BHARAT TILES & MARBLE P.LTD, MUMBAI V. DCIT CIR 2(1), MUMBAI

ITA 438/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0276 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: ISHWAR PRAKASH RATHI
• Keywords: Business income; Depreciation; Business expenditure
• Section: 142(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.438/M/2015 ASSESSMENT YEAR: 2011-12 M/S. BHARAT TILES & MARBLE PVT. LTD., 4/27, KAMAL MANSION, ARTHUR BUNDER ROAD, COLABA, MUMBAI-400 005 PAN: AAACB1727A VS. DY. COMM. OF INCOME TAX, CIRCLE 2(1), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ISHWAR PRAKASH RATHI, A.R. REVENUE BY : SHRI RAM TIWARI, SR. D.R. DATE OF HEARING : 29.12.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 05.12.2014 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.72,00,000/- BEING ENTIRE AMO UNT OF REMUNERATION PAID TO THE DIRECTORS OF THE COMPANY. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 2 THE DISALLOWANCE OF FOLLOWING EXPENSES INCURRED IN RELATION TO THE MOTOR CAR USED FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY; A) INTEREST ON CAR LOAN RS. 3,04,198/- B) MOTOR CAR EXPENSES RS. 5,82,318/- C) MOTOR CAR INSURANCE RS. 1,13,847/- D) DEPRECIATION ON MOTOR CAR RS. 5,83,233/- 3. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FURNISH FRESH AND DETAILED GROUNDS OF APPEALS. 3. THE ASSESSEE HAS ALSO FILED A PETITION FOR ADMIS SION OF ADDITIONAL GROUNDS ON 26.09.17 BY RAISING THE FOLLO WING ADDITIONAL GROUNDS OF APPEAL. THE ADDITIONAL GROUNDS RAISED B Y THE ASSESSEE ARE REPRODUCED AS BELOW: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE PROVISION OF LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN ASSESSING TH E COMPENSATION / RENTAL INCOME OF RS. 1,89,70,520/- UNDER THE HEAD INCOME FOR HOUS E PROPERTY AS AGAINST DECLARED AND CLAIMED UNDER THE HEAD BUSINESS INCOME. FURTHER WHILE ALLOWING THE AFORESAID INCOME UNDER THE HEAD BUSINESS THE DISALLOWANCE OF VARIOUS EXPENSES RELATED TO INCOME FROM HOUSE PROPERTY AMOUNTING TO RS. 32,05,6 60/-, ENTIRE REMUNERATION PAID TO DIRECTORS RS. 72,00,000/- AND ENTIRE EXPENS ES INCURRED IN RELATION TO THE MOTOR CAR RS. 15,83,596/- MAY PLEASE BE ALLOWED AS BUSINESS EXPENSES AS THE SAME WAS INCURRED FOR THE PURPOSE OF SUCH BUSINESS. 4. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE TAKING A LEGAL PLEA OF ASSESSING THE COMPENSATION/RENTAL INCOME UNDER THE HEAD INCOME F ROM HOUSE PROPERTY AS AGAINST DECLARED AND CLAIMED UNDER THE HEAD INCOME FROM BUSINESS EMANATES FROM THE ORDERS OF THE LOWE R AUTHORITIES AND NO NEW FACTS OR EVIDENCES BROUGHT IN SUPPORT OF ADD ITIONAL GROUNDS. THEREFORE, THE ADDITIONAL GROUNDS RAISED MAY BE ADM ITTED AND DECIDE ON MERITS. ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 3 5. ON THE OTHER HAND, THE LD. D.R. OPPOSED ADMISSIO N OF ADDITIONAL GROUNDS. 6. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IAL AVAILABLE ON RECORD, WE FIND THAT THE ADDITIONAL GROUNDS RAIS ED BY THE ASSESSEE CHALLENGING THE ACTION OF THE AO IN ASSESSING THE COMPENSATION/RENTAL INCOME UNDER THE HEAD INCOME F ROM HOUSE PROPERTY AS AGAINST DECLARED AND CLAIMED UNDER THE HEAD INCOME FROM BUSINESS EMANATES FROM THE ORDER OF THE LOWER AUTHORITIES AND NO NEW FACTS OR EVIDENCES BROUGHT ON RECORD TO SUPP ORT THE SAME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A DDITIONAL GROUNDS RAISED BY THE ASSESSEE NEED TO BE ADMITTED AND DECI DED ON MERITS. HENCE, WE ADMIT THE ADDITIONAL GROUNDS RAISED BY TH E ASSESSEE AND PROCEED TO DISPOSE OF ON MERITS. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF PROPERTY AND RENT COLLECTION. THE ASSESSEE FILED ITS RETURN OF INCOM E FOR ASSESSMENT YEAR 2011-12 ON 27.09.2011 DECLARING TOTAL INCOME O F RS.60,76,280/-. THE CASE HAS BEEN SELECTED FOR SCR UTINY AND ACCORDINGLY NOTICES UNDER SECTION 143(2) AND 142(1) ALONG WITH DETAILED QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME FILED THE DETAILS AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS D ERIVED RENTAL INCOME FROM TWO PROPERTIES AND TREATED THE SAME UND ER THE HEAD ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 4 INCOME FROM BUSINESS AND PROFESSION. THE AO FURT HER OBSERVED THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF RS. 6,44,553/- AND CONSIDERED IT AS PART OF BUSINESS RECEIPT. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAS TREATED RENTAL RECEIPTS AS ITS BUS INESS RECEIPTS AND CLAIMED VARIOUS EXPENSES AGAINST BUSINESS INCOME AN D OFFERED THE RESULTANT SURPLUS UNDER THE HEAD INCOME FROM BUSIN ESS AND PROFESSION. THEREFORE, CALLED UPON THE ASSESSEE T O EXPLAIN AS TO WHY THE RENTAL INCOME RECEIVED FROM LETTING OUT PROPERT IES SHALL NOT BE TREATED AS INCOME FROM HOUSE PROPERTY AND ALSO INTE REST EARNED FROM LOANS AND ADVANCES SHALL NOT BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. IN RESPONSE TO SHOW CAUSE NOT ICE, THE ASSESSEE VIDE ITS SUBMISSION DATED 25.11.13 SUBMITTED THAT I T HAS EARNED RENTAL INCOME FROM LETTING OUT OF PROPERTIES WHICH WERE ON CE USED BY THEMSELVES FOR THE BUSINESS PURPOSE IN THE PAST. H OWEVER, AS THE BUSINESS OF MANUFACTURING TILES IS CLOSED DOWN, THE Y HAVE GIVEN THE PREMISES ON LEASE TO OTHERS SO AS TO EARN RENTAL IN COME AND ACCORDINGLY IT IS TERMED RENT UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION, WHICH IS IN ACCORDANCE WITH LAW AND ALSO SUPPORTED BY ITS MAIN OBJECTIVE CLAUSE IN MEMORANDUM OF ASSOC IATION. THE ASSESSEE, IN SO FAR AS INTEREST RECEIPTS IS CONCERN ED, NO SPECIFIC REPLY HAS BEEN FURNISHED TO JUSTIFY INTEREST INCOME AS IT IS BUSINESS RECEIPTS. 8. THE AO AFTER CONSIDERING RIVAL SUBMISSIONS OF BO TH THE PARTIES AND ALSO RELYING UPON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF SHAMBHU INVESTMENT P. LTD. VS. CIT (SC) 263 ITR 143, OBSERVED THAT RENTAL INCOME RECEIVED FROM LETTING O UT OF PROPERTIES IS ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 5 ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY, BUT NOT UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND ACCORDINGLY CONSIDERED RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND RECOMPUTED INCOME FROM HOUSE PR OPERTY, AFTER ALLOWING DEDUCTIONS TOWARDS PROPERTY TAX AND STANDA RD DEDUCTION UNDER SECTION 24(A) OF THE INCOME TAX ACT AND DETER MINED NET INCOME OF HOUSE PROPERTY AT RS.1,31,29,691/-. THE AO ALSO TREATED INTEREST RECEIVED OF RS.6,44,553/- UNDER THE HEAD INCOME FROM OTHER SOURCES. FURTHER, THE AO HAS DISALLOWED EXPENSES BEING REMUNERATION PAID TO DIRECTORS FOR RS.72 LAKHS, ON THE GROUND THAT ONCE RENTAL INCOME HAS BEEN TREATED AS INCOME FROM HOUSE PROPERTY CONSEQUENT DEDUCTIONS TOWARDS EXPENSES UNDER SECTIO N 24(A) HAVE BEEN GIVEN. THEREFORE, NO FURTHER DEDUCTIONS CAN B E GIVEN TOWARDS REMUNERATION TO DIRECTORS UNDER THE HEAD INCOME FR OM HOUSE PROPERTY. THE AO FURTHER OBSERVED THAT THE EXPENS ES INCURRED BY THE ASSESSEE HAS NOT BEEN INCURRED WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS. HENCE, HE DISALLOWED THE REMU NERATION PAID TO DIRECTORS AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, THE AO HAS DISALLOWED EXPENSES BEING INT EREST ON CAR LOAN, MOTOR CAR EXPENSES, MOTOR CAR INSURANCE AND DEPRECI ATION ON MOTOR CAR ON THE GROUND THAT THE CAR IS IN THE NAME OF DI RECTOR AND ALSO THE ASSESSEE FAILED TO ESTABLISH WITH ANY EVIDENCES THE USE OF MOTOR CAR IN THE BUSINESS OF THE ASSESSEE. 9. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A ), THE ASSESSEE ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 6 HAS SUBMITTED THAT THE AO WAS ERRED IN DISALLOWING REMUNERATION PAID TO DIRECTORS WITHOUT APPRECIATING THE FACT THA T THE DIRECTORS ARE DEVOTING THEIR FULL TIME TO THE ACTIVITIES CARRIED OUT BY THE COMPANY AND ALSO THE PAYMENT IS FULLY SUPPORTED BY NECESSAR Y EVIDENCES. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS LOT OF PROPE RTIES, IN ORDER TO PROTECT THEIR RIGHTS AND TO GET THE OPTIMUM UTILISA TION AND TO MAKE FINANCIAL BENEFITS THE DIRECTORS ARE ENGAGED ON A D AY TO DAY BASIS. THEREFORE, PAYMENT OF REMUNERATION TO DIRECTORS IS FOR THE SERVICES RENDERED TO THE COMPANY AND HENCE CANNOT BE DISALLO WED. IN SO FAR AS DISALLOWANCE OF MOTOR CAR EXPENSES AND DEPRECIAT ION ON MOTOR CAR IS CONCERNED, MERELY BECAUSE THE CAR IS IN THE NAME OF THE DIRECTOR OF THE COMPANY THE USAGE OF THE CAR FOR THE BUSINESS P URPOSE CANNOT BE RULED OUT. THE ASSESSEE IS USING THE MOTOR CAR FOR THE PURPOSE OF BUSINESS OF THE COMPANY AND HENCE RIGHTLY CLAIMED M OTOR CAR EXPENSES AND DEPRECIATION. THEREFORE, THE AO WAS I NCORRECT IN DISALLOWING THE MOTOR CAR EXPENSES ONLY ON THE GROU ND THAT CAR IS IN THE NAME OF THE DIRECTOR OF THE COMPANY. THE LD. C IT(A), AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E AND ALSO RELYING UPON CERTAIN JUDICIAL PRECEDENTS OBSERVED THAT ONCE THE RENTAL RECEIPTS HAVE BEEN TREATED UNDER THE HEAD INCOME F ROM HOUSE PROPERTY CONSEQUENT DEDUCTIONS TOWARDS EXPENSES HA VE BEEN ALLOWED UNDER SECTION 24(A) OF THE ACT @ 30% OF REN TAL VALUE AND HENCE, FURTHER DEDUCTIONS TOWARDS DIRECTORS REMUNE RATIONS WHICH IS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CANNOT BE ALLOWED. IN SO FAR AS DISALLOWANCE OF MO TOR CAR EXPENSES INCLUDING DEPRECIATION, THE ASSESSEE HAS FAILED TO JUSTIFY EXPENSES ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 7 INCURRED TOWARDS MAINTENANCE OF MOTOR CAR AND PAYME NT OF INTEREST ON LOAN BORROWED INCLUDING DEPRECIATION WITH NECESS ARY EVIDENCES, WHEN THE AO SPECIFICALLY ASKED TO PRODUCE LOG BOOK ETC. THE ASSESSEE FAILED TO FILE ANY EVIDENCES. THEREFORE, THE AO WA S RIGHT IN DISALLOWING MOTOR CAR EXPENSES INCLUDING DEPRECIATI ON. WITH THESE OBSERVATIONS, THE LD. CIT(A) DISMISSED THE APPEAL F ILED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A ), THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD. A.R. FOR THE ASSESSEE REFERRING TO THE ADDITIONAL GROUNDS OF APPEAL RAISED, SUBMITTED THAT THE AO WAS ERRED IN ASSESSING THE COMPENSATION/RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST DECLARED AND CLAIME D UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION EVEN THOUGH TH E ASSESSEE HAS DISCONTINUED ITS MANUFACTURING ACTIVITY AND CONTINU ED THE ACTIVITY OF LETTING OUT OF PROPERTIES WHICH IS ALSO IN ACCORDAN CE WITH ITS MAIN OBJECTS. THE ASSESSEE FURTHER SUBMITTED THAT IT WA S IN THE BUSINESS OF RENTING ITS PROPERTIES AFTER DISCONTINUATION OF ITS MANUFACTURING ACTIVITY AND RECEIVED RENT FORM PROPERTIES WHICH HA S BEEN TAXED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROF ESSION. THE AO WITHOUT APPRECIATING THE FACT HAS ASSESSED RENTAL I NCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE FU RTHER SUBMITTED THAT ONCE THE INCOME HAS BEEN CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS RENTAL INCOME, REMUNERATION PAID T O DIRECTORS AND EXPENSES INCURRED IN RELATION TO MOTOR CAR ALSO NEE DS TO BE ALLOWED ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 8 AGAINST BUSINESS RECEIPTS. IN THIS REGARD, HE RELI ED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORP ORATION PVT. LTD. VS. ACIT (2016) 386 ITR 500 (SC) AND ALSO THE DECISION OF ITAT MUMBAI SMC BENCH IN THE CASE OF DISTINCT DEVEL OPERS PVT. LTD. IN ITA NO.6943/M/2016 DATED 03.05.17. 11. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TED THE ORDER OF THE LD. CIT(A). THE LD. D.R. FURTHER SUBMITTED THA T MERELY BECAUSE THE ASSESSEE CONSIDERED THE RENTAL RECEIPTS UNDER T HE HEAD INCOME FROM BUSINESS THE CHARTER OF INCOME DOES NOT CHANG E. THE ASSESSEE HAS DERIVED RENTAL INCOME FROM LETTING OUT OF PROPE RTIES WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. HENCE, THE AO WAS RIGHT IN CONSIDERING THE RENTAL RECEIPTS UND ER THE HEAD INCOME FROM HOUSE PROPERTY AND ALSO DISALLOWING C ERTAIN EXPENSES INCLUDING REMUNERATION PAID TO THE DIRECTORS AND MO TOR CAR EXPENSES CLAIMED AGAINST SUCH RENTAL RECEIPTS. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IT IS ADMITTED FACT THAT THE ASSESSEE HAS DISCONTINUED IT S MANUFACTURING ACTIVITY AND CONTINUED THE ACTIVITY OF LETTING OUT ITS PROPERTIES AND DERIVED RENTAL INCOME. THE ACTIVITY OF ASSESSEE IS ALSO SUPPORTED BY MAIN OBJECTS CLAUSE IN MEMORANDUM OF ASSOCIATION. WE FURTHER NOTICED THAT EXCEPT LETTING OUT PROPERTIES THE ASSE SSEE HAS NOT CARRIED OUT ANY OTHER BUSINESS ACTIVITY. ONCE THE ASSESSEE HAS CARRIED OUT ITS MAIN ACTIVITY OF LETTING OUT PROPERTIES TO DERIVE R ENTAL INCOME, SUCH ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 9 RENTAL INCOME SHOULD BE CONSIDERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RA YALA CORPORATION PVT. LTD. VS. ACIT (SUPRA), WHEREIN UND ER SIMILAR CIRCUMSTANCES THE HONBLE SUPREME COURT OBSERVED TH AT ONCE THE ASSESSEE HAD ONLY ONE BUSINESS THAT WAS OF LEASING ITS PROPERTY AND EARNING RENT THERE FROM, THE INCOME SO EARNED SHOUL D BE TREATED AS BUSINESS INCOME AND SUCH INCOME WAS TO BE SUBJECTED TO TAX UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFE SSION. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF ITAT MUMBAI SMC BENCH, IN THE CASE OF DISTINCT DEVELOPERS PVT. LTD. (SUPRA) WHEREIN UNDER SIMILAR CIRCUMSTANCES THE CO-ORDINATE BENCH BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA) HAS H ELD THAT RENTAL INCOME RECEIVED FROM LETTING OUT OF PROPERTIES SHOU LD BE CONSIDERED UNDER THE HEAD INCOME FROM BUSINESS. 13. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO FOLLOWING THE RATIO OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORATION PVT. LTD. VS. ACIT (SUPRA), WE ARE OF T HE CONSIDERED VIEW THAT IF THE MAIN ACTIVITY OF THE ASSESSEE IS O F LETTING OUT PROPERTIES AND DERIVE RENTAL INCOME WITHOUT ANY OTH ER BUSINESS ACTIVITY, THEN SUCH RENTAL INCOME SHOULD BE CONSIDE RED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION BUT NOT U NDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE, WE DIRECT THE AO TO ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 10 ASSESS RENTAL INCOME UNDER THE HEAD INCOME FROM BU SINESS OR PROFESSION AS CLAIMED BY THE ASSESSEE. 14. COMING TO DISALLOWANCE OF EXPENSES BEING DIRECT ORS REMUNERATION AND MOTOR CAR EXPENSES INCLUDING DEPRE CIATION ON MOTOR CAR. THE AO DISALLOWED REMUNERATION PAID TO DIRECTORS ON THE GROUND THAT THE EXPENDITURE WAS NOT WHOLLY AND EXCL USIVELY INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE A O FURTHER OBSERVED THAT ONCE THE RENTAL INCOME HAS BEEN CONSIDERED UND ER THE HEAD INCOME FROM HOUSE PROPERTY AFTER ALLOWING THE DED UCTIONS AVAILABLE TOWARDS EXPENSES AS PER THE PROVISIONS OF SECTION 24(A), FURTHER DEDUCTIONS TOWARDS EXPENSES CANNOT BE ALLOW ED. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE AO FOR THE REASON THAT THE ALLOWABILITY OF EXPENSES HAS TO BE CONSIDERED IN TH E LIGHT OF THE NATURE OF BUSINESS OF THE ASSESSEE AND ITS RELEVANC E. SINCE WE HAVE ALREADY DIRECTED THE AO TO CONSIDER RENTAL INCOME U NDER THE HEAD INCOME FROM BUSINESS, THE AO IS DIRECTED TO CONSI DER EXPENSES INCURRED BY THE ASSESSEE AGAINST SUCH INCOME. IN T HIS CASE, THE ASSESSEE HAS PAID REMUNERATION TO DIRECTORS AND ALS O FURNISHED EVIDENCES FOR PAYMENT OF REMUNERATION FOR SERVICES RENDERED BY THE DIRECTORS TO THE COMPANY. THEREFORE, WE ARE OF THE VIEW THAT THE AO WAS INCORRECT IN DISALLOWING REMUNERATION PAID TO D IRECTORS BY HOLDING THAT THE EXPENSES WERE NOT WHOLLY AND EXCLU SIVELY INCURRED FOR BUSINESS AND ALSO WHICH IS EXCESSIVE AND UNREAS ONABLE. HENCE, WE DIRECT THE AO TO ALLOW EXPENSES CLAIMED BY THE A SSESSEE AGAINST BUSINESS RECEIPTS. ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 11 15. IN SO FAR AS MOTOR CAR EXPENSES AND DEPRECIATIO N ON MOTOR CAR, THE ASSESSEE HAS USED MOTOR CAR FOR THE PURPOSE OF BUSINESS EVEN THOUGH THE CAR IS IN THE NAME OF DIRECTOR. MERELY BECAUSE THE CAR IS IN THE NAME OF DIRECTOR THE USAGE OF CAR FOR THE PU RPOSE OF BUSINESS CANNOT BE RULED OUT. HOWEVER, THE FACT REMAINS THA T WHEN THE AO HAS SPECIFICALLY ASKED FOR PRODUCTION OF LOG BOOK, THE ASSESSEE FAILED TO FURNISH LOG BOOK TO PROVE THE USE OF VEHICLE FOR THE PURPOSE OF BUSINESS. THEREFORE, WE ARE OF THE VIEW THAT THE I SSUE NEEDS TO BE EXAMINED BY THE AO IN THE LIGHT OF THE CLAIM OF THE ASSESSEE THAT THE MOTOR CAR HAS BEEN USED FOR THE BUSINESS PURPOSE. IF THE ASSESSEE SUBSTANTIATES ITS CLAIM WITH NECESSARY EVIDENCES AN D ALSO BY PRODUCING THE LOG BOOK TO PROVE THAT CAR IS USED FO R BUSINESS PURPOSE, THEN THE AO IS DIRECTED TO ALLOW MOTOR CAR EXPENSES INCLUDING DEPRECIATION ON MOTOR CAR. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI ITA NO.438/M/2015 M/S. BHARAT TILES & MARBLE PVT. LTD. 12 THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.