Dr. Sudershan Sabarwal, New Delhi V. DCIT, New Delhi

ITA 218/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6366 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G H SEMA
• Assessee Lawyers: HARSH KR
• Keywords: Depreciation; Business expenditure

Judgement Text

ITA NO. 218/DEL/12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEM BER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A .NO. 218 /DEL/2012 (ASSESSMENT YEAR:- 2007-08 SUDERSHAN SABARWAL JEEWAN NURSING HOME, GATE NO. 2, JEEWAN NAGAR NEW DELHI PAN:- AAPPS0672M (APPELLANT) VS DCIT CIRCLE 41(1) NEW DELHI (RESPONDENT) APPELLANT BY SH. HARSH KR. C.A RESPONDENT BY SH. G. H. SEMA, SR. DR ORDER PER CHANDRA MOHAN GARG, JM THIS APPEAL HAS BEEN PREFERRED AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX, NEW DELHI DATED 16/11/201 1 IN APPEAL NO. 507/2009- 10 FOR THE A. Y. 2007-08. 2. GROUND NO. 4 & 5 OF THE ASSESSEE ARE OF GENERAL IN NATURE WHICH NEED NO ADJUDICATION. REMAINING GROUND OF THE ASSESSEE REA D AS UNDER:- 1. THAT THE LD. CIT(A)-XXX, NEW DELHI, ERRED ON FA CTS AND IN LAW IN SUSTAINING THE ACTION OF THE AO THAT THE ACCOMMODATION BEING USED BY THE ASSESSEE IS A RENT FREE ACCOMMODATION AND HENCE TREATING IT AS A PERQUISITE AND ADDING AN AMOUNT OF RS.2,55,000/- TO THE INCOME OF THE ASSESSEE. THE L D. CIT(A) AND THE AO HAVE FAILED TO APPRECIATE THAT THE ASSESSEE WAS RESIDING IN AN ACCOMMODATION OWNED BY HER HUSBAND. 2. THAT THE LD. CIT(A)-XXX, NEW DELHI, ERRED ON FAC TS AND IN LAW IN SUSTAINING THE ADDITION MADE BY THE AO OF AN AMOUNT OF RS.1,20,000 /- AS A PERQUISITE ON ACCOUNT OF FREE ELECTRICITY/GENSET EXPENSES ESTIMATED AT RS .60,000/- AND DOMESTIC SERVANTS ESTIMATED AT RS.60,000/-. 3. THAT THE LD. CIT(A)-XXX, NEW DELHI, ERRED IN NOT DISCUSSING THE ORDER OF HIS PREDECESSOR FOR A.Y 2006-07 DECIDED IN FAVOUR OF TH E APPELLANT ON THE SAME ISSUES ITA NO. 218/DEL/12 2 AND TAKEN A STAND AGAINST THE APPELLANT CONTRARY TO THE STAND TAKEN BY HIS PREDECESSOR. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IS A DOCTOR BY PROFESSION AND ONE OF THE LEADING GYNECOL OGIST OF DELHI EMPLOYED BY JEEWAN NURSING HOME DRAWING A SALARY OF RS.17 LACS PER ANNUM. THE JEEWAN NURSING HOME IS A SOLE PROPRIETOR ENTERPRISE OF ASS ESSEES HUSBAND DR. RAVINDER SABARWAL. SINCE THE ASSESSEE IS A GYNECOLOGIST AN D NATURE OF JOB DEMANDS THAT SHE SHOULD REMAIN AVAILABLE ON CALL DURING DAY AND ODD HOURS ON 24 HOURS. THE AO MADE ADDITION OF RS. 3,75,000/- ON ACCOUNT OF FREE RENTAL ACCOMMODATION, ELECTRICITY AND DOMESTIC SERVANTS FACILITY. THE AGGRIEVED ASSE SSSEE PREFERRED AN APPEAL BEFORE CIT(A) WHICH WAS ALSO DISMISSED CONFIRMING THE ORD ER OF THE AO. NOW THE AGGRIEVED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. 4. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE CIT(A)-XXX, NEW DELHI ERRED IN NOT DISCUSSING AND FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR I.E A. Y 2006-07 DECIDED IN FAVOUR OF THE ASSESSEE ON THE SAME ISSUE AND TOOK A STAND ALREADY AGAINST THE ASSESSEE WHICH WAS CONTRARY TO THE STAND TAKEN BY HIS PREDECESSOR IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR THAT WAS 2006-07. THE LD. AR ALS O POINTED OUT THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE ON BOTH THE ISSUES IN THE APPELLATE ORDER DATED 1/2/2011 FOR THE A. Y 2006-07 BUT THE CIT(A) COMPLE TELY IGNORED THAT ORDER WHILE PASSING THE IMPUGNED ORDER. REPLYING TO THE ABOVE, THE LD. DR FAIRLY ACCEPTED THAT THE ASSESSEE WAS GRANTED RELIEF ON BOTH THE ISSUES IN THE ORDER OF CIT(A) DATED 1/2/2011 FOR THE A. Y 2006-07. ON SPECIFIC QUERY F ROM THE FACT THE DR ALSO EXPRESSED THAT TO THE BEST OF HIS KNOWLEDGE THE REV ENUE HAS NOT FILED ANY FURTHER APPEAL AGAINST THE ORDER OF THE CIT(A) FOR A. Y 200 6-07 (SUPRA). GROUND NO. 1 OF THE ASSESSEE ITA NO. 218/DEL/12 3 5. FROM BARE READING OF THE DECISION OF CIT(A) FOR THE A. Y 2006-07 IN ASSESSEES OWN CASE (SUPRA), WE OBSERVE THAT THE CI T(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MAD E BY THE APPELLANT AS WELL AS THE FINDINGS OF THE ASSESSING OFFICER. BY NO STRETCH O F IMAGINATION CAN THE WIFE WHO IS STAYING WITH HER HUSBAND IN HIS HOUSE BE CATEGORIZE D AS A BENEFICIARY OF A RENT FREE ACCOMMODATION PROVIDED. IT IS INCIDENTAL THAT THE HUSBAND HAPPENED TO BE THE EMPLOYER OF THE APPELLANT IN WHOSE NURSING HOME SHE WAS WORKING AND DRAWING HER SALARY. THE CONTRACTUAL OBLIGATION DOES NOT ARISE BETWEEN A HUSBAND AND WIFE WITH REGARD TO A RENT FREE ACCOMMODATION BY VIRTUE OF TH E APPELLANT POSITION BEING AN EMPLOYEE OF THE HUSBAND. THE AO HAS TRAVELLED BEYO ND THE LAW IN TREATING A SUM OF RS.1,80,000/- AS A PERQUISITE. I, THEREFORE, DELET E THE SAID ADDITION ACCORDINGLY. (RELIEF: RS.1,80,000/-) 6. IN THE A.Y 2007-08, THE CIT(A) DECIDED THE ISSUE AGAINST THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- HERE, IN THIS CASE THE EMPLOYER IS HER HUSBAND AN D HE IS PROVIDING ACCOMMODATION TO THE APPELLANT DIRECTLY OR INDIRECTLY ALONG WITH THE ANNUAL SALARY OF RS. 17 LAKHS AND IT IS ALSO MENTIONED IN THE RULE THAT ANY MEMBER OF HIS HOUSE HOLD BY REASON OF HIS EMPLOYMENT WHICH MEANS THE APPELLANT DOCTOR IS COV ERED UNDER RULE 3 OF I.T. RULES 1962 , FOR VALUATION OF PERQUISITES FOR PROVIDING RENT FREE ACCOMMODATION TO THE APPELLANT. THE APPELLANT AND HER HUSBAND STAYING I N TOP FLOOR OF THE NURSING HOME AND THAT FLOOR IS SHOWN IN THE DEPRECIATION CHART OF THE NURSING HOME AND IS USED FOR BUSINESS PURPOSE OF THE NURSING HOME. THE APPELLAN T AND HER HUSBAND USED ELECTRICITY, GAS AND OTHER AMENITIES OF THE NURSING HOME FOR THEIR OWN CONSUMPTION AND THESE EXPENDITURES ARE CHARGED TO NURSING HOME EXPENSES. CONSIDERING THE ABOVE FACTS INTO ACCOUNT AND THE RULES FOR COMPUTAT ION OF PERQUISITE, I FEEL THAT THE ACTION OF THE AO IS CORRECT IN DETERMINING PERQUISI TE UNDER RULE 3 OF THE I. T. RULES OF 1962. THE ACTION OF THE AO IS SUSTAINED AND THE AP PEAL IS DISMISSED ON THIS GROUND. THE ADDITION OF RS. 2,55,000/- IS CONFIRMED . 7. IN VIEW OF THE ABOVE, AT THE OUTSET, WE TAKE COG NIZANCE OF THIS LEGAL PROPOSITION THAT RES JUDICATA DOES NOT APPLY TO THE TAX PROCEEDINGS. AT THE SAME TIME, WE ALSO OBSERVE THAT THE REVENUE AUTHORITIES MUST ADOPT A CONSTANT VIEW UNTIL AND UNLESS A SUFFICIENT AND REASONABLE GROUDS ARE A VAILABLE TO TAKE A DIFFERENT VIEW. THE CIT(A) IN ASSESSEES OWN CASE FOR A.Y 2006-07 ( SUPRA) RIGHTLY HOLD THAT THE CONTRACTUAL OBLIGATION DOES NOT ARISE BETWEEN A HUS BAND AND WIFE WITH REGARD TO PERQUISITE BY VIRTUE OF THE APPELLANT POSITION BEIN G EMPLOYEE OF THE HUSBAND. ITA NO. 218/DEL/12 4 THEREFORE, THE CIT(A) SHOULD HAVE FOLLOWED THE CON STANT VIEW TAKEN BY HIS PREDECESSOR IN THE A. Y 2006-07. UNFORTUNATELY, TH E CIT(A) HAS COMPLETELY IGNORED THE ORDER DATED 1/2/2011 FOR THE A. Y 2006-07 (SUPR A) WHICH IS NOT A PROPER AND JUSTIFIED PRACTICE. THE VIEW TAKEN BY THE CIT(A) I N THE PRESENT ORDER IS HYPER TECHNICAL WHICH IS NOT ACCEPTABLE AND SUSTAINABLE. HENCE, GROUND NO. 1 OF THE ASSESSEE IS ALLOWED AND IMPUGNED ORDER IN THIS REGA RD IS SET ASIDE AND THE AOS DIRECTED TO DELETE THE SAID ADDITION ON ACCOUNT OF RENT FREE ACCOMMODATION. GROUND NO. 2 OF THE ASSESSEE 8. FROM THE ORDER OF THE CIT(A) DATED 01/02/2011 FO R THE A. Y 2006-07 (SUPRA), WE OBSERVE THAT THE ISSUE OF PERQUISITE ON ACCOUNT OF FREE ELECTRICITY/ GENSET EXPENSES AND DOMESTIC SERVANT FACILITY WAS DECIDED IN FAVOUR OF THE ASSESSEE DELETING THE IMPUGNED ADDITION WITH FOLLOWING OBSERVATIONS AND F INDINGS:- 10. DETERMINATION: I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AS WELL AS THE FINDINGS OF THE ASSESSING OFFICER. THE AO HAS NOT BROUGHT OUT IN HIS ASSESSMENT ORDER ANY VALID AND COMPELLING REASONS FOR ENHANCIN G THE VALUE OF PERQUISITES. FIRSTLY, HE HAS NOT ESTABLISHED WITH ANY FACTS THAT THE PERQUISITES STATED BY HIM HAVE ACCRUED TO THE APPELLANT BY VIRTUE OF BEING AN EMPL OYEE. IT IS INCIDENT THAT THE HUSBAND HAPPENED TO BE THE EMPLOYER OF THE APPELLAN T IN WHOSE NURSING HOME SHE WAS WORKING AND DRAWING HER SALARY. IT IS BUT NATU RAL THAT THE HUSBAND AND WIFE ARE IN A CONJUGAL RELATIONSHIP AND WOULD LIVE TOGET HER IN THE HOUSE ARE STATED TO BE BORNE BY THE HUSBAND. THE CONTRACTUAL OBLIGATION DOES NOT ARISE BETWEEN A HUSBAND AND WIFE WITH REGARD TO THE PERQUISITES BY VIRTUE O THE APPELLANT POSITION BEING AN EMPLOYEE OF THE HUSBAND. THE AO HAS TRAVE LLED BEYOND THE LAW IN TREATING A SUM OF RS.1,20,000/- AS A PERQUISITE. I THEREFOR E, DELETE THE SAID ADDITION ACCORDINGLY. 9. IN CASE OF ASSESSEE FOR THE A. Y 2007-08, THE CI T(A) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE WITH FOLLOWING OBSERVATIONS AN D FINDINGS:- I HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS MAD E BY THE APPELLANT AS WELL AS THE FINDINGS OF THE ASSESSING OFFICER. I HAVE ALREADY DISCUSSED THE MATTER IN GROUND NO. 2 OF APPEAL. WHEN THE EXPENSES ARE CLAIMED AS NURS ING HOME EXPENSES, THEN THE QUESTION OF ELECTRICITY/GENSET EXPENSES DOES NOT AR ISE. I FEEL THAT THESE EXPENSES ARE BORNE BY YOU IN INDIVIDUAL CAPITAL, THEN THERE IS N O PROVISION TO ALLOW THE CLAIM AS BUSINESS EXPENDITURE BECAUSE THE GENERATOR/SERVANT ETC. IS USED FOR YOUR PERSONAL ISSUE. THIS IS ANOTHER FORM OF BENEFIT/PERQUISITE RECEIVED FROM EMPLOYER . CONSIDERING THE ABOVE FACTS THE INCOME TAX LAW DOES NOT ALLOW ME TO DELETE THE ITA NO. 218/DEL/12 5 ADDITION OF RS.1,20,000/-. THE AO HAS RIGHTLY ADDE D THE SAME U/S 17(2) (III) OF THE ACT. THE ADDITION OF RS.1,20,000/- MADE BY AO IS S USTAINED. THE APPEAL OF THE APPELLANT IS DISMISSED. 10. IN THE SIMILAR FASHION, THE CIT(A) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY HOLDING THAT THE AO RIGHTLY MADE ADDITION U/S 17 (2) (III) OF THE ACT FROM THE ORDER OF THE CIT(A) IN EARLIER A. Y 2006-07 (SUPRA). THE FIRST APPELLATE AUTHORITY HAS RIGHTLY HELD THAT THE CONTRACTUAL OBLIGATION DOES N OT ARISE BETWEEN A HUSBAND AND WIFE WITH REGARD TO THE PERQUISITE PERTAINING TO FR EE ELECTRICITY/GENERATOR AND DOMESTIC SERVANT FACILITY, BY VIRTUE OF THE ASSESSE ES POSITION BEING AN EMPLOYEE OF THE HUSBAND. WE ALSO OBSERVE THAT THE AUTHORITIES BELOW HAVE NOT BROUGHT OUT ANY FACT THAT THE FACILITY OF RENT FREE ACCOMMODATION, USE OF ELECTRICITY/GENSET AND DOMESTIC SERVANT FACILITY WAS PROVIDED FOR THE ASSE SSEE BY HER HUSBAND UNDER A EMPLOYMENT CONTRACTUAL OBLIGATION. ON THE OTHER HA ND, WE CLEARLY OBSERVE THAT IT IS A NATURAL PHENOMENA THAT THE HUSBAND AND WIFE ARE A CONJUGAL RELATIONSHIP AND WOULD LIVE TOGETHER IN THE HOUSE BELONGING TO THE H USBAND AND ALL EXPENSES FOR THE MAINTENANCE OF HOUSE, ELECTRICITY/GENSET AND DOMEST IC SERVANT FACILITY WOULD BE BORNE BY THE HUSBAND WHO IS INCIDENTALLY HAPPEN TO BE THE EMPLOYER OF THE ASSESSEE. FROM BARE READING OF THE IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) HAS COMPLETELY IGNORED THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR THE A. Y 2006-07 (SUPRA) AND CIT(A) HAS TAKEN A DEVIATED VIE W WITHOUT ANY BASIS WHICH IS NOT PERMISSIBLE AS PER WELL ACCEPTED PRINCIPALS OF TAXATION JURISPRUDENCE. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEE IS ALSO A LLOWED BY SETTING ASIDE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AND AOS DIREC TED TO DELETE THE IMPUGNED ADDITION PERTAINING TO THE SO CALLED PERQUISITE. GROUND NO. 3 OF THE ASSESSEE ITA NO. 218/DEL/12 6 11. SINCE, WE HAVE ALLOWED GROUND NO.1 & 2 OF THE A SSESSEE BY APPROVING THE VIEW TAKEN BY THE CIT(A) IN ASSESSEES OWN CASE FOR THE A. Y 2006-07 (SUPRA). THEREFORE, GROUND NO. 3 OF THE ASSESSEE IS ALSO ALL OWED AS ABOVE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 RD MAY 2014. SD/- SD/- (S.V.MEHROTRA) (C. M. GARG) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: 23/05/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI