Hamilton Technologies (India) Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3311/DEL/2013

• Counselvise Citation: 331120114 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SAROHA
• Assessee Lawyers: ADHIR SAMAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH C BENCH C BENCH C BENCH C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 3310/DEL/2013 & 3311/DEL/2013 3310/DEL/2013 & 3311/DEL/2013 3310/DEL/2013 & 3311/DEL/2013 3310/DEL/2013 & 3311/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : : : : 2008 2008 2008 2008 - -- - 09 & 2007 09 & 2007 09 & 2007 09 & 2007 - -- - 08 0808 08 M/S HAMILTON TECHNOLOGIES M/S HAMILTON TECHNOLOGIES M/S HAMILTON TECHNOLOGIES M/S HAMILTON TECHNOLOGIES I II INDIA PVT.LTD., NDIA PVT.LTD., NDIA PVT.LTD., NDIA PVT.LTD., 5/51, SECOND FLOOR, 5/51, SECOND FLOOR, 5/51, SECOND FLOOR, 5/51, SECOND FLOOR, WEA, KAROL BAGH, WEA, KAROL BAGH, WEA, KAROL BAGH, WEA, KAROL BAGH, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 005. 110 005. 110 005. 110 005. PAN : AABCH2066H. PAN : AABCH2066H. PAN : AABCH2066H. PAN : AABCH2066H. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -17, 17, 17, 17, ARA CENTRE, ARA CENTRE, ARA CENTRE, ARA CENTRE, JHANDEWALAN, JHANDEWALAN, JHANDEWALAN, JHANDEWALAN, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ADHIR SAMAL, CA. RESPONDENT BY : SHRI ASHOK SAROHA, CIT - DR. DATE OF HEARING : 21.10.2015 21.10.2015 21.10.2015 21.10.2015 DATE OF PRONOUNCEMENT : 23.10.2015 23.10.2015 23.10.2015 23.10.2015 ORDER ORDER ORDER ORDER PER R.S. SYAL, AM: PER R.S. SYAL, AM: PER R.S. SYAL, AM: PER R.S. SYAL, AM:- -- - THESE TWO APPEALS BY THE ASSESSEE RELATE TO ASSESSMENT YEA R 2007-08 AND 2008-09. SINCE SOME OF THE ISSUES RAISED IN THESE APPEALS ARE COMMON, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENI ENCE. AY 2007 AY 2007 AY 2007 AY 2007- -- -08: 08: 08: 08:- -- - 2. GROUND NO.1 IS GENERAL WHICH DOES NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO.2 ABOUT THE TREATMENT OF RENTAL INCOME BY THE REVENUE AS INCOME FROM OTHER SOURCES INSTEAD OF INCO ME FROM HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE, WAS NOT PRESSED BY TH E LEARNED AR. THE SAME IS, THEREFORE, DISMISSED. ITA-3310 & 3311/D/2013 2 4. GROUND NO.3 IS AGAINST COMPUTATION OF RENTAL INCO ME AT `1,84,34,516/- INSTEAD OF `1,62,16,316/-. THE FACTS OF THIS GROUND ARE THAT THE ASSESSING OFFICER, ON PERUSAL OF LEASE AGREEMEN T WITH M/S FISHERV INDIA P. LTD. TO WHOM PREMISES WAS LET OUT, OBSE RVED THAT THERE WAS A MENTION OF RENT OF `1.84 CRORES. THE ASSESSING OFF ICER TREATED THIS AMOUNT OF RENT AS INCOME FROM OTHER SOURCES. TH E ASSESSEE ARGUED BEFORE THE LEARNED CIT(A) THAT RENT FOR ONE MONTH WAS NOT RECEIVED AS THE PREMISES WAS GIVEN ON RENT TO THIS PARTY WITH A CONDITION OF FREE USER FOR ONE MONTH. THE LEARNED C IT(A) DID NOT ACCEPT THIS CONTENTION AND APPROVED THE ASSESSING OFFICE RS ACTION. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING R ELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE ASSESSEE HAS I N FACT CREDITED RENTAL INCOME OF `1.62 CRORES TO ITS PROFIT & LOSS AC COUNT. A COPY OF THE ADDENDUM DATED 25.08.2006 TO THE LEASE AGREEMENT HA S BEEN PLACED AT PAGE 28 OF THE PAPER BOOK, AS PER WHICH, THE LESSO R AGREES TO GIVE AN ADDITIONAL RENT FREE PERIOD OF ONE MONTH FROM TH E RENT COMMENCEMENT DATE TOWARDS DELAYS IN HANDOVER OF THE P REMISES. LESSEE HEREBY AGREE TO ADJUST RS.22,18,200/- OUT OF THE RENT PAYABLE TO THE LESSOR. THIS ADDENDUM TO THE AGREEMENT AMPLY PROVES THAT THE ASSESSEE ALLOWED RENT FREE PERIOD OF ONE MONTH TO T HE LESSEE BECAUSE THERE WAS SOME DELAY IN HANDING OVER OF THE PR EMISES. ONCE NO RENT IS RECEIVED AS THE SAME STOOD WAIVED BECAUSE OF LATE HANDING OVER OF THE POSSESSION, THERE CANNOT BE ANY QUESTION OF CHARGING SUCH AMOUNT AS INCOME FROM OTHER SOURCES. WE, THEREFORE , OVERTURN THE IMPUGNED ORDER ON THIS SCORE AND ORDER FOR DELETION O F THIS ADDITION. 6. GROUND NO.4 IS AGAINST THE CONFIRMATION OF DISALLOW ANCE OF `86,828/- ON ACCOUNT OF INTEREST ON O.D. ACCOUNT. T HE ASSESSING OFFICER DISALLOWED INTEREST FOR THE REASON THAT NO EVI DENCE WAS FILED IN ITA-3310 & 3311/D/2013 3 THIS REGARD. THE LEARNED CIT(A) COUNTENANCED THE VI EW TAKEN BY THE ASSESSING OFFICER. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED RELEV ANT MATERIAL ON RECORD, WE OBSERVE THAT THE ASSESSEE CLAIMED DEDUCTION OF INTEREST AMOUNTING TO `86,828/- ON OVER DRAFT ACCOUN T STATED TO HAVE BEEN UTILIZED FOR PURCHASE OF THE FURNITURE AND FIXT URES AND REPAIRS AND MAINTENANCE OF THE BUILDING WHICH WAS LET OUT ON REN T. THE LEARNED AR SUBMITTED THAT THE AO DID NOT ALLOW A REASONABLE OPPORTUNITY TO ADDUCE NECESSARY EVIDENCE AND REQUESTED THAT ONE MORE OPPORTUNITY BE GIVEN TO THE ASSESSEE FOR FILING NECESSARY EVIDENCE I N THIS REGARD. IT IS NOTICED THAT IT IS A CASE OF PAYMENT OF INTEREST TO BANK AND HENCE THE GENUINENESS OF PAYMENT OF SUCH INTEREST CANNOT BE DENIE D. THE ONLY THING WHICH REMAINS IS TO LINK SUCH INTEREST WITH THE PURPOSE OF LOAN. AGREEING WITH THE CONTENTION, WE SET ASIDE THE IMPUGN ED ORDER ON THIS SCORE AND SEND THE MATTER TO THE ASSESSING OFFICER FOR EX AMINING THIS ISSUE AFRESH IN THE LIGHT OF THE EVIDENCE WHICH THE ASSE SSEE PROPOSES TO ADDUCE IN SUPPORT OF THE CLAIM OF DEDUCTION OF IN TEREST. 8. GROUND NO.5 IS AGAINST DISALLOWANCE OF SUM OF `38,74 ,359/- ON ACCOUNT OF INTEREST ON BANK LOAN. THE FACTS AND CIRC UMSTANCES OF THIS GROUND ARE SIMILAR TO THAT OF THE IMMEDIATELY PRECED ING GROUND. HERE AGAIN, THE ASSESSEE COULD NOT FILE EVIDENCE OF SPENDING THE LOAN AMOUNT FOR ACQUIRING BUILDING ETC. WITH THE HELP OF LOAN ON WHICH INTEREST WAS PAID AND THE LEARNED AR SEEKS ONE MORE OPP ORTUNITY FOR ADDUCING SUCH EVIDENCE. FOLLOWING THE VIEW TAKEN HE REINABOVE, WE SET ASIDE THE IMPUGNED ORDER AND SEND THE MATTER TO TH E ASSESSING OFFICER FOR DECIDING THIS ISSUE AFRESH IN THE LIGHT OF THE EVIDENCE TO BE FILED BY THE ASSESSEE. ITA-3310 & 3311/D/2013 4 9. GROUND NO.6 IS ABOUT THE SUSTENANCE OF DISALLOWANCE OF A SUM OF `54,827/- ON ACCOUNT OF PROFESSIONAL CHARGES. THE ASSE SSEE CLAIMED DEDUCTION FOR THIS AMOUNT WHICH THE ASSESSING OFFICER REFUSED TO ALLOW FOR WANT OF EVIDENCE OF PROFESSIONAL CHARGES. WE HAVE EXAMINED THE ASSESSEES AUDITED ACCOUNTS WHICH ARE AVAILABLE IN THE PA PER BOOK. IT CAN BE SEEN FROM THE PROFIT & LOSS ACCOUNT THAT THERE IS A DEBIT OF `54,827/- TOWARDS PROFESSIONAL CHARGES. THE LEARNED AR CONTENDED THAT THE ASSESSING OFFICER DID NOT ALLOW ADEQUATE OPPOR TUNITY TO PRESENT EVIDENCE IN SUPPORT OF THE PAYMENT OF SUCH PRO FESSIONAL CHARGES. SETTING ASIDE THE IMPUGNED ORDER ON THIS SC ORE, WE REMIT THE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW ADEQUATE OPPORTUNITY TO THE ASSESSEE FOR PRODUCING NECESSARY EVIDE NCE IN SUPPORT OF THIS PAYMENT AND THEN DECIDE AS PER LAW. 10. THE LAST GROUND IS AGAINST CONFIRMATION OF DISALLOW ANCE OF A SUM OF `4,19,083/- ON ACCOUNT OF PROCESSING OF LOAN FEES B Y TREATING IT AS CAPITAL EXPENDITURE. 11. THE ASSESSING OFFICER TREATED PROCESSING OF LOAN FEES AS A CAPITAL EXPENDITURE AND DISALLOWED THE SAME. NO RELIEF WAS A LLOWED IN THE FIRST APPEAL. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING RELEVANT MATERIAL ON RECORD, WE DO NOT FIND ANY SUBSTANCE IN THE VIEW CANVASSED BY THE AUTHORITIES BELOW THAT THE PROCESSING O F LOAN FEES IS A CAPITAL EXPENDITURE. THE FACT THAT SUCH PROCESSING FEE HAS BEEN PAID BY THE ASSESSEE HAS NOT BEEN DENIED BY THE AO. THE DISPU TE IS ONLY WHETHER IT IS A CAPITAL OR A REVENUE EXPENDITURE. WE DO NOT FIND ANY QUALITATIVE DIFFERENCE BETWEEN INTEREST AND PROCESSING FEE ON LOAN. IN OUR CONSIDERED OPINION, SUCH PROCESSING FEE CANNOT BE C APITALIZED AND IS DEDUCTIBLE IN THE SAME MANNER IN WHICH THE INTEREST IS DEDUCTIBLE. ITA-3310 & 3311/D/2013 5 WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISSU E ALSO AND SEND THE MATTER TO THE FILE OF THE AO TO CONSIDER THE DEDUCTIBILITY OF SUCH AMOUNT ON THE SAME LINE AS THAT OF THE INTEREST. 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. AY 200 AY 200 AY 200 AY 2008 88 8- -- -0 00 09 99 9: :: :- -- - 14. GROUND NO.1 IS GENERAL WHICH DOES NOT REQUIRE ANY ADJUDICATION. 15. GROUND NO.2 TREATING THE RENTAL INCOME AS `INCOM E FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY AS CLAI MED BY THE ASSESSEE WAS NOT PRESSED BY THE LEARNED AR. THE SAME IS, TH EREFORE, DISMISSED. 16. GROUND NO.3 IS AGAINST THE COMPUTATION OF RENTAL INCOME AT `2,66,18,256/- INSTEAD OF `2,52,82,066/-, IGNORING THE FACT THAT THE RENT RECEIVED BY THE ASSESSEE WAS INCLUSIVE OF SERVICE TAX . THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE DECLARED RENT REC EIVED AT `2.52 CRORE. THE ASSESSING OFFICER NOTICED THAT THE AC TUAL RENT PAID BY THE COMPANY WAS OF `2.66 CRORE. HE, THEREFORE, INCL UDED THE AMOUNT OF `2.66 CRORE AS ASSESSEES RENTAL INCOME. THE ASSESSEE ARG UED BEFORE THE AUTHORITIES BELOW THAT THIS RENTAL INCOME IS INCLUSIVE OF SERVICE TAX AMOUNTING TO `0.14 CRORE WHICH SHOULD BE DEDUCTED FROM THE GROSS RENTAL RECEIPTS. THIS CONTENTION MET WITH TH E FATE OF DISMISSAL. NOW, THE ASSESSEE IS BEFORE US. 17. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING RE LEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE CATEGORIC ALLY CLAIMED BEFORE THE AUTHORITIES THAT GROSS RENT OF `2.66 CRORE INCLUDES SERVICE TAX OF `0.14 CRORE AND ONLY THE NET AMOUNT SHOULD BE CHARGED TO TAX. THE AMOUNT OF SERVICE TAX IS UNDOUBTEDLY A PART OF ASSE SSEES RECEIPT ITA-3310 & 3311/D/2013 6 AND IS CHARGEABLE TO TAX IN THE SAME WAY AS RECEIPT. HOWEVER, THE PAYMENT OF SERVICE TAX IS DEDUCTIBLE IN THE COMPUTATI ON OF INCOME. THE AUTHORITIES BELOW HAVE CONSIDERED ONLY THE RECEIP T ASPECT OF THE RENT AT `2.66 CRORE INCLUSIVE OF SERVICE TAX BUT HAVE NOT ALLOWED ANY DEDUCTION FOR SERVICE TAX CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE BEFORE THE DUE DATE. UNDER SUCH CIRCUMSTANCES, WE HOL D THAT THE GROSS RENTAL INCOME IS CHARGEABLE AT `2.66 CRORE BUT T HE ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION OF `0.14 CRORE TOWARDS PA YMENT OF SERVICE TAX. THIS GROUND IS, THEREFORE, ALLOWED. 18. GROUND NO.4 AGAINST DISALLOWANCE OF `86,828/- ON ACCOUNT OF INTEREST ON O.D. ACCOUNT IS SIMILAR TO GROUND NO.4 OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08 DECIDED BY US IN THE FOREGOING PARAGRAPHS OF THIS ORDER. FOR THE REASONS GIVEN ABOVE FOR THE ASSESSMENT YEAR 2007-08, WE SET ASIDE THE IMPUGNED ORDER ON THIS SCORE AND SEND THE MATTER TO THE ASSESSING OFFICER FOR E XAMINING IT AFRESH IN THE LIGHT OF THE EVIDENCE WHICH THE ASSESSEE P ROPOSES TO ADDUCE IN SUPPORT OF THE CLAIM OF DEDUCTION OF INTER EST. 19. GROUND NO.5 AGAINST DISALLOWANCE OF SUM OF `67,43, 094/- ON ACCOUNT OF INTEREST ON BANK LOAN IS SIMILAR TO GROUND NO.5 OF THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08 DECIDED B Y US IN THE FOREGOING PARAGRAPHS OF THIS ORDER. FOLLOWING TH E VIEW TAKEN HEREINABOVE, WE SET ASIDE THE IMPUGNED ORDER AND SEND THE MATTER TO THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH IN THE LIGHT OF THE EVIDENCE TO BE FILED BY THE ASSESSEE. 20. GROUND NO.6 ABOUT DISALLOWANCE OF SUM OF `60,000/ - ON ACCOUNT OF PROFESSIONAL CHARGES IS SIMILAR TO GROUND NO.6 OF TH E ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08 DECIDED IN THE FOREGOING PARAGRAPHS OF THIS ORDER. FOLLOWING THE SAME, WE SET ASIDE THE ITA-3310 & 3311/D/2013 7 IMPUGNED ORDER ON THIS SCORE AND REMIT THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW ADEQUATE OPPORTUN ITY TO THE ASSESSEE FOR PRODUCING NECESSARY EVIDENCE IN SUPPORT OF THIS PAY MENT. 21. GROUND NO.7 IS AGAINST CONFIRMATION OF DISALLOWAN CE OF `14,04,048/- ON ACCOUNT OF BROKERAGE CHARGES. THE A SSESSEE CLAIMED DEDUCTION FOR THIS AMOUNT AS BROKERAGE CHARGES PAID. IN THE ABSENCE OF ANY DETAILS, THE ASSESSING OFFICER MADE DISALLOWANCE, WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 22. THE LEARNED AR ARGUED THAT SUCH BROKERAGE CHARGE S WERE PAID TO COMMISSION AGENTS FOR PROCURING TENANTS OF THE BUILD ING AND THIS BROKERAGE WAS PAID AT THE RATE OF 40 DAYS RENTAL VA LUE. HE SUBMITTED THAT THE ASSESSEE COULD NOT FILE EVIDENCE FOR THE PAYME NT OF SUCH BROKERAGE BECAUSE OF INADEQUATE OPPORTUNITY PROVIDE D BY THE ASSESSING OFFICER. IN OUR CONSIDERED OPINION, THE ENDS O F JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE I S SET ASIDE AND MATTER IS SENT BACK TO THE ASSESSING OFFICER FOR A FRESH D ETERMINATION AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. WE ORDER ACCORDINGLY. 23. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.10.2015. SD/- SD/- (SUCHITRA KAMBLE) (SUCHITRA KAMBLE) (SUCHITRA KAMBLE) (SUCHITRA KAMBLE) ( (( ( R.S. SYAL R.S. SYAL R.S. SYAL R.S. SYAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER VK. DATE : 23.10.2015 ITA-3310 & 3311/D/2013 8 COPY FORWARDED TO: - 1. APPELLANT : M/S HAMILTON TECHNOLOGIES INDIA PV T.LTD., M/S HAMILTON TECHNOLOGIES INDIA PVT.LTD., M/S HAMILTON TECHNOLOGIES INDIA PVT.LTD., M/S HAMILTON TECHNOLOGIES INDIA PVT.LTD., 5/51, SECOND FLOOR, WEA, KAROL BAGH, 5/51, SECOND FLOOR, WEA, KAROL BAGH, 5/51, SECOND FLOOR, WEA, KAROL BAGH, 5/51, SECOND FLOOR, WEA, KAROL BAGH, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 005. 110 005. 110 005. 110 005. 2. RESPONDENT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -17, ARA CENTRE, 17, ARA CENTRE, 17, ARA CENTRE, 17, ARA CENTRE, JHANDEWALAN, NEW DELHI. JHANDEWALAN, NEW DELHI. JHANDEWALAN, NEW DELHI. JHANDEWALAN, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR *