JAMES MACKINTOSH & CO. P. LTD, MUMBAI V. DCIT CEN CIR 23, MUMBAI

ITA 3617/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59879 (ITAT-MUMBAI)
• Duration Of Justice: 42 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: K SHIVARAMAJAY R SINGH
• Keywords: Depreciation; Additional evidence; Corroborative evidences; Valuation report
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI P.M. JAGTAP (AM) & SHRI S.S. GODAR A (JM) I.T.A. NO.3617/MUM/2011 (A.Y. 2004-05) M/S. JAMES MACKINTOSH & CO. P.LTD., DARASHAW HOUSE, 3 RD FLOOR, S.V. ROAD, BALLARD ESTATE, MUMBAI-400 001. PAN: AAACJ0988P VS. DY. COMMR. OF INCOME-TAX, CIR. 2(2), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY S/SHRI K.SHIVARAM/AJAY R. SINGH. RESPONDENT BY SHRI D.S. SUNDER SINGH. DATE OF HEARING 05-03-2012 DATE OF PRONOUNCEMENT 16-03-2012 O R D E R PER S.S. GODRA, JM : THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 16-2-2011 PASSED BY THE CIT(A)-5, MUMBAI. IN THE INSTANT APPEAL, ALTHOUGH THE ASSESSEE HAS RA ISED TWO GROUNDS. GROUND NO.2 IS GENERAL IN NATURE. THEREFORE, WE ARE ONLY DECIDING GROUND NO.1, WHICH IS REPRODUCED AS UNDER : 1. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING ORDE R OF THE LEARNED ASSESSING OFFICER IN DISALLOWING DEPRECIATI ON OF RS.18,23,292/- CLAIMED BY THE ASSESSEE COMPANY IN RESPECT OF THE P ROPERTY AT KASHID ACQUIRED DURING THE YEAR BY STATING THAT ASSESSEE C OMPANY IS NOT AN OWNER OF THE PROPERTY. FURTHER PROPERTY HAS BEEN HE LD BY HIM TO BE ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 2 AGRICULTURE LAND AND MEANT FOR AGRICULTURAL PURPOSE AND NOT FOR BUSINESS. IT IS THEREFORE CONCLUDED THAT SAID PROPE RTY IS NOT OWNED AND ITS USAGE FOR BUSINESS HAS NOT BEEN ESTABLISHED. IT IS HOWEVER SUBMITTED THAT SAID PROPERTY WAS ACQUIRED BY THE ASSESSEE COM PANY AND OWNED BY IT AND FURTHER THE SAME WAS USED AS TRADING CENT RE. ACCORDINGLY, DEPRECIATION CLAIMED IN RESPECT OF THE SAID PROPERT Y SHOULD BE ALLOWED. GROUND NO.1: 2. FACTS GIVING RISE TO FILING OF THE INSTANT APPEA L RAISING THE ABOVE GROUND ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SH IPPING AGENT. FOR THE ASSESSMENT YEAR 2004- 05, IT FILED ITS RETURN ON 31-10-2004. BEFORE THE AO, THE ASSESSEE CLAIMED DEPRECIATION ON AGRICULTURAL LAND (INCLUDING A FARM HOUSE) AMOUNTIN G TO RS.18,23,292/-. BEFORE DECIDING THE SAME, THE AO SOUGHT EXPLANATION. IN REPLY THEREOF, THE ASSESSEE COMPANY STATED THAT IT HAD ACQUIRED LAND ADMEASURING 60 GUNTAS APPROXIMATELY A ND BUILDING APPURTENANT THERETO WITH THE PRIMARY OBJECT OF HAVING A STAFF GUEST HOUSE AND CO NFERENCE CENTRE. HENCE, IT CLAIMED DEPRECIATION. HOWEVER, AFTER TAKING INTO CONSIDERATION THE AGREE MENT OF SALE DATED 11-7-2003 AND BY PERUSING THE ENTIRE RECORD OF THE CASE, IT WAS HELD BY THE AO THAT THE LAND WAS OWNED BY SHRI FAROKH HOMI COMMISSARIATE. NOT BY THE ASSESSEE. FU RTHER REACHED TO THE FOLLOWING CONCLUSIONS: (2) AS PER SECTION 32(1) OF THE INCOME-TAX ACT 196 1, DEPRECIATION IS ALLOWABLE IN THE CASE THE ASSET IS OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR PURPOSE OF BUSINESS OR PROFES SION . IN THE INSTANT CASE IT IS EVIDENT THAT THE ASSET IS NOT OWNED BY T HE ASSESSEE COMPANY. (3) DURING THE ASSESSMENT PROCEEDING THE ASSESSEE W AS ASKED TO PRODUCE THE PROOF OF CONSTRUCTION OF THE GUEST HOUS E AND CONFERENCE HALL. THE ASSESSEE SUBMITTED THAT THE FARM HOUSE WH ICH WAS ALREADY IN EXISTENCE WAS USED FOR THE PURPOSE OF GUEST HOUSE. THIS IS IN CONTRADICTION TO THEIR EARLIER SUBMISSION WHEREIN T HEY HAD STATED THAT THE LAND WAS PURCHASED FOR THE PURPOSE OF HAVING A GUEST HOUSE AND CONFERENCE HALL TO BE USED FOR THE BUSINESS PURPOSE S. (4) THE ASSESSEE WAS ASKED VIDE THIS OFFICE LETTER DATED 11-12-2006 TO GIVE THE DETAILS AS TO HOW THE PROPERTIES WERE U SED FOR THE PURPOSE OF ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 3 BUSINESS ALONGWITH SUPPORTING EVIDENCES. VIDE ITS REPLY DATED 14-12- 2006, IT WAS CONTENDED BY THE ASSESSEE THAT THE PRO PERTY WAS USED AS GUEST HOUSE CUM CONFERENCE HALL. THE REPLY IS GENER AL IN NATURE WITHOUT ANY SPECIFIC DETAILS. NO SUPPORTING EVIDENCE HAS BE EN FILED TO SHOW ANY USE FOR BUSINESS DESPITE BEING ASKED TO DO SO. (5) AS PER THE PURCHASE AGREEMENT THE PROPERTY IS A GRICULTURAL LAND WITH FARM HOUSE AND PRIMA FACIE NOT AMOUNT TO USE I N BUSINESS, ACCORDINGLY, IT WAS HELD THAT THE ASSET IN QUESTION IS AN AGRICULTURAL LAND AS IS CLEAR FROM THE TERMS OF THE AGREEMENT. THEREFORE, IN AOS OPINION, THE CONSIDERATION PAID FOR THE PROPERTY WAS ESSENTIALLY FOR LAND. NEGLIGIBLE PORTION OF THE SAM E PERTAINED TO THE STRUCTURES STANDING ON A SMALL PART OF THE LAND. HENCE, THE SAID CLAIM OF D EPRECIATION WAS DISALLOWED. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE PREFERR ED APPEAL BEFORE THE LD. CIT(A). ALSO FILED APPLICATION UNDER RULE 46A OF THE I.T. RULES, 1962. WITH REQUEST TO ADMIT THE VALUATION REPORT OF THE PROPERTY AS ADDITIONAL EVIDENCE. HOWE VER, THE LD. CIT(A) NEITHER ADMITTED THE SAID APPLICATION AFTER CALLING FOR EXPLANATION FROM THE AO NOR THE APPEAL WAS ACCEPTED. CONSEQUENTLY, VIDE THE IMPUGNED ORDER, THE LD. CIT(A) CAME TO TH E CONCLUSION THAT AS PER THE AGREEMENT, THE ASSESSEE HAD FAILED TO PROVE THAT THE LAND IN QUEST ION/FARM HOUSE WAS USED AS A GUEST HOUSE/CONFERENCE CENTRE. FURTHER, CONCLUDED THAT TH E VENDEE IN QUESTION HAD PURCHASED THE LAND AS AN AGRICULTURIST AS WELL AS INDIVIDUAL WHICH HAD NOTHING TO DO WITH THE ASSESSEE COMPANY. IN HIS OPINION, THE VENDEE BEING AN AGRICULTURIST HAD NO CO-RELATION WITH HIS ROLE AS A DIRECTOR OF THE ASSESSEE COMPANY. MORE SO, WHEN THE ASSESSEE HAD NO THING TO DO WITH AGRICULTURAL ACTIVITIES. THE ASSESSEE WAS NOT TREATED AS OWNER OF THE PROPER TY. THEREFORE, NOT ENTITLED TO CLAIM DEPRECIATION ALLOWANCE. ALSO HELD THAT THE LAND IS AGRICULTURAL LAND. THE BUILDING THEREON ONLY COMPRISED 12% OF THE TOTAL AREA WHICH WAS NOT FIT F OR ALLOWANCE OF DEPRECIATION. HENCE, THE ASSESSEES APPEAL HAS BEEN DISMISSED. THEREFORE, TH E ASSESSEE HAS RAISED THE INSTANT GROUND. 3. IN SUPPORT OF THE GROUND, THE LD. AR HAS ARGUED BEFORE US THAT THE LD. CIT(A) SHOULD HAVE ADMITTED THE ADDITIONAL GROUND I.E. VALUATION REPOR T. IN THE PAPER BOOK FILED BEFORE US, HE ALSO ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 4 MADE US TO PERUSE PAGE NO.32 I.E. LETTER OF THE ASS ESSEE TO THE LD. AO WHEREIN THE ASSESSEE HAD CLAIMED THAT THE PROPERTY BELONGED TO THE COMPANY P URCHASED IN THE NAME OF THE DIRECTOR ON BEHALF OF THE COMPANY. SIMILARLY, HE CONTENDED THAT IN THE RECORD THERE E XISTED AMPLE EVIDENCE IN VIEW OF THE AGREEMENT AS WELL AS PAGE 33 OF THE PAPER BOOK AND OTHER DOCUMENTS THAT IT IS THE COMPANY WHICH HAD BORNE THE COST OF THE PURCHASE OF THE LAN D THROUGH ITS DIRECTOR/VENDEE. THE ASSESSEE SUBMITTED THAT AT PAGE 41 OF THE RECORD, THERE ARE DETAILS OF GUESTS HOSTED IN THE SAID GUEST HOUSE. ALSO PLACED RELIANCE ON PAGE 42 TO CONTEND THAT THE COMPANY IS DE FACTO OWNER OF THE LAND IN QUESTION. THEREFORE, IT WAS ENTITLED FOR THE BENEFI T OF DEPRECIATION CLAIMED. IN SUPPORT THEREOF, HE ALSO RELIED ON SEC. 32 OF T HE ACT TO CONTEND THAT FOR THE PURPOSE OF DEPRECIATION UNDER THE PROVISIONS OF THE ACT, ACTUA L OWNERSHIP IS NOT NECESSARY. IN THE CONTEXT OF DEPRECIATION, AS PER THE LD. AR, EVEN A BENEFICIAL OWNER IS ENTITLED TO BE TREATED AT PAR WITH THE ACTUAL OWNER. THE LD. AR ALSO TAKEN PAINS TO CITE C ASE LAWS IN RESPECT THEREOF I.E. 336 ITR 434, 322 ITR 64, 254 ITR 599 (601), 239 ITR 775 AND 270 ITR 98. FURTHER, THE LD. AR HAS ALSO DRAWN OUR ATTENTION T O PAGES 38-41 AS WELL AS PAGE 74 TO CONTEND THAT THE SAID PREMISES HAS BEEN OR IS BEING USED AS A GUEST HOUSE. THEREFORE, THE LD. AUTHORITIES BELOW SHOULD HAVE ACCEPTED THE VALUATIO N REPORT AS WELL AS THE ASSESSEES CLAIM FOR DEPRECIATION OF THE ASSETS. ON THE OTHER HAND, THE LD. DR HAS REBUTTED THE ARG UMENTS OF LD. AR. CONTENDED THAT THE AUTHORITIES BELOW HAVE RIGHTLY PASSED THE IMPUGNED ORDERS THEREBY DISALLOWING THE CLAIM OF DEPRECIATION ON THE AGRICULTURAL LAND IN QUESTION W HICH IN FACT IS NOT EVEN OWNED BY THE ASSESSEE. IN SUPPORT THEREOF, HE ALSO CITED THE CLAUSES OF TH E AGREEMENT. PRAYED FOR REJECTION OF THE GROUND. ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 5 4. WE HAVE HEARD BOTH THE LD. REPRESENTATIVES OF TH E PARTIES. ALSO GONE THROUGH THE PAPER BOOK (COMPRISING OF 78 PAGES). AFTER PERUSING THE S AME, WE FIND THAT THE COMPANY IS NOWHERE SHOWN AS TITLE HOLDER OF THE AGRICULTURAL LAND IN Q UESTION. ADMITTEDLY, NO FOREIGN COMPANY CAN PURCHASE OR OWN AGRICULTURAL LAND THROUGHOUT THE IN DIAN TERRITORY. EVEN IF WE ACCEPT THAT IT IS DE FACTO OWNER OF THE LAND IN QUESTION THROUGH THE DIRECTOR/VENDEE CONCERNED, IT WOULD AMOUNT TO VIOLATING THE LAW OF THE LAND. IT IS WELL SETTL ED THAT WHAT IS FORBIDDEN/BARRED BY LAW OF THE LAND DIRECTLY CANNOT BE ALLOWED INDIRECTLY BY CIRCUMVEN TING THE LAWFUL AUTHORITY. THEREFORE, WE REJECT THE CONTENTION OF THE ASSESSEE SO FAR AS TIT LE OF THE LAND IS CONCERNED. IN OUR OPINION, LAND/ASSET UNDER OWNERSHIP OF ANY DIRECTOR CANNOT B E HELD TO BE THE ASSET OF THE COMPANY AS THEY ARE SEPARATE ENTITIES. FURTHERMORE, AFTER MINUTELY ANALYZING THE FACTS OF THE CASE, IN VIEW OF THE CASE LAWS CITED BY THE LD. AR, WE FIND THAT IN NONE OF THE CASES, ISSUE OF DEPRECIATION ON AGRICULTURAL LAND HAS BEEN ACCEPTED. EVEN SEC. 32 OF THE ACT CONTAINS PRO VISIONS FOR DEPRECIATION REGARDING BUILDINGS, MACHINERY, PLANT, ETC., I.E. TANGIBLE ASSETS AS WEL L AS KNOWHOW, PATENT, COPYRIGHT, ETC., I.E. INTANGIBLE ASSETS. THE LEGISLATURE IN ITS WISDOM HA S NOT INCLUDED THE WORDS AGRICULTURAL LAND IN THE SAID PROVISION. THEREFORE, WE HOLD THAT BY NO S TRETCH OF IMAGINATION DEPRECIATION ON AGRICULTURAL LAND CAN BE ALLOWED UNDER THE SAID PRO VISION OF THE ACT. NOW, COMING TO THE USE OF THE LAND AS HOUSE ETC. BY THE ASSESSEE, THERE IS NO PROOF BEFORE US BY WAY OF REVENUE RECORD ETC. THAT THE LA ND IS NOT AGRICULTURAL BUT BEING USED AS A GUEST HOUSE. IN THIS REGARD, IT IS WELL SETTLED THAT IN T HE ABSENCE OF ANY CHANGE OF LAND USER GRANTED BY THE PRESCRIBED AUTHORITY UNDER THE PROVISIONS OF RE VENUE LAW OR ANY OTHER LEGISLATION, MERE AN ORAL PLEA WITHOUT ANY MATERIAL IN SUPPORT CANNOT BE ACCEPTED. 5. ACCORDINGLY, FINDING NO MERIT IN THE SAME, THE INSTANT APPEAL IS HEREBY DISMISSED. ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 6 ORDER PRONOUNCED ON THE 16TH DAY OF MARCH, 2012. SD/- SD/- (P.M. JAGTAP ) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI: 16TH MARCH , 2012. NG: COPY TO : 1. ASSESSEE. 2. DEPARTMENT. 3 CIT(A)-5,,MUMBAI. 4 CIT-2,MUMBAI. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, I TAT, MUMBAI. ITA NO.3617/MUM/2011 JAMES MACKINTOSH & CO.P.LTD. 7 DETAILS DATE INITIALS DESIGNATI ON 1. DRAFT DICTATED ON 05-03-2012 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 07-03-2012 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER