DHANRAJGIR BUSINESS P.LTD, MUMBAI V. ITO WD 2(1)(2), MUMBAI

ITA 2488/MUM/2013

• Counselvise Citation: 248819914 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: FIROZE ANDHYARUJINA
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI D. MANMOHAN, V ICE PRESIDENT & SHRI R.C.SHARMA , A CCOUNTANT MEMBER ITA NO. 2488 / MUM/20 1 3 ( ASSESSMENT YEAR : 2009 - 2010 ) DHANRAJGIR BUSINESS PVT. LTD., 43, DHANRAJ MAHAL, CSM ROAD, APOLLO BUNDER, COLABA, MUMBAI - 400039 VS. ITO WARD - 2(1)(2), MUMBAI PAN NO. : A A BCD 3080 D ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI FIROZE ANDHYARUJINA REVENUE BY : SHRI LOVE KUMAR DATE OF HEARING : 2 7 - 0 5 - 201 5 DATE OF PRONOUNCEMENT 14 - 08 - 2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPE AL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), MUMBAI DATED 18 - 2 - 2013, FOR THE ASSESSMENT YEAR 2009 - 2010 , IN THE MATTER OF ORDER PASSED U/S.14 3 OF THE I.T. ACT . 2. IN THIS APPEAL, THE GRIEVANCES OF THE ASSESSEE AGAINST THE ACTION OF THE CIT(A) ARE I) IN CONFIRMING THE DISALLOWANCE MADE ON ACCOUNT OF BUSINESS PROMOTION, CLUB EXPENSES, SUB - LEASE EXPENSES A ND DEPRECIATION AS PER I.T. ACT AMOUNTING TO RS. 58,89,825/ - ; AND II) IN CONFIRMING THE DISALLOWANCE MADE ON ACCOUNT OF REPAIR AND MAINTENANCE EXPE NSES, SECURITY SERVICE CHARGES AND ADMINISTRATIVE EXPENSES AMOUNTING TO RS. 29,86,443/ - . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE CLAIMED CERTAIN EXPENSES RELATING TO EARNING OF RENTAL INCOME AS OTHER BUSINESS EXPENSES . AS PER A.O. INCOME OF THE ITA NO. 2488 / 1 3 2 ASSESSEE WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR OTHER SOURCES . UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE AO HAS ALLOWED THE STATUTORY DEDUCTION AND HELD THAT THERE IS NO REASON FOR A LLOWING ANY OTHER EXPENSES ON ACCOUNT OF SUCH FLATS. IN APPEAL, THE CIT(A) CONFIRMED ACTION OF A.O. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS CONTENDED BY LD. AR THAT MAIN OBJECT OF THE ASSESSEE WAS TO COMMERCIALLY EXPLOIT THE B USINESS ASSETS, THEREFORE, INCOME RECEIVED THEREFROM IS LIABLE TO BE ASSESSED AS BUSINESS INCOME RESULTING INTO ALLOWING THE EXPENDITURE SO CLAIMED. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S CHENNAI PROPERTIES, CIVIL AP PEAL NO. 4494/2004, DATED 9 - 4 - 2015. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE FILED RETURN OF INCOME CLAIMING RENTAL INCOME AS BUSINESS INCOME AND THE SAM E WAS PROCESSED U/S.143(1) ON 20 - 12 - 2005, WHEREAS, DURING ASSESSMENT PROCEEDINGS FOR A.Y.2007 - 08, THE AO FOUND THAT RENTAL INCOME RECEIVED BY THE ASSESSEE IS TAXABLE AS INCOME FROM HOUSE PROPERTY. THEREFORE, THE AO REOPENED THE AY UNDER CONSIDERATION ON TH E PLEA THAT INSTEAD OF STAND ARD DEDUCTION U/S.24, ASSESSEE HAD CLAIMED BUSINESS EXPENSES. THEREAFTER IN THE ASSESSMENT FRAMED U/S.143(3) R/W SEC. 147, A.O. ASSESSED INCOME UNDER HEAD OF INCOME FROM HOUSE ITA NO. 2488 / 1 3 3 PROPERTY AND DECLINED ASSESSEES CLAIM OF VARIOUS EXPENSES. FROM THE RECORD WE FOUND THAT THE COMPANY WAS INCORPORATED ON 13 - 10 - 2000 WITH THE OBJECT OF DEALING IN HOUSE PROPERTY INCLUDING LETTING OUT TO SOPHISTIC CUSTOMERS LIKE FOREIGNERS CONSULTANTS AND EXPATRIATES ETC. THE PROPERTIES DEALT WITH THE COMP ANY WERE PREVIOUSLY IN POSSESSION OF UNION OF INDIA SINCE 1942 FOR OVER 58 YEARS. HENCE, AT THE TIME OF TAKING POSSESSION BY THE ASSESSEE COMPANY THESE PROPERTIES WERE IN A TERRIBLE DILAPIDATED AND INHABITABLE CONDITION. THE COMPANY HAD TO REMODEL, REDESIG N AND REDECORATE TO SUIT COMMERCIAL EXPLOITATION AND TO ATTRACT SOPHISTICATED CUSTOMERS BY WAY OF EXTRAVAGANT INTERIOR WORKS INCLUDING FIXING ELECTRICAL GADGETS LIKE AIR CONDITIONS, REFRIGERATOR, GEYSERS, WASHING MACHINES, DRYERS, DISHWASHERS, EXPENSIVE LI GHT FITTINGS AND FURNITURE ITEMS, INCLUDING FIRE SAFETY MECHANISMS AND AROUND THE CLOCK PROFESSIONAL SECURITY AND MAINTENANCE TEAM. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS IN RECEIPT OF FOLLOWING INCOME : - LICENSE FEE R S.35,17,782/ - FURNITU RE HIRE CHARGES RS.10,50,000/ - SERVICE CHARGES RS. 19,62,473/ - FORFEITURE RS.4,61,500/ - RS.69,91,755/ - FOR EARNING THESE INCOME ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF SECURITY CHARGES, REPAIR AND MAINTENANCE, BUSINESS PROMOTION EXPENSES, SUB - LE ASE EXPENSES AND ADMINISTRATIVE EXPENSES, ETC. WHICH WAS DISALLOWED BY THE AO AND HE ASSESSED THE INCOME OFFERED AS BUSINESS INCOME, UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HON B LE SUPREME ITA NO. 2488 / 1 3 4 COURT IN THE CASE OF CHENNAI PROPERTY (SUPRA) , BY CONSIDERING IT S EARLIER JUDGMENT OF SUPREME COURT IN THE CASE OF SULTAN BROTHERS PVT. LTD. CA NO.4494/22004, AND KARANPURA DEVELOPMENT CO. LTD. 44 ITR 362 HELD HOLDING OF PROPERTY AND EARNING OF INCOME BY LETTING OUT THOSE PROPERTY IS IN MAIN BUSINESS OF THE ASSESSEE , T HE INCOME ARISING THEREON IS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND CANNOT BE TREATED AS INCOME FROM HOUSE PROPERTY. 5. IN VIEW OF THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CHENNAI PROPERTIES 9SUPRA), WE RESTORE TH E MAT T ER BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER CONSIDERING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME C OURT IN THE CASE OF CHENNAI PROPERTIES (SUPRA). WE DIRECT ACCORDINGLY. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PA RT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 /08 / 201 5 . SD/ - ( D.MANMOHAN ) SD/ - ( R.C.SHARMA ) VICE PRESIDENT ACCOUNTANT MEMB ER MUMBAI ; DATED 14 /08 /2015 PKM , . / PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT ITA NO. 2488 / 1 3 5 BY ORDER , (ASSTT. REGISTRAR) ITAT, MUMBAI 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//