M/s. Vimal Paints, Mehsana V. The ACIT.,Cent.Circle-1(2), Mehsana

ITA 3684/AHD/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7740 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 26-06-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 12-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N S DAYAM
• Assessee Lawyers: P M MEHTA
• Keywords: Business income; Depreciation; Tax effect; Set aside
• Section: 153A; 234B; 251; 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' (BEFORE S/SHRI P K BANSAL AND MAHAVIR SINGH) ITA NOS.3684, 3685, 3686 AND 3832/AHD/2008 (ASSESSMENT YEARS: 1999-2000, 2003-04, 2004-05 AND 2005-06) M/S VIMAL PAINTS, 32, GIDC-II, DEDIYASAN, MEHSANA V/S THE ASSISTANT COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE-1(2), AHMEDABAD [APPELLANT] [RESPONDENT] PAN NO.: AABFV 3952 F APPELLANT BY :- SHRI P M MEHTA RESPONDENT BY:- SHRI N S DAYAM, CIT-DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER): THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST FOUR SEPARA TE ORDERS PASSED BY THE CIT(A) DATED 08/09/08, 09/09/08, 10/0 9/08 AND 16/09/08 FOR ASSESSMENT YEARS (AY) 1999-2000, 2003- 04, 2004- 05 AND 2005-06 RESPECTIVELY. 2 THE FOLLOWING COMMON EFFECTIVE GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE ASSESSEE IN ITS APPEALS [EXC EPT THE CHANGE IN FIGURES]: 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DEP ARTMENTAL AUTHORITIES HAVE ERRED IN NOT REALIZING THAT IT WAS NOT AT ALL A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 153A IN ALL THE YEARS INVOLVED. 2 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DEP ARTMENTAL AUTHORITIES SHOULD HAVE APPRECIATED THAT FOR THIS P ARTICULAR ASSESSEE NO INCRIMINATING MATERIAL OR ANY UNDISCLOS ED ASSET WAS FOUND AT ALL, AND HENCE, THE AO WAS NOT JUSTIFIED I N RE-OPENING ASSESSMENTS OF THESE YEARS BY INVOKING THE PROVISIO NS OF SECTION 153A. 3 WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) SHOULD HAVE REALIZED THAT THE AO WAS NOT JUS TIFIED IN EMBARKING UPON THE PROCESSING AND SCRUTINY OF THE A SSESSMENT IN A FASHION WHICH WAS PERMISSIBLE IN REGULAR SECTION 14 3(3), BUT IN THIS PARTICULAR CASE IT WAS NOT PERMISSIBLE U/S 153A. 4 WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) SHOULD HAVE DELETED THE WHOLE DISALLOWANCE O F RS.15,000 OUT OF TRAVELING EXPENSES, AND HENCE, MERELY REDUCI NG IT BY RS.4605. AT ANY RATE, THE RELIEF ALLOWED IS TOO SMA LL AND DESERVES TO BE INCREASED SUBSTANTIALLY. 5 WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) ERRED IN CONFIRMING THE FOLLOWING DISALLOWAN CES: (I) OUT OF VEHICLE EXPENSES (II) OUT OF TELEPHONE EXPENSES THE CIT(A) SHOULD HAVE DELETED THE DISALLOWANCE FUL LY OR AT LEAST ALLOWED SUBSTANTIAL RELIEF. 6 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF STATUTORY DEDUCTION I N RESPECT OF HOUSE PROPERTY INCOME AND HE SHOULD HAVE REALIZED T HAT THE RELEVANT INCOME WAS REALLY TAXABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY AND CONSEQUENTLY THE ASSESSEE WAS EN TITLED TO THE STATUTORY DEDUCTION U/S 24(A). 7 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN HIMSELF EFFECTING A DISALLOWANCE IN A SUM OF RS.7,4 84 CLAIMED, OUT OF DEPRECIATION MORE PARTICULARLY BECAUSE THIS DISA LLOWANCE WAS MORE THAN THE TOTAL RELIEF ALLOWED BY THE CIT(A), A ND HENCE, THE OVERALL POSITION WAS THAT THE ASSESSMENT STOOD ENHA NCED AND THE CIT(A) EFFECTED THIS ENHANCEMENT WITHOUT GIVING A S HOW CAUSE 3 NOTICE TO THE ASSESSEE AND THIS WAS WHOLLY CONTRARY TO THE STATUTORY MANDATE CONTAINED IN SUB-SECTION (2) OF SECTION 251 . 8 WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) SHOULD HAVE ACCEPTED THE ASSESSEES CONTENTI ON THAT IT WAS NOT AT ALL A FIT CASE FOR LEVY OF INTEREST U/S 234B . 3 AT THE OUTSET, THE LEARNED AR SUBMITTED THAT GRO UND NOS.1 TO 3 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 4 GROUND NO.4 RELATES TO SUSTENANCE OF THE DISALLO WANCE OUT OF TRAVELING EXPENSES. THE FACTS RELATING TO T HIS GROUND ARE AS UNDER:- PARTICULARS ASSESSMENT YEARS 1999-00 2003-04 2004-05 2005-06 TRAVELING EXPENDITURE EXPENDITURE DEBITED TO PROFIT & LOSS 1,03,959 38,995 73,353 46,013 DISALLOWANCE BY AO 15,000 5,000 10,000 7,000 ADDITION CONFIRMED IN CIT(A)S ORDER 10,395 3,900 7,335 4,600 5 BEFORE US, THE LEARNED AR VEHEMENTLY CONTENDED T HAT THE DISALLOWANCE HAS BEEN MADE MERELY ON AD HOC BAS IS WITHOUT ANY MATERIAL OR EVIDENCE BEING FOUND DURING THE COU RSE OF SEARCH. THE DISALLOWANCE HAS BEEN MADE ON THE BASIS OF SURM ISES AND CONJECTURES. NO SUCH DISALLOWANCE WAS MADE EVEN IN THE ORIGINAL 4 ASSESSMENTS. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LTD. V DCIT [2008] 22 SOT 315 . THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AUTHORITIES BELOW. THE ADDITIONS W ERE ALSO MADE IN THE ASSESSMENT YEAR 2001-02 WHICH HAVE BEEN ACCE PTED BY THE ASSESSEE. 6 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE FIND THAT THE AO HAS MAD E THE DISALLOWANCE MERELY ON ESTIMATE BASIS BEING 10% OF THE TOTAL EXPENDITURE INCURRED ON THE TRAVELING IN EACH OF TH E ASSESSMENT YEAR WITHOUT POINTING OUT THE SPECIFIC EXPENDITURE WHICH HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS. THE ASSE SSEE HAS SUBMITTED THE COPY OF LEDGER ACCOUNT SHOWING THE TR AVELING EXPENSES BEFORE THE AUTHORITIES BELOW. THE EXPENDIT URE WAS DULY SUPPORTED BY THE VOUCHERS BUT THE DISALLOWANCE IS M ADE JUST ON AD HOC BASIS. IN OUR OPINION, NO DISALLOWANCE CAN B E MADE MERELY ON ESTIMATE BASIS. WE ACCORDINGLY DELETE THE DISALL OWANCE IN EACH OF THE ASSESSMENT YEAR. 5 7.1 THE NEXT GROUND RELATES TO CONFIRMATION OF THE DISALLOWANCE OF VEHICLE EXPENSES. THE FACTS RELATIN G TO THIS GROUND ARE AS UNDER: PARTICULARS ASSESSMENT YEARS 1999-00 2003-04 2004-05 2005-06 VEHICLE EXPENDITURE INCLUDING DEPRECIATION EXPENDITURE DEBITED TO PROFIT & LOSS 3,58,147 2,42,801 3,92,426 4,15,788 DISALLOWANCE BY AO 71,628 48,560 78,485 83,158 ADDITION CONFIRMED IN CIT(A)S ORDER 71,628 48,560 78,485 83,158 7.2 THE CIT(A) DEALT WITH THE ISSUE AS UNDER:- 8.4 I HAVE CAREFULLY GONE THROUGH THE CASE RECORDS AND HAVE ALSO CONSIDERED THE PLEA OF THE APPELLANT. THE AO HAS CA TEGORICALLY MENTIONED THAT NO DOCUMENTARY EVIDENCES IN SUPPORT OF THE EXPENSES DEBITED IN THE BOOKS OF ACCOUNT WERE FILED BY THE A PPELLANT BEFORE HIM NOR ANY SUCH DOCUMENT HAS BEEN FILED DURING THE COU RSE OF PRESENT PROCEEDINGS. IN SUCH CIRCUMSTANCES, PERSONAL USE OF THE VEHICLE CANNOT BE RULED OUT. PARTICULARLY, THE APPELLANTS ACCEPTI NG SIMILAR ADDITION IN THE ASSESSMENT YEAR 2001-02 SUPPORTS THIS VIEW. THE REFORE, AOS ADDITION OF 1/5 TH OF THESE EXPENSES ON ESTIMATE BASIS, CONSIDERING T HEM AS PERSONAL, DOES NOT REQUIRE ANY INTERFERENCE. HAV ING HELD SO, DISALLOWANCE OF 1/5 TH OF THE TOTAL DEPRECIATION AT RS.8242/- (1/5 TH OF 41,212) IS ALSO JUSTIFIED IN VIEW OF SUB-SECTION 2 OF SECTION 38 OF THE I.T. ACT WHICH READS AS UNDER:- WHERE ANY BUILDING, MACHINERY, PLANT OR FURNITURE IS NOT EXCLUSIVELY USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION, THE DEDUCTIONS UNDER SUB CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30, CLAUSE (I) AND (II) OF SECTION 31 AND CLAUSE (II) OF SUB-S ECTION (1) OF SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE AO MAY DETERMINE, HAVING REGARD TO THE USER OF SUCH BUILDING, MACHINERY, PLANT OR FURNITURE FOR THE PURPOSE OF TH E BUSINESS OR PROFESSION. 6 ACCORDINGLY, THE AOS ADDITION OF RS.71,628/- BEING 1/5 TH OF PETROL AND REPAIRING EXPENSES AND DEPRECIATION O N VEHICLE IS UPHELD AND THIS GROUND OF APPEAL STANDS DISMISSE D. 7.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY CONSIDERED THE SAME. WE HAVE ALSO PERUSED THE MATER IAL ON RECORD AND HAVE ALSO THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE CIT(A) HAS RIGHTLY HELD TH AT PERSONAL USE OF THE VEHICLE CANNOT BE RULED OUT. THE CIT(A) ALSO OBSERVED THAT THE ASSESSEES ACCEPTING SIMILAR ADDITION IN T HE ASSESSMENT YEAR 2001-02 SUPPORTS THIS VIEW. IN THE COUNTER QUE STIONING THE LEARNED DR POINTED OUT THAT SINCE THE TAX EFFECT WA S NOT MORE, THEREFORE, THE ASSESSEE DID NOT FILE THE APPEAL IN THE ASSESSMENT YEAR 2001-02 AGAINST THE ORDER OF THE CIT(A).THEREF ORE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER O F THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A). 8.1 THE NEXT GROUND RELATES TO CONFIRMATION OF THE DISALLOWANCE OF TELEPHONE EXPENSES. THE FACTS RELAT ING TO THIS GROUND ARE AS UNDER: 7 PARTICULARS ASSESSMENT YEARS 1999-00 2003-04 2004-05 2005-06 TELEPHONE EXPENDITURE EXPENDITURE DEBITED TO PROFIT & LOSS 1,22,710 59,395 1,01,802 87,711 DISALLOWANCE BY AO 12,271 5,939 10,180 8,771 ADDITION CONFIRMED IN CIT(A)S ORDER 12,271 5,939 10,180 8,771 8.2 THE CIT(A) UPHELD THE ADDITION BY OBSERVING AS UNDER:- 9.2 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT REC ORDS AS ALSO THE SUBMISSION OF THE APPELLANT. THE ASSESSMENT ORDER C LEARLY SHOWS THAT INSPITE OF OPPORTUNITY GIVEN TO THE ASSESSEE, NO DO CUMENTARY EVIDENCES WERE PRODUCED TO PROVE THAT THE TELEPHONES WERE EXC LUSIVELY USED FOR THE PURPOSE OF BUSINESS. SINCE THE PERSONAL USE OF THE TELEPHONE CANNOT BE RULED OUT, IN ABSENCE OF DOCUMENTARY EVIDENCES, IT CANNOT BE TAKEN THAT THEY HAVE BEEN USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE IN TOTALITY AS ALSO THE PAST HISTORY OF THE CASE, I DO NT CONSIDER ANY INTERFERENCE IS NEEDED WITH REGARD TO THE 1/10 TH OF THE TELEPHONE EXPENSES HAVING BEEN DISALLOWED BY THE AO. I, THERE FORE, UPHOLD THE ADDITION OF RS.12,271/- MADE BY THE AO IN THIS REGA RD. ACCORDINGLY, THIS GROUND OF APPEAL OF THE APPELLANT ALSO STANDS DISMISSED. 8.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE HAVE ALSO PERUSED THE MATER IAL ON RECORD AND HAVE ALSO THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE CIT(A) HAS RIGHTLY HELD TH AT PERSONAL USE OF THE TELEPHONES CANNOT BE RULED OUT. THE CIT( A) ALSO OBSERVED THAT THE ASSESSEES ACCEPTING SIMILAR ADDI TION IN THE ASSESSMENT YEAR 2001-02 SUPPORTS THIS VIEW. IN THE COUNTER 8 QUESTIONING THE LEARNED DR POINTED OUT THAT SINCE T HE TAX EFFECT WAS NOT MORE, THEREFORE, THE ASSESSEE DID NOT FILE THE APPEAL IN THE ASSESSMENT YEAR 2001-02 AGAINST THE ORDER OF TH E CIT(A).THEREFORE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A). 9 THE NEXT GROUND RELATES TO THE DISALLOWANCE OF STATUTORY DEDUCTION OUT OF HOUSE PROPERTY INCOME AN D THE INCOME MUST HAVE BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE BRIEF FACTS RELATING TO THIS GROUND THAT THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AN D OTHER EXPENSES ON THE OFFICE BUILDING AND SIMULTANEOUSLY HE HAS ALSO CLAIMED REPAIRING AND COLLECTION CHARGES U/S 24 OF THE ACT IN EACH OF THE ASSESSMENT YEARS. THE AO TOOK THE VIEW THAT THE EXPENDITURE WAS NOT ALLOWABLE ON THE DEPRECIABLE AS SET AND DISALLOWED THE SAME. THE ASSESSEE WENT IN APPEAL BE FORE THE CIT(A). THE CIT(A) HELD AS UNDER:- 10.4 I HAVE CAREFULLY GONE THROUGH THE CASE RECOR DS AS ALSO THE CONTENTION OF THE APPELLANT ALONGWITH THE DOCUMENTS FILED BY IT. THE PROPERTY AT ISSUE IS THE GODOWN AT SARTHI TOWER N R. TULSI BUNGLOW, THALTEJ, AHMEDABAD OWNED BY THE APPELLANT. THE APPE LLANT CLAIMS THAT PART OF IT HAS BEEN USED BY IT FOR ITS OWN BUSINESS AND ANOTHER PART HAS BEEN GIVEN ON RENT TO VIMAL MICRONS LTD., ANOTHER F AMILY CONCERN. A 9 PERUSAL OF AGREEMENT FOR RENT SHOWS THAT AS PER CLA USE-1, THE SAID PROPERTY IS BASEMENT HAVING AREA OF 1900 SQ. FT. (6 6X29), OUT OF WHICH 800 SQ. FT. OF AREA HAS BEEN AGREED TO BE GIVEN O N RENT TO VIMAL MICRONS LTD. THIS AGREEMENT IS FOR THE PERIOD 1/5/9 7 TO 31/3/98. AS PER THE COUNSEL OF THE APPELLANT, THE AGREEMENT CON TINUED FOR THE YEAR UNDER CONSIDERATION TOO. CONSIDERING THE SAME, OUT OF 1900 SQ. FT. OF GODOWN AREA, 800 SQ. FT. HAS BEEN GIVEN ON RENT AND THE BALANCE 1100 SQ. FT. IS BEING UTILIZED BY THE APPELLANT FOR ITS OWN PURPOSE. THIS GIVES A RATIO OF 42 : 58. IN OTHER WORDS, 42% OF THE GODO WN HAD BEEN GIVEN ON RENT AND 58% OF THE GODOWN WAS BEING UTILIZED BY THE APPELLANT FOR THE PURPOSE OF ITS OWN BUSINESS. THE APPELLANT HAS PLEADED AND RIGHTLY SO THAT THE DISALLOWANCE OF THE DEPRECIATION SHOULD BE RESTRICTED PROPORTIONATE TO THE AREA GIVEN ON RENT. SINCE 58% OF THE AREA OF THE GODOWN HAS BEEN UTILIZED FOR THE PURPOSE OF THE BUS INESS OF THE APPELLANT, DEPRECIATION TO THAT EXTENT IS ALLOWABLE TO IT. HOWEVER, GODOWN TO THE EXTENT OF 42% HAS NOT BEEN UTILIZED F OR THE PURPOSE OF ITS OWN BUSINESS. ACCORDINGLY, OUT OF DEPRECIATION OF RS.17,820 THE APPELLANT IS ENTITLED FOR DEPRECIATION OF RS.10,335 /- ONLY. (17820 X 58 BY 100). THE BALANCE RS.7484/-, BEING 42% OF THE DE PRECIATION (17820 X 42 BY 100) IS NOT ALLOWABLE TO THE APPELLANT, THE GODOWN PORTION NOT HAVING BEEN USED FOR THE PURPOSE OF APPELLANTS BUS INESS. THIS LEADS TO AN ADDITION OF RS.7484/-, BEING DISALLOWANCE OF DEP RECIATION FOR GODOWN BEING USED FOR PURPOSE OTHER THAN ITS OWN BU SINESS. THE AO SHOULD GIVE EFFECT TO THE SAME. THE OTHER ISSUE WHICH IS CORRELATED WITH THIS ISSUE RELATES TO CHARGING OF RENTAL INCOME UNDER THE HEAD BUSINESS INCOME BY THE CIT(A) WHILE THE AO HAS TAXED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND THERE WAS NO ISSUE BEFORE THE CIT(A) ABOUT THE CHARGING OF RENTAL INCO ME UNDER A PARTICULAR HEAD. 10 THE LEARNED AR VEHEMENTLY CONTENDED THAT THE PREMISES IS OWNED BY THE ASSESSEE AND THE ASSESSEE HAS LET OUT 10 THE BASEMENT TO EARN THE RENTAL INCOME, TO THE FAMI LY CONCERN VIMAL MICRONS LTD. AND THE REST OF THE PROPERTY WAS BEING USED BY THE ASSESSEE FOR ITS OWN BUSINESS PURPOSE. THE A SSESSEE WAS NOT PROVIDING ANY OTHER FACILITIES TO VIMAL MICRONS LTD. EXCEPT LETTING OUT OF THE PART OF THE PREMISES (BASEMENT) WHICH IS OWNED BY THE ASSESSEE. THE RENT SO RECEIVED IS TO BE ALLO WED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM BUSINESS AND CONSEQUENTLY THE ASSESSE E WAS ENTITLED FOR THE STATUTORY DEDUCTION U/S 24 OUT OF THE RENTAL INCOME. THE SAID INCOME WAS CONSISTENTLY SHOWN BY T HE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY SINCE A Y 1996-97. THE CIT(A) WAS NOT CORRECT IN LAW IN DIRECTING THE AO TO ASSESS THE INCOME AS INCOME FROM BUSINESS MERELY ON THE BASIS THAT THE PROPERTY IS A COMMERCIAL PROPERTY. 11 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDER OF THE CIT(A) AND CONTENDED THAT THE RENTAL I NCOME HAS TO BE ASSESSED AS BUSINESS INCOME AND CONSEQUENTLY THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 24 OF THE ACT. 12 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE 11 TAX AUTHORITIES BELOW. THIS IS AN ADMITTED FACT THA T THE ASSESSEE HAS LET OUT THE PART OF THE PROPERTY TO VIMAL MICRO NS LTD. SINCE AY 1996-97 AND THE RENTAL INCOME SO RECEIVED IS BEI NG ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE AO HAS ALSO ASSESSED THE ENTIRE RENTAL INCOME AS INCOME FROM H OUSE PROPERTY IN EACH OF THE AFORESAID ASSESSMENT YEARS IN THE ASSESSMENT ORDERS PASSED U/S 153A OF THE ACT. PART OF THE PROPERTY WAS USED BY THE ASSESSEE FOR ITS OWN BUSIN ESS PURPOSE I.E. 58% OF THE TOTAL AREA. THE PROPERTY IS A COMM ERCIAL PREMISES. MERELY A PROPERTY IS A COMMERCIAL PREMISE S, IN OUR OPINION, THAT CANNOT BE CRITERIA TO DECIDE THAT THE RENT RECEIVED BY THE ASSESSEE IS A BUSINESS INCOME. THE ASSESSEE HAS MERELY LET OUT A PART OF THE PROPERTY AND HAS NOT PROVIDED ANY FACILITIES OR UTILITY. EVEN LETTING OUT OF THE PROPERTY WAS NOT T HE BUSINESS OF THE ASSESSEE. UNDER SECTION 22 OF THE ACT, ANNUAL L ETTING VALUE OF THE PROPERTY CONSISTING OF ANY BUILDING OR LAND APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER OTHER TH AN SUCH PORTION OF SUCH PROPERTY AS IS BEING OCCUPIED BY HIM FOR TH E PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED OUT BY HIM, WILL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PRO PERTY. THE ASSESSEE WAS OWNING THE PROPERTY. PORTION OF TH E PROPERTY IS 12 USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINES S. THE ASSESSEE HAS NOT EXPLOITED THE PROPERTY AS A BUSINESS. THERE FORE, IN OUR OPINION, THE RENT RECEIVED BY THE ASSESSEE IS THE I NCOME DERIVED FROM HOUSE PROPERTY. THE CIT(A) HAS DIRECTED THE A O TO ASSESS SUCH RENTAL INCOME AS BUSINESS INCOME MERELY BECAUS E THE PROPERTY IS A COMMERCIAL PROPERTY / PREMISES. IN VI EW OF THE PROVISIONS OF SECTION 22 OF THE ACT, WE ARE OF THE OPINION THAT THIS VIEW OF THE CIT(A) CANNOT BE UPHELD. OUR AFORE SAID VIEW IS DULY SUPPORTED BY THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF UNIVERSAL PLAST LTD. V CIT [1999] 237 ITR 454 (SC) , AS IN THIS CASE THE PROPERTY HAS BEEN LET OUT BY TH E ASSESSEE FROM YEAR TO YEAR AND IT CANNOT BE SAID THAT THE PROPERT Y HAS BEEN TEMPORARILY LET OUT FOR EXPLOITING THE BUSINESS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ASSESS THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. SECTION 24 OF THE ACT LAYS DOWN THE DED UCTIONS WHICH ARE TO BE ALLOWED WHILE COMPUTING THE INCOME FROM H OUSE PROPERTY. THESE DEDUCTIONS HAVE TO BE ALLOWED OUT O F THE ANNUAL LETTING VALUE AT THE RATE OF 30% WITH EFFECT FROM 0 1-04-2002. PRIOR TO THAT IT WAS TO BE ALLOWED AT A DIFFERENT R ATE. WE ACCORDINGLY DIRECT THE AO TO ALLOW THE DEDUCTION TO THE ASSESSEE 13 U/S 24 AT THE RATE AS MAY BE APPLICABLE TO THE RESP ECTIVE ASSESSMENT YEARS LAID DOWN U/S 24 OF THE ACT. 13 COMING TO THE CLAIM OF DEPRECIATION, IN OUR OPI NION, THE CIT(A) WAS FAIR ENOUGH AND REASONABLE TO ALLOW THE DEPRECIATION PROPORTIONATELY IN RESPECT OF PART OF THE PROPERTY WHICH HAS BEEN USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. TO THE EXTENT THE PREMISES HAS BEEN LET O UT, THE ASSESSEE CANNOT BE ALLOWED THE DEDUCTION U/S 32 OF THE ACT AS THE DEDUCTION IS ALLOWABLE OUT OF THE INCOME ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR INCOME ASSESSABLE UN DER THE HEAD INCOME FROM OTHER SOURCES. OUT OF THE INCOM E WHICH IS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY , THE ASSESSEE CAN BE ENTITLED FOR THE DEDUCTIONS WHICH A RE LAID DOWN U/S 24 OF THE ACT AND NO OTHER DEDUCTION CAN BE ALL OWED TO THE ASSESSEE. WE, THEREFORE, CONFIRM THE DISALLOWANCE M ADE AND BY THE AO AND SUSTAINED BY THE CIT(A) IN RESPECT OF DE PRECIATION IN EACH OF THE ASSESSMENT YEARS. ACCORDINGLY, THIS GR OUND IS PARTLY ALLOWED. 14 THE LAST GROUND RELATING TO CHARGING OF INTERES T UNDER SECTION 234B OF THE ACT IS CONSEQUENTIAL IN NATURE. THE AO IS 14 ACCORDINGLY DIRECTED TO RE-COMPUTE THE INTEREST CHA RGEABLE U/S 234B AFTER GIVING EFFECT TO OUR AFORESAID ORDER. 15 IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 24-07-2 009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 24-07-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S VIMAL PAINTS, 32, GIDC-II, DEDIYASAN, MEHSAN A 2. THE ACIT, CENTRAL CIRCLE-1(2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-I, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA