DCIT 10(1), MUMBAI V. IVF ADVISORS P. LTD, MUMBAI

ITA 5279/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9392 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 20-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTY
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 5279/MUM /2011 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME- TAX 10(1), 455, 4 TH FLOOR, AAYAKAR BHAVAN M.K. MARG, MUMBAI 400 020. VS. M/S IVF ADVISORS PRIVATE LIMITED, SUITE F9C, GRAND HYATT PLAZA, SANTACRUZ (E), MUMBAI 400055. PAN AABCI5623F (APPELLANT) (RESPONDENT) REVENUE BY: SHRI V. KRISHNAMOORTY ASSESSEE BY : SHRI DHANESH BAFNA DATE OF HEARING 08-11-2012 DATE OF PRONOUNCEMENT 21-11-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DTD. 11-04-2011 PASSED BY THE LD. CIT(A) 21, MUMB AI FOR THE A.Y. 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS AS INVESTMENT MANAGEMENT AN D ADVISORY SERVICES. THE RETURN WAS FILED DECLARING LOSS OF R S. 14,48,778/-. DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS INTER AL IA OBSERVED BY THE A.O. THAT THE ASSESSEE HAS MADE TOTAL ADDITION TO T HE FIXED ASSET ITA NO. 5279/MUM/2011 2 AMOUNTING TO RS. 1,40,54,576/-. OUT OF THE SAID AD DITIONS TO ASSETS, ADDITIONS TO BLOCK OF FURNITURE AND LEASE HOLD IMPR OVEMENTS WERE MADE ON THE LAST DATE I.E. 31-03-2007 AS UNDER:- NAME OF THE BLOCK TOTAL ADDITION ADDITIONS ON 31-3-2007 FURNITURE & FIXTURE RS.23,21,716/- RS. 23,21,716 /- LEASEHOLD IMPROVEMENTS RS.80,26,088/- RS. 73,88,0 62/- ON THE BASIS OF THE ABOVE FACTS, THE A.O. OBSERVED THAT THE ADDITIONS TO FIXED ASSETS WERE GOING ON TILL THE FAG END OF THE YEAR. HOWEVER, THE RENT EXPENDITURE WAS CLAIMED FOR THE MONTH OF FEBRUARY & MARCH 2007 AT 100% WITHOUT CAPITALIZING THE SAME. THE A.O. HELD THAT IT WAS NOT POSSIBLE THAT THE RENTAL PREMISES COULD HAVE BEEN U SED BY THE ASSESSEE TILL THE ADDITIONS TO FIXED ASSETS WERE NOT IN PLAC E. ACCORDINGLY THE RENT EXPENSES OF RS. 31,52,250/- WAS TREATED BY THE A.O. AS CAPITAL EXPENDITURE. THE A.O. AFTER ALLOWING DEPRECIATION THEREON AT THE RATE OF 5% MADE AN ADDITION OF RS. 29,94,637/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, IT WAS EXPLAINED THAT PURSUAN T TO LEASE AGREEMENT DTD. 15-12-2006, THE ASSESSEE OCCUPIED ITS OFFICE P REMISES. SOME REPAIRS AND RENOVATIONS WERE REQUIRED THEREIN AND THEREFORE , THE LEASE RENTALS WERE TO COMMENTS FROM 15-2-2007. THE ASSESSEE INCU RRED RENT EXPENSES OF RS. 31,52,250/- FROM 15-2-2007 TO 31-3-2007 WHIC H WERE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE FURTHER EXPLAINED THAT THE PREMISES WERE USED FOR BUSINESS PURPOSES. THE RENT EXPENDIT URE WAS INCURRED ITA NO. 5279/MUM/2011 3 AFTER THE DATE OF SET UP OF ITS BUSINESS AND THEREF ORE IT WAS CLEARLY REVENUE EXPENDITURE AND, THEREFORE, THE DISALLOWANC E MADE BY THE A.O. SHOULD BE DELETED. THE LD. CIT(A) WHILE OBSERVING THAT THE APPELLANT BUSINESS WAS ALREADY SET UP, DELETED THE DISALLOWAN CE MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING REVISED GROUNDS O F APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE RENTAL EXPENDITURE WAS ALLOWABLE AS REVENUE EXPENDITURE TO THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE ADDITIONS TO THE FIXED ASSETS WERE MADE AT THE FAG END OF THE YEAR, WHEREAS, THE RENT EXPENDITURE WAS CLAIMED FOR THE MONTH OF FEBRU ARY AND MARCH, 2007. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 4. AT THE TIME OF HEARING THE LD. D.R. SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESS EE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A), RELIED ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT AS PER THE LEASE AGREEMENT DTD. 15-12-2006 THE ASSESSEE OCCUPIED ITS OFFICE PREMISES. ITA NO. 5279/MUM/2011 4 THE LD. CIT(A) AFTER CONSIDERING THE TOTALITY OF TH E FACTS AND CIRCUMSTANCES OF THE CASE HAS HELD VIDE PARA 2.3 OF HIS ORDER AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE. IN THE FA CTS AND CIRCUMSTANCES AS MENTIONED BY THE APPELLANT, THE RENTAL EXPENDITU RE WAS ALLOWABLE AS REVENUE EXPENDITURE. THE APPELLANT OCCUPIED THE SA ID PREMISES VIDE LEASE AGREEMENT DATED 15-12-2006. THE APPELLANTS BUSINESS WAS ALREADY SET UP DURING THE YEAR SINCE THE APPELLANT HAS SHOWN MANAGEMENT RECEIPTS OF RS. 67.93 LACS AND ADVISORY FEE OF RS. 1.72 CRORE. THE PREMISES WAS OCCUPIED AFTER THE BUSINESS WAS SE T UP. THOUGH REPAIRS AND RENOVATIONS ACTIVITIES WERE CARRIED OUT IN THE RENTED PREMISES, HOWEVER, IT CAN BE SAID THAT DURING THAT PERIOD ALSO THE PREMISES WAS USED FOR THE PURPOSE OF BUSINESS. THE REFORE, THE RENTAL EXPENDITURE INCURRED BY THE APPELLANT AFTER THE SET UP OF BUSINESS WAS ALLOWABLE AS REVENUE EXPENDITURE. THE DISALLOWANCE MADE BY THE AO, IS THEREFORE DELETED. 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE REVENUE AND KEEPING IN VIEW THAT THE PREMISES W AS OCCUPIED AFTER THE BUSINESS WAS SET UP BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE RENTAL EXPENDITURE INCURRED BY THE ASSESSEE ON THE PREMISES OCCUPIED BY THE ASSESSEE IS ALLOWABLE AS REVENUE EXPENDITURE AN D ACCORDINGLY THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. HOWEVER, THE A.O. IS DIRECTED TO WITHDRAW DEPRECIAT ION ALREADY ALLOWED BY HIM ON THIS ACCOUNT. THE GROUNDS TAKEN BY THE REVE NUE ARE, THEREFORE, REJECTED. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED ON 21-11-2012. SD/- SD/- (N.K. BILLAIYA ) ACCOUNTANT MEMBER (DINESH KUMAR AGARWAL) JUDICIAL MEMBER ITA NO. 5279/MUM/2011 5 MUMBAI, DATED : 21-11-2012 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 33, MUMBA I 4. COMMISSIONER OF INCOME TAX 22, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI