HERCULES HOISTS LTD, MUMBAI V. ACIT 10(1), MUMBAI

ITA 4129/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8585 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DALAL
• Assessee Lawyers: J D MISTRY
• Keywords: Depreciation; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL EMBER AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER I.T.A. NO.4129/MUM/2009. ASSESSMENT YEAR : 2005-06. M/S HERCULES HOISTS LIMITED, ASSTT. COMMISSIONER OF 110, MINERVA INDL. ESTATE, VS. INCOME-TAX- 10(1), OFF LBS MARG, MUMBAI. MUMBAI 80. PAN AAACH2706D APPELLANT. RESPONDENT . APPELLA NT BY : SHRI J.D. MISTRY. RESPONDE NT BY : SHRI GIRIJA DALAL DATE OF HEARING : 18-09-2012 DATE OF PRONOUNCEMENT : 10-10-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-X, MUMBAI DATED 01-05-2009 . 2. THE ISSUE RAISED IN GROUND NO.1 OF THIS APPEAL R ELATES TO THE ADDITION OF RS.12,98,899/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACCOUNT OF INCOME FROM HOUSE PROPERTY. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MATERIAL HANDLING EQUI PMENTS AND POWER UNIT GENERATION. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 2 ITA NO.4129/MUM/2009 25-10-2005 DECLARING TOTAL INCOME OF RS.3,63,33,940 /-. A REVISED RETURN WAS THEREAFTER FILED BY THE ASSESSEE ON 28-08-2006 DECL ARING TOTAL INCOME OF RS.3,78,33,944/-. DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE WAS THE OWNER OF A PREMISES AT 226, BAJAJ BHAVAN, 2 ND FLOOR, NARIMAN POINT ADMEASURING 966 SQ.FT. THE SAID PREMISES HAD BEEN GIVEN ON LEASE TO IDBI PRINCIPAL ASSET MANAGEMENT CO. WHICH EXPIRED ON 23-04-2004. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE THUS HAD RECEIVED RENT FROM THE SAID PREMISES FOR A PERIOD OF 23 DAYS AMOUNTING TO RS.1,80,710/- AND TH E SAME WAS OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE AO TO EXPLAIN WHY INCOME FROM HOUSE PROPERTY IN RESPECT OF THE SAID PREMISES FOR THE ENTIRE YEAR SHOULD NOT BE BROUGHT TO TAX ON NOTIONAL BASIS AS PER THE PROVISI ONS OF SECTION 22 READ WITH SECTION 23 OF THE ACT. IN REPLY, IT WAS SUBMITTED O N BEHALF OF THE ASSESSEE, INTER ALIA, THAT SINCE THE PROPERTY WAS GIVEN ON RENT ONL Y FOR A PERIOD OF 23 DAYS AND THE SAME HAD REMAINED VACANT FOR THE REST OF THE PERIOD , IT WAS LIABLE TO TAX ONLY ON THE RENT FOR THE PERIOD OF 23 DAYS IN VIEW OF THE PROVI SIONS OF SECTION 23(1)(C). THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT IN THE LETTER DATED 17-12-2007, THE ASSESSEE COMPANY ITSEL F HAD MENTIONED THAT THE PROPERTY COULD NOT BE LET OUT AFTER 23-04-2004 AS T HE SAME WAS OCCUPIED BY ITS FULL TIME DIRECTOR SHRI H.A. NEVATIA AND CHAIRMAN SHRI S HEKHAR BAJAJ. ACCORDING TO THE AO, THE PROVISIONS OF SECTION 23(1)(C) WOULD HA VE BEEN APPLICABLE HAD THE PROPERTY OF THE ASSESSEE REMAINED VACANT AFTER 23-0 4-2004. HE, THEREFORE, DENIED THE BENEFIT OF VACANCY CLAIMED BY THE ASSESSEE AS P ER THE PROVISIONS OF SECTION 23(1)(C) AND ASSESSED THE INCOME FROM THE PROPERTY AT RS.12,98,899/- AFTER DETERMINING THE ALV OF THE SAID PROPERTY AT RS.18,5 8,116/- BY APPLYING THE PROVISIONS OF SECTION 23(1)(A). 3 ITA NO.4129/MUM/2009 3. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(AP PEALS) IN AN APPEAL FILED BY THE ASSESSEE AND IT WAS SUBMITTED ON BEHALF OF T HE ASSESSEE BEFORE HIM THAT THE PROPERTY IN QUESTION WAS NOT OCCUPIED BY ITS WHOLE TIME DIRECTOR AND CHAIRMAN BUT THE SAME REMAINED VACANT AFTER 23-04-2004. IT WAS C ONTENDED THAT DEPRECIATION ON THE SAID PROPERTY WAS WRONGLY CLAIMED AND THE SAME, THEREFORE, SHOULD BE DISALLOWED. IT WAS CONTENDED THAT THE ASSESSEE THUS WAS ENTITLED TO THE BENEFIT AVAILABLE U/S 23(1)(C) AS THE PROPERTY HAD REMAINED VACANT AFTER 23-04-2004. THE LEARNED CIT(APPEALS) DID NOT FIND MERIT IN THIS CON TENTION OF THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE HAD NO INTENTION OF LETTING OUT THE PROPERTY ONCE IT HAD BEEN VACATED BY THE TENANT ON 23-04-2004 AND IT , THEREFORE, WAS NOT ENTITLED TO THE BENEFIT AVAILABLE U/S 23(1)(C). HE, THEREFORE, UPHELD THE ACTION OF THE AO ON THIS ISSUE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED COU NSEL FOR THE ASSESSEE, THE PROPERTY IN QUESTION WAS NOT OCCUPIED BY THE WHOLE TIME DIRECTOR AND CHAIRMAN OF THE ASSESSEE COMPANY AND SINCE IT REMAINED VACANT A FTER 23-04-2004, THE PROVISIONS OF SECTION 23(1)(C) ARE CLEARLY APPLICAB LE. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED ON THE DECISION OF HONBLE ANDHRA PRA DESH HIGH COURT IN THE CASE OF VIVEK JAIN VS. ACIT 337 ITR 74 WHEREIN AFTER DISCUS SING THE REQUIREMENTS THAT ARE TO BE FULFILLED IN ORDER TO ATTRACT SECTION 23(1)(C ), IT WAS HELD BY THE HONBLE ANDHRA PRADESH HIGH COURT THAT THE BENEFIT PROVIDED IN SECTION 23(1)(C) HAS TO BE EXTENDED ONLY WHERE THE PROPERTY WAS LET OUT AND TH E ACTUAL INCOME HAD FALLEN FROM WHAT IT WOULD HAVE BEEN HAD THE PROPERTY NOT R EMAINED VACANT. KEEPING IN VIEW THIS DECISION OF HONBLE ANDHRA PRADESH HIGH C OURT, WE FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THE PROPERTY WAS LET OUT FOR THE PART OF THE YEAR AND THE SAME REMAINED VACA NT FOR THE REMAINING PART OF THAT 4 ITA NO.4129/MUM/2009 YEAR, THE BENEFIT PROVIDED U/S 23(1)(C) IS AVAILABL E. IT IS, HOWEVER, OBSERVED THAT THE SAID BENEFIT WAS DENIED BY THE AO ON THE GROUND THA T THE PROPERTY HAD NOT REMAINED VACANT FOR THE REST OF THE PERIOD AS THE S AME WAS OCCUPIED BY THE WHOLE TIME DIRECTOR AND CHAIRMAN OF THE ASSESSEE COMPANY . BEFORE THE LEARNED CIT(APPEALS), IT WAS SUBMITTED ON BEHALF OF THE ASS ESEE THAT THIS POSITION WAS FACTUALLY INCORRECT AND EVEN THE DEPRECIATION ON TH E PROPERTY WAS WRONGLY CLAIMED BY THE ASSESSEE. IN THIS REGARD, THE LEARNED CIT(AP PEALS), HOWEVER, HAS NOT GIVEN ANY FINDING/CONCLUSION. WE, THEREFORE, RESTORE THIS MATTER TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF VERIFYING THE CLAIM OF THE A SSESSEE THAT THE PROPERTY WAS NOT OCCUPIED BY ITS WHOLE TIME DIRECTOR AND CHAIRMAN AN D IT HAS REMAINED VACANT AFTER 23-04-2004. IF THE CLAIM OF THE ASSESSEE IS FOUND T O BE CORRECT ON VERIFICATION, THE AO IS DIRECTED TO ALLOW THE BENEFIT TO THE ASSESSEE AVAILABLE U/S 23(1)(C). GROUND NO.1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATE D AS ALLOWED. 5. THE ISSUE RAISED IN GROUND NO.2 RELATES TO THE D ISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) U/S 14A. 6. IN ITS RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, DIVIDEND INCOME OF RS.22,04,802/- RECEIVED DURING THE YEAR U NDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE. NO DISALLOWAN CE ON ACCOUNT OF EXPENSES INCURRED IN RELATION TO THE EARNING OF THE SAID EXE MPT INCOME, HOWEVER, WAS MADE BY THE ASSESSEE AS REQUIRED BY THE PROVISIONS OF SE CTION 14A. SINCE THE TOTAL DIVIDEND INCOME WAS 0.44% OF THE TOTAL RECEIPTS, SA LARY AND ADMINISTRATION EXPENSES OF RS.3.93 CRORES AND MISCELLANEOUS EXPENS ES OF RS. . 99 CRORES WERE DISALLOWED BY THE AO TO THE EXTENT OF . 44% ON PROPORTIONATE BASIS U/S 14A WHICH CAME TO RS.2,16,952/-. ON APPEAL, THE LEARNED CIT(A PPEALS) DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE TO BE MADE U/S 14A AS PE R RULE 8D OF INCOME-TAX RULES, 1962 RELYING ON THE DECISION OF SPECIAL BENC H OF ITAT IN THE CASE OF DAGA 5 ITA NO.4129/MUM/2009 CAPITAL MANAGEMENT P. LTD. 26 SOT 603 WHEREIN IT WA S HELD THAT RULE 8D WOULD BE APPLICABLE RETROSPECTIVELY. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ BOYCE AND MFG. CO. LTD. 234 CTR 1, RULE 8D IS APPLI CABLE ONLY FROM ASSESSMENT YEAR 2008-09 AND FOR THE YEAR PRIOR TO ASSESSMENT Y EAR 2008-09, THE DISALLOWANCE U/S 14A HAS TO BE MADE ON SOME REASONABLE BASIS. KE EPING IN VIEW THE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE S ET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO THE AO TO RECOMPUTE THE DISALL OWANCE TO BE MADE U/S 14A ON SOME REASONABLE BASIS. GROUND NO.2 OF THE ASSESSEE S APPEAL IS ACCORDINGLY TREATED AS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 10 TH DAY OF OCT. , 2012. SD/- SD/- (D.K.AGARWAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 10 TH OCT., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY) BY ORD ER ASSTT. R EGISTRAR, WAKODE ITAT, MUMBAI BENCHES, MUMBAI.