M/s. P. N. Rao, Bangalore V. Assistant Commissioner Of Income Tax, Circle- 1(1), Bengaluru

ITA 2327/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2757 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRATIBHA
• Keywords: Depreciation; Onus to prove

Judgement Text

ITA NO.2327/BANG/2019 M/S. P.N. RAO, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH SMC : BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER ITA NO.2327/BANG/2019 ASSESSMENT YEAR: 2009-10 M/S. P.N. RAO M/S. BRAHMAYYA& CO. CHARTERED ACCOUNTANTS 10/2, KHIVRAJ MANSION, KASTURBA ROAD BENGALURU 560 001 PAN NO : AABFP8461F VS. ACIT CIRCLE-1(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SMT. PRATIBHA, A.R. RESPONDENT BY : SHRI GANESH R. GHALE, D.R. DATE OF HEARING : 22.04.2021 DATE OF PRONOUNCEMENT : 23.06.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29.8.2019 PASSED BY LD. CIT(A)-1, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN PARTIALLY CONFIRMING THE DISALLOWANCE MADE BY THE A .O. IN RESPECT OF DEPRECIATION CLAIMED BY THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A DEALER IN TEXTILES/READYMADE GARMENTS FOR MEN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT ITA NO.2327/BANG/2019 M/S. P.N. RAO, BANGALORE PAGE 2 OF 5 THE ASSESSEE HAS CLAIMED DEPRECIATION @ 100% AMOUNT ING TO RS.52,03,586/- UNDER THE BLOCK FURNITURE & FITTING S. THE ASSESSEE HAD CLAIMED DEPRECIATION @ 100% CLAIMING THAT THEY ARE TEMPORARY CONSTRUCTIONS. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE A.O. ASKED THE ASSESSEE TO PRODUCE BILLS & VOUCHERS IN SUPPORT OF PURCHASE OF FURNITURE AND FIXTURES. THE ASSESSEE C OULD NOT PRODUCE BILLS FOR AN AMOUNT OF RS.14,55,919/-. HENCE, THE A.O. DISALLOWED THE SAME HOLDING THAT THE ASSESSEE COULD NOT PROVE THE EXPENDITURE. FOR THE REMAINING AMOUNT OF RS.37,47,667/- THE ASSE SSEE PRODUCED BILLS. IT WAS SUBMITTED THAT THE ASSESSEE IS HAVIN G SHOWROOMS AT VARIOUS PLACES TAKEN ON RENTAL BASIS AND THESE EXPE NSES HAVE BEEN INCURRED ON INTERIOR DECORATION OF THE SAID SHOWROO MS. SINCE, THESE SHOW ROOMS ARE RUN ON RENTED PREMISES, IT WAS CONTE NDED THATTHESE EXPENDITURES ARE TO BE CATEGORIZED AS TEMPORARY CON STRUCTIONS. ACCORDINGLY, IT WAS CLAIMED THAT THE ASSESSEE IS EL IGIBLE FOR DEPRECIATION @ 100%. 4. THE A.O. NOTICED THAT THE ASSESSEE HAS CAPITA LIZED THESE EXPENDITURES IN THE BOOKS OF ACCOUNTS AS FURNITURE & FIXTURES AND FOR INCOME TAX PURPOSES, IT IS CLAIMED AS TEMPORARY CONSTRUCTIONS. HENCE THE AO DID NOT AGREE THAT THESE EXPENDITURES RELATE TO TEMPORARY STRUCTURES. ACCORDINGLY, HE HELD THAT TH E DEPRECIATION IS ALLOWABLE @ 10%, AS APPLICABLE TO FURNITURE AND FIX TURES. ACCORDINGLY, HE ALLOWED DEPRECIATION OF RS.3,74,776 /- AND DISALLOWED THE BALANCE AMOUNT OF RS.33,72,897/- CLA IMED BY THE ASSESSEE AS DEPRECIATION. 5. BEFORE LD. CIT(A), THE ASSESSEE SUBMITTED THAT T HE AMOUNT OF RS.14,55,919/- DISALLOWED BY THE A.O. FOR WANT OF B ILLS/VOUCHERS INCLUDED FOLLOWING ITEM OF EXPENSES. ITA NO.2327/BANG/2019 M/S. P.N. RAO, BANGALORE PAGE 3 OF 5 COMMISSION - RS.1,25,000/- ELECTRICITY CHARGES - RS. 15,288/- RENT - RS.5,00,000/- SALARIES - RS. 41,807/- SHOP INSURANCE - RS. 33,427/- SHOP MAINTENANCE - RS. 1,400/- TOTAL - RS.7,16,922/- THE ASSESSEE FURNISHED RENTAL AGREEMENT IN SUPPORT OF THE PAYMENT OF RENT. IT WAS SUBMITTED THAT THESE EXPENSES HAVE BEEN INCURRED DURING THE TIME OF SETTING UP OF THE SHOWROOM AND H ENCE, THEY HAVE BEEN CAPITALIZED IN THE BOOKS OF ACCOUNTS. CONSIDE RING THE RENTAL AGREEMENT, THE A.O. TOOK THE VIEW THAT ELECTRICITY CHARGES OF RS.15,288/-, RENT OF RS.5,00,000/- AND SHOP INSURAN CE OF RS.33,427/- (ALL RELATED TO THE PREMISES TAKEN ON R ENT THROUGH RENTAL AGREEMENT) CAN BE ALLOWED TO BE CAPITALIZED AND DEPRECIATION @ 10% BE ALLOWED. ACCORDINGLY, THE LD. CIT(A) CONF IRMED THE DISALLOWANCE OF REMAINING AMOUNT AND DIRECTED TO AL LOW DEPRECIATION @ 10% ON THE ABOVE SAID 3 PAYMENTS. 6. WITH REGARD TO THE DISALLOWANCE OF DEPRECIATION ON THE REMAINING AMOUNT OF RS.37,47,667/-, THE LD. CIT(A) NOTICED THAT THE EXPENDITURE INCURRED ON INTERIORS AND FURNISHIN GS INCLUDING FLOORING, COUNTERS, ETC. ARE BEING USED AS IT IS BY THE ASSESSEE EVEN AT THE TIME OF HEARING THE APPEAL. THE EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09 AND THE SAME WAS CONTINUED TO BE USED BY THE ASSESSEE EVEN IN THE YEAR 2019. ACCORDINGLY, THE LD. CIT(A) TOOK THE VIEW TH AT THESE EXPENDITURES CANNOT BE CONSIDERED TO BE TEMPORARY I N NATURE. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE A.O. IN RESTRICTING THE DEPRECIATION CLAIM TO 10%. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. ITA NO.2327/BANG/2019 M/S. P.N. RAO, BANGALORE PAGE 4 OF 5 7. I HEARD THE PARTIES AND PERUSED THE RECORD. THE LD. A.R. PLACED HER RELIANCE ON THE WRITTEN SUBMISSIONS FILE D BEFORE LD. CIT(A). THE LD. D.R. PLACED HIS RELIANCE ON THE OR DER PLACED BY LD. CIT(A). 8. THE FIRST ISSUE RELATES TO DISALLOWANCE OF RS.14 ,55,919/- OUT OF WHICH THE LD. CIT(A) HAS ALLOWED CAPITALIZATION TO THE EXTENT OF RS.5,48,715/- AND DIRECTED THE AO TO ALLOW DEPRECIA TION @ 10%, AS APPLICABLE TO FURNITURE & FIXTURES. THE PLEA OF TH E ASSESSEE IS THAT THE LD. CIT(A) SHOULD HAVE ALLOWED CAPITALIZATION O F ENTIRE AMOUNT OF RS.14,55,919/-. HOWEVER, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY BILLS/VOUCHERS IN SUPPORT OF T HESE PAYMENTS. THE ASSESSEE COULD FURNISH DETAILS OF CHEQUE NUMBER S RELATING TO THESE PAYMENTS, BUT COULD NOT ESTABLISH THE NATURE OF EXPENSES FOR WHICH THESE PAYMENTS HAVE BEEN MADE. SINCE THE ASS ESSEE COULD PRODUCE RENTAL AGREEMENTS, THE LD. CIT(A) HAS ALLOW ED CAPITALIZATION OF PAYMENTS RELATED TO BUILDING. IT IS A SETTLED P ROPOSITION THAT THE ONUS TO PROVE THE EXPENDITURE LIES UPON THE ASSESSE E. SINCE THE ASSESSEE HAS FAILED TO PROVE THE NATURE OF EXPENDIT URE, I DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE. 9. THE NEXT ISSUE RELATES TO RESTRICTING THE DEPREC IATION TO 10% IN RESPECT OF INTERIOR AND OTHER EXPENSES INCURRED ON THE SHOWROOMS. I NOTICED EARLIER THAT THE LD. CIT(A) H AS GIVEN A CATEGORICAL FINDING THAT INTERIORS, FURNITURE AND F IXTURES INSTALLED IN THE YEAR 2008 CONTINUED TO BE USED EVEN IN THE YEAR 2019. ACCORDINGLY, THE LD. CIT(A) HAS OBSERVED THAT THESE EXPENSES HAVE GIVEN ENDURING BENEFIT TO THE ASSESSEE. THESE FACT S CLEARLY DEMONSTRATE THAT THE EXPENDITURE INCURRED BY THE AS SESSEE CANNOT BE TERMED TOWARDS TEMPORARY STRUCTURES. ANOTHER FA CT THAT THE ASSESSEE, ON THE FIRST ISSUE, HAS SOUGHT CAPITALIZA TION OF ENTIRE ITA NO.2327/BANG/2019 M/S. P.N. RAO, BANGALORE PAGE 5 OF 5 AMOUNT OF RS.14,55,919/-. ON THE ABOVE SAID AMOUNT ALSO, THE ASSESSEE HAD CLAIMED DEPRECIATION 100%. THE AO DIS ALLOWED THE ENTIRE AMOUNT FOR WANT OF BILLS/VOUCHERS. BEFORE L D CIT(A), THE ASSESSEE HAS ONLY SOUGHT CAPITALIZATION AND DEPRECI ATION @ 10%. THUS, THE ASSESSEE HAS ACCEPTED THE TREATMENT GIVEN BY AO IN RESPECT OF THE ABOVE SAID AMOUNT OF RS.14,55,919/-. HENCE IT IS NOT APPROPRIATE ON THE PART OF THE ASSESSEE TO TAKE A D IFFERENT STAND WITH REGARD TO THE REMAINING AMOUNT. ACCORDINGLY, I AM OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE A.O. IN RESTRICTING THE DEPRECIATION TO 10%. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2021 SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 23 RD JUNE, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE