M/s. Motiwala Square, Aurangabad V. Additional Commissioner of Income-tax,

ITA 327/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9361 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVANAND KALAKERI
• Keywords: Business income; Depreciation; Business expenditure
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.327/PUN/2015 / ASSESSMENT YEAR : 2010-11 M/S. MOTIWALA SQUARE, SHOP NO.B-1/2, MOTIWALA TRADE CENTRE, NIRALA BAZAR, SAMARTH NAGAR, AURANGABAD 431101. PAN : AAMFM9370K. . / APPELLANT V/S ADDL.COMMISSIONER OF INCOME TAX, RANGE-2, AURANGABAD. . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI SHIVANAND KALAKERI. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A)-2, AURANGABAD DT.23.01.2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE DERIVING IN COME FROM RENT, BANK INTEREST AND OTHER SOURCES. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 30.07.2010 DECLARING TO TAL INCOME OF RS.2,21,92,580/-. THE CASE WAS SELECTED FOR SCRUT INY / DATE OF HEARING : 16.05.2017 / DATE OF PRONOUNCEMENT: 07.06.2017 2 AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF T HE ACT VIDE ORDER DT.22.03.2013 AND THE TOTAL INCOME WAS DETERMIN ED AT RS.2,59,23,520/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.23.01.2015 IN (APPEAL NO.ABD/CIT(A)/171/2013-14 (A-2/10) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT (A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND : COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RESTRICTING 20% OF THE EXPENDITURE OUT OF LISTED OF RS.32,97,863/- AS BUSINESS EXPENDITURE AS AGAINST CLAIM OF RS.32,97,863/- BY T HE APPELLANT. 3. ON THE DATE OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED ON THE IR BEHALF. WE THEREFORE PROCEED TO DISPOSE OF THE APPEAL EXP ARTE QUA THE ASSESSEE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUS ING THE PROFIT AND LOSS ACCOUNT FURNISHED BY THE ASSESSEE, A O NOTICED THAT ASSESSEE HAD EARNED THE COMMISSION INCOME OF RS.3,10 ,000/- BUT HAD ENDED UP WITH LOSS OF RS.34,20,944/-. ACCORDING T O AO, THE LOSS INCURRED BY THE ASSESSEE WAS NOT ALLOWABLE BECA USE ASSESSEE HAD NOT UNDERTAKEN ANY MAJOR BUSINESS ACTIVIT Y DURING THE YEAR AND ACCORDING TO AO, NO EXPENDITURE HAS BEEN INCURRED FOR EARNING COMMISSION OF RS.3,10,000/-. HE ACCORDINGLY DISALLOWED THE LOSS INCURRED BY THE ASSESSEE. AGGRIEVED B Y THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER : 3 10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NO TICED THAT THE FIRST CONTENTION OF THE A.O IS THAT THE APPELLANT H AS NOT CARRIED OUT ANY BUSINESS ACTIVITY AND HENCE THE APPELLANT IS NO T ELIGIBLE TO CLAIM ANY BUSINESS EXPENDITURE. ON PERUSAL OF THE WRITTEN SUBMISSION FILED BY THE APPELLANT, IT HAS BEEN NOTICED THAT TH E APPELLANT HAS ALSO CARRIED OUT SOME BUSINESS ACTIVITY IN THE YEAR UNDER APPEAL. THEREFORE, THE ABOVE MENTIONED FIRST CONTENTION OF THE A.O IS REJECTED. 10.1 THE A.O WITHOUT PREJUDICE TO THE FIRST CONTENT ION, HAS HELD THAT EVEN IF IT IS ACCEPTED THAT THE APPELLANT HAS CARRIED OUT SOME BUSINESS ACTIVITY THEN THE EXPENDITURE ONLY IN RESP ECT OF LAND SURVEY EXPENSES OF RS. 44,010/- AND 0.75% EXPENSES OUT OF TOTAL EXPENSES AMOUNTING TO RS. 22,095/- ARE TO BE ALLOWED AND THE BUSINESS PROFIT IS TO BE ACCESSED AT RS.2,43,895/- AS AGAINST BUSIN ESS LOSS CLAIMED BY THE APPELLANT AT RS.34,20,944/-. IN SHORT, THE A .O. HAS HELD THAT THE BUSINESS EXPENDITURE CLAIMED BY THE APPELLANT A T RS. 37,30,944/- IS TO BE ALLOWED TO THE EXTENT OF RS. 6 6,105/- AGAINST THE GROSS BUSINESS INCOME OF COMMISSION RS. 3,10,00 0/-. 10.2 IN ORDER TO DECIDE THE ISSUE ABOUT THE QUANTUM OF ALLOWABILITY OF BUSINESS EXPENDITURE, IT HAS BEEN NOTICED THAT I T IS UNDISPUTED FACT THAT THE APPELLANT FIRM HAS CARRIED OUT TWO AC TIVITIES I.E., OF LETTING OUT HOUSE PROPERTIES AND BUSINESS ACTIVITY OF EARNING COMMISSION IN REAL ESTATE TRANSACTION AND ALSO MAKI NG INVESTMENT IN LAND FOR DEVELOPING AND EARNING PROFIT. IT HAS A LSO BEEN NOTICED THAT THE MAJOR ACTIVITY OF THE APPELLANT IN THE YEA R UNDER APPEAL AND ALSO IN THE PRECEDING TWO YEARS IS THAT OF LETTING OUT OF HOUSE PROPERTIES. THIS FACT IS EVIDENT FROM THE FACT THAT DURING THE ABOVE MENTIONED THREE YEARS THE APPELLANT HAS EARNED INCO ME FROM HOUSE PROPERTY WHICH CONSTITUTES MORE THAN 99% OF THE TOT AL INCOME EARNED BY THE APPELLANT FIRM. ON PERUSAL OF THE EXP ENDITURE INCURRED AND CLAIMED BY THE APPELLANT FIRM IN THE PROFIT AND LOSS ACCOUNT IT HAS BEEN NOTICED THAT MOST OF THE EXPENSES HAVE BEE N INCURRED FOR BOTH THE ACTIVITIES AND SOME OF THE EXPENDITURES AR E INCURRED MAINLY FOR LETTING OUT OF THE PROPERTY AND SOME OF THE EXP ENDITURE ARE INCURRED MAINLY FOR BUSINESS ACTIVITY. THE ABOVE OB SERVATION ABOUT THE EXPENDITURE INCURRED HAS BEEN NOTICE AS UNDER : - PARTICULARS AMOUNTS RS. REMARK ABOUT RELATION OF THE EXPENDITURE WITH LET OUT HOUSE PROPERTY AND BUSINESS. ACCOUNTING CHARGES 38,218 COMMON FOR BOTH THE ACTIVITIES. BANK CHARGES 2,078 COMMON FOR BOTH THE ACTIVITIES. BUILDING INSURANCE 28,755 COMMON FOR BOTH THE ACTIVITIES. COMPUTER REPAIRS AND MAINTENANCE 6,100 COMMON FOR BOTH THE ACTIVITIES. DEPRECIATION 13,44,320 COMMON FOR BOTH THE ACTIVITIES. INTEREST ON TDS 3,298 COMMON FOR BOTH THE ACTIVITIES. LAND SURVEY EXPENSES 44,010 COMMON FOR BOTH THE ACTIVITIES. LIGHT BILL FOR OFFICE 22,700 COMMON FOR BOTH THE ACTIVITIES. NEWSPAPER EXPENSES 5,685 COMMON FOR BOTH THE ACTIVITIES. OFFICE EXPENSES 87,662 COMMON FOR BOTH THE ACTIVITIES. OFFICE RENT 1,08,000 COMMON FOR BOTH THE ACTIVITIES. 4 PRINTING & STATIONERY 7,467 COMMON FOR BOTH THE ACTIVITIES. PROCESSING FEES 2,79,250 COMMON FOR BOTH THE ACTIVITIES. PROCESSING CHARGES 3,45,890 COMMON FOR BOTH THE ACTIVITIES. REPAIRS & MAINTENANCE 5,260 COMMON FOR BOTH THE ACTIVITIES. SALARIES 4,37,850 COMMON FOR BOTH THE ACTIVITIES. TELEPHONE & MOBILE 1,52,458 COMMON FOR BOTH THE ACTIVITIES. TRAVELLING EXPENSES 31,354 COMMON FOR BOTH THE ACTIVITIES. VEHICLE INSURANCE 37,317 COMMON FOR BOTH THE ACTIVITIES. VEHICLES REPAIRS & MAINTENANCE 3,82,946 COMMON FOR BOTH THE ACTIVITIES. BANK & HDFC INTEREST 3,91,939 MAINLY RELATED TO BUSINESS ACTIVITY AS INTEREST IN RESPECT OF LET OUT PROPERTY HAS BEEN SEPARATELY CLAIMED. TOTAL 37,62,557 -- FROM THE ABOVE TABULAR CHART IT IS EVIDENT THAT THE APPELLANT HAS INCURRED EXPENDITURE OF RS. 3,91,939/- AND RS.4 4,010/- MAINLY FOR BUSINESS ACTIVITY AND EXPENDITURE OF RS.28,755/ - MAINLY FOR LET OUT HOUSE PROPERTY. THE COMMON EXPENDITURE INCURRED FOR BOTH THE ACTIVITIES, THEREFORE, WORKS OUT TO RS. 32,97,863/- . IT HAS ALREADY BEEN MENTIONED THAT THE MAJOR ACTIVITY OF THE APPEL LANT IS THAT OF LETTING OUT OF THE HOUSE PROPERTY AND MAJOR ACTIVIT Y IS THAT OF BUSINESS. IT IS ALSO UNDISPUTED FACT THAT THE COMMO N EXPENDITURE CANNOT BE EXACTLY BIFURCATED FOR BOTH THE ACTIVITIE S. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND THE SUBMI SSION OF THE APPELLANT AND TO MEET THE ENDS OF JUSTICE, THE BUSI NESS EXPENDITURE INCLUDED IN COMMON EXPENDITURE IS ESTIMATED @20% OF THE SAID EXPENDITURE OF RS. 32,97,863/- WHICH WORKS OUT TO R S. 6,59, 573/-. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION THE TOTA L BUSINESS EXPENDITURE WORKS OUT TO RS.10,95,522/-[RS.6,59,573 /- +RS.44,010/-+RS.3,91,939/-]. THE DISALLOWANCE OF BU SINESS EXPENDITURE AND THE ADDITION MADE BY THE A.O OF RS. 37,30,944/- IS, THEREFORE, DELETED TO THE EXTENT OF RS. 10,95,5 22/- AND CONFIRMED TO THE EXTENT OF RS.26,35,422/-. THE A.O. IS DIRECT ED ACCORDINGLY. IN RESPECT OF THE CLAIM OF THE APPELLANT THAT CREDIT FOR TDS OF RS. 31,000/- HAS NOT BEEN ALLOWED TO THE APPELLANT, THE A.O IS DIRECTED TO VERIFY THE CLAIM OF THE APPELLANT AND I F THE SAME IS FOUND TO BE CORRECT ON VERIFICATION, THE SAME MAY BE ALLO WED. GROUNDS NOS. 1 TO 6 ARE, THEREFORE, TREATED AS PART LY ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. 5 6. WE HAVE HEARD LD.D.R. AND PERUSED THE MATERIAL ON RECO RD. WE FIND THAT LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE HAS GIVEN A FINDING THAT ASSESSEE HAD CARRIED O UT THE BUSINESS ACTIVITY DURING THE YEAR UNDER APPEAL AS AGAINST THE A.O.S OBSERVATION THAT NO BUSINESS ACTIVITY WAS CARRIED ON BY THE ASSESSEE AND HAS INCURRED RS.32,97,863/- AS COMMON EXP ENDITURE FOR BUSINESS ACTIVITY AND FOR THE ACTIVITY OF LETTING OUT OF HOUSE PROPERTIES. HE THEREAFTER ESTIMATED THE SHARE OF EXPEN DITURE INCURRED FOR THE BUSINESS AT 20% AND ACCORDINGLY CONFIRME D ADDITION TO THE EXTENT OF RS.26,35,422/- AND GRANTED PART IAL RELIEF AT RS.10,95,522/-. CONSIDERING THE TOTALITY OF THE FACTS AN D THE FINDINGS OF LD.CIT(A), WE ARE OF THE VIEW THAT IN THE PRESEN T CASE, THE DISALLOWANCE OF EXPENDITURE AT 20% IS ON HIGHER SIDE AN D CONSIDERING THE NATURE OF EXPENSES AND RATIO OF INCOME FRO M BUSINESS ACTIVITY AND LETTING OF HOUSE PROPERTIES, WE ARE O F THE VIEW THAT IN THE PRESENT CASE THE DISALLOWANCE IF RESTRICTED TO 10% WOULD MEET THE ENDS OF JUSTICE. WE THUS DIRECT ACCORDINGLY. THUS THE GROUND OF ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY -ALLOWED. ORDER PRONOUNCED ON 7 TH DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 7 TH JUNE, 2017. YAMINI 6 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-2, AURANGABAD. CIT-2, AURANGABAD. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // //// // TRUE COP // /// TRUE // //COPY // TRUE COPY // //// // // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.