ALKA N. MANDKE, MUMBAI V. ASST CIT 11(2), MUMBAI

ITA 2356/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4067 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Depreciation
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 2356 / MUM/ 201 3 ( / ASSESSMENT YEA R : 200 9 - 10 ) MRS.ALKA N MANDKE, 1ST FLOOR, KADAMGIRI HANUMAN ROAD, VILLE PARLE (E), MUMBAI - 400057 / VS. ASSTT. COMMISSIONER OF INCOME TAX, 11 ( 2), AAYAKR BHAV AN , M K ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAFPM7755D / A SSESSEE BY SHRI SANJAY R PARIKH / RE VENUE BY SHRI GANESH BARE / DATE OF HEARING : 13 .1.20 16 / DATE OF PRONOUNCEM ENT: 3. 2 .2016 / O R D E R P ER B R BASKARAN,AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 21.12.2012 PASSED BY THE LD.CIT(A) - 3 , MUMBAI FOR THE ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING ISSUES: A ) DETERMINATION OF ANNUAL RENTAL (LETTING) VALUE IN RESPECT OF DEEMED TO BE LET OUT PROPERTY / - ; B ) DISALLOWANCE OF DEPRECIATION ; C ) DISALLOWANCE MADE U/S 14A OF THE ACT ; D ) ASSESSMENT OF SHORT TERM CAPITAL LOSS AT LOWE R FIGURE. 2356 /M/201 3 2 2. THE ASSESSEE IS A DOCTOR BY PROFESSION. THE ASSESSEE HE LD ABOUT 8 FLATS IN PUNE AND BOMBAY AS DETAILED BELOW : S.NO. PROPERTY BALANCE SHEET VALUE 1 FLAT AT KADAMGIRI APARTMENTS 12,26,100 2 FLAT AT KA N DIVALI 47,11,412 3 FLAT AT OBEROI CONSTRUCTION 50,70,193 4 FLAT AT PUNE (KOHINOOR DEV) 34,14,129 5 FLAT AT PUNE (RAVINDRA GURJARI) 4,37,200 6 FLAT AT PUNE (SATHE) 9,44,000 7 FLAT AT SHIVSWAMI KRUPA HSG SOC. 1,80,000 8 FLAT AT DAHISAR 26,33,330 3 . THE ASSESSEE CLAIMED THAT THE FLAT LOCATED AT KADAMGIRI APARTMENTS IS SELF OCCUPIED PROPERTY. THE ASSESSEE OFFERED RENTAL INCOME IN RESPECT OF FLAT AT PUNE (KOHINOOR DEV). IN RESPECT OF THE REMAINING PROPERTIES, THE ASSESSEE DID NOT SHOW ANY RENTAL INCOME. HENCE, THE AO ASKED THE ASSESSEE TO PRODUCE DETAILS RELATING TO RENTAL INCOME ALONG WITH THE M UNICIPAL VALUE CERTIFICATE FOR THE PROPERTIES WHICH WERE NOT LET OUT, AS THEY HAVE TO BE ASSESSED AS DEEMED TO BE LET OUT PROPERTIES AS PER THE PROVISIONS OF THE ACT. THE ASSESSEE DID NOT FURNISH THE DETAILS THAT WERE CALLED FOR AND INSTEAD OFFERED A CON SOLIDATED AMOUNT OF RS.1,75,000/ - AS RENTAL INCOME IN RESPECT OF THE REMAINING PROPERTIES. THE AO DID NOT ACCEPT THE SAME AND HENCE HE ASSESSED 8% OF THE VALUE OF THE PROPERTIES AS ANNUAL LETTING VALUE (ALV). THE LD. CIT(A) ALSO CONFIRMED THE SAME. 4 . T HE LD. AR SUBMITTED THAT THE MUNICIPAL RATABLE VALUE SHOULD BE CONSIDERED AS STANDARD RENT FOR ASCERTAINING THE ALV OF THE PROPERTY. ACCORDINGLY, HE SUBMITTED THAT THE AMOUNT OF RS.1,75,000/ - OFFERED BY THE ASSESSEE WAS REASONABLE. WHEN A SPECIFIC QUESTI ON WAS PUT TO THE A R AS TO WHETHER THE ALV OF RS.1,75,000/ - OFFERED BY THE ASSESSEE IS BASED UPON THE MUNICIPAL RATABLE VALUE, HE FAIRLY ADMITTED THAT IT WAS AN ESTIMATE MADE BY THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE 2356 /M/201 3 3 SHOULD BE GIVEN ONE MORE OPPORTUNITY TO FURNISH THE CERTIFICATE S P ERTAINING TO THE MUNICIPAL RATABLE VALUE IN RESPECT OF REMAINING PROPERTIES. THE LD. AR SUBMITTED THAT THE AO ASKED THE ASSESSEE TO PRODUCE MUNICIPAL RATABLE VALUE CERTIFICA TE S ON 1.12.2011 , BU T THE ASSESSE E COULD NOT OBTAIN THE M WITHIN A SHORT PERIOD GIVEN BY THE AO AND T HE AO ALSO COMPLETED THE ASSESSMENT ON 23.12.2011. ACCORDINGLY, HE PRAYED THAT THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY TO FURNISH THE RELEVANT CERTIFICATES. 5 . WE HEARD THE LD. DR AND PERUSED THE RECORD. WE FIND MERIT IN THE PRAYE R MADE BY THE LD.AR. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITION THAT MUNICIPAL RATABLE VALUE IS CONSIDERED AS STANDARD RENT FOR THE PURPOSE OF DETERMINING THE ALV UNDER SECTION 23 OF THE ACT. IN THE INSTANT CASE, BOTH THE ASSESSEE AS WELL AS THE AO HAS FAILED TO BRING THE DETAILS RELATING TO MUNICIPAL RATABLE VALUE . HENCE, UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO . ACCORDINGLY , WE SET ASIDE THE ORDER LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO DETERMINE THE ALV OF THE PROPERTIES BY DULY CONSIDERING THE MUNICIPAL RATABLE VALUE CERTIFICATE OF THE RESPECTIVE PROPERTIES AND TAKE APPROPR IATE DECISION IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO CO - OPERAT E WITH THE AO BY FURNISHING ALL THE DETAILS THAT MAY BE CALLED FOR THE BY AO . 6. THE NEXT ISSUE RELATES TO REJECTION OF CLAIM OF DEPRECIATION. THE ASSESSEE S FATHER DR.N V MANDKE OWN ED A HOSPITAL AND HE PASSED AWAY IN THE YEAR 2003. AFTER THE DEMISE OF HER FATHER, T HE ASSESSEE CONTINUED TO RUN THE ABOVE SAID HOSPITAL UNDER THE NAME DR. N V MANDKE MEMORIAL SERVICES . FOR THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDE RATION , THE ACCOUNTS OF DR.N V MANDKE MEMORIAL SERVICES WERE MERGED WITH THE ACCOUNT S OF THE ASSESSEE. ACCORDINGLY, THE ASSESSEE CLAIMED DEPRECIATION ON THE ASSETS OWNED BY DR.N V MANDKE MEMORIAL 2356 /M/201 3 4 SERVICES . THE AO NOTICED THAT THE ASSESSEE DID NOT CARR Y O N ANY PROFESSIONAL ACTIVITY IN DR. N V MANDKE MEMORIAL SERVICES AND ACCORDING LY , NO INCOME WAS DECLARED FROM THAT CONCERN. HENCE, THE AO TOOK THE VIEW THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE ASSETS BELONGING TO DR.N.V.MANDKE MEMORIAL SERVICE S CANNOT BE ALLOWED. ACCORDINGLY, HE DISALLOWED CLAIM OF DEPRECIATION OF RS.4,26,562/ - AND THE SAME WAS CONFIRMED BY THE LD. CIT(A). 7 . THE LD. AR SUBMITTED THAT THE ASSESSEE HAS BEEN OFFERING INCOME FROM THE CONCERN DR.N V MANDKE MEMORIAL SERVICES IN T HE EARLIER YEARS AND DEPRECIATION CLAIMED BY THE ASSESSEE WAS ALSO ALLOWED. IT IS SUBMITTED THAT THE DEPRECIATION CANNOT BE REJECTED ONLY ON THE REASONING THAT THE ASSESSEE DID NOT GENERATE ANY INCOME OUT OF THE SAID CONCERN. B Y PLACING RELIANCE ON THE O RDER DATED 17.11.2015 PASSED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S M/S SONIC BIOCHEM EXTRACTIONS PVT LTD IN INCOME TAX APPEAL NO. 2088 OF 2013, TH E LD. AR SUBMITTED THAT THE IDENTITY OF THE INDIVIDUAL ASSETS IS LO ST WHEN IT BECOMES THE PART OF BLOCK OF ASSETS AND HENCE, THE USE R TEST IS REQUIRED TO BE SATISFIED ONLY AT THE TIME OF PURCHASE OF ASSETS AND NOT THEREAFTER. 8 . ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASSESSEE DISCONTINUED THE OPERATION OF DR.N V MANDKE MEMORIAL S ERVICES AND HENCE, THE LD.CIT(A) WAS JUSTIFIED IN CONFIRMING THE REJECTION OF DEPRECIATION. 9 . WE HEARD THE PARTIES AND PERUSED THE RECORD. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS GENERATED INCOME FROM THE CONCERN DR.N V MANDKE MEMORIA L SERVICES IN THE EARLIER YEAR. HOWEVER, THE LD. AR DID NOT FURNISH ANY DOCUMENT TO SUBSTANTIATE ITS CLAIM. IF THE ASSESSEE HAS OFFERED THE INCOME FROM THE SAID CONCERN AND DEPRECIATION HAS ALSO BEEN ALLOW ON THE ASSETS OWNED BY IT, THE DEPRECIATION FOR T HE YEAR UNDER 2356 /M/201 3 5 CONSIDERATION CANNOT BE REJECTED ONLY ON THE GROUND THAT THE ASSESSEE DID NOT GENERATE ANY INCOME FROM THE ABOVE SAID CONCERN. HOWEVER, IT IS THE SUBMISSION OF THE LD. D R THAT THIS ISSUE REQUIRES VERIFICATION. ACCORDINGLY, WE SET ASIDE THE O RDER OF THE LD. CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SONIC BIOCHEM EXTRACTIONS PVT LTD (SUPRA). 10. THE NEXT ISSUE RE LATES TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE ASSESSEE HAD DECLARED DIVIDEND INCOME OF RS.7,99,341/ - AND DID NOT DISALLOW ANY EXPENDITURE U/S 14A OF THE ACT. THE AO DISALLOWED A SUM OF RS.2,78,982/ - UNDER RULE 8D(2)(III) OF THE I.T RULES TOWARDS ADMINISTRATIVE EXPENSES. THE LD CIT(A) ALSO CONFIRMED THE SAME. 11. THE LD A.R SUBMITTED THAT THE ASSESSEE DID NOT INCUR ANY EXPENSES IN RELATION TO THE DIVIDEND INCOME AND HENCE NO DISALLOWANCE IS CALLED FOR. ON THE CONTRARY, THE LD D.R SUBMITTED THA T THE ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPENSES IN HIS PROFIT AND LOSS ACCOUNT AND HENCE IT CANNOT BE SAID THAT THE ASSESSEE DID NOT INCUR ANY EXPENSES. 12. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO PERUSED THE PROFIT AND LOSS ACCOUNT FURNISHED BY TH E ASSESSEE AT PAGE 14 OF THE PAPER BOOK. THE EXPENSES INCURRED ON SALARIES, TELEPHONE AND SUNDRY EXPENSES WORKS OUT TO RS.2.25 LAKHS APPROXIMATELY. OTHER EXPENSES APPEAR TO RELATE TO THE PROFESSIONAL INCOME OF THE ASSESSEE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE PROVISIONS OF RULE 8D(2)(III) SHOULD NOT BE APPLIED IN THIS YEAR AND THE DISALLOWANCE SHOULD BE ESTIMATED ON A REASONABLE BASIS. WE FURTHER NOTICE THAT THE ASSESSEE HAS RECEIVED MOST OF THE DIVIDEND INCOME FROM MUTUAL FUNDS, INVES TMENT OF WHICH DOES NOT REQUIRE MUCH ANALYSIS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE DISALLOWANCE MAY BE ESTIMATED ON A ROUND SUM BASIS AT RS.20,000/ - AND THE SAME, IN OUR VIEW, WOULD MEET 2356 /M/201 3 6 THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. IN VIEW OF THE ABO VE, THE ORDER OF LD CIT(A) ON THIS ISSUE IS SET ASIDE AND THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE U/S 14A TO RS.20,000/ - , AS STATED ABOVE. 13. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF SHORT TERM CAPITAL LOSS AT RS.17,716/ - , WHERE AS THE CLAIM OF THE ASSESSEE IS THAT IT SHOULD HAVE BEEN ASSESSED AT RS.5,06,182/ - . SINCE THIS MATTER REQUIRES VERIFICATION AT THE END OF THE AO, WE SET ASIDE THIS MATTER TO HIS FILE. ACCORDINGLY, THE ORDER OF LD CIT(A) ON THIS ISSUE IS MODIFIED ACCORDINGLY. 14 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 3RD FEBRU ARY , 2016 . 3RD FEBRU ARY, 2016 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 3RD FEB , 201 6 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI