGHTS WERE TRULY AND FULLY FURNISHED BY THE ASSESS EE. 6. AS REGARDS THE DISALLOWANCE OF ASSESSEES CLAIM FOR DEPRECIATION ON PORTION LET OUT TO ITS SUBSIDIARY COMPANY, THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RENTAL INCOME RECEIVED FROM PORT ION OF ITS PREMISES WAS CLAIMED TO BE ITS BUSINESS INCOME BY THE ASSESSEE COMPANY WHILE JUSTIFYING ITS CLAIM FOR DEPRECIATION. HE CONTENTED THAT THE AO HO WEVER DID NOT ACCEPT THE SAID 6 STAND OF THE ASSESSEE AND BROUGHT TO TAX THE RENTAL INCOME IN ITS HANDS UNDER THE HEAD INCOME FORM HOUSE PROPERTY THEREBY DISALLOWI NG THE DEPRECIATION CLAIMED IN RESPECT OF PORTION OF THE OFFICE PREMISE S. HE CONTENTED THAT THIS DISALLOWANCE THUS WAS MADE BY THE AO MERELY AS A RE SULT OF CHANGE OF HEAD OF INCOME WHICH CANNOT BE TREATED AS FURNISHING OF INA CCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE COMPANY SO AS TO ATTRACT PEN ALTY U/S.271 (1)(C). IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF TH E TRIBUNAL IN THE CASE OF CIT VS. ELITOS S.P.A 191 TAXATION 143 (ALL.) AND IN THE CAS E OF KANBAY SOFTWARE INDIA (P.) LTD. VS. DCIT 31 SOT 153 (PUNE). 7. THE LEARNED DR SUBMITTED THAT THE ISSUE INVOLVE D IN THE CASE OF TECHNO SHARES AND STOCKS LTD. (SUPRA) BEFORE THE H ONBLE BOMBAY HIGH COURT WAS IN RELATION TO THE DEPRECIATION ON BOMBAY STOCK EXCHANGE MEMBERSHIP CARD, WHEREAS THE PENALTY U/S.271(1)(C) HAS BEEN IMPOSED IN THE PRESENT CASE IN RESPECT OF DISALLOWANCE OF ASSESSEES CLAIM ON TENANCY RIGH TS. HE ALSO CONTENTED THAT THE DECISION OF HONBLE SUPREME COURT REVERSING THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF TECHNO SHARES AND STOCKS LIMITED. (SUPRA) THUS HAS NO BEARING ON THE ISSUE INVOLVED IN THE PRESENT CAS E. HE ALSO CONTENDED THAT DEPRECIATION ON TENANCY RIGHTS IS NOT ALLOWABLE U/S .32(1)(II) AS CATEGORICALLY HELD BY AO AS WELL AS BY THE LEARNED CIT (APPEALS) AND T HE TRIBUNAL IN THE QUANTUM PROCEEDINGS AND SINCE THE CLAIM OF THE ASSESSEE MAD E FOR DEPRECIATION ON TENANCY RIGHTS IS PATENTLY A WRONG CLAIM, IT CLEARLY AMOUNT S TO FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE. HE SUBMI TTED THAT A SIMILAR CLAIM OF THE ASSESSEE FOR DEPRECIATION ON TENANCY RIGHTS WAS ALL OWED BY THE AO INITIALLY IN ASSESSMENT YEAR 2002-03 BY MISTAKE BUT THE SAME HAS BEEN SUBSEQUENTLY WITHDRAWN BY WAY OF RECTIFICATION OF ORDER PASSED U /S.154 WHICH HAS BEEN ACCEPTED BY THE ASSESSEE. AS REGARDS THE DISALLOWAN CE OF ASSESSEES CLAIM FOR 7 DEPRECIATION ON PORTION OF ITS OFFICE PREMISES LET OUT TO THE SUBSIDIARY COMPANY, THE LEARNED DR POINTED OUT THAT THE RENTAL INCOME R ECEIVED BY THE ASSESSEE COMPANY FOR THE SAID PORTION WAS DECLARED IN THE RE TURN OF INCOME UNDER THE HEAD INCOME FORM HOUSE PROPERTY AND EVEN DEDUCTION ON ACCOUNT OF REPAIRS AND MAINTENANCE AT A FIXED RATE OF 30% WAS CLAIMED BY T HE ASSESSEE U/S.24(A). HE SUBMITTED THAT WHILE COMPUTING ITS BUSINESS INCOME, THE ASSESSEE COMPANY HOWEVER CLAIMED DEPRECIATION EVEN ON THE PORTION OF ITS PREMISES LET OUT WHICH WAS PATENTLY WRONG AND TOTALLY UNTENABLE. HE CONTEN DED THAT IN ORDER TO JUSTIFY THE SAID WRONG CLAIM, IT WAS SOUGHT TO BE CONTENTED ON BEHALF OF THE ASSESSEE THAT THE RENTAL INCOME ACTUALLY REPRESENTS ITS BUSINESS INCOME. HE CONTENTED THAT THIS STAND OF THE ASSESSEE HAS NOT BEEN ACCEPTED EITHER BY THE AO OR EVEN BY THE LEARNED CIT(APPEALS) AND THE TRIBUNAL AND THE RENTA L INCOME FROM THE LET OUT PORTION HAS BEEN HELD TO BE CHARGEABLE TO TAX IN IT S HANDS UNDER THE HEAD INCOME FORM HOUSE PROPERTY AS DECLARED BY THE ASSESSEE C OMPANY ITSELF IN ITS RETURN OF INCOME. HE CONTENTED THAT IT IS THUS NOT A CASE OF A DISALLOWANCE MADE MERELY AS A RESULT OF CHANGE IN THE HEAD OF INCOME AS SOUGHT TO BE CONTENTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND IT IS A CLEAR CASE WHE RE A WRONG AND UNTENABLE CLAIM FOR DEPRECIATION WAS MADE BY THE ASSESSEE IN RESPEC T OF OFFICE PREMISES LET OUT WHICH HAS BEEN DISALLOWED. HE CONTENTED THAT THE AS SESSEE THUS HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME BY MAKING WRON G AND UNTENABLE CLAIM FOR DEPRECIATION ON TENANCY RIGHTS AND ON LET OUT PORTI ON OF BUSINESS PREMISES AS RIGHTLY HELD BY THE AUTHORISED BELOW AND IT IS A FI T CASE TO IMPOSE PENALTY U/S. 271(1)(C). 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E CLAIM OF THE ASSESSEE FOR DEPRECATION ON TENANCY RIGHTS HAS BEEN DISALLOWED B Y THE AO AND THE SAID 8 DISALLOWANCE HAS BEEN CONFIRMED BY THE LEARNED CIT (APPEALS) AS WELL AS BY THE TRIBUNAL. THE AO HAS ALSO IMPOSED PENALTY U/S.271(1 )(C) IN RESPECT OF THE SAID DISALLOWANCE WHICH HAS BEEN CONFIRMED BY THE LEARNE D CIT (APPEALS) BY HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF ITS INCOME. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENTED THAT THE CLA IM OF THE ASSESSEE FOR DEPRECIATION ON TENANCY RIGHTS WAS MADE BONAFIDE TA KING A POSSIBLE VIEW OF THE MATTER AND ALL THE PARTICULARS RELATING TO THE SAID CLAIM HAVING BEEN TRULY AND FULLY FURNISHED BY THE ASSESSEE, THE DISALLOWANCE OF THE SAID CLAIM CANNOT BE TREATED AS FURNISHING THE INACCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED ON THE DECISION OF S UPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD (SUPRA). HE HAS ALSO RE LIED ON THE DECISION OF HONBLE SUPREME COURT REVERSING THE DECISION OF HON BLE BOMBAY COURT IN THE CASE OF TECHNO SHARES AND STOCKS LIMITED. (SUPRA) ON WHICH RELIANCE WAS PLACED BY THE TRIBUNAL WHILE CONFIRMING THE DISALLO WANCE MADE ON ACCOUNT OF ASSESSEES CLAIM FOR DEPRECIATION ON TENANCY RIGHTS . AS RIGHTLY SUBMITTED BY THE LEARNED DR IN THIS REGARD, THE ISSUE IN THE CASE OF TECHNO SHARES AND STOCKS LIMITED (SUPRA) INVOLVED BEFORE THE HONBLE BOMBAY HIGH COURT HOWEVER WAS RELATING TO DEPRECIATION ON BOMBAY STOCK EXCHANGE M EMBERSHIP CARD WHICH HAS BEEN HELD BY THE HONBLE SUPREME COURT TO BE IN THE NATURE OF BUSINESS OR COMMERCIAL RIGHT AS ENVISAGED IN SECTION 32(1) (II) . THE CLAIM OF THE ASSESSEE INVOLVED IN THE PRESENT CASE HOWEVER RELATES TO THE DEPRECIATION ON TENANCY RIGHTS WHICH AS HELD IN THE QUANTUM PROCEEDINGS EVEN BY TH E TRIBUNAL CANNOT BE TREATED AS ANY BUSINESS OR COMMERCIAL RIGHTS OF THE NATURE AS SPECIFIED U/S.32(1)(II). AS CATEGORICALLY OBSERVED BY THE TRIBUNAL IN THIS REGA RD, THE TENANCY RIGHTS ONLY GIVE RIGHT TO THE ASSESSEE TO OCCUPY AND USE THE PREMISE S TAKEN ON RENT AND THE SAID RIGHT CANNOT BE CONSIDERED AS ANY BUSINESS OR COMME RCIAL RIGHT WHICH CAN BE EXPLOITED FOR THE PURPOSE OF ITS BUSINESS OF MANUFA CTURING PHARMACEUTICS, 9 CHEMICALS, ETC. THE CLAIM OF THE ASSESSEE FOR DEPRE CIATION ON TENANCY RIGHTS THUS WAS NOT TENABLE IN LAW AND WE AGREE WITH THE CONTEN TION OF THE LEARNED DR THAT THE SAID CLAIM MADE BY THE ASSESSEE WAS PATENTLY WR ONG. IN THE CASE OF RELAINCE PETRO PRODUCTS LTD. (SUPRA) RELIED UPON BY THE LEAR NED COUNSEL FOR THE ASSESSEE, THE CLAIM OF THE ASSESSEE ON ACCOUNT OF INTEREST EX PENSES WAS FOUND TO BE MADE BONAFIDE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND SINCE THE BONAFIDES OF THE SAID CLAIM WERE CLEARLY PROVED FROM THE FACTS OF TH E CASE AND THE EXPLANATION OFFERED BY THE ASSESSEE AND ALL THE MATERIAL PARTIC ULARS RELEVANT TO THE SAID CLAIM WERE ALSO FOUND TO BE TRULY AND FULLY FURNISHED, IT WAS HELD BY THE HONBLE SUPREME COURT THAT MAKING OF SUCH BONAFIDE CLAIM CO ULD NOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME BY THE ASSESSEE MERELY BECAUSE THE SAID CLAIM WAS FOUND TO BE UNACCEPTABLE. IN THE PRESENT CASE, THE ASSESSEE HOWEVER HAS FAILED TO ESTABLISH THAT ITS CLAIM FOR DEPRECIATION ON TENANCY RIGHTS WAS MADE BONAFIDE. AS SUBMITTED BY THE LEARNED COUN SEL FOR THE ASSESSEE IN THIS REGARD, THE SIMILAR CLAIM MADE BY THE ASSESSEE NO D OUBT WAS ACCEPTED BY THE AO IN THE EARLIER YEAR. THE SAME HOWEVER WAS WITHDRAWN SUBSEQUENTLY BY THE AO BY WAY OF RECTIFICATION ORDER PASSED U/S.154 AND FACT THAT THE ASSESSEE HAS ACCEPTED THE SAID ORDER AGAIN GOES TO SHOW THAT ITS CLAIM OF DEPRECIATION ON TENANCY RIGHTS WAS UNTENABLE IN LAW AND THERE WAS NO SATISFACTORY EXPLANATION WHICH COULD BE OFFERED BY THE ASSESSEE TO SHOW THAT THE SAID CLAIM WAS MADE BONAFIDE. 9. SIMILARLY, THE CLAIM OF THE ASSESSEE FOR DEDUCT ION WHILE COMPUTING ITS BUSINESS INCOME ON ACCOUNT OF DEPRECIATION ON T HE PORTION OF OFFICE PREMISES WHICH HAD BEEN LET OUT WAS WHOLLY UNTENABLE IN LAW AND HAD ABSOLUTELY NO BASIS ON WHICH IT COULD BE MADE. IT IS NOT A CASE WHERE T HE SAID CLAIM FOR DEPRECIATION WAS DISALLOWED AS A RESULT OF CHANGE IN THE HEAD OF INCOME UNDER WHICH THE RENTAL INCOME WAS HELD TO BE CHARGEABLE TO TAX AS SOUGHT T O BE CONTENTED BY THE LEARNED 10 COUNSEL FOR THE ASSESSEE. AS A MATTER OF THE FACT, THE ASSESSEE COMPANY ITSELF HAD NOT ONLY OFFERED THE RENTAL INCOME TO TAX UNDER THE HEAD INCOME FORM HOUSE PROPERTY IN ITS RETURN OF INCOME BUT EVEN HAD CLA IMED DEDUCTION AT THE RATE OF 30% ON ACCOUNT OF REPAIRS AND MAINTENANCE U/S.24(A) WHICH WAS AVAILABLE ONLY UNDER THAT HEAD. WHILE COMPUTING ITS BUSINESS INCOM E, THE ASSESSEE COMPANY HOWEVER CLAIMED DEPRECIATION ON THE ENTIRE PREMISES INCLUDING THE PORTION WHICH HAD BEEN LET OUT AND ONLY WHEN THIS WRONG AND UNTEN ABLE CLAIM WAS SOUGHT TO BE DISALLOWED BY THE AO, THE ASSESSEE MADE AN ATTEMPT TO CLAIM THAT THE RENTAL INCOME ACTUALLY CONSTITUTED ITS BUSINESS INCOME, WH ICH CLAIM AGAIN WAS FOUND TO BE UNACCEPTABLE BY THE AO AND IN OUR OPINION, QUITE RIGHTLY SO. IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. 327 ITR 510, HONB LE DELHI HIGH COURT HAS HELD, AFTER TAKING INTO CONSIDERATION THE PREPOSITI ON PROPOUNDED BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. (SUPRA), THAT IF THE VIEW IS TAKEN THAT THE CLAIM WHICH IS WHOLLY UNTENA BLE IN LAW AND ABSOLUTELY HAS NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESS EE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY EVEN IF HE WAS NOT ACTING BON AFIDE WHILE MAKING A CLAIM OF THIS NATURE, IT WOULD GIVE LICENSE TO UNSCRUPULOUS ASSESSEE TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIM WITHOUT THERE BEI NG ANY BASIS FOR MAKING THEM IN THE HOPE THAT THEY WOULD BE ASSESSED ON THE BASI S OF SELF ASSESSMENT U/S. 143(1) AND EVEN IF THERE CASE IS SELECTED FOR SCRUTINY, TH EY CAN GET AWAY MERELY BY PAYING TAX WHICH IN ANY CASE, WAS PAYABLE BY THEM. IF THE FACTS OF THE PRESENT CASE ARE CONSIDERED IN THE LIGHT OF THE JUDGEMENT O F HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. (S UPRA), WE ARE OF THE VIEW THAT THE ASSESSEE HAVING MADE WHOLLY UNTENABLE CLAI M FOR DEPRECIATION ON TENANCY RIGHTS AND FOR DEPRECIATION ON LET OUT PORT ION OF THE PREMISES FOR WHICH THERE WAS NO BASIS WHATSOEVER AND FOR WHICH THERE W AS NO EXPLANATION WHICH COULD BE OFFERED TO SHOW THAT THE SAID CLAIMS WERE BONAFIDE, IT IS A FIT CASE WHERE 11 THE ASSESSEE COULD BE SAID TO HAVE FURNISH INACCURA TE PARTICULARS OF ITS INCOME MAKING IT LIABLE FOR PENALTY U/S.271(1)(C). IN THAT VIEW OF THE MATTER, WE SUSTAIN THE PENALTY IMPOSED U/S.271(1)(C) TO THE EXTENT IT IS IN RESPECT OF TWO ADDITIONS OF RS.8,43,750/- AND RS.10,65,778/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON TENANCY RIGHTS AND DISALLOWANCE OF DEPRECIATION ON LET OUT PORTION OF THE PREMISES RESPECTIVELY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF JANUARY, 2011. SD/- SD/- (R.V. EASWAR ) ( P.M . JAGTAP ) HONBLE PRESIDENT ACCOUNTANT ME MBER MUMBAI, DATED: 28/01/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, F - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI