PRAKASH H. TRIVEDI, MUMBAI V. A.C.I.T.-11(3), MUMBAI

ITA 4565/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88700 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 06-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI SANJAY ARORA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 4565M/2012 ASSESSMENT YEAR: 2008 - 09 DR. PRAKASH H. TRIVEDI, 2, GAUTAM BUILDING, TILAK ROAD, GHATKOPA R (E), MUMBAI 400 077 PAN: ACIPT 4404H VS. THE ASST. CIT - 11(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KIRIT SANGHVI, A.R. REVENUE BY : SHRI JEETENDRA KUMAR, D.R. DATE OF HEARING : 30.03 .201 5 DATE OF PRONOUNCEMENT : 30.03.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 03.05.2012 OF THE COMMISSIONER OF INCO ME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008 - 09. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALL OWANCE OF INTEREST OF RS.2,04,607/ - PAID TO HDFC. 2. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.90,827/ - PAID TO CITI BANK. 3. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.20,243/ - BEING INTEREST CLAIMED UNDER S.24(B) OF THE I.T. ACT, 1961. ITA NO.4565M/2012 DR. PRAKASH H. TRIVEDI 2 4. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWAN CE OF INTEREST OF RS.15,000/ - BEING THE PROCESSING CHARGES FOR PROCURING A LOAN. 5. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE FOLLOWING DISALLOWANCES: NATURE OF EXPENSES EXPENSES CLAIMED DISALLOWED @ 10% NURSING HOME EXP. 3,56,433/ - 35,643/ - TRAVELLING EXPENSES 2,33,190/ - 23,319/ - FOREIGN TRAVELLING EXP. 1,00,905/ - 10,091/ - TOTAL DISALLOWANCE 69,053/ - THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR MODIFY THE GROUND(S) OF APPEAL. GR OUND NO.1 & 2: 3. GROUND NOS.1 & 2 RELATE TO DISALLOWANCE OF INTEREST OF RS.2,04,607/ - AND RS. 90,827/ - PAID BY THE ASSESSEE TO HDFC BANK AND CITI BANK RESPECTIVELY. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DOCTOR (GYNECOLOGIST) . THE ASS ESSEE OBTAINED LOAN FROM THE HDFC BANK AND CITI BANK WHICH WERE CATEGORIZED AS PERSONAL LOAN . THE ASSESSEE CLAIMED THAT A PART OF TH O SE LOANS WAS UTILIZED FOR PURCHASE OF COMMERCIAL PROPERTY I.E. TWO OFFICES TO BE USED AS CONSULTING ROOMS FOR THE PROFES SION OF THE ASSESSEE. THE ASSESSEE THEREFORE CLAIMED THE ABOVE STATED AMOUNT OF RS.2,04,607/ - PAID TO HDFC BANK AND RS.90,827/ - PAID TO CITI BANK AS REVENUE EXPENDITURE. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO), HOWEVER, DISALLOWED THE S AID INTEREST EXPENDITURE OBSERVING THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE LOAN AMOUNT WAS UTILIZED FOR PROFESSIONAL PURPOSE OF THE DOCTOR. HE OBSERVED THAT THE LOANS OBTAINED BY THE ASSESSEE FROM THE BANKS WERE CATEGORIZED AS PERSONAL LOAN AND T HAT THE PERSONAL EXPENDITURE CANNOT BE ALLOWED AS RELATING TO THE PROFESSIONAL INCOME. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). ITA NO.4565M/2012 DR. PRAKASH H. TRIVEDI 3 4. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO OBSERVING THAT EVE N IF , THE ASSESSEE HAD APPLIED A PART OF LOAN AMOUNT FOR THE PURCHASE OF OFFICE BUILDING BUT THE SAME C OULD NOT BE CLAIMED AS REVENUE EXPENDITURE. THE NATURE OF THE EXPENDITURE WAS CAPITAL IN NATURE. HE FURTHER OBSERVED THAT EVEN THE SAID OFFICE PREMISES WERE NOT USED FOR PROFESSIONAL WORK FOR THE YEAR UNDER CONSIDERATION. EVEN THE LOAN WAS CATEGORIZED AS PERSONAL LOAN AND THE SAME CANNOT BE SAID TO HAVE BEEN OBTAINED FOR BUSINESS/ PROFESSION PURPOSES. HE THEREFORE CONFIRMED THE DISALLOWANCE MADE BY TH E AO ON THIS ACCOUNT. 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT PART OF THE MONEY WAS USED BY THE ASSESSEE FOR PURCHASE OF TWO OFFICE PREMISES WHICH WERE USED BY THE ASSESSEE AS CONSULT ING ROOMS, WHICH ACTIVITY WAS DIRECTLY RELATING T O THE PROFESSION OF THE ASSESSEE. HE, THEREFORE, HAS CLAIMED THAT THE INTEREST EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF HIS PROFESSION. HE HAS FURTHER CONTENDED THAT EVEN IF THE EXPENDITURE INCURRED IS TO BE TREATED AS CAPITAL IN NATUR E, THEN IN THAT EVENT, THE ASSESSEE IS ENTITL ED TO THE CLAIM OF DEPRECIATION, AS ADMISSIBLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE R IVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE AO HAS DENIED THE CLAIM OF THE ASSESSEE MERELY OBSERVING THAT THE LOAN WAS CATEGORIZED BY THE BANK AS PERSONAL LOAN. HE HAS NOT GIVEN ANY FINDING AS TO THE UTILIZATION OF THE LOAN FOR THE PURPOSE O F PROFESSION OF THE ASSESSEE OR THAT WHETHER THE EXPENDITURE WAS REVENUE IN NATURE OR CAPITAL IN NATURE; IF CAPITAL IN NATURE, THEN WHETHER THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION? THE LD. CIT(A) HAS ALSO FAILED TO GIVE PROPER FINDINGS IN TH IS ITA NO.4565M/2012 DR. PRAKASH H. TRIVEDI 4 RESPECT. SO KEEPING IN VIEW OF THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO REEXAMINE THE ISSUE AND PASS A FRESH SPEAKING ORDER I N THIS RESPECT . NEEDLESS TO SAY THAT THE AO WILL G IVE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS CASE. GROUND NO.3: 7. THE LD. A.R. OF THE ASSESSEE HAS STATED AT BAR THAT AS PER THE INSTRUCTIONS OF HIS CLIENT , HE DOES NOT PRESS THE GROUND NO.3. GROUND NO.3 IS, THEREFORE , DISMISSED AS NOT PRESSE D. GROUND NO.4 8. VIDE GROUND NO.4 , THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF RS.15,000/ - PAID AS PROCESSING CHARGES FOR PROCURING THE LOAN FROM THE BANKS. WE HAVE ALREADY RESTORED THE ISSUE RELATING TO THE ALLOWABILITY OF THE INTEREST EXPENDITURE WHETHER CAPITAL OR REVENUE IN NATURE TO THE FILE OF THE AO. WE ACCORDINGLY, RESTORE THIS ISSUE ALSO TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THIS ISSUE ALSO , AFRESH AFTER PROPER VERIFICATIONS. HOWEVER, IT IS CLARIFIED THAT IF THE AO WILL BE OF TH E VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS OF CAPITAL IN NATURE, THEN THE PROCESSING CHARGES FOR OBTAINING THE LOAN WILL ALSO BE TREATED AS PART OF CAPITAL EXPENDITURE . GROUND NO.5 9. VIDE GROUND NO.5 , THE ASSESSEE HAS AGITATED THE ADHOC D ISALLOWANCE AT THE RATE OF 10% RELATING TO THE EXPENDITURE , CLAIMED TO HAVE BEEN INCURRED ON NURSING HOME, TRAVELLING EXPENSES AND FOREIGN TRAVELLING EXPENSES. 10. WE HAVE GONE THROUGH THE ORDER OF THE LOWER AUTHORITIES. WE FIND THAT NEITHER THE AO NOR THE LD. CIT(A) HAS GIVEN ANY FINDING AS TO WHICH OF THE EXPENDITURE WAS OF PERSONAL IN NATURE. THE AO HAS SIMPLY DISALLOWED THE 10% ITA NO.4565M/2012 DR. PRAKASH H. TRIVEDI 5 OF THE EXPENDITURE CLAIMED BY THE ASSESSEE , WHICH FINDING HAS BEEN AFFIRMED BY THE LD. CIT(A). 11. THE LD. CIT(A), HOWE VER, HAS GIVEN A VERY SHORT FINDING RELATING TO TRAVELLING EXPENSES. CONSIDERING THE NATURE OF THE EXPENSES, WE FIND THAT IN THE ABSENCE OF ANY SPECIFIC AVERMENT BY THE AO IN RELATION TO NURSING HOME EXPENSES , NO ADHOC DISALLOWANCE IS WARRANTED. THEREFO RE, THE DISALLOWANCE IN RELATION TO NURSING HOME EXPENSES IS ORDERED TO BE DELETED. 11.1 SO FAR AS THE TRAVELLING AND FOREIGN TRAVELLING EXPENDITURE IS CONCERNED, WE FIND THAT THE NATURE OF EXPENSES , WHEN LOOKED INTO WITH THAT OF PROFESSIONAL ACTIVITY O F THE ASSESSEE, THE UTILIZATION FOR PERSONAL PURPOSES CANNOT BE RULED OUT. WE, THEREFORE, ARE OF THE VIEW THAT THE 10% DISALLOWANCE OF THE EXPENSES RELATING TO TRAVELLING/FOREIGN TRAVELLING IS QUITE JUSTIFIED AND THE SAME IS ACCORDINGLY UPHELD. 12. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.03. 201 5 . SD/ - SD/ - ( SANJAY ARORA ) (SANJAY GARG) ACCOUNTANT M EMBER JUDICIAL MEMBER MUMBAI, DATED: 30.03.2015 * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH ITA NO.4565M/2012 DR. PRAKASH H. TRIVEDI 6 //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITA T, MUMBAI.