DDIT, New Delhi V. Sh. Atul Mehta, New Delhi

ITA 2669/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2663 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: GAURAV YA DAV
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 32; 6; 56

Judgement Text

1 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCHES: A NEW DELHI ] BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI L. P. SAHU, ACCOUNTANT MEMBER I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. DEPUTY DIRECTOR OF SHRI ATUL MEHT A, INCOME TAX, CIRCLE : 3 (1), VS. A31, N ARAINA INDUSTRIAL AREA, INTERNATIONAL TAXATION, PHASE : I, N E W D E L H I. N E W D E L H I 110 065. PAN : ANEPM 2429 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. C. YADAV, ADV.; & SHRI GAURAV YA DAV, ADV. DEPARTMENT BY : SHRI S. K. JAIN, SR. D. R.; DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 31.07.2017 O R D E R . PER I. C. SUDHIR, J. M. : THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, WHETHER LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS CORRECT IN HOLDING THAT THE DEPRECIATION UNDER SECT ION 32 OF THE 2 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. ACT WAS ALLOWABLE TO THE ASSESSEE AGAINST THE INCOM E FROM OTHER SOURCES, AS HE HAS IGNORED THE FINDINGS OF THE ASSESSING OFFICER RECORDED IN THE ASSESSMENT ORDER THAT THE ASSE SSEE WAS NOT ELIGIBLE FOR DEPRECIATION OF RS.38,25,000/- UNDER SECTION 57 ON THE AMENITIES AND SERVICES; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, WHETHER LD. COMMISSIONER OF INCOME TAX (APPEALS) WA S CORRECT IN HOLDING THAT CASH EXPENSES OF RS.2,15,600/- HAVE BEEN INCURRED IN RELATION TO EARNING OF INCOME FROM OTHE R SOURCES AND HENCE ALLOWABLE, WHEREAS THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS CLEARLY RECORDED THAT THE ASSESSE E HAS FAILED TO DISCHARGE ITS INITIAL ONUS CAST UPON HIM TO JUSTIFY, ESTABLISH AND VALIDATE THE OCCURRENCE OF SUCH EXPEN DITURE FOR THE PURPOSE OF EARNING SUCH INCOME WITHIN THE MEANI NG OF SECTION 57 OF THE ACT; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND LAW, WHETHER LD. COMMISSIONER OF INCOME TAX (APPEALS) WA S CORRECT IN HOLDING THAT MAINTENANCE EXPENSES OF RS.3,94,626 /- WERE ALLOWABLE TO THE ASSESSEE AS DEDUCTION IGNORING THE FACT RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH OR PROV E THAT SUCH EXPENDITURE, AS CLAIMED, WAS INDEED INCURRED OR EXPEN DED FOR THE PURPOSE OF EARNING SUCH INCOME WHICH IS PREREQU ISITE TO AVAIL ANY BENEFIT UNDER SECTION 57(III) OF THE ACT. 3 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. HAVING GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW, WE FIND THAT DURING THE YEAR THE ASSESSEE HAD DECLARED TOTAL INCOME OF RS.1,27,29,260/-. THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY AND ASSESSMENT UNDER SECTION 143(3) WAS FRAMED. TH E ASSESSEE HAD INCURRED IN TWO SEPARATE LEAVE AND LICENSE AGREEMEN T WITH (I) ICICI PRUDENTIAL LIFE INSURANCE COMPANY TO WHOM IT HAD LE T OUT UNIT NOS. 1 TO 4 OF FIRST FLOOR, TRADE POINT, KAMLA MILLS, LOW ER PAREL, MUMBAI [INCOME OFFERED - RS.68,53,289/-] AND (II) BHARTI A XA LIFE INSURANCE LTD. TO WHOM UNIT NO.401, 4 TH FLOOR, RAHEJA TITANIUM, WESTERN EXPRESS HIGHWAY, GOREGAON, MUMBAI, WAS LET OUT[INCOME OFFER ED RS.1,55,883/-]. THUS, THE INCOME OFFERED WAS LOSS OF RS.66,97,406/- [RS.68,53,289/- - RS.1,55,883/-]. THE ASSESSING OFFICER WAS OF THE V IEW THAT ASSESSEE IS NOT ENTITLED FOR THE DEPRECIATION AND OTHER EXPE NSES CLAIMED BY HIM UNDER SECTION 57 OF THE ACT AND HENCE HE MADE D ISALLOWANCES. THE LD. CIT (APPEALS) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THIS ACTION 4 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. OF THE LD. CIT (APPEALS) HAS BEEN QUESTIONED BY THE REVENUE ON THE ABOVE GROUNDS. 3.1 IN SUPPORT OF THE GROUNDS THE LD. SR. DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. THE LD. AR, ON T HE OTHER HAND, TRIED TO JUSTIFY THE FIRST APPELLATE ORDER. 3.2 CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE FIND THAT THE ASSESSEE HAD DECLARED NEGATIVE INCOME UNDER THE HEA D INCOME FROM HOUSE PROPERTY AS MUCH AS THE AMOUNT OF INTER EST PAID BY THE ASSESSEE WAS IN EXCESS TO THE INCOME EARNED. THE A SSESSING OFFICER HAS NOT DISPUTED THE ABOVE DISCUSSED FIGURES IN PAR A NO. 3. THE ABOVE FIGURES ARE ARISING OUT OF THE COMPUTATION OF INCOM E FOR THE YEAR UNDER CONSIDERATION. THE AGREEMENT WITH ICICI WAS ENTERED ON 12.07.2008 AND WITH BHARTI ON 6.03.2009. AS PER TH ESE AGREEMENTS THE ASSESSEE AGREED TO PROVIDE FURNITURE, FIXTURE A ND FITTINGS, CABINS, LIFTS, USAGES OF COMMON LOBBY AREA, 24 HOURS POWER BACK-UP WITH GENSET AND STANDBY GENSET, PROVISIONS FOR AIR-CONDI TIONING ETC. THE ASSESSING OFFICER HELD THAT DEPRECIATION IS NOTIONA L OR AN INCIDENTAL EXPENSE AND HAS NOT ACTUALLY BEEN SPENT. THE CONT ENTION OF THE 5 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. ASSESSEE REMAINED THAT THE ASSESSING OFFICER HAD OV ER-LOOKED THE PROVISIONS OF EXPLANATION 5 OF SECTION 32 WHICH PRO VIDES THAT DEPRECIATION IS ADMISSIBLE IRRESPECTIVE OF THE FACT WHETHER AN ASSESSEE CLAIMED IT OR NOT. IT WAS CONTENDED THAT THE ASSES SING OFFICER HAD ALSO OVER-LOOKED THE FACT THAT SECTION 56 IS MEANT EXCLU SIVELY FOR TAXING SUCH INCOME, WHICH ARE NOT COVERED UNDER ANY HEAD A ND HENCE, THE SAME ARE TERMED AS INCOME FROM OTHER SOURCES AND, THEREFORE, IT WOULD HARDLY MAKES ANY DIFFERENCE WHETHER SUCH INCO ME FALLS UNDER SUB SECTION (2)(II) OR (2)(III) OF THE SAID SECTION . THE ASSESSING OFFICER FURTHER FAILED TO CONSIDER THE PROVISIONS OF SECTIO N 57(II), WHICH COVERS BOTH SUB SECTIONS (2)(II) AND (2)(III) OF SECTION 5 6 OF THE ACT. THEREFORE, WHETHER THE INCOME IS TAXABLE UNDER SUB SECTION (2) (II) OR SUB SECTION (2)(III) OF SECTION 56, IT WOULD NOT MAKE ANY DIFFE RENCE FOR CLAIMING THE BENEFITS PROVIDED UNDER SECTION 57(II) OF THE A CT. 3.3 FOR A READY REFERENCE PROVISIONS LAID DOWN UNDER SECTION 57(II) ARE BEING REPRODUCED HEREUNDER :- (II) IN THE CASE OF INCOME OF THE NATURE REFERRED TO IN CLAUSES (II) AND (III) OF SUB SECTION (2) OF SECTION 56, DE DUCTIONS, SO FAR AS MAY BE, IN ACCORDANCE WITH THE PROVISION OF SUB CLAUSE (II) 6 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. OF CLAUSE (A) AND CLAUSE (C ) OF SECTION 30, SECTIO N 3] AND [SUB SECTIONS (1) AND (2) OF SECTION 32 AND SUBJECT TO T HE PROVISIONS OF [SECTION 38]; 3.4 HAVING GONE THROUGH THE ABOVE PROVISIONS, WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER WHEREIN THE LD. CIT (APPEALS) HAS RIGHTLY CONCUR WITH THE SUBMISSION OF THE ASSESSEE ESPECIALLY WHEN THERE IS NO DISPUTE THAT THE ASSESSEE HAD ENTERED I NTO TWO SEPARATE AGREEMENTS WITH THE TENANTS (LICENSEES) AND HAD OFF ERED THE INCOME FROM HOUSE PROPERTY SEPARATELY. FOR A READY REFERENCE PA RA NO. 6 OF THE FIRST APPELLATE ORDER IS BEING REPRODUCED :- 6.0 I HAVE DULY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. THE ASSESSING OFFICER HAS HELD THAT REC EIPTS FROM HIRING OF AMENITIES ETC. IS TAXABLE AS INCOME FROM OTHER SOUR CES AGAINST WHICH DEDUCTION OF EXPENSES IS ALLOWABLE AS PER PROVISIONS OF SECTION 57(III). THE ASSESSING OFFICER HAS FURTHER OBSERVE D THAT IF CONTENTION OF THE ASSESSEE IS ACCEPTED THAT NATURE OF INCOME A S DECLARED BY THE ASSESSEE FALLS UNDER SECTION 56(II) OR (III), THEN EVEN INCOME DECLARED BY HIM AS INCOME FROM HOUSE PROPERTY SHALKL BE OF T HE NATURE AS INCOME FROM OTHER SOURCES. I HAVE CAREFULLY GONE T HROUGH PROVISIONS OF SECTION 56 AND 57 OF THE ACT. SECTION 56 DESCRIBE S VARIOUS INCOMES WHICH ARE ASSESSABLE AS INCOME FROM OTHER S OURCES. SECTION 57 PROVIDED FOR DEDUCTIONS AVAILABLE AGAINST SUCH IN COMES. CLEARLY, THE INCOME OF THE APPELLANT FALLS UNDER PROVISIONS OF SECTION 56(2)(II). 7 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. NOW, SECTION 57(II) SAYS THAT IF INCOME IS IN NATUR E PRESCRIBED IN SECTION 56(II) / (III), THEN DEPRECIATION UNDER SECT ION 32 IS ALLOWABLE. EVEN IF, FOR ARGUMENT SAKE, IT IS ASSUMED THAT INCO ME FALLS UNDER SECTION 56(2)(III), THEN BOTH STREAMS OF INCOMES SH ALL BE IN NATURE OF INCOME FROM OTHER SOURCES AND DEPRECIATION SHALL BE AVAILABLE TO THE ASSESSEE EVEN ON INCOME COMPONENT PERTAINING TO HOU SE PROPERTY. THE APPELLANT HAS DECLARED INCOME PERTAINING TO LEASE RENTAL AGREEMENT AS INCOME FROM HOUSE PROPERTY AND CLAIMED 3 0% ON IT UNDER SECTION 24(A) AND FURTHER DECLARED INCOME FROM AGREEMENT FOR AMENITIES AND SERVICES AS INCOME FROM OTHER SOURCES AND CLAIMED DEPRECIATION ALLOWABLE UNDER SECTION 32. DEDUCTION OF EXPENSES AVAILABLE UNDER SECTION 57(III) IS RESIDUAL SECTION AND IS AVAILABLE TO ANY KIND OF INCOME FROM OTHER SOURCES. IN VIEW OF A BOVE, I HOLD THAT DEPRECIATION UNDER SECTION 32 OF THE ACT IS ALLOWABLE AGAINST INCOME FROM OTHER SOURCES AS DECLARED BY THE APPELLANT. T HE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 3.5 AS DISCUSSED ABOVE, WE FULLY CONCUR WITH THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE. THE SAME IS UPHELD. GROUND NO. 1 IS ACCORDINGLY REJECTED. 4. GROUND NO. 2 : THE ASSESSEE CLAIMED CASH EXPENSES OF RS.2,15,600/- ON SALARIES AND STAFF WELFARE FOR RUN NING OF GENERATOR WITH THIS SUBMISSION THAT THESE WERE PART OF TOTAL EXPEN SES INCURRED FOR WHOLE BUILDING AND SHARED PROPORTIONATELY WITH OTHE R LAND-LORDS. THE 8 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. ASSESSING OFFICER DISALLOWED THE CLAIM ON THE BASIS THAT NO DOCUMENTARY EVIDENCE IN SUPPORT WAS FURNISHED. THE CONTENTION OF THE ASSESSEE REMAINED THAT THE CLAIMED EXPENSES WERE INCURRED ON THE SALARY OF TWO EMPLOYEES, WHO WERE EMPLOYED FOR SUPERVISION OF THE TWO PROPERTIES IN QUESTION. AND IF THESE EXPENSES ARE BIFURCATED INT O MONTHS, THE FIGURE WOULD COME TO RS.8,400/- APPROXIMATELY. IT WAS SUB MITTED THAT SEPARATE VOUCHERS WERE NOT AVAILABLE SINCE EXPENSES WERE INC URRED IN COMMON WITH OTHER LAND-LORDS, WHICH WERE LATER ON DIVIDED PROPORTIONATELY. WE DO NOT FIND THERE WAS ANY REASON TO DOUBT THE SUBMI SSIONS OF THE ASSESSEE EXPLAINING THE CLAIMED EXPENSES AND THUS, THE LD. CIT (APPEALS) WAS JUSTIFIED IN ACCEPTING THE SAME. THE SAME IS U PHELD. GROUND NO. 2 IS ACCORDINGLY REJECTED. 5. GROUND NO. 3 : THE ASSESSING OFFICER MADE DISALLOWANCE OF MAINTENANCE EXPENSES OF RS.3,94,625/- AS NO DOCUMEN TARY EVIDENCE WAS FILED IN SUPPORT. DURING THE FIRST APPELLATE P ROCEEDINGS, WE HOWEVER, FIND THAT THE ASSESSEE FURNISHED COPIES OF VOUCHERS IN SUPPORT OF THE CLAIMED EXPENSES WITH REQUEST TO ADM IT THE SAME UNDER RULE 46A AS ADDITIONAL EVIDENCES AS THE ASSESSING O FFICER HAD NEVER COMMUNICATED THE REQUIREMENT OF THE DOCUMENTS IN SU PPORT TO THE ASSESSEE. THE LD. CIT (APPEALS) SENT IT FOR REMAND REPORT OF THE 9 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. ASSESSING OFFICER. SINCE NO REMAND REPORT WAS FURN ISHED, THE LD. CIT (APPEALS) PROCEEDED TO ADJUDICATE UPON THE ISSUE. T HE LD. CIT (APPEALS) OBSERVED THAT IT IS NOT THE CASE OF THE R EVENUE THAT THESE EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF EARNING OF INCOME FROM OTHER SOURCES. THE LD. C IT (APPEALS) ADMITTED THE ADDITIONAL EVIDENCE I.E. VOUCHERS AND HAS ACCOR DINGLY COME TO THE CONCLUSION THAT THE ASSESSEE HAD PAID MAINTENANCE E XPENSES TO TRADE PREMISES (INDIA) PVT. LTD. AT FIXED RATE OF R S.3/- PER SQ. FT. PER MONTH FOR MAINTAINING BUILDING AND EQUIPMENT AND AL LOWED THE CLAIMED EXPENSES FOR DEDUCTION. THE FIRST APPELLAT E ORDER IS SPEAKING AND REASONED ONE, HENCE WE ARE NOT INCLINED TO INTE RFERE THERE WITH. THE SAME IS UPHELD. GROUND NO. 3 IS ACCORDINGLY RE JECTED. 6. IN RESULT, APPEAL IS DISMISSED. 7. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON : 31 ST JULY, 2017 . SD/- SD/- ( L. P. SAHU ) ( I. C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : THE 31 ST JULY, 2017 . *MEHTA* 10 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT (APPEALS); 5. DR, ITAT, ND. BY ORDER ASSISTANT REGISTR AR 11 I. T. APPEAL NO. 2669/DEL/2014 ASSESSMENT YEAR : 2009-10.