Gratik Infotech Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 2351/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1783 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Assessee Lawyers: P D SHAH
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard; Revised return; Set aside
• Section: 143(3); 142(1); 143(1); 147; 148; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M .) I.T.A. NO. 2351/AHD./2009 ASSESSMENT YEAR : 2005-2006 GRATIK INFOTECH PVT. LTD., AHMEDABAD -VS- A.C.I.T.(A)-VIII, AHMEDABAD (PAN : AACCG 0544N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.D. SHAH RESPONDENT BY : SHRI VIMALENDU VERMA, D .R. O R D E R THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 06.04.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VIII, AHMEDABAD FOR THE ASSESSMENT YEAR 2005-2006. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 24.1 0.2005 DECLARING LOSS OF RS.3,51,128/-. THIS RETURN WAS PROCESSED UNDER SECTION 143(1) ON 1 2.01.2006. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 148 OF THE AC T. IN RESPONSE TO SAID NOTICE, THE ASSESSEE FILED THE RETURN OF INCOME ON 17.10.2007 REVISING T OTAL LOSS AT RS.2,93,680/- AS AGAINST A LOSS OF RS.3,51,128/- DECLARED IN THE ORIGINAL RETURN OF INCOME FILED ON 24.10.2005. 2.1 THE ASSESSING OFFICER FRAMED THE ASSESSMENT UND ER SECTION 143(3) READ WITH SECTION 147 ON 30.10.2008 AT A TOTAL INCOME OF RS.2,24,251/ -. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT HAS DISCLOSED AS UNDER: OFFICE RENT INCOME RS.1,14,500/- OTHER RENT INCOME RS. 99,700/- KASAR & VATAV RS. 28,436/- 2 ITA NO. 2351-AHD-2009 2.2 AGAINST THE ABOVE INCOME, THE ASSESSEE COMPANY HAS CLAIMED OPERATIVE AND ADMINISTRATIVE AND OTHER EXPENSES AT RS.62,298.-, F INANCING EXPENSES OF RS.68,189/-, DEPRECIATION OF RS.5,60,646/- AND PRELIMINARY AND P RE-OPERATIVE EXPENSES OF RS.2539/- TOTALING TO RS.6,93,772/-. THE ASSESSING OFFICER OB SERVED THAT THESE EXPENSES ARE ALLOWABLE AGAINST INCOME FROM BUSINESS AND PROFESSION. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT RS.2,24,251/- FOR DETA ILED REASONS GIVEN IN PARA 6 TO 9, WHICH READ AS UNDER: (6) SECTION 56(2)(II) PROVIDES THAT INCOME FROM M ACHINERY, PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE IS TAXAB LE AS INCOME FROM OTHER SOURCES IF THE SAME IS NOT CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. DHARAK LTD. V. CIT (1986) 25 TAXMAN 1 96 (KER.) (7) INCOME FROM COMPOSITE LETTING OF BUILDING, MA CHINERY, PLANT OR FURNITURE (SEC. 56 (2) (III) : - IF AN ASSESSEE LETS ON HIRE MACHINER Y, PLANT OR FURNITURE AND ALSO BUILDING AND LETTING BUILDING IS INSEPARABLE FROM LETTING O F MACHINERY, PLANT OR FURNITURE, INCOME FROM SUCH LETTING IS TAXABLE AS INCOME FROM OTHER SOURCES, IF THE SAME IS NOT CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAIN S OF BUSINESS OR PROFESSION'. (8) LETTING OF BUILDING NEED NOT BE INCIDENTAL TO LETTING OF PLANT, MACHINERY OR FURNITURE - THE MERE FACT THAT SE CTION 56(2)(III) FIRST MENTIONS THE LETTING OF THE MACHINERY, PLANT OR FURNITURE AND THEN REFE RS TO THE LETTING OF THE BUILDING AND FURTHER USES THE WORD ALSO IN CONNECTION WITH TH E LETTING OF THE BUILDING, IS TOO SLENDER A FOUNDATION FOR THE CONCLUSION THAT THE I NTENTION IS THAT THE PRIMARY LETTING MUST BE OF THE MACHINERY, PLANT OR FURNITURE. ALL THAT SECTION 56(2)(III) CONTEMPLATES IS THAT THE LETTING OF MACHINERY, PLANT OR FURNITURE SHOULD BE INSEPARABLE FROM THE LETTING OF THE BUILDING SULTAN BROS. (P.) LTD. V . CIT (1964) 51 ITR 353 (SC). IT IS NOT NECESSARY THAT MACHINERY, FURNITURE OR P LANT IS INSEPARABLE FROM BUILDING. THE LANGUAGE USED IN THE ACT IS NOT THAT THE TWO M UST BE INSEPARABLY CONNECTION WHEN LET OUT. WHAT IS REQUIRED BY LAW IS THAT THE LETTI NG OF ONE IS INSEPARABLE FROM THE LETTING OF THE OTHER. SULTAN BROS. PVT. LTD. V. CI T (1964) 51 ITR 353 (SC). WHEN LETTING OF PLANT, MACHINERY OR FURNITURE IS I NSEPARABLE FROM LETTING OF BUILDING THE INSEPARABILITY REFERRED TO IN SECTION 56(2)(II I) IS AN INSEPARABILITY ARISING FROM THE INTENTION OF THE PARTIES. THAT INTENTION MAY BE AS CERTAINED BY FRAMING THE FOLLOWING QUESTIONS: 1. IS IT THE INTENTION IN MAKING THE LEASE THAT THE TWO SHOULD BE ENJOYED TOGETHER? IT IS IMMATERIAL WHETHER THERE IS ONE LE ASE OR TWO. 2. IS IT THE INTENTION TO MAKE THE LETTING OF TH E TWO PRACTICALLY ONE LETTING 3 ITA NO. 2351-AHD-2009 3 . WOULD ONE HAVE BEEN LET ALONE AND A LEASE OF IT ACCEPTED BY THE TENANT WITHOUT THE OTHER? IF THE ANSWERS TO THE FIRST TWO QUESTIONS ARE IN T HE AFFIRMATIVE, AND THE LAST IN THE NEGATIVE, THEN IT SHOULD BE HELD THAT IT IS INTEND ED THAT THE LETTINGS WOULD BE INSEPARABLE SULTAN BROS. PVT. LTD. VS. CIT (1964 ) 51 ITR 353 (SC). (9) IN VIEW OF THE ABOVE LEGAL AND FACTUAL POSITI ON THE TOTAL INCOME OF THE ASSESSEE COMPANY IS COMPUTED. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT THERE IS NO DISPUTE ABOU T THE FACT THAT DURING THE RELEVANT PERIOD, THE ASSESSEE DID NOT HAVE ANY RECEIPTS FROM THE ALL EGED BUSINESS OF DATA PROCESSING AND OTHER INFORMATION TECHNOLOGY RELATED SERVICES. THE ONLY R ECEIPT DURING THE RELEVANT PERIOD WERE FROM OFFICE RENT, OTHER RENT AND KASAR AND VATAV. T HEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION ONLY UNDER SECTION 24 OF THE I.T. ACT, 19 61 OUT OF RENTAL INCOME. IN REGARD TO CLAIM FOR DEPRECIATION ON OFFICE BUILDING, THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR T HE DETAILED REASONS GIVEN IN PARA 6.8 OF THE IMPUGNED ORDER. IN PARA 6.9, THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS) ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER REGARDING DISAL LOWANCE OF PREOPERATIVE EXPENSES AMOUNTING TO RS.2539/-. HOWEVER, IN THE IMPUGNED OR DER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFICER TO ALLOW CARRY FORWARD LOSSES AND DEPRECIATION, AS PER THE STATEMENT OF ACCOUNT FILED WITH THE RETURN OF INCOME. 4. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FO LLOWING GROUNDS: 1. THE LEARNED CIT (A) HAS ERRED IN LAW AN D FACTS BY CONFIRMING THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF RS. 62,398/- THEREFORE THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE DEDUCTION OF ADMI NISTRATIVE ' EXPENSES, WHILE COMPUTING THE TOTAL INCOME. 2. THE LEARNED CIT [A] HAS ERRED IN LAW AND FACTS BY CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.68,189/- RELATED TO INTERE ST PAID FOR LOAN AMOUNT TOR THE COMPUTERS PURCHASED, THEREFORE THE ASSESSING OFFIC ER BE DIRECTED TO ALLOW THE DEDUCTION OF INTEREST EXPENSES, WHILE COMPUTING TH E TOTAL INCOME. 4 ITA NO. 2351-AHD-2009 3. THE LEARNED CIT (A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.3,81,779/- AND THEREFORE THE AS SESSING OFFICER BE DIRECTED TO ALLOW DEPRECIATION, WHILE COMPUTING THE TOTAL INCOME. 4. THE LEARNED CIT (A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE DISALLOWANCE OF THE PRELIMINARY OF RS. 2,539/- AND THEREFORE THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE DEDUCTION OF PRELIMINARY EXP ENSES, WHILE COMPUTING THE TOTAL INCOME. 5. AT THE TIME OF HEARING, SHRI P. D. SHAH, A.R., A PPEARED ON BEHALF OF THE ASSESSEE AND EXPLAINED THAT AFTER GIVING APPEAL EFFECT TO THE OR DER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSED INCOME IS REDUCED TO RS. 1,59,990/-. IT WAS ALSO SUBMITTED THAT THE CORRECT AMOUNT FOR GROUND NO.1 IS 54,454/- INSTEAD OF RS.62,398/- AS MENTIONED IN THE GROUNDS OF APPEAL. IT WAS ALSO CONTENDED THAT THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW AND FACTS IN NOT ALLO WING THE ADMINISTRATIVE EXPENSES, THOUGH THE VATVA AND KASAR (DISCOUNT) INCOME HAS BEEN TAXE D UNDER THE BUSINESS HEAD. THE VATVA AND KASAR (DISCOUNT) HAS BEEN RECEIVED FROM THE PAR TIES WITH WHOM THE ASSESSEE HAS DONE THE BUSINESS IN EARLIER YEARS. THEREFORE, THERE IS NO Q UESTION FOR DISALLOWANCE OF SAID ADMINISTRATIVE EXPENSES. THE ASSESSEE HAS TO INCUR EXPENSES TO MAINTAIN THE STAFF AND OFFICE AND CARRY ON THE BUSINESS FORMALITIES. EVEN ADMINIS TRATIVE EXPENSES WERE INCURRED IN ORDER TO MAKE THE PAYMENT OF CREDITOR, SECURED LOAN AND RECE IVED PAYMENT FROM DEBTORS AND ADVANCE RECOVERABLE IN CASH OR IN KIND. THE ASSESSEE COMPAN Y WAS ALSO STRIVING TO CATER TO NEW BUSINESS AND TO CONTINUE EXISTING OPERATIONS OF THE COMPANY, THE MINIMUM EXPENSES ARE REQUIRED TO BE INCURRED AND SAID EXPENSES ARE ALLOW ABLE. IT WAS ALSO EXPLAINED THAT NATURE OF OTHER RENTAL INCOME IS HIRE CHARGES OF COMPUTERS. T HIS INCOME IS ALSO ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS BECAUSE IN EARLIER YEAR ALSO, THE ASSESSEE COMPANY HAS GIVEN THE COMPUTERS ON HIRE. ONLY ONE FLOOR WAS GIVEN ON RENT AND REMAINING FLOORS ARE IN THE POSSESSION OF THE ASSESSEE WHICH WERE USED BY THE A SSESSEE FOR ITS USE WHICH IS EVIDENT FROM THE FACT THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS DISALLOWED PROPORTIONATE DEPRECIATION ON BUILDING WHILE COMPUTING THE INCOME UNDER THE HE AD INCOME FROM HOUSE PROPERTY. THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECI SION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. VS- BLEND WELL BOTTLES ( P) LTD. REPORTED IN 323 ITR 18 (KAR) WHEREIN IT WAS HELD THAT IF FOR THE REASONS WHICH W ERE BEYOND THE CONTROL OF THE ASSESSEE, ITS 5 ITA NO. 2351-AHD-2009 BUSINESS ACTIVITIES WERE CLOSED, IT WAS ON ACCOUNT OF UNFORESEEN CIRCUMSTANCES- SUCH CLOSURE WILL NOT DISENTITLE THE ASSESSEE TO CLAIM DEPRECIAT ION. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT-VS-ANITA JAIN REPORTED IN 182 TAXMAN 173 (DEL) WHEREIN IT WAS HELD THAT IN CASE T HE BUSINESS HAD CLOSED DOWN BUT ASSESSEE WAS MAINTAINING OFFICE, RETAINING THE STAFF AND WAS ENGAGED IN THE BUSINESS OF EXPORT, IN THAT EVENT, EXPENSES CANNOT BE DISALLOWED. 5.1 WITH REGARD TO DISALLOWANCE OF FINANCIAL EXPENS ES OF RS.68,189/-, IT WAS CONTENDED THAT INTEREST WAS PAID ON LOAN BORROWED TO ACQUIRE THE COMPUTERS WHICH WERE ULTIMATELY GIVEN ON RENT AND OWN USED. THE LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) HAS CONSIDERED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE SUBMITTED THAT RENTAL INCOME RECEIVED FROM GIVING THE COMPUTE RS ON HIRE IS ASSESSABLE AS BUSINESS INCOME AND WHATEVER INTEREST/FINANCIAL EXPENSES ARE INCURRED ARE ALLOWABLE UNDER SECTION 28 OF THE I.T. ACT, 1961. FURTHER DEPRECIATION ON FURN ITURE AND TWO FLOORS BE ALLOWED AS BUSINESS EXPENDITURE. 5.2 WITH REGARD TO CONFIRMATION OF DISALLOWANCE OF DEPRECIATION OF RS.3,81,779/-, THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS CONSIDERED RENT FROM PROPERTY AS INCOME FROM HOUSE PROPERTY AND DEPRECIATION OF RS.8 6,803/- (ON PROPORTIONATE BASIS OF PROPERTY) WAS SUO MOTU DISALLOWED BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT ASSET LOOSES ITS INDIVIDUAL ENTITY AFTER IT ENTERS THE BLOCK OF ASSET. THE CONDITION OF USER REQUIRED FOR ALLOWING THE DEPRECIATION APPLIES ONLY IN RESPECT O F THE FIRST YEAR WHERE THE INDIVIDUAL ASSET ENTERS THE BLOCK FOR THE FIRST TIME AND THEREAFTER THE DEPRECIATION SHOULD BE ALLOWED ON THE ENTIRE BLOCK ON ROUTINE BASIS, IRRESPECTIVE OF USER CONDITION. IN SUPPORT OF THIS, RELIANCE WAS PLACED ON THE JUDGEMENT OF HON'BLE MUMBAI HIGH COUR T DATED 17 TH JULY, 2008 IN THE CASE OF G.R. SHIPPING LTD. VS. DCIT IN ITA NO.822/MUM/05. F URTHER RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CAS E CIT-VS- OSWAL AGRO MILLS LTD. IN ITA NO.161 OF 2006 WHEREIN IT WAS HELD THAT DESPITE NON USER OF THE ASSET, DEPRECIATION IS ALLOWABLE, IF IT IS PART OF BLOCK OF ASSETS. 5.3 WITH REGARD TO DISALLOWANCE OF PRELIMINARY AND PREOPERATIVE EXPENSES, IT WAS CONTENDED THAT THE SAID EXPENSES CONSIST OF EXPENSE S OF INCORPORATION OF THE COMPANY WHICH 6 ITA NO. 2351-AHD-2009 ARE CLAIMED OVER TEN YEARS WHICH IS PRE-DETERMINED BY STATUTE ITSELF AND HENCE THE DISALLOWANCE OF THE SAID EXPENSES BE DELETED. 6. ON THE OTHER HAND, SHRI VIMALENDU VERMA, D.R., A PPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS). THE LD. D.R. POINTED OUT THAT IN THE REVISED RETURN OF INCOME, THE ASSESSEE COMPANY ITSELF HAS DECLARED THE INCOME UNDER HEAD INCOME FROM HOUSE P ROPERTY AND VARIOUS CONTENTIONS, NOW RAISED, WERE NOT RAISED BEFORE BOTH THE DEPARTMENTA L AUTHORITIES BELOW. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE STATEMENT OF FACTS FILED BEF ORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) READS AS UNDER: 1) THE APPELLANT ABOVENAMED CRAVES LIBERTY TO PLA CE THE FOLLOWING FACTS IN CONNECTION WITH APPEAL FILED BY IT AGAINST THE ORD ER OF LEARNED ASST. COMMISSIONER OF IT CIRCLE 4, AHMEDABAD. (HEREINAFTER REFERRED TO A S THE LD A.O.) DATED 31.10.2008 WHICH WAS SERVED ON 10/11/2008. 2) THE APPELLANT HAS RENTAL INCOME FROM PROPERTY AND FURNITURE &. FIXTURES. THE PROPERTY IS DIVIDED INTO 3 FLOORS AND OUT OF WHICH ONE FLOOR HAS BEEN GIVEN ON RENT WITH FURNITURES AND FIXTURES. IN THE REMAINING TWO FLOORS THE APPELLANT IS CARRYING ON ITS OPERATIONS. IN PREVIOUS YEARS IT WAS ENGAGED I N THE BUSINESS OF DATA PROCESSING AND OTHER INFORMATION TECHNOLOGY RELATED SERVICES. THE APPELLANT IS STRIVING TO CATER NEW BUSINESS AND MAKING EFFORTS TO RECOVER THE OUT STANDINGS FROM THE DEBTORS. IT HAS SUBMITTED ITS RETURN OF INCOME ON 24.10.2005 DECLA RING TOTAL LOSS OF RS. 351130/-. HOWEVER NOTICE U/S 148 DATED 18.9.2007 WAS ISSUED TO FILE RETURN WITHIN 30 DAYS. THE APPELLANT FILED THE RETURN AGAIN IN REPLY OF THE N OTICE DECLARING TOTAL LOSS OF RS. 298675/-. THE APPELLANT HAS REVISED ITS LOSS TO AV OID LITIGATION AND TO BUY PEACE OF MIND. 3) THE LD A.O. HAS ASSESSED RENTAL INCOME OF RS.2 42636/- AS BUSINESS INCOME AND DISALLOWED THE STANDARD DEDUCTION AVAILABLE U/S 24 . THE APPELLANT BELIEVES THAT IF AN INCOME IS ASSESSED UNDER HOUSE PROPERTY IT IS ENTI TLED TO CLAIM STANDARD DEDUCTION OF RS.72791/-(30%) AND IF AN INCOME IS ASSESSED UNDER BUSINESS INCOME IT IS ENTITLED TO CLAIM DEPRECIATION OF RS.126877/-(RS.86803/- ON BU ILDING AND RS.40074/- ON FURNITURE & FIXTURES). THE LD. A.O. HAS DEPRIVED T HE APPELLANT FROM ANY OF THE DEDUCTION AVAILABLE UNDER STATUE. 7 ITA NO. 2351-AHD-2009 4) THE LD. A.O HAS ISSUED A NOTICE UNDER SECTION 142(1) AND BY HIS ORDER DATED 31.10.2008 MADE AN ERRONEOUS ADDITION OF RS. 6,93, 772/- FOR THE SAKE OF DISALLOWANCE AND ASSESSED TOTAL INCOME AS RS. 2,24,251/- AND LE VIED A DEMAND OF RS.1,17,319/- WITHOUT GIVING EFFECT OF CARRIED FORWARD DEPRECIAT ION LOSSES AND BUSINESS LOSSES. HOWEVER THE APPELLANT HAS FILED AN APPLICATION U/S . 154 TO REVISE THE ORDER AS IT IS APPARENT MISTAKE. 5) THE LD A.O. HAS WITHOUT GIVING ANY SHOW CAUSE NOTICE OR GIVING US A REASONABLE OPPORTUNITY OF BEING HEARD, DISALLOWED THE HUGE EX PENDITURE. INSPITE OF REQUEST FROM APPELLANT THE LD. A.O. HAS NOT AFFORDED A SINGLE O FFICIAL HEARING TO THE APPELLANT AND THEIR DULY AUTHORIZED REPRESENTATIVE. THE LD. A.O. HAS NOT CONSIDERED THE FACTS NARRATED AND PRODUCED IN THE SUBMISSION WITH REGAR D TO THE GENUINITY OF EXPENDITURES INCURRED. 7.1 IN PARA 2 OF THE AFORESAID STATEMENT OF FACTS, THE ASSESSEE HAS STATED THAT PROPERTY IS DIVIDED INTO THREE FLOORS AND OUT OF WHICH ONE FLOO R HAS BEEN GIVEN ON RENT WITH FURNITURES AND FIXTURES. IN THE REMAINING TWO FLOORS, THE ASSE SSEE IS CARRYING ON ITS OPERATION. THE FACTS MENTIONED IN THAT PARA INDICATE THAT THE ASSESSEE H AS NOT COMPLETELY CLOSED DOWN ITS BUSINESS. THIS IS EVIDENT FROM THE FACT THAT OTHER INCOME IS NOTHING BUT HIRE CHARGES OF COMPUTERS. THIS ASPECT HAS BEEN COMPLETELY IGNORED BY BOTH THE DEPA RTMENTAL AUTHORITIES BELOW. IN PARA 7 OF THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE CARRY FORWARD LOSSES AND DEPRECIATION, AS PER LAW, AFTER VERIFYING THE RECORD ACCORDINGLY. IT APPEARS THAT I N THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS GIVE N THE COMPUTERS/TABLE SPACE ON RENT FROM WHICH THE INCOME EARNED IS SHOWN UNDER THE HEAD OT HER RENT INCOME. THIS INCOME, IN MY OPINION, IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION AND THE ASSESSEE IS ENTITLED TO DEPRECIATION ON COMPUTERS WHICH WERE GIVEN ON RENT AS WELL AS FINANCIAL EXPENSES WHICH IS NOTHING BUT INTEREST PAID ON LOAN S BORROWED TO ACQUIRE THE COMPUTERS WHICH WERE GIVEN ON RENT. 7.2 IN VIEW OF THE FOREGOING, I AM OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE, IF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT OTHER RENT RS.99,700/-, WHICH IS RENTAL INCOME FROM COMPUTERS/FURNITURE/TABLE SPA CE AND VATVA & KASAR (DISCOUNT) INCOME 8 ITA NO. 2351-AHD-2009 RS.28,436/- UNDER SECTION 41(1) OF THE I.T. ACT, 19 61 UNDER THE HEAD INCOME FROM BUSINESS AND THEREFROM ALLOW THE FOLLOWING: I) FINANCIAL EXPENSES AMOUNTING TO RS.68,189/- AS THIS IS NOTHING BUT INTEREST PAID ON LOAN BORROWED TO ACQUIRE THE COMPUTERS WHICH WERE ULTIMATELY GIVEN ON RENT AND/OR USED BY THE ASSESSEE ITSELF. II) DEPRECIATION ON COMPUTER AND BUILDING EXCEPT T HE DEPRECIATION ON ONE FLOOR WHICH IS GIVEN ON RENT (INCOME OF WHICH IS DECLARED AS A SSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY) 7.3 ASSESSING OFFICER WILL RE-COMPUTE THE INCOME OF THE ASSESSEE, IN ACCORDANCE WITH THE DIRECTIONS GIVEN ABOVE. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.03.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 25/03/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S. 9 ITA NO. 2351-AHD-2009