Sthapati Architecture and Interiors Pvt.Ltd., Ahmedabad V. Dy. Commissioner of Income Tax, Ahmedabad

ITA 2361/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8224 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Keywords: Capital asset; Depreciation
• Section: 43B; 201(1); 32; 37; 6; 28

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD L LL LOZJH OZJH OZJH OZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2361/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) STHAPATI ARCHITECTURE AND INTERIORS PVT. LTD., 502, NEW YORK PLAZA, OPP. JUDGES BUNGLOW, SATELLITE, AHMEDABAD 380015 / VS. DCIT, CIRCLE 8, AHMEDABAD. ./ ./ PAN/GIR NO. : AAHCS 8758 F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SAKAR SHARMA, C.A. / RESPONDENT BY : SHRI T. SANKAR, SR. D.R. / DATE OF HEARING 10/05/2018 !'# / DATE OF PRONOUNCEMENT 31/05/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-9, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- 9/463/14-15 DATED 01/05/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS 'THE ACT') DATED 06/11/2013 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- DISALLOWANCE UNDER SECTION 36(1)(VA) R.W.S. 43B & SECTION 37 1. THE LEARNED CIT(A) ERRED ON THE FACTS AND CIR CUMSTANCES OF THE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.265 48/- WITHOUT APPRECIATING THAT ACTUAL PAYMENT OF PROVIDENT FUND AND ESIC WAS MADE BEFORE DUE DATE OF FILING OF RETURN OF INC OME UNDER SECTION 43B. 2. THE LEARNED CIT (A) ERRED ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW IN NOT ALLOWING ACTUAL PAYMENT OF B USINESS EXPENSE FOR EMPLOYEES' CONTRIBUTION TOWARDS PF AND ESIC OF RS.26548/- UNDER SECTION 37. RELIEF CLAIMED THE SAID PAYMENT TOWARDS PF AND ESIC BE ALLOWED AS NORMAL BUSINESS EXPENSE UNDER SECTION 37 OR SECTION 43B. DISALLOWANCE UNDER SECTION 32 3. THE LEARNED CIT (A) ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF R S.590440/- WITHOUT APPRECIATING FACTS THAT DEPRECIATION ON REN TED MACHINERIES WERE USED FOR ASSESSEE'S BUSINESS, ALSO OWNED BY IT AND INCOME OF RENT SHOWN UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. RELIEF CLAIMED SAID AMOUNT TOWARDS DEPRECIATION ON RENTED MACHINER Y OWNED AND USED BY APPELLANT AND INCOME FROM THE SAME IS O FFERED FOR TAXATION UNDER THE HEAD INCOME FROM BUSINESS AND PR OFESSION, BE ALLOWED UNDER SECTION 32. DISALLOWANCE UNDER SECTION 40(A)(IA) READ WITH SECT ION 194J 4. THE LEARNED CIT(A) ERRED ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF R S.80000/- THOUGH APPELLANT IS NOT ASSESSEE IN DEFAULT ACCORDI NG PROVISIONS ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 3 - OF SUB-SECTION (1) OF SECTION 201 READ WITH SECTION 194J AND SECTION 40(A)(IA). 5. THE LEARNED CIT (A) ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF R S.25000/- THOUGH AMOUNT PAID FOR LEGAL EXPENSE IS BELOW THRES HOLD LIMIT AS SPECIFIED UNDER SECTION 194J AND HENCE, TAX IS NOT REQUIRED TO BE DEDUCTED BY APPELLANT. RELIEF CLAIMED DISALLOWANCE FOR BOTH THE AMOUNT I.E. RS.80000/- AN D RS.25000/- BE DELETED AND BE ALLOWED AS EXPENSE AS CLAIMED IN ORIGINAL RETURN OF INCOME. NON-CONSIDERATION OF AN ARGUMENT BY THE LD. CIT (A) 6. THE LEARNED CIT (A) ERRED IN LAW IN NOT CONSI DERING SUBMISSION MADE FOR ALLOWANCE OF DEPRECIATION UNDER SECTION 32 AS PER GROUND OF APPEAL NUMBERS 3 ABOVE. THE LEARNED CIT ( A) ERRED IN LAW BY NOT PASSING SPEAKING ORDER AGAINST CONTENTIO N MADE BY THE APPELLANT. RELIEF CLAIMED THE SAID SUBMISSION BE CONSIDERED AND DISALLOWANCE OF DEPRECIATION OF RS.590440/- BE DELETED. 7. THE LEARNED CIT(A) ERRED IN LAW IN NOT CONSID ERING SUBMISSION MADE TOWARDS COMPLIANCE WITH PROVISION OF SECTION 4 0(A)(IA) R.W.S. 201(1) FOR DISALLOWANCE OF RS.80000/- AS PER GROUND OF APPEAL NUMBERS 4 ABOVE. THE LEARNED CIT (A) ERRED I N LAW BY NOT PASSING SPEAKING ORDER FOR THE SAME. RELIEF CLAIMED THE SAID SUBMISSION BE CONSIDERED AND DISALLOWANCE OF RS.80000/- BE DELETED. 3. THE FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO. 1 AND 2 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2 6,548/- ON ACCOUNT ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 4 - OF PAYMENT FOR EMPLOYEES CONTRIBUTION TOWARDS PF A ND ESIC AFTER THE DUE DATE. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF ARCHITECTURE , INTERIOR DECORATOR AND TURNKEY CONTRACTOR. THE AO DURING THE ASSESSMEN T PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC AMOUNTING TO RS.26,548/- AFTER THE DUE DATE AS SPECIFIED UNDER THE RELEVANT ACT. THEREFORE, THE AO DISALLOWE D THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO HAS CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 3.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ON. I HAVE ALSO PERUSED THE CASE LAWS RELIED UPON BY THE LD. A.R. I T IS SEEN THAT THE PROVIDENT FUND RECEIVED FROM EMPLOYEES WERE DEPOSIT ED IN THE PROVIDENT FUND ACCOUNT BEYOND THE DUE DATES AS PRESCRIBED IN THE P.F. ACT. SIMILARLY, THERE HAS BEEN DELAYED PAYMENT W.R.T. ES IC. AFTER DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. GUJARAT STATE ROAD TRANSPORT CORPORATION REPORTED IN 265 CTR 64 ( GUJ.) THE FACTUAL LEGAL POSITION HAS CHANGED. IN THIS CASE HON'BLE HI GH COURT OF GUJARAT HELD THAT THE PROVISIONS OF SECTION 43B OF THE INCO ME TAX ACT, 1961 ('THE ACT') DO NOT APPLY TO 'EMPLOYEES' CONTRIBUTION TO E SI/PF' AND THE DEDUCTION IN RESPECT OF THE SAME IS ALLOWABLE ONLY IF SUCH CONTRIBUTION IS DEPOSITED WITHIN THE 'DUE DATE' SPECIFIED IN EXPLAN ATION TO SECTION 36(1)(VA) OF THE ACT. WHILE RULING IN FAVOUR OF THE REVENUE, THE HIGH COURT DISTINGUISHED THE APEX COURT RULING IN ALOM E XTRUSIONS AND OTHER HIGH COURT DECISIONS, AT THE SAME TIME DISSENTED FR OM THE VIEW ADOPTED BY HIGH COURTS, WHICH RULED IN FAVOUR OF THE TAXPAY ER. THE HON'BLE GUJARAT HIGH COURT IN THE SAID DECISION HAS HELD TH AT WHERE THE EMPLOYER HAS NOT CREDITED THE SUM RECEIVED BY IT AS EMPLOYEES' CONTRIBUTION TO EMPLOYEES' ACCOUNT IN RELEVANT FUND ON OR BEFORE DUE DATE AS PRESCRIBED IN EXPLANATION TO SECTION 36(1)( VA), THE ASSESSEE ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 5 - SHALL NOT BE ENTITLED TO DEDUCTION OF SUCH AMOUNT T HOUGH HE DEPOSITS THE SAID SUM BEFORE THE DUE DATE PRESCRIBED U/S.43B, I. E. PRIOR TO FILING OF RETURN U/S.139(1) OF THE I.T. ACT. SINCE IN THIS CA SE, THE EMPLOYEES CONTRIBUTION TOWARDS EPF AND ESIC WAS NOT DEPOSITED BEFORE DUE DATE AS PRESCRIBED IN EXPLANATION TO SECTION 36(1)(VA) A CCORDINGLY, DISALLOWANCE OF RS.26,548/- IS CONFIRMED. THIS GROU ND OF APPEAL IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSE E IS IN SECOND APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK COMPRISI NG PAGES 1 TO 40 AND CONCEDED THE FACT THAT THE ISSUE FOR LATE DEPOS ITS OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC HAS BEEN DECIDED A GAINST THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GSRTC REPORTED IN 265 CTR 64. ON THE CONTRARY, THE LD. DR VEHEMENTLY SUPPORTED TH E ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, IT WAS OBSERVED THAT THE ISSUE FOR DELAYED DEPOSITS OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GSRTC (SUPRA). THE RELEVANT EX TRACT OF THE ORDER IS REPRODUCED BELOW: IN VIEW OF THE ABOVE AND CONSIDERING SECTION 36(1) (VA), READ WITH SUB- CLAUSE (X) OF CLAUSE (24) OF SECTION 2, IT IS TO BE HELD THAT WITH RESPECT TO THE SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EM PLOYEES TO WHICH PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) OF SECT ION 2 APPLIES, THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION IN COMPUTIN G THE INCOME REFERRED ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 6 - TO IN SECTION 28 WITH RESPECT TO SUCH SUM CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' MENTIONED IN EXPLANATION TO SECTION 36(1)(VA) . CONSEQUENTLY, IT IS HELD THAT THE TRIBUNAL HAS ERRED IN DELETING RESPEC TIVE DISALLOWANCES BEING EMPLOYEES' CONTRIBUTION TO PF ACCOUNT/ESI ACC OUNT MADE BY THE ASSESSING OFFICER AS, AS SUCH, SUCH SUMS WERE NOT C REDITED BY THE RESPECTIVE ASSESSEE TO THE EMPLOYEES 'ACCOUNTS IN T HE RELEVANT FUND OR FUNDS ON OR BEFORE THE DUE DATE AS PER THE EXPLANAT ION TO SECTION 36(1)(VA) OF THE ACT I.E. DATE BY WHICH THE CONCERN ED ASSESSEE WAS REQUIRED AS AN EMPLOYER TO CREDIT EMPLOYEES' CONTRI BUTION TO THE EMPLOYEES ACCOUNT IN THE PROVIDENT FUND UNDER THE P ROVIDENT FUND ACT AND/OR IN THE ESI FUND UNDER THE ESI ACT. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT LAID DOWN BY THE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE SECOND ISSUE RAISED BY THE ASSESSEE IN GROUN D NO.3 AND 6 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF DEPRECIATION RS.5,90,440/- ON THE GROUND THAT THE MACHINERIES WE RE NOT USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. 9. THE ASSESSEE DURING THE YEAR HAS SHOWN RENTAL IN COME UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION ON ACCOUNT OF RENTING OUT OF THE MACHINERIES. ACCORDINGLY, THE ASSESSEE CLAIMED DEPRECIATION IN ITS BOOKS OF ACCOUNTS, ON THE VALUE OF THE MACHINERIES RENTED OUT TO THIRD PARTY. HOWEVER, THE AO WAS OF THE VIEW THAT MACHINE RIES RENTED OUT BY THE ASSESSEE WERE NOT ACTUALLY USED BY THE ASSESSEE ITSELF. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION. 10. SIMILARLY, THE AO WITHOUT PREJUDICE TO THE ABOV E ALSO OPINED THAT THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE ASSES SEE SUGGESTING THAT ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 7 - SUCH MACHINES HAVE ACTUALLY BEEN USED BY THE PERSON S WHO HAVE TAKEN THEM ON RENT. THUS, IN VIEW OF ABOVE, THE DEPRECIATION CLAIMED BY THE ASSESSEE FOR RS.5,90,440/- ON SUCH MACHINERIES WAS DISALLOWED AN D ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE P ROVISION OF SECTION 32 OF THE ACT REQUIRES THAT THE ASSET MUST BE OWNED EI THER WHOLLY OR PARTLY BY IT AND THE SAME SHOULD BE USED FOR THE PURPOSE O F THE BUSINESS. PROVISION OF SECTION 32 OF THE ACT DOES NOT SAY THA T THE ASSET MUST BE USED BY THE ASSESSEE ITSELF, MEANING THEREBY, IT CA N BE USED BY ANY OTHER PERSONS FOR THE PURPOSE OF THE BUSINESS. THE ASSESS EE HAS GIVEN MACHINES ON RENTAL BASIS, WHICH HAS BEEN USED FOR THE PURPOS E OF THE BUSINESS BY THE OTHER PARTY. THUS, THE PROVISION OF SECTION 32 HAVE BEEN DULY COMPLIED WITH IN THE CASE ON HAND. EVEN IN THE EARLIER YEAR A RENTAL INCOME WAS OFFERE D TO TAX UNDER THE HEAD BUSINESS OR PROFESSION AND DEPRECIATION THEREON WAS DULY ALLOWED TO THE ASSESSEE. THE OBJECTS MENTIONED IN THE MEMORANDUM OF THE ASSO CIATION PERMITS THE ASSESSEE TO RENT OUT THE MACHINERIES. THEREFORE, IT CAN BE INFERRED THAT THE ASSESSEE HAS RENTED OUT THE MACHINERIES FOR THE PUR POSE OF ITS BUSINESS. 12. HOWEVER, THE LD. CIT(A) DISREGARDED THE CONTENT ION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 8 - 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. I AM IN AGREEMENT WITH THE CONTENTION OF THE AO WRT THE DIS ALLOWANCE OF RS.5,90,440/- U/S.32 OF THE I. T. ACT. THE APPELLAN T HAS FAILED TO PRODUCE EVIDENCE WRT USAGE OF MACHINERY GIVEN ON THE RENT I N CONNECTION WITH CLAIM OF DEPRECIATION BY IT. THE RENTED MACHINERIES ARE OWNED BY THE ASSESSEE. HOWEVER, THEY HAVE NOT BEEN UTILIZED BY T HE ASSESSEE. FURTHER, THE MACHINERIES HAVE BEEN GIVEN ON RENT. IN THIS CA SE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF 'ARCHITECTURE, INTERIOR DECORATORS AND TURNKEY CONTRACTOR' AS PER 3CD REPORT. 'GIVING MACH INERIES ON RENT' IS NOT THE BUSINESS OF THE ASSESSEE. THUS, THE CONDITI ON PRESCRIBED IN 32 REGARDING USE FOR THE PURPOSES OF BUSINESS OR PROF ESSION' IS NOT FULFILLED. THEREFORE, IN MY CONSIDERED OPINION THE APPELLANT IS NOT ENTITLED TO CLAIM DEPRECIATION SECTION 32 ON THE MA CHINERY GIVEN ON RENT. ACCORDINGLY, THE ADDITION ON ACCOUNT OF DISAL LOWANCE OF DEPRECIATION/S 32 IS CONFIRMED. THIS GROUND OF APPE AL IS DISMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN SECOND APPEAL BEFORE US. 13. THE LD. AR BEFORE US REITERATED THE SUBMISSION AS MADE BEFORE THE LD. CIT(A). ON THE CONTRARY, THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES TO THE DEPRECIATION ALLOWANCE CLAIMED BY THE ASSESSEE ON T HE MACHINERIES, WHICH HAVE BEEN RENTED OUT BY IT. AS PER THE LOWER AUTHORITIES, THE MACHINERIES HAVE NOT BEEN USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THEREFORE, THE DEPRECIATION CLAIMED THERE ON CANNOT BE ALLOWED AS DEDUCTION UNDER THE PROVISION OF SECTION 32 OF T HE ACT. AT THIS JUNCTURE, WE FIND IMPORTANT AND RELEVANT PR ODUCE THE PROVISION OF SECTION 32 OF THE ACT, WHICH READS AS UNDER: ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 9 - 32. (1) 89 [IN RESPECT OF DEPRECIATION OF (I) BUILDINGS 90 , MACHINERY 90 , PLANT OR FURNITURE, BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRAD E MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED 90 , WHOLLY OR PARTLY, BY THE ASSESSEE 90 AND USED FOR THE PURPOSES OF THE BUSINESS 90 OR PROFESSION. A READING THE ABOVE PROVISION REVEALS THAT THE ASSE SSEE MUST OWNED THE ASSET EITHER PARTLY OR WHOLLY AND THE SAME SHOULD B E USED FOR THE PURPOSE OF THE BUSINESS. IT IS NOWHERE MENTIONED THAT THE A SSET MUST BE USED FOR THE PURPOSE OF THE BUSINESS BY THE ASSESSEE ITSELF. THERE IS SUFFICIENT COMPLIANCE OF THE PROVISIONS OF SECTION 32 OF THE A CT, IF THE ASSETS ARE USED BY ANY OTHER PERSONS FOR THE PURPOSE OF THE BU SINESS. IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE ON THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF ICDS LTD. VS. CIT, REPORTED IN 350 ITR 527, WHEREIN IT WAS HELD AS UNDER: THEREFORE, IN THE FACTS OF THE PRESENT CASE, WE HO LD THAT THE LESSOR I.E. THE ASSESSEE IS THE OWNER OF THE VEHICLES. AS THE O WNER, IT USED THE ASSETS IN THE COURSE OF ITS BUSINESS, SATISFYING BOTH REQU IREMENTS OF SECTION 32 OF THE ACT AND HENCE, IS ENTITLED TO CLAIM DEPRECIA TION IN RESPECT OF ADDITIONS MADE TO THE TRUCKS, WHICH WERE LEASED OUT . FROM THE ABOVE JUDGMENT, IT IS INFERRED THAT THE US E OF CAPITAL ASSET BY THE ASSESSEE BEING OWNER IS NOT MANDATORY. WHAT IS REQU IRED UNDER THE PROVISIONS OF SECTION 32 OF THE ACT IS THAT THE ASS ET MUST BE USED FOR THE PURPOSE OF THE BUSINESS. 15. THE AO IN HIS ORDER HAS ALSO ALLEGED THAT THERE IS NO EVIDENCE SUGGESTING THAT THE PARTY WHO HAS TAKEN MACHINERY O N RENTAL BASIS HAS ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 10 - USED THE MACHINE FOR THE PURPOSE OF ITS BUSINESS. I N THIS REGARD, WE OBSERVED THAT THE ASSESSEE HAS DISCHARGED HIS ONUS BY SHOWING THE RENTAL INCOME FROM THE MACHINERIES IN ITS INCOME TAX RETUR N. THEREFORE, THE ASSESSEE IS NOT ANSWERABLE, WHETHER THE PARTY WHO H AS TAKEN THE MACHINES FROM THE ASSESSEE HAS ACTUALLY USED FOR THE PURPOSE OF THEIR BUSINESS. BESIDES THE ABOVE WE ALSO OBSERVE THAT THE ASSESSEE HAS OFFERED RENTAL INCOME FROM THE MACHINERIES UNDER THE HEAD BUSINESS OR PROVISIONS AND THE SAME HAS NOT BEEN DISPUTED BY THE LOWER AUTHORI TIES. THEREFORE, THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION CORRESPO NDING TO THE RENTAL INCOME DERIVED FROM THE LETTING OUT OF MACHINERIES U/S 32 AS WELL AS 57(III) OF THE ACT. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION IN RESPECT OF THE MACHINERIES RENTED OUT TO THE THIRD PARTY BY THE ASSESSEE. ACCORDINGLY, WE REVERSE THE ORDER OF LOWER AUTHORITIES AND DIRECT THE AO TO DELETE THE ADDITIO N MADE BY HIM. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 16. THE THIRD ISSUE RAISED BY THE ASSESSEE IN GROUN D NO.4, 5 AND 7 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MA DE BY THE AO ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 194J R.W.S. 40( A)(IA) OF THE ACT. THE ASSESSEE DURING THE YEAR HAS CLAIMED CERTAIN EXPENS ES UNDER THE HEAD LEGAL AND PROFESSIONAL FEES. THE DETAILS OF THE EXP ENSES CLAIMED BY THE ASSESSEE IS LISTED AS UNDER: SR. NO. PARTY NAME AMOUNT 1. SANJIV KHURANA RS. 30,000/- 2. R. M. MODI (ACCOUNT WRITING FEES) RS. 50,000/- ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 11 - 3. NILESH B. SONI RS. 15,000/- TOTAL RS.1,05,000/- THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ABOVE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE WITHO UT DEDUCTING THE TDS U/S 194J OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A ). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE ACCOUNTANT INADVERTENTLY OMITTED TO DEDUCT TDS FROM THE AFORESAID PAYMENT. H OWEVER THE AFORESAID PARTIES HAVE DULY DISCLOSED ABOVE RECEIPT S IN THEIR RESPECTIVE INCOME TAX RETURNS AND ACCORDINGLY, PAID THE TAXES ON THEIR INCOME AFTER INCLUDING THE ABOVE RECEIPTS. 17. THE ASSESSEE ALSO SUBMITTED THAT THE PAYMENT MA DE TO NILESH B. SONI FOR RS.25,000/- IS BELOW THE THRESHOLD LIMIT S PECIFIED U/S 194J OF THE ACT. THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT THE TDS U/S 194J OF THE ACT. HOWEVER, THE LD . CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONF IRMED THE ORDER OF AO BY OBSERVING AS UNDER: 6.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. I AM NOT INCLINED TO AGREE WITH THE CONTENTION OF THE APPELL ANT COMPLETELY. IT IS A FACT THAT WITH REGARD TO THE EXPENSES PERTAINING TO LEGAL FEE AMOUNTING TO RS.1,05,000/-, THE AO HAS RIGHTY DISALLOWED THIS AMOUNT. THE APPELLANT HAS ALSO ACCEPTED ITS MISTAKE IN NON-DEDU CTION OF TDS. ACCORDINGLY, THE DISALLOWANCE OF RS.1,05,000/- U/S. 40(A)(IA) OF THE ACT IS CONFIRMED. ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 12 - BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN SECOND APPEAL BEFORE US. 18. THE LD. AR BEFORE US SUBMITTED THAT SHRI SANJIV KHURANA HAS INCLUDED THE AMOUNT OF FEES RECEIVED FROM THE ASSES SEE IN THEIR INCOME TAX RETURN. THEREFORE, THE ASSESSEE IS NOT UNDER TH E OBLIGATION TO DEDUCT TDS U/S 194J R.W.S. 40(A)(IA) OF THE ACT. LD. AR IN SUPPORT OF HIS CLAIM HAS FILED THE COPIES OF INCOME TAX RETURN, STATEMEN T OF INCOME, TRADING AND PROFIT & LOSS ACCOUNT AND BALANCE SHEET, WHICH ARE PLACED ON PAGES 36 TO 39 OF THE PAPER BOOK. 19. THE LD. AR ALSO SUBMITTED THAT THE PAYMENT TO S HRI SANJIV KHURANA DOES NOT EXCEED THE THRESHOLD UNIT AS SPECI FIED U/S 194J OF THE ACT. THEREFORE, THE ASSESSEE IS NOT LIABLE TO DEDUC T TDS IN RESPECT OF PAYMENT MADE TO SHRI SANJIV KHURANA. THE ASSESSEE A LSO SUBMITTED THAT THE THRESHOLD UNIT WAS INCREASED FROM RS.20,000 TO RS.30,000/- UNDER THE PROVISION OF SECTION 194J OF THE ACT W.E.F 01/07/20 10 AND IN THE INSTANT CASE THE BILL WAS RAISED BY SANJIV KHURANA AFTER 1 ST JULY, 2007. THE LD. AR IN SUPPORT OF HIS CLAIM DREW OUR ATTENTION ON TH E COPY OF LEDGER OF SHRI SANJIV KHURANA MAINTAINED BY THE ASSESSEE IN I TS BOOK OF ACCOUNTS, WHICH IS PLACED ON PAGE 35 OF THE PAPER BOOK. 20. IN CASE PAYMENT MADE TO SHRI R. M. MODI, THE LD . AR SUBMITTED THAT THE PAYMENT WAS IN THE NATURE OF SALARY TO SHR I R. M. MODI AND THEREFORE THE LIABILITY OF TDS ARISES UNDER THE PRO VISION U/S 192 OF THE ACT. ACCORDINGLY, THERE WAS NO LIABILITY ON THE PAR T OF THE ASSESSEE TO ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 13 - DEDUCT TDS U/S 192 OF THE ACT AS SUCH PAYMENT DID N OT EXCEED THE THRESHOLD LIMIT SPECIFIED U/S 192 OF THE ACT. 21. IN CASE OF PAYMENT TO SHRI NILESH B. SONI, LD. AR SUBMITTED THAT PAYMENT WAS MADE BELOW THE THRESHOLD LIMIT AS SPECI FIED U/S 194J OF THE ACT. THEREFORE, THERE IS NO LIABILITY ON THE PART O F THE ASSESSEE FOR DEDUCTION OF TDS U/S 194J OF THE ACT. LD. AR ALSO S UBMITTED THAT THE THRESHOLD LIMIT HAS SPECIFIED U/S 194J OF THE ACT W AS ENHANCED FROM RS.20,000/- TO 30,000/- W.E.F 01/07/2010. BUT IN TH E INSTANT CASE, THE BILLS WERE RAISED BY SHRI NILESH B. SONI ON 7 TH JULY 2010. IN THIS REGARD, THE LD. AR FILED THE COPY OF LEDGER OF NILESH B. SONI M AINTAINED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS, WHICH IS PLACED ON PAGE 40 OF THE PAPER BOOK. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 22. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE PRESENT CASE HAVE ALREA DY BEEN ELABORATED IN THE PRECEDING PARAGRAPH. THEREFORE, WE ARE NOT INCL INED TO REPEAT THE SAME FOR THE SAKE OF BREVITY. 23. IN CASE THE PAYMENT MADE TO SHRI SANJIV KHURANA , WE NOTE THAT THE BILL WAS RAISED BY SHRI SANJIV KHURANA AFTER 1 ST JULY, 2010 AND THE LIMIT WAS ENHANCED FROM 20,000/- TO 30,000/- IN THE F.Y. 2010 W.E.F 01/07/2010. THEREFORE, THE CASE OF THE ASSESSEE FAL LS AFTER THE ENHANCEMENT OF THRESHOLD LIMIT. AS PER THE NEW THRE SHOLD LIMIT THE ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 14 - LIABILITY OF THE ASSESSEE ARISES IF THE PAYMENT OF PROFESSIONAL CHARGES TO A PERSON EXCEEDS RS.30,000/-. IN THE INSTANT CASE, NO DISPUTE HAS BEEN RAISED BY THE LOWER AUTHORITIES SUGGESTING THAT THE PAYMENT EXCEEDS RS.30,000/- IN THE CASE OF HAND TO SHRI SANJIV KHUR ANA. THEREFORE, WE HOLD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 194J OF THE ACT. CONSEQUENTLY THE ASSESSEE CANNOT BE HOLD GUILTY FOR NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT. 24. BESIDES THE ABOVE, WE ALSO NOTE THE ASSESSEE HA S CLAIMED THAT SHRI SANJIV KHURANA HAS PAID THE TAXES ON THE AMOUNT OF PROFESSIONAL CHARGES RECEIVED FROM THE ASSESSEE. THE ASSESSEE IN THIS RE GARD HAS DULY FILED THE COPY OF INCOME TAX RETURN, STATEMENT OF INCOME OF S HRI SANJIV KHURANA. THEREFORE, IN OUR CONSIDERED VIEW FURTHER DISALLOWA NCE U/S 194J R.W.S 40(A)(IA) OF THE ACT WILL LEAD TO DOUBLE TAXATION I N THE HANDS OF THE ASSESSEE. THEREFORE WE HOLD THAT THE ASSESSEE IS NO T IN DEFAULT ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT. 25. NOW COMING TO THE PAYMENT MADE TO R. M. MODI, I T WAS CLAIMED BY THE LD. AR THAT SUCH PAYMENT IS IN THE NATURE OF SALARY AND THEREFORE THERE IS NO LIABILITY FOR THE DEDUCTION OF TDS FROM THE PAYMENT MADE TO SHRI R. M. MODI. HOWEVER, IN THIS REGARD WE NOTE TH AT NO DOCUMENTARY EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE DEMONST RATING THAT THERE EXISTS EMPLOYER AND EMPLOYEES RELATIONSHIP BETWEEN THE ASSESSEE AND SHRI R. M. MODI. THEREFORE, IN THE ABSENCE OF THE D OCUMENTARY EVIDENCE, WE REJECT THE ARGUMENTS ADVANCED BY THE LD. AR. HOW EVER, WE FIND FORCE IN THE ARGUMENT OF LD. AR THAT SHRI R. M. MODI HAS INCLUDED THE AMOUNT ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 15 - OF PROFESSIONAL CHARGES RECEIVED FROM THE ASSESSEE IN THEIR RECEIPTS AND OFFERED THE SAME IN THE INCOME TAX RETURN BUT NO DO CUMENTARY EVIDENCE IN SUPPORT OF ASSESSEES CLAIM WAS PRODUCED BEFORE US. THEREFORE, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, WE REMIT THE I SSUE TO THE FILE OF THE AO WITH DIRECTION THAT THE AO WILL COLLECT NECE SSARY EVIDENCES TO ENSURE THAT AMOUNT PAID BY THE ASSESSEE TO SHRI R. M. MODI HAS BEEN OFFERED TO TAX. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL CO-OPERATE IN THE ASSESSMENT PROCEEDINGS BEFORE THE AO. 26. NOW COMING TO THE PAYMENT MADE TO SHRI NILESH B . SONI, WE NOTE THAT THE PAYMENT MADE BY THE ASSESSEE TO SHRI NILES H B. SONI HAS NOT BEEN DISPUTED THE LOWER AUTHORITIES. ACCORDINGLY, W E NOTE THAT THE PAYMENT IS BELOW THE THRESHOLD LIMIT AS SPECIFIED U /S 194J OF THE ACT. THE COPY OF THE LEDGER OF NILESH B. SONI IS PLACED ON P AGE 40 OF THE PB AND THE SAME REPRODUCED AS UNDER: LEDGER ACCOUNT 1-APR-2010 TO 31-MAR-2011 PAGE 1 DATE PARTICULARS VCH TYPE VCH NO DEBIT CREDIT 7 - 7 - 2010 DR CONSULTANCY CHARGES JOURNAL BILL 25,000.00 31 - 8 - 2010 CR THE J&K BANK LTD 0447030100000058 BK PYMT 092703 15,000.00 2 - 9 - 2010 CR THE J&K BANK LTD 0447030100000058 PAYMENT 353 10,000.00 25,000.00 25,000.00 ITA NO.2361/AHD/2015 STHAPATI ARCHIT ECTURE AND INTERIORS PVT. LTD. VS. DCIT ASST.YEAR 2011-12 - 16 - IN VIEW OF WE HOLD THAT THE ASSESSEE WAS NOT UNDER THE OBLIGATION TO DEDUCT THE TDS ON THE PAYMENT MADE TO SHRI NILESH B . SONI ON THE REASONING AS DISCUSSED IN THE CASE OF PAYMENT TO SH RI SANJIV KHURANA IN THE PRECEDING PARAGRAPH. IN VIEW OF ABOVE THE GROUN D OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. 27. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2018 SD/- SD/- EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-9, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD