DR. RUSTOM PHIROZE SOONAWALA, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 16(3), MUMBAI

ITA 227/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4042 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 09-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P H MARFATIA
• Keywords: Deemed owner of house property

Judgement Text

INTHEINCOMETAX APPELLATETRIBUNAL MUMBAI BENCHDMUMBAI BEFORE SHRI MAHAVIRSINGH (VICEPRESIDENT)AND SHRI S. RIFAURRAHMAN(ACCOUNTANT MEMBER) ITANO.227/MUM/2018 ASSESSMENT YEAR:2012-13 DR. RUSTOMPHIROZE SOONAWALA, 5, PASHMINA, PEDDER ROAD, MUMBAI-400026. VS. ACIT-16(3), MUMBAI. PANNO. AAVPS1871N APPELLANT RESPONDENT ASSESSEEBY : MR. P.H. MARFATIA, AR REVENUEBY : MR. BHARAT ANDHLE, DR DATE OF HEARING : 12/07/2021 DATE OF PRONOUNCEMENT : 15 /0 9 /2021 ORDER PER S.RIFAUR RAHMAN, A.M. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-7, MUMBAI [IN SHORT CIT(A)] FOR THE ASSESSMENT YEAR 2012-13 DATED 01.11.2017 AND ARISES OUT OF ASSESSMENT COMPLETEDU/S143(3)OF THE INCOMETAXACT, 1961(IN SHORTTHE ACT). 2. BEFORE US,THE ASSESSEE FILEDFOLLOWINGGROUNDSOFAPPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS ERRED IN DISALLOWING MEMBERSHIP FEES & SUBSCRIPTION EXPENSES OF RS.13,070/- (10% OF RS.1,30,700/-) AS PERSONAL EXPENSES ON THE GROUND THAT IN SUCH EXPENSES PERSONAL ELEMENT CANNOT BE RULEDOUTWITHOUTAPPRECIATINGANDEXAMININGINDETAILSTHEACTUALEXPENSESINCURRED BYTHE ASSESSEE. DR. RUSTOMPHIROZE SOONAWALA ITA NO.227/M/2018 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS ERRED IN DISALLOWING TRAVELLING EXPENSES OF RS.9,268/- (10% OF RS.92,676/-) AS PERSONAL EXPENSES ON THE GROUND THAT IN SUCH EXPENSES PERSONAL ELEMENT CANNOT BE RULED OUT WITHOUT APPRECIATING AND EXAMINING IN DETAILS THE ACTUAL FACT THAT TRAVELLING EXPENSES OF RS.2,92,604/-OFPERSONALNATUREHASNOTBEENCLAIMEDASEXPENSESATALLANDSAMEHAS BEENDEBITEDTO HIS CAPITALACCOUNT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS ERRED IN DIRECTING AO TO COMPUTE HOUSE PROPERTY INCOME AT ANNUAL MUNICIPAL RATABLE VALUE OF 8% OF ACQUISITIONCOSTWITHOUTAPPRECIATINGANDEXAMININGINDETAILSTHEACTUALFACTTHATNO DEEMEDNOTIONALINCOMENEEDSTOBEWORKEDOUTSINCEPROPERTYINQUESTIONWASBEING USEDFOR THEPURPOSE OF PROFESSIONBYTHEASSESSEE. 3. IN THE ABOVE GROUNDS OF APPEAL, THE ASSESSEE IS CHALLENGING IN GROUND NO. 1 & 2 ON THE AD-HOC DISALLOWANCE OF 10% SUSTAINED BY THE LD. CIT(A) ON MEMBERSHIP FEES AND SUBSCRIPTION EXPENSES AND TRAVELLING EXPENSES. THE RELEVANT FACTS RELATING TO ABOVE GROUNDS ARE, THE ASSESSING OFFICER DISALLOWED 20%OF THEABOVE SAIDEXPENSESASITRELATESTO PERSONAL INNATURE. 4. THE LD. CIT(A) ON APPEAL BEFORE HIM, SUSTAINED THE ABOVE ADDITION RESTRICTINGTHE SAME AT 10%. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. ON CONSIDERING THE SUBMISSIONSOFBOTHTHECOUNSELSANDWEOBSERVETHATTHEASSESSEEHASFILEDCOPY OF THE CAPITAL ACCOUNT AS ON 31.03.2012 TO THE BALANCE SHEET. AS PER THE SUBMISSIONS AND CAREFUL EVALUATION, WE NOTICED THAT THE TRAVELLING EXPENSES WEREDEBITEDTOTHECAPITALACCOUNTTHATMEANS,ITISNOTCHARGEDTOTHEPROFITAND LOSS. IT WILL NOT HAVE ANY IMPACT ON THE PROFIT DETERMINED FOR TAX PURPOSE. THEREFORE, ONCE AGAIN DISALLOWING ON AD-HOC BASIS WILL AMOUNT TO DOUBLE DR. RUSTOMPHIROZE SOONAWALA ITA NO.227/M/2018 3 TAXATION. THEREFORE, WE ARE INCLINED TO DIRECT THE ASSESSING OFFICER TO ALLOW THE TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE. WITH REGARD TO MEMBERSHIP FEES AND SUBSCRIPTION EXPENSES, ON EXAMINATION OF LEDGER ACCOUNT SUBMITTED BY THE ASSESSEE, WE NOTICED THAT THE ASSESSEE HAS ATTENDED SEVERAL CONFERENCES AND PAID MEMBERSHIP FEES. THE CONFERENCES ARE RELEVANT FOR THE PROFESSION CARRIED ON BY THE ASSESSEE. THEREFORE, WE REJECT THE CONTENTION OF THE AO THAT THERE IS INVOLVEMENTOFPERSONALBENEFITEXCEPTIMPROVEMENTINPROFESSIONALKNOWLEDGE. ITWILLCERTAINLYIMPROVETHEDISPENSATIONOFTHEPROFESSION.THEREFORE,WEDIRECT THE ASSESSINGOFFICERTOALLOWTHEEXPENDITURE CLAIMEDBY THE ASSESSEE. WITH REGARD TO GROUND NO. 3, RELEVANT FACTS ARE, DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE OWNED FLATS OF PUSHPA MILAN CO-OP HOUSING SOCIETY AND HE NOTICED THAT THE ASSESSEE HAS NOT OFFERED ANY INCOME FROM THIS PROPERTY. ACCORDINGLY, WHEN THE ASSESSEE WAS ASKED TO EXPLAIN. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ABOVE SAID FLAT IS USED FOR RESIDENCE BY ONE OF THE SENIOR DOCTOR MS. GULOO C. NAGARWALA WHO IS ATTACHED TO THE ASSESSEE AND WORKING FOR THE ASSESSEE. THEREFORE, THE SAME IS USEDFORTHEPURPOSEOFASSESSEESPROFESSION.ITWASSUBMITTEDTHATITSHOULDNOT BE CONSIDERED AS DEEMED LET OUT AND CHARGE OF NOTIONAL GROSS RENT IS NOT WARRANTED. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE. IT OBSERVED THAT WITH THE ABOVE OBSERVATION THAT THE PROPERTY IS GIVEN WITHOUT RENT TO ONE OF COLLEAGUE IS NOT PROPER AND HE DETERMINED THE NOTIONAL RENT FROM THE PROPERTY BASED ON THE NORMS LAID OUT BY HONBLE HIGH COURT I.E. 8% OF THE COST OF THE FLAT. ACCORDINGLY, DR. RUSTOMPHIROZE SOONAWALA ITA NO.227/M/2018 4 HE DETERMINED THE ANNUL VALUE OF PROPERTY AT RS.81,340/- ALLOWED 30% DEDUCTION U/S24OFTHEACTANDBROUGHTTO TAXAMOUNTOFRS.56,398/-. 7. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD.CIT(A)ANDLD.CIT(A)SUSTAINEDTHE ADDITIONMADE BYTHEASSESSING OFFICER. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. IT IS SUBMITTED BEFORE US THAT THE PROPERTY UNDER CONSIDERATION WAS USED BY THE ASSESSEE FOR ITS PROFESSION PURPOSES AND THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 2011-12. IN THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION, THE LD. CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE AND SUSTAINEDTHEADDITIONMADEBYTHEAOI.E.TOCOMPUTEHOUSEPROPERTYINCOME@ 8%OF THE VALUE OFACQUISITION. 9. AFTER CAREFUL CONSIDERATION AND SUBMISSIONS MADE BY BOTH THE PARTIES, IN OUR CONSIDERED VIEW THE ASSESSEE HAS USED THE PROPERTY FOR RESIDENCE OF ONE OF SENIOR DOCTOR MS. GULOO C. NAGARWALA ATTACHED TO HIM. IT IS NOT CLEAR FROM THE RECORDWHETHERTHESENIORDOCTORMS.GULOOC.NAGARWALATOWHOMTHEFLATSWAS ALLOWED TO BE USED FOR THE PURPOSE OF RESIDENCE I.E. DOCTOR MS. GULOO C. NAGARWALAWORKINGFULLTIMEINTHEASSESSEESHOSPITAL.WEDEEMITFITANDPROPER TO REMIT THIS ISSUE TO THE FILE OF AO TO FIND OUT WHETHER DOCTOR MS. GULOO C. NAGARWALA IS IN FULL TIME EMPLOYMENT WITH THE ASSESSEE AND IT IS FOUND THAT SHE IS IN FULL TIME EMPLOYMENT WITH THE ASSESSEE THEN THE FLAT ALLOCATED TO HER FOR RESIDENTIALUSEDMAYBETREATEDASUSEDFORTHE PURPOSEOF PROFESSIONOTHERWISE THEMETHODADOPTEDBYTHE REVENUEAUTHORITIESMAYBE SUSTAINED.WEDIRECTTHE ASSESSINGOFFICERTOFOLLOWTHEABOVE DIRECTION ANDGIVEANOPPORTUNITYTO BEING HEARDOFTHEASSESSEE. DR. RUSTOMPHIROZE SOONAWALA ITA NO.227/M/2018 5 ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT,THE APPEALFILEDBYTHE ASSESSE ISPARTLYALLOWED. ORDER PRONOUNCEDINTHEOPENCOURTON 15/09/2021. SD/- SD/- ( MAHAVIRSINGH ) ( S. RIFAURRAHMAN ) VICEPRESIDENT ACCOUNTANTMEMBER MUMBAI; DATED:15/09/2021 RAHUL SHARMA,SR. P.S. COPYOFTHEORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT,MUMBAI 6. GUARDFILE. BY ORDER, //TRUE COPY// (DY./ASSISTANTREGISTRAR) ITAT,MUMBAI