M.M. Creations, New Delhi V. ACIT, New Delhi

ITA 2544/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65323 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 01-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2012
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: KGR AGNIHOTRI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: E NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI CM GARG, JUDICIAL MEMBER ITA NO:2544/DEL/2012 ASSESSMENT YEAR : - 2007-08 MM CREATIONS VS. ACIT, CIRCLE 24(1) T-481A, BALJETT NAGAR NEW DELHI 2 BEHIND PATEL NAGAR POLICE STATION NEW DELHI 8 PAN: : AAEFM 9802 A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KGR AGNIHOTRI, ADV. RESPONDENT BY : SHRI R.S.NEGI, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DT. 6. 2.2012 PERTAINING TO THE ASSESSMENT YEAR 2007-08. SHRI G.R.AGNIHOTRI, ADVOCATE APPEARED FOR THE ASSESSEE. MR.R.S.NEGI, SR.D.R. REPRESENTED THE REVENUE. 2. ON A QUERY FROM THE BENCH MR.AGNIHOTRI SUBMITTED THAT HE WOULD BE PRESSING GROUND NO. 2.1, GROUND NO.3 AND GROUND NO.6(I)(II)(III) AND THAT HE WOULD NOT PRESS THE OTHER GROUNDS. 3. FACTS IN BRIEF:- THE ASSESSEE IS A FIRM ENGAGED IN MANUFACTURE AND EXPORT OF HOME FURNISHING, PILLOW COVERS, TABLE COV ERS ETC. DURING THE P.Y. RELEVANT TO THE ASSESSMENT YEAR THE ASSESSEE F IRM HAD LEASED OUT A ITA NO. 2544/DEL/2012 PAGE 2 OF 5 ASSESSMENT YEAR 2007-08 M.M.CREATIONS, NEW DELHI PORTION OF ITS FACTORY BUILDING AND MACHINERY TO M /S BHUVESH ENTERPRISES ON AN ANNUAL RENT OF RS.18 LAKHS FOR TH E USE OF THE BUILDING AND FOR RS.2 LAKHS IN RESPECT OF ITS MACHINERY. TH E ASSESSEE FIRM CLAIMED STATUTORY DEDUCTION UNDER SECTION 24 OF THE INCOME TAX ACT, 1961 IN RESPECT OF RENTAL INCOME OF RS.18 LAKHS CL AIMED TO HAVE BEEN DERIVED FROM LEASING OUT OF FACTORY BUILDING. THE ASSESSING OFFICER NOTICED THAT M/S BHUVESH ENTERPRISES IS A PROPRIETA RY CONCERN OF SHRI MANMOHAN GAIND WHO IS ALSO ONE OF THE PARTNERS OF T HE ASSESSEE FIRM. HE HAD RECORDED THAT THE ASSESSEE HAS CLAIMED DEPRE CIATION OF RS.10,25,135/- ON THE WDV OF PLANT AND MACHINERY, W HICH WAS RS.66,29,332/-. THUS HE CONCLUDED THAT THE PRIMAR Y OBJECT OF THE ASSESSEE WAS TO LEASE OUT PLANT AND MACHINERY AND N OT TO LET OUT THE BUILDING. HENCE HE HELD THAT THE RENT RECEIVED SHO ULD HAVE BEEN SHOWN IN A COMPOSITE MANNER AND OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THUS HE DISALLOWED THE DEDUCTION U NDER SECTION 24 AND BROUGHT TO TAX THE COMPOSITE RENT RECEIVED UNDER TH E HEAD INCOME FROM OTHER SOURCES. ANOTHER ISSUE THAT ARISES IN THIS APPEAL, IS A QUANTUM OF THE INTEREST THAT ACCRUED FROM M/S INTEGRATION SERV ICES P.LTD. 4. THE FIRST APPELLATE AUTHORITY UPHELD THE ORDER O F THE A.O. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS WHICH ARE PRESSED BEFORE US. 2(I) THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRE CIATING THAT PROPERTY NO.69, SECTOR 3, IMT MANESAR, GURGAON HAS BEEN USED BY THE APPELLANT FOR ITS EXPORT BUSINESS OF HOME FURNI SHINGS, PILLOW COVERS AND TABLE COVERS ETC. AND A PART THEREOF WAS LET OUT ITA NO. 2544/DEL/2012 PAGE 3 OF 5 ASSESSMENT YEAR 2007-08 M.M.CREATIONS, NEW DELHI BHUVESH ENTERPRISES FOR A SHORT PERIOD IN THIS YEAR FOR RS.18 LAKHS IN RESPECT OF HIS EMBROIDERY BUSINESS. 3. THE LOWER AUTHORITIES HAVE ERRED IN NOT CONSID ERING THAT THE BUILDING AND THE PLANT AND MACHINERY HAVE BEEN HELD TO BE SEPARATE AND INDEPENDENT BUSINESS ASSETS OF THE APP ELLANT AND THE DEPRECIATION IN RESPECT OF THE BUILDING ;AND TH E PLANT AND MACHINERY WERE ALLOWED BY THE ASSESSING OFFICER FOR THIS YEAR AS IN ;THE PRECEDING YEARS. 6.(I) THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRE CIATING THAT THE APPELLANT HAD RECEIVED INTEREST INCOME RS.6,77,670/ - ON ACCOUNT OF LOAN GIVEN TO T-3 INTEGRATION TECHNOLOGIES SERVICES P.LTD. FOR THE PERIOD FROM 1.4.2006 TO 31.3.2007 AND TAX AT SOURCE OF RS.76,035/- HAD BEEN DEDUCTED AS PER TDS CERTIFICAT E IN FORM NO.16A WHICH HAD BEEN ISSUED BY THE SAID DEBTOR. 6.(II). THE LOWER AUTHORITIES HAVE ERRED IN IGNORI NG THE COPIES OF THE TDS CERTIFICATES WHICH WERE FILED BEFORE THEM 6.(III) THE ASSESSING OFFICER HAD ERRED IN ARBITRAR ILY ASSUMING THAT THE INTEREST AMOUNT OF RS.7,20,000/- WOULD HAVE ACC RUED AT THE ARBITRARY INTEREST RATE OF 10% ON LOAN OF RS.1,11,2 1,530/- ADVANCED TO T-3 TECHNOLOGIES SERVICES P.LTD. ON DIF FERENT DATES EVEN WHEN THE COPIES OF THE LOAN ACCOUNT, WERE FILE D BEFORE THEM. 5. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE ST ATED THAT THE ENTIRE MACHINERY HAS NOT BEEN LEASED OUT AND THAT O NLY A SMALL PORTION OF THE MACHINERY WAS LEASED OUT. THE RECORDING OF THE ASSESSING OFFICER THAT THE WDV OF LEASED OUT PLANT & MACHINERY IS RS. 66,29,332/- IS DISPUTED AS AGAINST THE FACTS OF THE CASE. IT WAS SUBMITTED THAT NO DEPRECIATION WHATSOEVER WAS CLAIMED ON THE PLANT A ND MACHINERY LEASED OUT. IT IS EVIDENT THAT THERE IS NO WRITTEN AGREE MENT FOR LEASING OUT OF THE FACTORY BUILDING AND MACHINERY TO M/S BHUVESH E NTERPRISES. UNDER THESE CIRCUMSTANCES WE HAVE CONSIDERED OPINION THAT THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR ASCERTAINING THE CORRECT FACTS. IF THE CLAIM OF THE ASSESSEE THAT THE DEPRE CIATION ON THE PLANT AND MACHINERY LEASED OUT, HAS NOT BEEN CLAIMED IS TRUE AND THAT IT IS NOT TO ITA NO. 2544/DEL/2012 PAGE 4 OF 5 ASSESSMENT YEAR 2007-08 M.M.CREATIONS, NEW DELHI THE TUNE OF RS.10,25,135/- AS STATED BY THE ASSESSI NG OFFICER, THEN THE A.O. CAN NOT ATTRIBUTE MAJOR PORTION OF THE RENT TO LEASING OUT OF MACHINERY. 6. BE AS IT MAY, IF THE RENTAL INCOME IS TO BE ASSE SSED UNDER THE HEAD INCOME FROM OTHER SOURCES, THEN PROBABLY THE ALL OWABILITY OF DEPRECIATION UNDER SECTION 57(III) HAS TO BE ADJUDI CATED UPON. 7. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE TH E MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. C OMING TO THE QUANTIFICATION OF INTEREST, THEN THE ISSUE MAY BE R ECONSIDERED BY THE A.O. BASED ON THE CONFIRMATION OBTAINED FROM T-3 TECHNOL OGY SERVICES PVT.LTD. THE BASIS ON WHICH THE ASSESSING OFFICER ASSUME AN INTEREST RATE OF 10% IS NOT GIVEN. THUS, THIS ISSUE ALSO IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH AUGU ST, 2012. SD/- SD/- (C.M.GARG) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: THE 29 TH AUGUST, 2012 *MANGA ITA NO. 2544/DEL/2012 PAGE 5 OF 5 ASSESSMENT YEAR 2007-08 M.M.CREATIONS, NEW DELHI COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR 1. DATE OF DICTATION: 06/8 2. DRAFT PLACED BEFORE THE AUTHOR ON: 27/8 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 28/8 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 2 8/8 5. APPROVED DRAFT CAME TO SR.P.S. ON: 29/8 6. DATE OF PRONOUNCEMENT : 29/8 7. FILE SENT TO BENCH CLERK ON : 30/8 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON :