M/s. DLF Infocity Developers (Chandigarh) Ltd., Gurgaon V. DCIT, Gurgaon

ITA 2376/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7299 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 10-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NO. 2376/DEL/2015 ASSTT. YR: 2010-11 DLF INFOCITY DEVELOPERS VS. DCIT, CIRCLE 1(1), (CHANDIGARH) LTD., GURGAON. 3 RD FLOOR, SHOPPING MALL COMPLEX, ARJUN MARG, DLF CITY, PHASE-I, GURGAON. PAN: AABCD 9114 E ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI R.S. SINGHVI, CA RESPONDENT BY : SHRI AMRIT LAL SR. DR . DATE OF HEARING : 10/12/2015. DATE OF ORDER : 02/02/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 9 .2.2015 PASSED BY THE LD. CIT(A)-1, GURGAON IN APPEAL NO. 256/12-13 , RELATING TO A.Y. 2010- 11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 4,75,333/-. LD. CIT(A), WHILE PARTLY ALLOWING THE A SSESSEES APPEAL, 2 CONFIRMED THE DISALLOWANCES. BEING AGGRIEVED, THE A SSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL : 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE IMPUGNED ORDER PASSED BY THE LEARNED CIT (APPEA LS) IS BAD IN LAW AND WRONG ON FACTS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE; THE LEARNED CIT (APPEALS) HAS ERRED IN LAW IN UP-HO LDING THE ORDER OF THE LD ASSESSING OFFICER, IN ALLOCATING PR OPORTIONATE EXPENSES OUT OF STATUTORY AUDIT FEES, TAX AUDIT FEE S, MISC EXPENSES AND RATES & TAXES AMOUNTING TO F 250,243 R ELATED TO RETAIL DIVISION ON WHOLLY ERRONEOUS, ILLEGAL AND UN TENABLE GROUNDS. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND, SUBSTITUTE. WITHDRAW AND/OR VARY ANY GROUNDS OF APP EAL AT OR BEFORE THE TIME OF HEARING. 3. IN COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTIC ED THAT ASSESSEE OWNED A BUILDING COMPLEX AT CHANDIGARH. PART OF THE COMPLEX HOUSED AN IT PARK, INCOME FROM WHICH HAD BEEN SHOWN AS BUSINESS INCOME AND ANOTHER PART HAD BEEN LET OUT TO RETAIL MERCHANTS, INCOME F ROM WHICH WAS DECLARED AS INCOME FROM HOUSE PROPERTY. THE AO HELD THAT EXPEN SES ATTRIBUTABLE TO RETAIL PART WERE NOT ALLOWABLE AS BUSINESS INCOME, AS LETTING OUT OF RETAIL PART WAS NOT PART OF BUSINESS OF THE ASSESSEE AND DEDUCT ION U/S 24(A) HAD ALREADY BEEN CLAIMED ON THOSE RECEIPTS. HE, THEREFORE, REQU IRED THE ASSESSEE TO ESTABLISH THAT NO EXPENSES ATTRIBUTABLE TO THE RETA IL DIVISION WERE CLAIMED AS DEDUCTIBLE. AFTER CONSIDERING THE ASSESSEES SUBMIS SIONS THE AO OBSERVED THAT NO EXPLANATION WAS OFFERED REGARDING STATUTORY AUDIT FEE, TAX AUDIT FEE, 3 MISC. EXPENSES AND RATES AND TAXES DEBITED TO P&L A CCOUNT, WHICH WERE COMMON TO I.T. DIVISION AND RETAIL DIVISION. HE COM PUTED THE EXPENSES ATTRIBUTABLE TO RETAIL DIVISION ON THE BASIS OF RAT IO OF AREA OF RETAIL DIVISION TO THE TOTAL AREA OF THE BUILDING COMPLEX AND, ACCORDI NGLY, MADE A DISALLOWANCE OF RS. 2,50,243/- BEING 22% OF RS. 11,36,981/-, THE EXPENSES INCURRED IN RESPECT OF VARIOUS ITEMS NOTED ABOVE. 4. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL ON VA RIOUS COUNTS. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AUDIT FEE IS TO BE ALLOWED BEING STATUTORY OBLIGATI ON OF COMPANY. FOR OTHER TWO ITEMS VIZ. MISC. EXPENSES AND RATES & TAXES, LD . COUNSEL SUBMITTED THAT THEY DID NOT PERTAIN TO RETAIL DIVISION AND HENCE C OULD NOT BE DISALLOWED. 6. WE ARE IN AGREEMENT WITH LD. COUNSEL THAT, IN AN Y VIEW OF THE MATTER, AUDIT FEE PAID BY ASSESSEE COMPANY HAS TO BE ALLOWE D BECAUSE THAT IS FOR THE EXISTENCE OF COMPANY. HOWEVER, RATES AND TAXES AND MISC. EXPENSES CANNOT BE ALLOWED IF THEY PERTAIN TO RETAIL DIVISION. THE AO HAS ALLOCATED THE EXPENSES ON THE BASIS OF RATIO OF AREA OF RETAIL DI VISION TO THE TOTAL AREA OF THE BUILDING COMPLEX. IF RATES AND TAXES SPECIFICALLY P ERTAINED ONLY TO THE AREA HOUSING IT PARK, THEN NO PART OF THE SAME CAN BE DI SALLOWED. HOWEVER, IF THE RATES AND TAXES ARE FOR THE ENTIRE BUILDING THEN AO S METHOD OF ALLOCATION IS PROPER. WE, THEREFORE, RESTORE THIS MATTER TO THE FILE OF AO TO RECORD A SPECIFIC FINDING WHETHER ANY PART OF RATES AND TAXE S PERTAINED TO RETAIL DIVISION OR NOT AND THEN COMPUTE THE DISALLOWANCE ACCORDINGLY IN TERMS OF OUR OBSERVATIONS MADE EARLIER. SIMILARLY, AO SHALL ALSO EXAMINE, WHETHER 4 ANY PART OF THE MISC. EXPENSES PERTAINED TO THE RET AIL DIVISION OR NOT BECAUSE IN THIS REGARD AO HAS OBSERVED THAT NO EXPLANATION WAS OFFERED BY ASSESSEE. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 02/02/2016. SD/- SD/- (SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 02/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.