ACIT (OSD) 2(2), MUMBAI V. THE MANJIRI STUD FARM P.LTD, MUMBAI

ITA 2919/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84025 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , . . , ! BEFORE SHRI JOGINDER SINGH, JM AND SHRI N. K. BILL AIYA, AM ' #$ ./ I.T.A. NO. 2919/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) DY. CIT, CIRCLE-2(2), AAYAKAR BHAVAN, ROOM NO. 545, 5 TH FLOOR, M. K. ROAD, MUMBAI-400 020 / VS. THE MANJRI STUD FARM PVT. LTD. SHAPOORJI PALLONJI CENTRE, 41/44, MINOO DESAI MARG, COLABA, MUMBAI-400 005 & ./''' ./PAN/GIR NO. AAACT 1947 J ( ( / REVENUE ) : ( )*+ , / ASSESSEE ) & ' #$ ./ I.T.A. NO. 2955/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) THE MANJRI STUD FARM PVT. LTD. SHAPOORJI PALLONJI CENTRE, 41/44, MINOO DESAI MARG, COLABA, MUMBAI-400 005 / VS. DY. CIT, CIRCLE-2(2), AAYAKAR BHAVAN, ROOM NO. 545, 5 TH FLOOR, M. K. ROAD, MUMBAI-400 020 & ./''' ./PAN/GIR NO. AAACT 1947 J ( )*+ , / ASSESSEE ) : ( ( / REVENUE ) ( - . / REVENUE BY : SHRI VIJAY KUMAR BORA )*+ , - . / ASSESSEE BY : SHRI K. K. VED / (0 - , 1 / DATE OF HEARING : 28.10.2014 234 - , 1 / DATE OF PRONOUNCEMENT : 28.10.2014 2 ITA NO. 2919/M/11 & 2955/M/11 (A.Y. 2006-07) THE MANJRI STUD FARM PVT. LTD. '5 / O R D E R PER N. K. BILLAIYA, AM: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-5, MUMBAI DATED 17.01.2011 PERTAI NING TO ASSESSMENT YEAR (A.Y.) 2006-07. BOTH THESE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2919/MUM/2011 (REVENUES APPEAL) 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE OF RS.26,69,300/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED REPAIRS AND MAINTENANCE EXPENSES TO THE TUNE OF RS.70,68,575/- IN THE PROFI T AND LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO FILE THE DETAILS OF THESE EXPENDITURE AND ALSO TO SHOW CAUSE WHY SUCH EXPENDITURE SHOULD NOT BE DISALLOWED SINCE 30% OF A NNUAL LETTING VALUE WAS ALREADY DEDUCTED FROM THE COMPUTATION OF INCOME UNDER THE H EAD HOUSE PROPERTY. THE ASSESSEE FILED A DETAILED REPLY GIVING THE BIFURCATION OF TH E EXPENSES DEBITED UNDER THE HEAD REPAIRS AND MAINTENANCE. THE EXPLANATION OF THE A SSESSEE DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER (A.O.) WHO WAS OF THE OPINION THA T THE EXPENDITURE WERE ALREADY ALLOWED @ 30% OF THE ANNUAL VALUE IN COMPUTING THE INCOME UNDER THE HEAD HOUSE PROPERTY. THE A.O. DISALLOWED A SUM OF RS.49,19,71 4/- OUT OF PROPERTY MAINTENANCE EXPENSES CLAIMED BY THE ASSESSEE. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED ITS CLAIM OF E XPENDITURE. IT WAS EXPLAINED THAT THE ASSESSEE IS HAVING INCOME FROM HOUSE PROPERTY AS WE LL AS INCOME FROM BUSINESS. BEFORE THE LD. CIT(A), IT WAS CLAIMED THAT THE PROPERTY MA INTENANCE EXPENDITURE AMOUNTING TO RS.26,69,300/- BEING ATTRIBUTABLE TOWARDS EARNING B USINESS INCOME SHOULD BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION. AFTER CONSIDERING THE FACTS AND THE SU BMISSIONS, THE LD. CIT(A) OBSERVED THAT CONSIDERING THE SPLIT CHARACTER OF THE BUSINESS IN QUESTION INTO LETTING OUT OF PREMISES AND LETTING OUT OF THE FIT OUTS, DISALLOWANCE OF THE EN TIRE EXPENDITURE OF RS.49,19,714/- 3 ITA NO. 2919/M/11 & 2955/M/11 (A.Y. 2006-07) THE MANJRI STUD FARM PVT. LTD. APPEARS TO BE DISTRACTED. THE LD. CIT(A) FURTHER OB SERVED THAT THE EXPENDITURE INCLUDES EXPENSES LIKE FACILITY MANAGEMENT EXPENSES, SECURIT Y EXPENSES, HOUSEKEEPING SERVICE, PEST CONTROL EXPENSES AND MANY OTHER LIKE EXPENSES. THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT THE INCOME FROM BUSINESS HAS BEEN OFFER ED, THEREFORE, PART OF THESE EXPENDITURE HAVE TO BE ATTRIBUTED TOWARDS EARNING OF BUSINESS I NCOME. THE LD. CIT(A) FURTHER OBSERVED THAT THE BASIS FOR APPORTIONMENT OF THE EX PENDITURE WAS ON THE BASIS OF GROSS BLOCK OF THE ASSETS AND FOUND THE APPORTIONMENT VER Y FAIR AND REASONABLE AND ALLOWED THE CLAIM OF EXPENDITURE OF RS.26,69,300/-. AGGRIEVED B Y THIS THE REVENUE IS BEFORE US. 3. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) DREW OU R ATTENTION TO PAGE 16 OF THE PAPER BOOK AND POINTED OUT THAT THE ASSESSEE ITSELF HAS ASKED TO DISALLOW RS.49,19,714/-. THEREFORE, THERE IS NO REASON WHY THE ADDITION SHOU LD BE RESTRICTED AS DONE BY THE LD. CIT(A). REBUTTING TO THIS, THE LD. COUNSEL POINTED OUT THAT WHAT THE ASSESSEE HAS EXPLAINED IN PAGE 16 OF THE PAPER BOOK IS THAT IF A NY DISALLOWANCE HAS TO BE CONSIDERED, IT HAS TO BE CONSIDERED NOT OUT OF RS.70,68,575/- BUT OUT OF RS.49,19,714/-. 4. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE RELEVANT PAGE OF THE PAPER BOOK BROUGHT TO OUR NOTICE. WE FI ND FORCE IN THE CONTENTION OF THE LD. COUNSEL. THE TOTAL REPAIRS AND MAINTENANCE EXPENSES CHARGED TO PROFIT AND LOSS ACCOUNT IS RS.70,68,575/-. BY ITS NOTE, THE ASSESSEE HAS ASKED TO CONSIDER THE DISALLOWANCE OUT OF RS.49,19,714/-. SINCE THE ASSESSEE IS SHOWING INCOM E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT PART OF THE EXPENDITURE HAVE TO BE APPORTIONED TO THE BUSINESS INCOME. WE A LSO FIND THAT HE BASIS BEING GROSS BLOCK OF THE ASSETS IS ALSO VERY LOGICAL. THE LD. C IT(A) HAS RIGHTLY ALLOWED THE CLAIM OF RS.26,69,300/-. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THIS FINDING OF THE LD. CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. $+ 4,6 ( - #$ + - , ! 4 ITA NO. 2919/M/11 & 2955/M/11 (A.Y. 2006-07) THE MANJRI STUD FARM PVT. LTD. ITA NO. 2955/MUM/2011(ASSESSEES APPEAL) 6. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION OF RS.10,54,640/- IN RESPECT OF THE INTEREST PERTAINING TO PRECONSTRUCTION PERIOD IN TERMS OF THE EXPLANATION TO SECTION 24(B) OF THE ACT. THE LD. CIT(A) HAS NOT ENTERTAINED THIS CLAIM OF THE ASSESS EE ON THE GROUND THAT THE ASSESSEE DID NOT CLAIMED THE INTEREST RELATING TO THE PRECONSTRU CTION PERIOD AT ANY STAGE OF THE ASSESSMENT PROCEEDINGS. DRAWING SUPPORT FROM THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT [2006] 284 ITR 323 (SC), THE LD. CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY T HIS, THE ASSESSEE IS BEFORE US. 7. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT IN A.Y. 2007-08 THE TRIBUNAL IN ITA NO. 4189/MUM/2011 HAS CONSIDERED ID ENTICAL ISSUE AND FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS [2012] 23 TAXMANN.COM 23 (BOM), HAD SET ASIDE THE MATTER TO THE FILE OF THE A.O. TO EXAMINE THE CLAIM OF DEDUCTION IN TERMS OF EXPLANATION TO SECTION 24(B) OF THE ACT. THE LD. DR COULD NOT BRING ANY DISTINGUISHING FACT/DECISION BEFORE US. 8. FACTS AND ISSUES BEING IDENTICAL, RESPECTFULLY F OLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 4189/MUM/ 2011, WE SET ASIDE THE MATTER TO THE FILE OF THE A.O. WHO IS DIRECTED TO EXAMINE THE CLAIM OF DEDUCTION OF RS.10,54,640/- IN TERMS OF EXPLANATION TO SECTION 24(B) OF THE ACT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. $+ 4,6 )*+ , - #$ 7- 89: ( ; , - , ! ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 28, 2 014 SD/- SD/- (JOGINDER SINGH) (N. K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / 0 MUMBAI; < DATED : 28.10.2014 5 ITA NO. 2919/M/11 & 2955/M/11 (A.Y. 2006-07) THE MANJRI STUD FARM PVT. LTD. (.. ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. #$&= / THE APPELLANT 2. >?&= / THE RESPONDENT 3. ' ' / @, ( #$ ) / THE CIT(A) 4. ' ' / @, / CIT - CONCERNED 5. C(D >,) , ' #$1 #) 4 , / 0 / DR, ITAT, MUMBAI 6. E* F0 / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , / 0 / ITAT, MUMBAI