The Dy. Commissioner of Income-tax, Jammu V. Sh. Tej Ram, Katra.

ITA 528/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95096 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SHARDA
• Assessee Lawyers: P N ARORA
• Keywords: Notional interest; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (JAMMU CAMP; JAMMU ) BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S.KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NO. 528(ASR)/2014 ASSESSMENT YEARS: 2009-10 THE DCIT, CIRCLE-2, JAMMU. VS. SH. TEJ RAM PROP. HOTEL MOUNT VIEW, KATRA. PAN: ACHPR4124M (APPELLANT) (RESPONDENT) APPELLANT BY: SH. R.K.SHARDA (DR.) RESPONDENT BY: SH. P.N.ARORA (ADV.) DATE OF HEARING: 01.12.2015 DATE OF PRONOUNCEM ENT: 04.12.2015 ORDER PER T.S.KAPOOR (A.M): THIS IS AN APPEAL FILED BY THE REVENUE AGAI NST THE ORDER OF LEARNED CIT(A) DATED 18.06.2014 FOR ASST. YEAR 2009-10. 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE R EPRODUCED BELOW. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT (A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF BUILDING R ENOVATION AS THE EXPENSES DO NOT PERTAIN TO REPAIRS BUT TO ADDITIONS /ALTERATION TO THE EXISTING STRUCTURE. SO THE EXPENSES MAY BE TREATED AS CAPITAL EXPENDITURE AND NOT IN THE NATURE OF REVENUE EXPEND ITURE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF I NTEREST FREE LOAN 2. ITA NO.52 8 (ASR)/2014 ASST. YEAR 200 9-10 WHEN THE ASSESSEE HAS NEITHER REPLIED TO THIS QUERY DURING THE ASSESSMENT PROCEEDINGS NOR FILED ANY REPLY IN THIS REGARD. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEAR NED CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF TELEPHONE EXPENSES AND MOTOR VEHICLE EXPENSES INCLUDING DEPRE CIATION AS THE PERSONAL ELEMENT IN THESE EXPENDITURE CANNOT BE RUL ED OUT. 3. AT THE OUTSET, THE LEARNED DR INVITED OUR ATTENT ION TO GROUND NO.1, AND SUBMITTED THAT THE ASSESSEE HAD INCURRED A MAJOR EX PENDITURE ON BUILDING WHICH CANNOT BE CLASSIFIED AS REPAIRS BUT WERE IN T HE NATURE OF ADDITIONS TO THE EXISTING STRUCTURE, THEREFORE, THE ASSESSING OFFICE R HAD RIGHTLY MADE THE ADDITIONS. 4. AS REGARDS GROUND NO.2, THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER HAD MADE AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST AMOUNTING TO RS.60,000/- AS THE ASSESSEE HAD GRANTED INTEREST FR EE LOAN OF RS.5 LACS TO HIS DAUGHTER-IN-LAW AND DURING THE ASSESSMENT PROCEEDIN GS HE WAS SPECIFICALLY ASKED TO EXPLAIN AS TO WHY INTEREST HAS NOT BEEN CH ARGED AND TO WHICH HE DID NOT REPLY AND THEREFORE, THE ACTION OF THE ASSESSIN G OFFICER WAS JUSTIFIED. 5. AS REGARDS GROUND NO.3, THE LEARNED DR SUBMITTED THAT HE IS NOT PRESSING THE SAME. 6. THE LEARNED AR, ON THE OTHER HAND, INVITED OUR A TTENTION TO THE AMOUNT OF REPAIR AND MAINTENANCE EXPENSES REPRODUCED IN TH E ASSESSMENT ORDER ITSELF AND SUBMITTED THAT THE ASSESSEE WAS RUNNING A HOTEL WHICH REQUIRED EXTENSIVE 3. ITA NO.52 8 (ASR)/2014 ASST. YEAR 200 9-10 REPAIRS FROM TIME TO TIME. HE INVITED OUR ATTENTION TO THE ITEMS OF REPAIRS AND MAINTENANCE. THE LEARNED AR SUBMITTED THAT NO ADDIT IONAL STRUCTURE WAS CREATED AND RATHER THE EXPENDITURE WAS INCURRED ON THE EXISTING STRUCTURE ONLY, THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DELETED T HE SAME. 7. AS REGARDS THE AMOUNT OF NOTIONAL INTEREST, T HE LEARNED AR SUBMITTED THAT THE ASSESSEE WAS HAVING A CAPITAL OF RS.1.33 CRORES AND THERE WAS NO LINKAGE BETWEEN BORROWING COSTS AND INTEREST FREE LOAN GIVE N TO DAUGHTER-IN-LAW AND THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DELETED T HE SAME. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS RUNN ING A HOTEL WHERE EXPENDITURE OF REPAIR AND MAINTENANCE ON ACCOUNT OF ELECTRICITY ITEMS, SANITARY ITEMS ETC. ARE NECESSARY TO KEEP THE HOTEL IN A RUN NING CONDITION. THE NATURE OF EXPENDITURE AS NOTED IN THE ASST. ORDER ITSELF CLAR IFIES THAT THE EXPENDITURE WAS IN THE FORM OF REPAIRS AND ASSESSING OFFICER HAS FA ILED TO BRING ON RECORD CONSTRUCTION OF ANY ADDITIONAL STRUCTURE. IN VIEW O F THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), THEREFORE, GR OUND NO.1 OF THE APPEAL IS DISMISSED. 9. NOW, COMING TO THE GROUND NO.2, WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST W ITHOUT ESTABLISHING ANY LINKAGE BETWEEN THE INTEREST PAID ON BORROWINGS AND INTEREST FREE LOAN TO THE 4. ITA NO.52 8 (ASR)/2014 ASST. YEAR 200 9-10 DAUGHTER-IN-LAW. THE LEARNED CIT(A) HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE WAS HAVING CAPITAL OF RS.1.33 CRORES, THER EFORE, ADVANCE OF RS.5 LACS CAN EASILY BE MADE OUT OF OWN FUNDS OF ASSESSEE AND THEREFORE, THE ADDITIONS MADE BY ASSESSING OFFICER IS NOT JUSTIFIED AND THER EFORE, THE LEARNED CIT(A) HAS RIGHTLY DELETED THE SAME. IN VIEW OF THE ABOVE, GRO UND NO.2 IS ALSO DISMISSED. 10. GROUND NO.3 IS DISMISSED AS NOT PRESSED. 11. IN VIEW OF THE ABOVE, THE APPEAL FILED BY RE VENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2015. SD/- SD/- (A.D.JAIN) (T.S.KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04.12.2015 PK/PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.