M/s. KAIRA CAN COMPANY LTD., MUMBAI V. CIT VI, MUMBAI

ITA 2733/MUM/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88093 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 31-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2008
• Court: TRIBUNAL
• Assessee Lawyers: VALLABH GOKHALE; MILING THAKORE
• Keywords: Depreciation; Earning of tax free income; Notional interest; Revenue expenditure
• Section: 43B

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 2733/M/2008 (AY:2004 - 2005) ./I.T.A. NO. 6962/M/2011 (AY:2005 - 2006) ./I.T.A. NO. 6225/M/2008 (AY:2005 - 2006) ./I.T.A. NO. 2332/M/2010 (AY:2006 - 2007) ./I.T.A. NO. 6963/M/2011 (AY:200 7 - 2008) KARIA CAN COMPANY LTD, TIECICON HOUSE, DR. E. MOSES RD, MUMBAI 400 011. VS. THE ASST. COMMISSIONER OF INCOME TAX - 6(2), AAYAKAR BHAVAN, MUMBAI - 20. ./ PAN : AAACK4319B ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 6189/M/2008 (AY:2005 - 2006 ) THE ASST. COMMISSIONER OF INCOME TAX - 6(2), AAYAKAR BHAVAN, MUMBAI - 20. VS. KARIA CAN COMPANY LTD, TIECICON HOUSE, DR. E. MOSES RD, MUMBAI 400 011. ./ PAN : AAACK4319B ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI MILING THAKORE AND VALLABH GOKHALE / REVENUE BY : SHRI V.K. BORA / DATE OF HEARING : 31.12.2014 / DATE OF PRONOUNCEMENT : 30 .1.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE 6 APPEALS UNDER CONSIDERATION. OUT OF 6 APPEALS , 5 APPEALS ARE FILED BY THE ASSESSEE INVOLVING ASSESSMENT YEARS 2004 - 05 TO 2007 - 08 AND 1 CROSS 2 APPEAL FILED BY THE REVENUE FOR THE AY 2005 - 2006 . SINCE, T HE ISSUES RAISED IN ALL THESE APPEALS ARE CONNECTED THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLL OWING PARAS OF THIS ORDER. 2. FIRSTLY, WE SHALL TAKE UP THE APPEAL ITA NO.2733/M/2008 FOR THE ASSESSMENT YEAR 2004 - 2005. THIS APPEAL IS FILED BY THE ASSESSEE ON 21.4.2008 AGAINST THE ORDER OF THE CIT (A) - VI, MUMBAI DATED 21.1.2008. IN THIS APPEAL, ASSESS EE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME FROM HOUSE PROPERTY AT RS. 18,28,310/ - INSTEAD OF RS. 2,16,776/ - AS RETURNED BY THE APPELLANT. HE ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INCLUDING THE NATIONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT RECEIVED FROM THE LICENCEE OF THE HOUSE PROPERTY IN COMPUTING THE ANNUAL VALUE OF THE PROPERTY. HE FURTHER ERRED IN NOT ALLOWING THE CLAIM OF THE APPELLANT FOR DEDUCTING AN AMOUNT OF RS. 2,30,320/ - REPRESENTING MAINTENANCE EXPENSES PAID TO THE HOUSING SOCIETY IN COMPUTING INCOME FROM HOUSE PROPERTY. 2. THE LD CIT (A) ERRED IN NOT DELETING THE ADDITION TO THE CLOSING STOCK ON ACCOUNT OF UNUTILIZED MODVAT CREDIT UNDER SECTION 145A OF THE ACT. HE ERRED IN NOT ACCEPTING THE METHOD PRESCRIBED UNDER THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA RELATING TO ADJUSTMENTS UNDER SECTION 145A OF THE ACT. HE FURTHER ERRED I N DIRECTING THE ASSESSING OFFICER TO FIND OUT WHETHER THE UNUTILIZED MODVAT CREDIT TO BE AVAILED AS SHOWN UNDER THE HEAD ASSETS IN THE BALANCE SHEET OF THE COMPANY, IS MORE THAN THE MODVAT AVAILED BY THE ASSESSEE AND TO ADD THE DIFFERENCE, IF ANY, TO THE TOTAL INCOME UNDER SECTION 145A OF THE ACT. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO MAKE THE ADJUSTMENT ON ACCOUNT OF UNTILIZED MODVAT CREDIT WHICH HAD BEEN DISALLOWED IN THE EARLIER AY 2003 - 2004 TO T HE VALUE OF OPENING STOCK. 3. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF LEASE RENT RS. 10,42,279/ - MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE LEASE AGREEMENTS WERE FINANCIAL ARRANGEMENTS ENTERED INTO BY THE APPELLANT AND THE FIANNCER . HE FURTHER ERRED IN OBSERVING THAT AT THE END OF THE LEASE PERIOD THE ASSETS WOULD BECOME THE PROPERTY OF THE APPELLANT AND ON THIS BASIS THEREFORE THE RENTALS WERE NOTHING BUT A FINANCIAL AGREEMENT. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE ABOVE. 3. THE FIRST ISSUE RELATES TO THE INCLUSION OF NOTIONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT RECEIVED FROM THE LICENCEE OF THE HOUSE PROPERTY , FOR THE PURPOSE OF COMPUTING THE ALV OF THE SAID PROPERTY. RELEVANT FACTS I N THIS REGARD ARE THAT THE ASSESSEE OWNS A PROPERTY AT FLAT NO.72, APSARA COOPERATIVE HSG. SOCIETY, NARIMAN 3 POINT, MUMBAI AND RENTED OUT FOR MONTHLY RENT OF RS. 45,000/ - . ASSESSEE RECEIVED T HE SECURITY DEPOSIT OF RS . 1.8 CRS AND AND LICENSE AGREEMENT DATED 27.9.2001 IS RELEVANT. ASSESSEE OFFERED THE GROSS RENT OF RS. 5.4 LAKHS LESS MAINTENANCE CHARGES PAID OF RS. 2,30,320/ - AND CLAIMED STANDARD DEDUCTION @ 30% WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. IN THE ASSESSMENT PROCEE DINGS, ASSESSING OFFICER ENQUIRED INTO THE MATTER RELATING TO ALV OF THE PROPERTY AND GATHERED SOME INFORMATION RELATING TO ANOTHER FLAT OWNER WHO LET OUT THE FLAT TO M/S. GUJRAT AMBUJA CEMENT LTD FOR MONTHLY RENT OF RS. 2,75,000/ - AND CONCLUDED THAT THE A LV OF THE PROPERTY IS UNDER STATED . ON SEEING THE LESSER RENT CONSIDERED BY THE ASSESSEE , WHILE DETERMINING THE ALV IN RESPECT OF THE PROPERTY, ASSESSING OFFICER REVISED THE ALV UPWARDS AND FOR THIS HE INCLUDED THE NOTIONAL INTEREST @ 12% ON THE DEPOSIT O F 1.8 CRS (RS. 21.6 LAKHS) . T HUS , THE ALV WAS COMPUTED AT RS. 27 LAKHS. ON THIS ISSUE, DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, CIT (A) CONSIDERED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. J.K. INVE STORS (BOMBAY) LTD (248 ITR 723) AND DISTINGUISHED THE SAME BEFORE CONFIRMING THE ORDER OF THE ASSESSING OFFICER. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MADE ELABORATE DISCUSSION ON THE APPLICABILITY OF THE SAID JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS (SUPRA). FURTHER, HE SUBMITTED THE ACTUAL RENT RECEIVABLE ON THE PROPERTY CONSTITUTES THE REASONABLE RENT. THERE I S NO INCRIMINATING EVIDENCE BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEFLATED THE RENT BY INVOKING THE EXTRANEOUS CONSIDERATION. FOR THIS PROPOSITION HE RELIED ON ANOTHER JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TOP T YPOGRAPHY (48 TAXMANN.COM 191) (BOM.) AS WELL AS THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF CIT VS. MONI KUMAR SUBBA (10 TAXMANN.COM 195) (DELHI) (FB). FURTHER, HE MENTIONED THAT THE RENT RECEIVED @ RS. 45,000/ - PER MONTH IS MUCH HIGHER THAN THE MUNICIPAL RATEABLE VALUE. HE ALSO REASONED THAT THE SECURITY DEPOSIT OF RS. 1.8 CRS RECEIVED BY THE ASSESSEE IS KEPT IN THE BANKS AND THE INTEREST SO EARNED FROM THE BANKS WAS OFFERED TO TAX AS INCOME OF THE ASSESSEE. BY THE ASSESSING OFFICERS PROPOSAL TO CONSIDER THE SAME AS RENT, THE SAID INTEREST INCOME IS AGAIN SUBJECT TO 4 TAX WHICH AMOUNTS TO DOUBLE TAXATION. S UCH EFFORTS OF THE ASSESSING OFFICER ARE DISCOURAGED BY THE COURTS AS WELL AS THE TRIBUNAL. IN THIS REGARD, HE RELIED ON THE JUDGMENT OF TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. HEMARAJ MAHABIR PRASAD LTD (279 ITR 522) (CAL) AS WELL AS ANOTHER JUDGMENT IN THE CASE OF CIT VS. SATYA CO. LTD (75 TAXMANN.COM 193) (CAL.) AND THE ORDERS OF THE TRIBUNAL INCLUDING THE DECISION IN THE CA SE OF ACIT VS. MALINI V. SHETH (48 TAXMANN.COM 32) (ITAT) (MUM.) AND JAIDEEP M TANDON V. ITO (ITA NOS.7990 - 7992/M/2010) (ITAT) (MUM). HE ALSO DEMONSTRATED THAT ASSESSEE HAS NOT DERIVED ANY TAX ADVANTAGE BY ACCEPTING THE INTEREST FRE E SECURITY DEPOSIT IN T HAT CASE. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL TO SUPPORT THE ASSESSING OFFICERS ALLEGATION TO DEFLATION OF RENT , ALV COMPUTATION OFFERED BY THE ASSESSEE SHOULD BE ACCEPTED. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) AND MENTIONED THAT THE RENTAL INCOME SHOWN BY M/S. GUJRAT AMBUJA CEMENT LTD IS MUCH HIGHER AND THEREFORE THE ALV OF THE IMPUGNED PROPERTY IS NOT JUSTIFIED. 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF INCLUSION OF NOTIONAL INT EREST INCOME ON THE INTEREST FREE SECURITY DEPOSIT. IT IS A SETTLED PROPOSITION OF LAW BY VIRTUE OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD (SUPRA) AND TIP TOP TYPOGRAPHY (SUPRA) THAT THE NOTIONAL IN TEREST SHOULD NOT BE INCLUD ED WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY UNDER SECTION 23(1)(A) AND (B) OF THE ACT. IT IS ALSO A SETTLED PROPOSITION THAT ACTUAL RENT RECEIVED OR RECEIVABLE BY THE LAND LORD CONSTITUTES A RELIABLE EVIDENCE TO ASCERTAIN THE PROPERTIES CAPACITY TO EARN THE RENT IN OPEN MARKET. THE FORMS SHOULD BE ACCEPTED UNLESS THE ASSESSING OFFICER HAS CONTRARY EVIDENCE TO SUGGEST THE DEFLATION OF RENTAL INCOME BY EXTRANEOUS CONSIDERATION . THIS IS ALSO AN ADMITTED FACT IN THIS CASE THAT THE RENT RECEIVED IS MUCH HIGHER THAN THE MUNICIPAL RATEABLE VALUE OF THE PROPERTY . IT IS ALSO DISCOURAGE D AND UNAPPROVED BY VARIOUS BENCHES OF THE TRIBUNAL THAT WHEN THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE SAID SECURITY DEPOSITS DEPOSITED WITH THE BANKS THE SAME IS OFFERED T O TAX, THE INCLUSION OF SUCH INTEREST ON THE SAID DEPOSITS FOR THE PURPOSE OF ALV AMOUNTS TO DOUBLE TAXATION . 5 CONSIDERING THE FACTUAL MATRIX OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED B Y THE ASSESSEE HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. WE ORDER ACCORDINGLY. 7. THE SECOND ISSUE RELATES TO THE CLAIM OF DEDUCTION OF RS. 2,30,320/ - REPRESENTING THE MAINTENANCE EXPENSES PAID TO THE SOCIETIES. RELEVANT FACTS ARE THAT AS PER THE LEASE AGREEMENT IN CONNECTION WITH THE PROPERTY REFERRED ABOVE, ASSESSEE HAS TO BEAR MAINTENANCE, PARKING AND WATERING CHARGES. ASSESSEE CONSIDERED THE SAID AMOUNT OF RS. 2,30,320/ - IS DEDUCTIBLE AT THE STAGE OF COMPUTING THE ALV FOR THE PURPOSE OF 23 OF THE AC T . SUCH EXPENSES ARE NOT TO BE CONSIDERED FOR CLAIM OF DEDUCTION U/S 24 OF THE ACT CONSIDERING THE A BSENCE OF ENABLING PROVISIONS IN SECTION 24 OF THE ACT. IN SUPPORT OF HIS CLAIM OF THE SAID EXPENSES U/S 23 OF THE ACT, HE RELIED ON VARIOUS DECISIONS OF THE TRIBUNAL AND MENTIONED THAT THE SAME CONSTITUTES A VALID CLAIM. THE LIST OF DECISIONS IS AS UNDER: 1. ALOO BEJAN DAVER VS. ITO (ITA NO.2381 - 2382/M/2010) 2. ADIT VS. VINOD ARORA (26 TAXMANN.COM 23) (ITAT DELHI) 3. SHARMILLA TAGORE VS. JCIT (150 TAXMANN 4) (ITAT MUM) 4. ITO VS. GOPICHAND P. GODHWANI (1 SOT 374) (ITAT MUM) 5. J.B. PATEL & CO. VS. DCIT (118 ITD 556) (ITAT AHD) 6. REALTY FINANCE & LEASING (P) LTD VS. ITO (5 SOT 348) (ITAT MUM) 8. ON PERUSAL OF THE DECISION OF THE TRIBUNAL IN THE CASE OF ALOO BEJAN DAVER (SUP RA) (COPY OF THE ORDER IS PLACED AT PAGE 76 OF THE P APER BOOK), WE FIND, IN PARA 7 OF THE SAID ORDER OF THE TRIBUNAL , IT IS CATEGORICALLY MENTIONED THAT THE MAINTENANCE CHARGES ARE TO BE DEDUCTED FROM THE GROSS RENT TO ARRIVE AT THE ALV OF THE PROPERTY . F OR THIS PROPOSITION , THE TRIBUNAL RELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF VARMA FAMILY TRUST (7 ITD 392) (BOM) AS WELL AS THE DECISION OF THE ITAT IN THE CASE OF SHARMILLA TAGORE VS. JCIT (93 TTJ 483) (MUM). THIS ORDER OF THE TRIB UNAL HAS REFERRED TO THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD [2001] 168 CTR (BOM) 189 IN PARA 8. THE SAID JUDGMENT OF HONBLE HIGH COURT IS RELEVANT FOR EXCLUSION OF OUTGOINGS , BEING LIABILITIES OF THE ASSESSEE IN VIEW OF SECTION 23(1)(B) OF THE ACT. 6 THE CONTENTS OF PARAS 7 AND 8 OF THE SAID ORDER OF THE TRIBUNAL IN THE CASE OF ALOO BEJAN DAVER (SUPRA) ARE EXTRACTED AS UNDER : 7. WE HAVE CONSIDERED THE SUBMISSION MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND LD CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY DISPUTE IN THE IMPUGNED APPEAL IS REGARDING THE ALLOWABILITY OF DEDUCTION OF SOCIETY CHARES FROM THE RENTAL INCOME FOR THE PURPOSE OF CALCULATION OF ANNUAL LETTING VALUE U/S 23(1)(B). WE FIND THE MUMBAI BENCH OF THE ITAT IN THE CASE OF VARMA FAMILY TRUST (SUPRA) HAS HELD THAT SECTION 23(1)(B) PROCEEDS ON THE BASIS OF ACTUAL RENT RECEIVED OR RECEIVABLE AND THEREFORE, ALL THE OUTGOINGS FOR EARNING THE SAID RENTAL INCOME WOULD BE ADMISSIBLE DEDUCTION. WE FIND THE TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES (SUPRA) HA S HELD THAT MAINTENANCE CHARGES AND MUNICIPAL TAXES PAID BY THE ASSESSEE ARE TO BE DEDUCTED FROM GROSS RENT TO ARRIVE AT THE ANNUAL VALUE. WE FIND THAT IN THE CASE OF SHARMILA TAGORE (SUPRA), THE TRIBUNAL HELD THAT MAINTENANCE CHARGES PAID TO HOUSING SOCI ETY HAVE TO DEDUCTED EVEN WHILE COMPUTING ANNUAL LETTING VALUE. SIMILAR VIEW HAS BEEN TAKEN IN VARIOUS OTHER DECISIONS RELIED ON BY THE LD COUNSEL FOR THE ASSESSEE. THE DECISIONS RELIED ON BY THE LD CIT (A), IN OUR OPINION, ARE DISTINGUISHABLE AND NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE. 8. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GOPICHAND P. GODHWANI (SUPRA), AFTER CONSIDERING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD (2001) 168 CTR ( BOM) 189 HAS HELD THAT FOR THE PURPOSE F DETERMINING ANNUAL VALUE OF THE PROPERTY ALL TAXES, CESSES AND OUTGOINGS BEING LIABILITIES OF THE ASSESSEE, HAVE TO BE EXCLUDED FROM ASSESSABLE INCOME IN VIEW OF SECTION 23(1)(B). SO FAR AS THE DECISION OF THE TRIB UNAL IN THE CASE OF BARODAWALA PROPERTIES LTD (SUPRA) IS CONCERNED, WE FIND THAT THE TRIBUNAL IN SUBSEQUENT JUDGMENTS HAVE HELD THAT WHILE CALCULATING ANNUAL VALUE OF THE LET OUT PROPERTY, MAINTENANCE CHARGES PAID TO THE SOCIETY BY THE ASSESSEE IS ADMISSIB LE DEDUCTION FROM THE ANNUAL LET OUT VALUE U/S 23(1)(B). IN VIEW OF THE SERIES OF DECISIONS RELIED ON BY THE LD COUNSEL FOR THE ASSESSEE SUPPORTING THE DEDUCTIBILITY OF SOCIETY CHARGES FROM THE GROSS RENT FOR THE PURPOSE OF DETERMINING THE ANNUAL LET OUT VALUE U/S 23(1)(B), WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF SOCIETY CHARGES AMOUNTING TO RS. 1,26,000/ - FROM THE RENT SO RECEIVED FOR THE PURPOSE OF DETERMINING THE ALV U/S 23(1)(B) OF THE ACT. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 9. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT DESPITE THE RESERVATIONS WE HAVE ON THIS ISSUE, WE FOLLOW THE COORDINATE BENCH DECISION OF THE TRIBUNAL CONSIDERING THE PRINCIPLES RELATING TO THE JUDICIAL DISCIPLINE. ACCORDINGLY, SECOND IS SUE RAISED BY THE ASSESSEE IS ALLOWED. 10. GROUND NO. 2 RELATES TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 145A OF THE ACT TO THE UNUTILIZED MODVAT. IN THE ASSESSMENT, THE ASSESSING OFFICER FAILED TO ADJUST ALL THE INVENTORIES AND RESTRICTED THE ADDITION TO CLOSING STOCK FOR THE AY 2004 - 05 AMOUNTING RS. 31,04,093/ - . BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE CALCULATIONS UNDERTAKEN BY THE AS SESSING OFFICER ARE NOT 7 SUSTAINABLE IN LAW IN VIEW OF THE BINDING DECISIONS OF VARIOUS HIGH COURTS AND THE AND THE CASE LAWS ARE AS UNDER: 1. ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE AY 2001 - 2002. 2. MAHAVIR ALLUMINIUM LIMITED (297 ITR 77)(DELHI) 3. KOLSITE MACHINE FABRIK LTD (BOMBAY HIGH COURT) (ITA NO.302 OF 2009) (BOM.) 4. RALLIS INDIA LTD [2013] 29 TAXMANN.COM 23 (ITAT MUMBAI) 5. J INDAL IRON AND STEEL CO. LTD VS. DCIT (33 TAXMANN.COM 96) (ITAT MUMBAI). 6. MAHALAXMI GLASS WORKS PVT LTD (318 ITR 116) (BOM) 11. THE ABOVE LIST OF DECISIONS / JUDGMENTS INCLUDES THE ORDER OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY 2001 - 02 (PAGE 105 OF THE PAPER BOOK). ON PERUSAL OF THE SAME WE FIND THE IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL AND THE CONT ENTS OF PARA 4 OF THE SAID ORDER IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARA 4 IS EXTRACTED AS FOLLOWS: 4. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS NOW COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN IT HAS BEEN HELD THAT U/S 145A, THE ADJUSTMENT ON ACCOUNT OF TAX DUTY, CESS OR FEE SHALL HAVE TO BE MADE NOT ONLY WITH RESPECT TO CLOSING STOCK BUT ALSO WITH REFERENCE TO OPENING STOCK, PURCHASES AS WELL AS SALES. THESE DECISIONS ARE HAWKINS COOKERS LTD VS. ITO [ITA NO.505/MUM/2004 DATED 11.8.2008]; GANDHAR OIL REFINERY [ITA NO.856/MUM/03 DATED 23.3.2006]; METAL TWICE P LTD [ITA NO.3857/MUM/05, DATED 5.11.2008. FURTHER, THE HONBLE DELHI HIGH COURT N THE CASE OF CIT VS. MAHAVIR ALUMINUM LTD 297 ITR 77 (DEL) HAS HELD THAT ADJUSTMENT HAS TO BE MADE NOT ONLY WITH REFERENCE T CLOSING STOCK BUT ALSO WITH REFERENCE TO OPENING STOCK SECTION 145A ITSELF PROVIDED THAT ADJUSTMENT HAS TO BE MADE WITH RESPECT TO PURCHASE AND SALES AS WELL AS INVENTORIES. THE WORD INVEN TORY SHALL INCLUDE OPENING STOCK AS WELL AS CLOSING STOCK. THEREFORE, FOLLOWING THE AFORESAID DECISIONS, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE THE ORDERS OF THE LD CIT (A) FOR BOTH THE YEARS ARE SET ASIDE ON THIS ISSUE AND CONSEQUENTLY, THE ASS ESSING OFFICER IS DIRECTED TO RECOMPUTED THE PROFITS AFTER MAKING ADJUSTMENTS WITH REFERENCE TO OPENING STOCK, CLOSING STOCK, PURCHASES AS WELL AS SALES. 12. FROM THE ABOVE, IT IS EVIDENT THAT THE ABOVE CITED DECISIONS ARE RELEVANT FOR THE PROPOSITION IN SUPPORT OF MAKING THE ADJUSTMENTS TO ALL THE INVENTORIES INCLUDING OPENING STOCK AS WELL AS THE CLOSING STOCK. FOLLOWING THE SAID DECISIONS, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER WAS DIRECTED BY THE ITAT TO RECOMPUTED TH E PROFITS AFTER MAKING ADJUSTMENTS WITH REFERENCE TO OPENING STOCK, PURCHASES AS WELL AS THE SALES. ACCORDINGLY, WE FOLLOW THE SAID ORDER OF THE TRIBUNAL AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE PROFITS AFTER GRANTING PROPER OPPORTUNITIES TO THE AS SESSEE WITH IDENTICAL DIRECTIONS. ACCORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8 13. GROUND NO.3 RELATES TO THE DISALLOWANCE OF RS. 10,42,279/ - . BRIEF FACTS RELATING TO THIS ISSUE INCLUDE THAT THE ASSESSEE TOOK SOME VEHICLES ON LEASE FROM 20 TH CENTURY FINANCIAL CORPORATION AND CLAIMED DEDUCTION OF LEASE RENTALS ASSESSING OFFICER TREATED THE SAID TRANSACTION IN THE NATURE OF FINANCIAL LEASE AND DISALLOWED THE LEASE RENTALS. ASSESSEE REASONED THAT HE IS MERELY A LESSE E AND NOT THE OWNER OF THE VEHICLE AND THEREFORE ENTITLED TO CLAIM DEDUCTION OF LEASE RENTALS ON THE LEASE IN QUESTION CONSTITUTES AN OPERATING LEASE . ON APPEAL, CIT (A) CONFIRMED THE CONCLUSIONS OF THE ASSESSING OFFICER. DURING THE PROCEEDINGS BEFORE US, IN SUPPORT OF HIS CLAIM, LD COUNSEL FOR THE ASSESSEE RELIED ON THE THIRD MEMBER DECISION IN THE ASSESSEES OWN CASE FOR THE AY 1996 - 97 TO 1998 - 99 (ITA NO.6987/M/2003 AND 5280 - 5281/M/2004) AND MENTIONED THAT THE LEASE OF MOTOR CARS WAS HELD TO BE AN O PERATING LE ASE AND NOT A FINANCIAL LEASE AND THEREFORE, THE LEASE RENTALS CONSTITUTE REVENUE EXPENDITURE AND THEY ARE ALLOWABLE. FURTHER, HE MENTIONED THAT THE THIRD MEMBER DECISION WAS PRONOUNCED AFTER CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF ICDS LIMITED VS. CIT (350 ITR 527) (SUPREME COURT). 14. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A). 15. ON HEARING BOTH THE PARTIES WE FIND THE ISSUE FOR ADJUDICATION RELATES TO THE NATURE OF LEASE IF IT IS FINANCIAL LEASE OR OPERATING LEASE. THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE ON IDENTICAL FACTS VIDE ORDER OF THE THIRD MEMBER DECISION OF THE TRIBUNAL IS PLACED AT PAGE 144 OF THE PAPER BOOK. ON PERUSAL OF THE LEASE AGREEMENT IT IS THE FINDING OF THE TRIBUNAL VIDE PARA 14 THAT THE OWNERSHIP OF THE VEHICLE IS ALWAYS WITH THE LESSOR BEING THE OWNER AND IT IS NEVER BE TRANSFERRED / TRANSFERABLE TO THE LESSEE EVEN AFTER THE TERMINATION OF THE LEASE AGREEMENT . THE SAID PARA 14 OF THE THIRD MEMBER DECISION IS EXTRACTED AS UNDER: 14. IN THE PRESENT CASE ALSO LOOKING INTO THE TERMS OF LEASE DEED WHICH HAVE BEEN DISCUSSED ABOVE, IT HAS TO BE HELD THAT THE OWNERSHIP OF LEASED ASSETS WAS ALWAYS WITH THE LESSOR. THE LESSOR IN THE NORMAL COURSE OF ITS BUSINESS HAD LEASED OUT THESE ASSETS TO THE ASSESSEE. THEREFORE, THE LESSOR BEING OWNER OF THE ASSETS AND ALSO USED THOSE ASSETS IN THE BUSINESS OF LEASING AND WAS ENTITLED TO DEPRECIATION. CONSEQUENTLY, THE ASSESSEE BEING LESSEE IS ENTITLED FOR LEASE RENT PAID BY IT WHICH IS IN THE NATURE OF REVENUE EXPENDITURE. ACCORDINGLY, QUESTION NO.2 IS ANSWERED IN FAVOUR OF THE ASSESSEE. 9 16. CONSIDERING THE ABOVE, DESPITE FEW ADJUSTMENTS TO THE LEASED AGREEMENT RELEVANT FOR T HE AY UNDER CONSIDERATION , THE ESSENTIAL FACTS RELATING TO THE OWNERSHIP OF THE VEHICLE I.E., THE OWNERSHIP REMAINS THE LESSOR AND THEREFORE , THE LEASE IN QUESTION CONSTITUTES OPERATING LEASE . THEREFORE, THE LEASE RENTALS PAID BY THE ASSESSEE CONSTITUTES AN ALLOWABLE EXPENDITURE. ACCORDINGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED IN FAVOUR OF THE ASSESSEE. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ITA NO.6225/M/2008 (AY 2005 - 2006) 18. THIS APPEAL FILED BY THE ASSESSEE ON 20.10.2008 IS AGAINST THE ORDER OF THE CIT (A) - VI, MUMBAI DATED 31.7.2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. (A) THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME FROM HOUSE PROPERTY AT RS. 18,28,310/ - INSTEAD OF RS. 2,16,776/ - AS RETURNED BY THE APPELLANT. (B) HE ERRED IN HOLDING THAT THE ASSESSING OFFICER WAS JUSTIFIED IN TAKING THE PART OF THE INTEREST AS ANNUAL LETTING VALUE OF THE HOUSE PROPERTY AND DETERMINING THE INCOME FROM HOUSE PROPERTY AT RS. 27 LAKHS. (C) HE FURTHER ERRED IN OBSERVING THAT THE CASE LAWS CITED BY THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THE CASE AS THE PROPERTY IS NOT UNDER THE RENT CONTROL ACT. 2. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF MAINTENANCE EXPENSES OF RS. 2,22,725/ - IN COMPUTING THE INCOME FROM HOUSE PROPERTY. 3 . (A) THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION TO THE CLOSING STOCK ON ACCOUNT OF UNUTILIZED MODVAT CREDIT UNDER SECTION 145A OF THE ACT. (B) HE ERRED IN NOT ACCEPTING THE METHOD PRESCRIBED UNDER THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA RELATING TO ADJUSTME NTS UNDER SECTION 145A OF THE ACT. (C) HE FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO FIND OUT WHETHER THE UNUTILIZED MODVAT ELEMENT TO BE INCLUDED IN THE CLOSING STOCK IS MORE THAN THE MODVAT BALANCE AVAILABLE IN THE MODVAT CREDIT ACCOUNT OCCURRIN G ON THE ASSET SIDE OF THE BALANCE SHEET AND TO ADD THE DIFFERENCE, IF ANY, TO THE TOTAL INCOME UNDER SECTION 145A OF THE ACT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO MAKE THE ADJUSTMENT ON ACCOUNT OF UNTILIZED MODVAT CREDIT WHICH TO THE VALUE OF OPENING STOCK OF SUBSEQUENT ASSESSMENT YEAR 2006 - 2007. 5. THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO MAKE THE ADJUSTMENT ON ACCOUNT OF UNUTILIZED MODVAT CREDIT TO THE OPENING STOCK OF THE CURRENT ASSESSMENT YEAR CONSEQUENT TO THE ADDITION MADE TO THE CLOSING STOCK OF THE EARLIER AY 2004 - 2005. 6 . (A) THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF LEASE RENT RS. 5,66,830/ - ON THE GROUND THAT THE LEASE AGREEMENTS WERE FINANCIAL ARRANG EMENTS ENTERED INTO BY THE APPELLANT AND THE FINANCER . (B) HE FURTHER ERRED IN OBSERVING THAT AT THE END OF THE LEASE PERIOD THE ASSETS WOULD BECOME THE PROPERTY OF THE APPELLANT AND ON THIS BASIS THEREFORE THE RENTALS WERE NOTHING BUT A FINANCIAL AGREEMEN T. (C) HE FURTHER ERRED IN MAKING THE FOLLOWING OBSERVATIONS WHICH ARE CONTRARY TO THE FACTS OF THE CASE. 10 THE ASSESSING OFFICER HAS FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THESE VEHICLES. IF THESE VEHICLES HAVE BEEN LEASED OUT, HOW TH E ASSESSEE IS CLAIMING DEPRECIATION IS NOT KNOWN. 19. IN THIS APPEAL, ASSESSEE RAISED THE SIMILAR ISSUES RAISED IN ITS APPEAL FOR THE AY 2004 - 2005, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER. SINCE, THE ISSUES RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE ONES RAISED BY THE ASSESSEE FOR THE AY 2004 - 2005, THEREFORE, OUR FINDING OF THE SAID ISSUES SQUARELY APPLIES TO THE ISSUES RAISED IN GROUNDS OF THIS APPEAL TOO. CONSIDERING THE SAME, GROUND NO.1, 2 AND 6 ARE ALLOWED IN FAVOUR OF THE ASSESSEE AND GROUND NOS.3, 4 AND 5 WHICH RELATE TO MODVAT CREDIT ARE ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6962/M/2011 (AY 2005 - 2006) 21. THIS APPEAL FILED BY THE ASSESSEE ON 13.10.2011 IS AGAINST THE ORDER OF THE CIT (A) - 12, MUMBAI DATED 21.7.2011 FOR THE ASSESSMENT YEAR 2005 - 06. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: THE APPELLANT OBJECTS TO THE ORDER DATED 21 ST JULY, 2011 PASSED BY THE CIT (A) FOR THE ASSESSMENT YEAR 2 005 - 06, ON THE FOLLOWING GROUNDS. 1. THE LD CIT (A) ERRED IN CONFIRMING THE PENALTY OF RS. 6,32,734/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON THE BASIS OF ADDITION MADE TO THE INCOME FROM HOUSE PROPERTY. 2. THE LD CIT (A) ERRED IN RELYING UPON THE ORDER PASSED BY THE PREDECESSOR CIT (A) FOR THE ASSESSMENT YEAR 2004 - 2005, WHEREIN THE CIT (A) HAS OBSERVED AS UNDER: IT WAS CLEAR THAT THE LOW RENT HAS BEEN CHARGED BECAUSE OF THE INTEREST FREE DEPOSIT THAT THE DEPOSIT COULD BE INVESTED IN SUCH A WAY THAT IT Y IELDS EXEMPT INCOME OR INCOME SUBJECTED TO LOWER RATE OF TAX. THUS, THE APPELLANT WOULD OBTAIN A SIGNIFICANT TAX ADVANTAGE BY DECLARING LOW RENT UNDER INCOME FROM HOUSE PROPERTY. IT APPEARS THAT THERE IS NO OTHER REASON FOR OBTAINING AN INTEREST FREE DEP OSIT BUT TO AVOID TAX. THE INTEREST FREE DEPOSITS CAN ALSO BE TREATED AS RENT TAKEN IN ADVANCE FOR THE PERIOD OF TENANCY. THE APPELLANT OBJECTS TO THE ABOVE OBSERVATION MADE BY THE LD CIT (A) WHICH IS CONTRARY TO THE FACTS OF THE CASE AND IN LAW. 3. EACH ON E OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 22. THE ONLY ISSUE RAISED IN THIS APPEAL RELATED TO THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND THE SAME IS CONNECTED TO APPEAL ITA NO.6225/M/2008 (AY 2005 - 06), WHICH IS A QUANTUM AP PEAL. WHILE ADJUDICATING THE SAID QUANTUM APPEAL IN THE ABOVE PARAGRAPHS OF THIS ORDER, WE HAVE DELETED THE ADDITION AND GRANTED 11 RELIEF TO THE ASSESSEE. CONSEQUENTLY, THE PENALTY LEVIED U/S 271(1)(C) IN RESPECT OF THE SAID ADDITIONS IS NOT SUSTAINABLE. TH EREFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.6189/M/2008 (AY 2005 - 2006) (BY REVENUE) 24. THIS APPEAL FILED BY THE REVENUE ON 16.10.2008 IS AGAINST THE ORDER OF THE CIT (A) - VI, MUMBAI DATED 31.7.2008. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS . 3,08,303/ - AND TO ESI AMOUNTING TO RS. 4,932/ - RELYING UPON MADRAS HIGH COURT DECISION IN THE CASE OF SALEM COOPERATIVE SPINNING MILLS LTD 258 ITR 360 EVEN THOUGH THESE PAYMENTS WERE MADE BEYOND THE GRACE PERIOD AND WERE TAXABLE IN VIEW OF SECTION 2(24)( X) R.W.S. 36(1)(VA) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON VEHICLES TAKEN BY THE ASSESSEE ON LEASE EVEN THOUGH THE ASSESSEE WAS NOT THE OWNER OF THESE VEHICLES DURING THE RELEVANT PREVIOUS YEAR. 25. GROUND NO.1 RELATES TO THE DELETION OF DISALLOWANCE WITH REGARD TO THE EMPLOYEES CONTRIBUTION TO PF AND ESIC. BRIEFLY STATED RELEVANT FACTS ARE THAT DURING THE YEAR ASSESSEE MADE PAYMENTS TOWARDS EMP LOYEES CONTRIBUTION TO PF AND ESIC AND CLAIMED DEDUCTION U/S 36(1)(VA) OF THE ACT ON THE GROUND THAT THE SAME ARE PAID BEFORE THE DUE DATE OF FILING OF RETURN. DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER CALLED FOR EXPLANATION. N OT SATISFIED WIT H THE ASSESSEES EXPLANATION , HE DISALLOWED RS. 3,13,235/ - AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED WITH THE SAID DECISION OF THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). 26. DURING THE PROCEEDI NGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE VIDE PARA 8 AND ITS SUB - PARAS OF HIS ORDER. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE US. 12 27. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 28. ON THE OTHER HAND, LD AR HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT THE EMPLOYEES CONTRIBUTION TO PF AND ESIC HAVE BEEN DEPOSITED BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND HENCE THE SAME SHOULD BE ALLOWED UNDER SECTION 43B ON PAYMENT BASIS. IN THIS REGARD, HE RELIED ON THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN ORGANICS CHEMICALS LTD (ITA NO.399 OF 2012, DATED 11.7.2014) (BOM) AND ANOTHER JUDGMENT IN THE CASE OF CIT VS. GHATGE PATIL TRANSPORTS LTD (ITA NO.1002 AND 1034 OF 2012) (BOM). 29. WE HAVE HEA RD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT (A), WE FIND PARA 8.3 IS RELEVANT IN THIS REGARD. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PARA 8.3 IS EXTRACTED AS UNDER: 8.3. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AR. AS REGARDS THE EMPLOYEES CONTRIBUTION, THE SAME ARE ALLOWABLE IN VIEW OF THE DECISION OF MADRAS HIGH COURT IN THE CASE OF SALES COOPERATIVE SPINNING MILLS LTD 258 ITR 360 WHEREIN IT WAS HELD THAT DUE DATE INCLUDES THE GRACE PERIOD ALLOWED UNDER THE PR AND ESIC ACT. HENCE, THIS GROUND OF APPEAL IS ALLOWED. 30. IT IS A SETTLED POSITION OF THE ISSUE THAT THE PAYMENTS MADE BY THE ASSESSEE TOWARDS PF AND ESIC ARE ELIG IBLE FOR DEDUCTION IF THE SAME HAVE BEEN MADE ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. AS WELL, IN VIEW OF THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT THE DUE DATE INCLUDES THE GRACE PERIOD . UNDISPUTED FACT IS THAT THE ASSESSEE MADE THE PAYMENTS WITHIN THE SAID GRACE PERIOD PRIOR TO THE DUE DATE FILING OF THE RETURN OF INCOME. THEREFORE, WE FIND NO INFIRMITY IN THE DECISION OF THE CIT (A) IN ALLOWING THE ASSESSEES APPEAL. IN OUR OPINION, THE ORDER OF THE CIT (A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 31. GROUND NO.2 RELATES TO THE ALLOWABLILITY OF DEPRECIATION ON VEHICLES TAKEN BY THE ASSESSEE ON LEASE. THIS GROUND IS CONNECTED TO TH E GROUND NO.3 RAISED BY THE ASSESSEE FOR THE AY 2004 - 2005 IN APPEAL ITA NO. 2733/M/2008. ON THE SAID GROUND, WE HAVE GIVEN OUR ADJUDICATION ON THIS ISSUE AND HELD THAT THE LEASE OF 13 VEHICLES IN QUESTION CONSTITUTES OPERATING LEASE AND THE LEASE RENTALS P AID BY THE ASSESSEE CONSTITUTES AN ALLOWABLE EXPENDITURE. T HE DECISION OF THE CIT (A) VIDE PARA 7.3 OF HIS ORDER IS FAIR AND REASONABLE AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 32. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2332/M/2010 (AY 2006 - 2007) (ASSESSEES APPEAL) 33. THIS APPEAL FILED BY THE ASSESSEE ON 24.3.2010 IS AGAINST THE ORDER OF THE CIT (A) - 12, MUMBAI DATED 20.1.2009 FOR THE ASSESSMENT YEAR 2006 - 2007. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1.(A) THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME FROM HOUSE PROPERTY AT RS. 19,54,310/ - INSTEAD OF RS. 11,054/ - AS RETURNED BY THE APPELLANT. (B) THE LD CIT (A) ERRED IN RELYING UPON THE CIT (A) ORDER PASSED FOR THE ASSESSMENT YEAR 2004 - 2005, WHEREIN THE CIT (A) HAS HELD THAT THAT IN CASES WHERE THE RENT CONTROL ACT IS NOT APPLICABLE, THE FAIR RENT CAN BE DETERMINED TAKING INTO ACCOUNT THE REFUNDABLE DEPOSITS SINCE THE MONTHLY RENT RECEIVED IS MUCH LOSS COMPARED TO THE NEIGHBORING FLAT. (C) THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INCLUDING THE NOTIONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT RECEIVED FROM THE LICENC E E OF THE HOUSE PROPERTY IN COMPUTING THE ANNUAL VALUE OF THE PROPERTY AND DETERMINING THE INCOME FROM HOUSE PROPERTY AT RS. 28,80,000/ - . 2. (A) THE LD CIT (A) ERRED IN CON FIRMING THE DISALLOWANCE OF MAINTENANCE EXPENSES OF RS. 1,36,080/ - IN COMPUTING THE INCOME FROM HOUSE PROPERTY. (B) THE LD CIT (A) ERRED IN RELYING UPON THE CIT (A( ORDER PASSED FOR THE ASSESSMENT YEAR 2004 - 05, WHEREIN THE CIT (A) HAS HELD THAT THERE WAS N O PROVISION UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO ALLOW ANY OTHER EXPENSES OTHER THAN SPECIFICALLY MENTIONED UNDER SECTION 24 OF THE ACT. 3. (A) THE LD CIT (A) ERRED IN CONFIRMING THE ADDITION TO THE CLOSING STOCK ION ACCOUNT OF UNUTILIZED MODVAT CR EDIT UNDER SECTION 145A OF THE ACT . (B) THE LD CIT (A) ERRED IN NOT ACCEPTING THE METHOD PRESCRIBED UNDER THE GUIDANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA RELA T ING TO ADJUSTMENTS UNDER SECTION 145A OF THE ACT. (C) THE LD CIT (A) ERRED FURTHER IN DIRECTING THE ASSESSING OFFICER TO FIND OUT WHETHER THE MODVAT ELEMENT TO BE INCLUDED IN THE CLOSING STOCK IS MORE THAN THE MOD VAT BALANCE AVAILABLE IN THE MODVAT CREDIT ACCOUNT OCCURRING ON THE ASSET SIDE OF THE BALANCE SHEET AND TO ADD T HE DIFFERENCE, IF ANY, TO THE TOTAL INCOME UNDER SECTION 145A OF THE ACT. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO MAKE THE CONSEQUENTIAL ADJUSTMENT ON ACCOUNT OF UNUTILIZED MODVAT CREDIT TO THE VAL UE OF OPENING STOCK OF SUBSEQUENT ASSESSMENT YEAR 2006 - 2007. 5. THE LD CIT (A) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO MAKE THE ADJUSTMENT ON ACCOUNT OF UNUTILIZED MODVAT CREDIT TO THE OPENING STOCK OF THE CURRENT ASSESSMENT YEAR CONSEQUENT TO THE ADDITION MADE TO THE CLOSING STOCK OF EARLIER AY 2005 - 2006. 6. (A) THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF LEASE RENT OF RS. 2,33,055/ - ON THE GROUND THAT THE LEASE AGREEMENTS WERE FINANCIAL ARRANGEMENTS ENTERED INTO BY THE APPELLANT AND TH E FINANCER. 14 (B) THE LD CIT (A) ERRED IN RELYING UPON THE CIT (A) ORDER PASSED FOR THE ASSESSMENT YEAR 2004 - 2005, WHEREIN THE CIT (A) HAS HELD THAT THE LEASE TRANSACTIONS ARE NOTING BUT FINANCIAL TRANSACTIONS. 34. IN THIS APPEAL, ASSESSEE RAISED THE SIMIL AR ISSUES TO THAT OF THE ISSUES (THE ISSUES INCLUDE (I) CONSIDERING NOTIONAL INTEREST FOR ALV PURPOSES; (II) EXCLUSION OF MAINTENANCE EXPENSES PAID TO SOCIETIES ; (III) APPLICABILITY OF SECTION 145A AND (IV) ALLOWABILITY OF LEASE RENT) RAISED IN ITS APPEAL FOR THE AY 2004 - 2005, WHICH IS ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER. SINCE, THE ISSUES RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE ONES RAISED BY THE ASSESSEE FOR THE AY 2004 - 2005, THEREFORE, OUR ADJUDICATION GIVEN THEREIN SQUARELY APPLIES TO THE INSTANT APPEAL TOO. CONSIDERING THE SAME, GROUND NO.1, 2 AND 6 ARE ALLOWED IN FAVOUR OF THE ASSESSEE AND GROUND NOS.3, 4 AND 5 WHICH RELATE TO MODVAT CREDIT ARE ALLOWED FOR STATISTICAL PURPOSES. 35. IN THE RESULT, APPEAL OF THE AS SESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6963/M/2011 (AY 2007 - 2008) (BY ASSESSEE) 36. THIS APPEAL FILED BY THE ASSESSEE ON 13.10.2011 IS AGAINST THE ORDER OF THE CIT (A) - 12, MUMBAI DATED 21.7.2011 FOR THE ASSESSMENT YEAR 2007 - 2008. IN THI S APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME FROM HOUSE PROPERTY AT RS. 26,26,311/ - INSTEAD OF A LOSS OF RS. 4,512/ - AS RETURNED BY T HE APPELLANT IN THE RETURN OF INCOME. 2. THE LD CIT (A) ERRED IN RELYING UPON THE ORDER PASSED BY THE PREDECESSOR CIT (A) FOR THE ASSESSMENT YEARS 2004 - 05 AND 2006 - 07, WHEREIN THE CIT (A) HAS HELD THAT IN CASES WHERE THE RENT CONTROL ACT IS NOT APPLICABLE, THE FAIR RENT CAN BE DETERMINED TAKING INTO ACCOUNT THE REFUNDABLE DEPOSITS SINCE THE MONTHLY RENT RECEIVED IS MUCH LOSS COMPARED TO THE NEIGHBORING FLAT. 3. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INCLUDING THE NOTIONAL INTEREST ON THE INTEREST FREE DEPOSIT RECEIVED FROM THE LICENCEE OF THE HOUSE PROPERTY IN COMPUTING THE ANNUAL VALUE OF THE PROPERTY AND THEREBY DETERMINING THE INCOME FROM HOUSE PROPERTY AT RS. 26,26,311/ - . 4. THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF MAINTENANCE EXPENSES OF RS. 2,44,512/ - IN COMPUTING THE INCOME FROM HOUSE PROPERTY. 5. THE LD CIT (A) ERRED IN RELYING UPON THE ORDER PASSED BY THE PREDECESSOR CIT (A) FOR THE ASSESSMENT YEAR 2004 - 2005 , WHEREIN THE CIT (A) HAS HELD THAT THERE WAS NO PROVISION UNDER THE HEAD INCOME FROM HOUSE PROPERTY TO ALLOW ANY OTHER EXPENSES OTHER THAN SPECIFICALLY MENTIONED UNDER SECTION 24 OF THE ACT. 6. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 15 37. IN THIS APPEAL, ASSESSEE RAISED THE ABOVE GROUNDS WHICH REVOLVE AROUND THE ISSUES OF (I) THE INCLUSION OF NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT FROM THE LICENCEE OF THE HOUSE PROPERTY FOR THE PURPOSE OF COMPUTING THE ALV OF THE PROPERTY AND (II) DISALLOWANCE OF MAINTENANCE EXPENSES PAID TO THE SOCIETY . IN THE PRE SENT APPEAL ASSESSEE RAISED THE ISSUES THAT ARE SIMILAR TO ONES RAIS ED IN ITS APPEAL FOR THE AY 2004 - 2005. THEY WERE ADJUDICATED BY US IN THE ABOVE PARAGRAPHS OF TH IS ORDER. SINCE, THE ISSUES RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF THE ONES RAISED BY THE ASSESSEE FOR THE AY 2004 - 2005, THEREFORE, OUR ADJUDICATION GIVEN THEREIN SQUARELY APPLIES TO THE INSTANT APPEAL TOO. ACCORDINGLY, GROUND NOS. 1 TO 5 R AISED BY THE ASSESSEE ARE ALLOWED. 38. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 39. TO SUM UP, OUT OF 6 APPEALS , ASSESSEES 4 APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND 1 APPEAL IS ALLOWED AND THE CROSS APPEAL FILED BY THE REVENUE A PPEAL IS DISMISSED. O R D E R P R O N O U N C E D I N T H E O P E N C O U R T O N 3 0 T H J A N U A R Y , 2 0 1 5 . S D / - S D / - (D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 30/1/2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// 16 / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI