DCIT, New Delhi V. M/s. Texaco Overseas Pvt Ltd., New Delhi

ITA 4050/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4146 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 20-04-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 06-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUKHESH JAIN
• Keywords: Business expenditure

Judgement Text

ITA NO.4050/DEL./2009 (AY : 2006-07) IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : H NEW DELHI) BEFORE SHRI A.D. JAIN, J UDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA. NO.4050/DEL./2009 (ASSESSMENT YEAR : 2006-07) DCIT, CIRCLE 16(1), VS. M/S TEXACO OVERSEAS PVT. LTD., NEW DELHI. 11/2A, PUSA ROAD, KAROL BAGH, NEW DELHI. (PAN/GIR NO.AABCT4812B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MUKESH GUPTA. REVENUE BY : SHRI SUKHESH JAIN, SR.DR ORDER PER A.K. GARODIA, AM THIS IS A REVENUE APPEAL DIRECTED AGAINST THE ORDE R OF THE CIT(A)-IX, NEW DELHI DATED 24.07.2009 AY 2006-07. THE ONLY GROUND RAI SED BY THE REVNEUE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCES OF RS.9,53,791/- AND RS. 33,359/- IGNORING THE FACT THAT DEDUCTION IN RESPECT OF THESE EXPENSES IS NOT ENUME RATED IN SECTION 24 OF INCOME TAX ACT, 1961. 2. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO IN TH E ASSESSMENT ORDER THAT WHILE COMPUTING INCOME FROM HOUSE PROPERTY, THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF VARIOUS EXPENSES AGGREGATING TO RS.953791/-. TH E AO WAS OF THE OPINION THAT FOR THE PURPOSE OF COMPUTING INCOME FORM HOUSE PROPERTY, ON LY STANDARD DEDUCTION AS PER SECTION 24 OF THE I.T. ACT, 1961 TO THE EXTENT OF 3 0% OF THE ANNUAL VALUE CAN BE ALLOWED AND NO DEDUCTION IS ALLOWABLE FOR ANY OTHER EXPENSE S EXCEPT INTEREST ON BORROWED FUNDS. HE DISALLOWED THIS CLAIM OF THE ASSESSEE. IN ADDIT ION TO THIS, IT IS ALSO NOTED BY THE AO THAT THE ASSESSEE HAS ALSO CLAIMED SET OFF OF LOSS OF RS.33,359/- WHICH IS NOTHING BUT AN ARTIFICIAL LOSS. THE AO DISALLOWED THE SAME ALSO. BEING AGGRIEVED AGAINST THESE TWO DISALLOWANCES, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A), WHO HAS DELETED BOTH THESE DISALLOWANCES AND NOW THE REVENU E IS IN APPEAL BEFORE US. ITA NO.4050/DEL./2009 (AY : 2006-07) 2 3. LD.DR OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER. IT IS ALSO SUBMITTED BY HIM THAT EVEN IF DEDUCTION IS TO BE ALLOWED OF EXPE NSES OF RS.953,791/-, THE SAME SHOULD BE REDUCED FROM ANNUAL VALUE AND STANDARD DEDUCTION OF 30% U/S 24 HAS TO BE ALLOWED AT NET INCOME ONLY. LD.AR OF THE ASSESSEE SUPPORTED T HE ORDER OF THE CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT WAS SUBMITTED B EFORE THE CIT(A) BY THE ASSESSEE THAT THE ASSESSEE WAS PROVIDING ADDITIONAL SERVICES ON ACCOUNT OF LIGHTING IN COMMON AREAS DURING WORKING HOURS, PEST CONTROL SERVICES PERIODI CALLY FOR ALL COMMON AREAS, CLEANING SERVICES OF COMMON AREAS AND SECURITY SERVICES. IT WAS ALSO SUBMITTED THAT THE RENTAL INCOME DECLARED BY THE ASSESSEE IS COMPOSITE INCOME INCLUDING CHARGES FOR THESE SERVICES ALSO AND HENCE THE EXPENSES INCURRED ON THESE ADDIT IONAL SERVICES HAS TO BE REDUCED FORM SUCH COMPOSITE RENTAL INCOME TO ARRIVE AT THE ANNUA L VALUE. THE CIT(A) HAS FOLLOWED A DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF J. B. PATEL & CO. VS. DCIT AS REPORTED IN 312 (AT) 171 (AHM.). IN THAT CASE ALSO COMPOSITE I NCOME WAS RECEIVED BY THE ASSESSEE AND IT WAS HELD BY THE TRIBUNAL THAT THE ANNUAL VAL UE OF THE HOUSE PROPERTY SHOULD BE ASSUMED AT THE REDUCED VALUE I.E. AFTER REDUCING EX PENSES INCURRED IN PROVIDING EXTRA SERVICES FROM RENTAL INCOME. IN THE PRESENT CASE A LSO, THE FACTS ARE SIMILAR. IT IS CLAIMED BY THE ASSESSEE THAT THE ASSESSEE IS PROVIDING ADDI TIONAL SERVICES SUCH AS LIGHTING IN COMMON AREAS DURING WORKING HOURS, PEST CONTROL SER VICES PERIODICALLY FOR ALL COMMON AREAS, CLEANING SERVICES FOR COMMON AREAS AND SECUR ITY SERVICES. THE RENTAL INCOME DECLARED BY THE ASSESSEE IS COMPOSITE RENTAL INCOME . THE RENTAL INCOME DECLARED BY THE ASSESSEE IS COMPOSITE RENTAL INCOME INCLUDING CHARG ES ON ACCOUNT OF THESE ADDITIONAL SERVICES BEING RENDERED BY THE ASSESSEE. FOR THE P URPOSE OF COMPUTING INCOME FROM HOUSE PROPERTY, RENTAL INCOME IN CONNECTION WITH US ER OF HOUSE PROPERTY ONLY IS ASSESSABLE AND WHEN CHARGES FOR OTHER SERVICES STAN D INCLUDED IN SUCH RENTAL INCOME, SUCH ADDITIONAL CHARGES SHOULD BE REDUCED FROM RENTAL IN COME IF THE QUANTIFICATION OF THE SAME IS AVAILABLE. IN THE PRESENT CASE, QUANTIFICATION OF CHARGES FOR ADDITIONAL SERVICES IS NOT READILY AVAILABLE AND HENCE WE DO NOT FIND ANY REAS ON TO INTERFERE IN THE ORDER OF THE CIT(A) ON THIS ISSUE AS PER WHICH IT WAS HELD BY HI M THAT THE ANNUAL VALUE OF THE PROPERTY SHOULD BE DETERMINED AFTER REDUCING THE EXPENSES IN CURRED BY THE ASSESSEE FOR RENDERING ITA NO.4050/DEL./2009 (AY : 2006-07) 3 THESE ADDITIONAL SERVICES. THE CIT(A) HAS HELD SO BY FOLLOWING A DECISION OF COORDINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF J.B. PATEL & CO. (SUPRA) AND WE THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF THE CIT(A) ON THIS ISSUE. REGARDING SUBMISSION OF THE LD.DR OF THE REVENUE THAT 30% STANDARD DEDUCTION U/ S 24(1) SHOULD BE ALLOWED ON NET INCOME ONLY, WE FIND THAT CIT(A) HAS DIRECTED THE A O TO REDUCE SUCH EXPENSES FOR ARRIVING AT ANNUAL VALUE AND DEDUCTION @ 30% ALLOWA BLE U/S 24 IS ALLOWABLE TO THE EXTENT OF 30% OF ANNUAL VALUE ONLY AND HENCE THIS SUBMISSI ON OF THE LD.DR OF THE REVENUE IS ALREADY COMPLIED WITH BY THE ASSESSEE AS WELL AS BY THE CIT(A). 5. REGARDING THE SECOND OBJECTION I.E. ALLOWING OF SET OFF OF LOSS OF RS.33559/-, WE FIND THAT IT IS NOTED BY THE CIT(A) IN PARA 10 OF H IS ORDER THAT UNDER TEN DIFFERENT HEADS, EXPENSES ARE INCURRED BY THE ASSESSEE WHICH INCLUDE S RS.15,000/- ON ACCOUNT OF AUDIT FEES, RS.5533/- ON ACCOUNT OF BANK CHARGES, RS.5877 /- ON ACCOUNT OF FEES AND SUBSCRIPTION, RS.1129/- ON ACCOUNT OF PRELIMINARY E XPENSES WRITTEN OFF AND RS.1102/- ON ACCOUNT OF LEGAL AND PROFESSIONAL FEES. THERE ARE SOME PETTY EXPENSES ALSO UNDER THE HEAD TELEPHONE, POSTAGE AND TELEGRAM, PRINTING AND STATIONERY, BUSINESS PROMOTION ETC., CIT(A) HAS FOLLOWED A DECISION OF COORDINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF GOJER BROTHERS PVT. LTD. VS. ITO, ITA NO.2606/KO L./2000 DATED 4.9.2003 IN WHICH IT WAS HELD BY THE TRIBUNAL THAT THE EXPENSES WHICH AR E NECESSARY FOR THE PURPOSE OF MAINTAINING REGISTERED OFFICE OF A COMPANY TO CONTI NUE ITS EXISTENCE AND TO COMPLY WITH THE STATUTORY OBLIGATIONS ARE ALLOWABLE AS BUSINESS EXPENDITURE EVEN IF ASSESSEE IS NOT CARRYING OUT ANY BUSINESS ACTIVITIES IN THE RELEVAN T YEAR BECAUSE THESE EXPENDITURE ARE INCIDENTAL TO THE BUSINESS ACTIVITIES OF THE ASSESS EE COMPANY. IN THE PRESENT CASE ALSO, WE FIND THAT THESE EXPENSES INCURRED BY THE ASSESSEE A RE SUCH WHICH ARE NECESSARY FOR THE PURPOSE OF MAINTAINING REGISTERED OFFICE OF A COMPA NY TO CONTINUE ITS EXISTENCE AND ALSO TO COMPLY WITH THE STATUTORY OBLIGATIONS AND HENCE THE SAME IS ALLOWABLE AS BUSINESS EXPENDITURE AND THE RESULTING LOSS FROM BUSINESS IS RIGHTLY CLAIMED FOR SET OFF AGAINST INCOME FROM HOUSE PROPERTY BY THE ASSESSEE AND HENC E WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A) ON THIS ASPECT ALSO. ITA NO.4050/DEL./2009 (AY : 2006-07) 4 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7. ORDER PRONOUNCED IN OPEN COURT ON 23.04.2010. SD/- SD/- (A.D. JAIN) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, APRIL 23, 2010. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XIX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT