A R Holdings and Electronics P Ltd, Chennai V. ITO Corporate Ward - 11(4), Chennai

ITA 57/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7056 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 04-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.57 & 58/CHNY/2018 /ASSESSMENT YEARS: 2013-14 & 2014-15 M/S.A.R.HOLDINGS AND ELECTRONICS- PVT. LTD., C/O. SHRI S.SRIDHAR, A.S.SRIRAMAN, ADVOCATES, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI-600 020. VS. THE INCOME TAX OFFICER, CORPORATE WARD-1(4), CHENNAI. & THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(1), CHENNAI. [PAN: AAECA 5650 K ] ( ) /APPELLANT) ( *+) /RESPONDENT) ) , / APPELLANT BY : MR.S.SRIDHAR, ADV. *+) , /RESPONDENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT , /DATE OF HEARING : 25.07.2019 , /DATE OF PRONOUNCEMENT : 25.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI , IN ITA NO.4/CIT(A)-1/2016-17 DATED 30.11.2017 FOR THE AY 2 013-14 AND IN ITA NO.298/CIT(A)-1/2016-17 DATED 30.11.2017 FOR THE AY 2014-15. ITA NOS.57 & 58/CHNY/2018 :- 2 -: 2. MR. R.CLEMENT RAMESH KUMAR, ADDL.CIT, REPRESENTED ON BEHALF OF THE REVENUE AND MR. S.SRIDHAR, ADV., REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: FOR THE AY 2013-14 : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-1, CHENNAI, DATED 30.11.2017 IN I.T.A.NO.4/CIT(A)-1/2016-17 FOR THE ABOVE MENTIONE D ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALLO WANCE OF EXPENSES INCURRED PROPORTIONATELY TO THE EXTENT OF RS.65,29,416/- FOR GETTING THE LEASEHOLD RIGHTS WHICH LED TO THE EARNING OF THE RENTAL INCOME IN THE COMPUTATION OF INCOME HOUSE PROPERTY AT PARA 5 WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) ERRED IN SUSTAINING THE ALLOCAT ION OF THE EXPENSES FOR EARNING RENTAL INCOME AND FOR EARNING AMENITY CHARGES IN PROPORTIO N TO THE TURNOVER/INCOME EARNED THERE FROM (75:25) WHICH RESULTED IN ENHANCEMENT OF THE IN COME EARNED FROM AMENITIES FOR TAXATION UNDER THE HEAD 'INCOME FROM BUSINESS' WITH OUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE R EJECTION OF THE CLAIM FOR EXPENSES BASED ON THE FACTS AVAILABLE ON RECORD WHICH ACCORDING TO THE APPELLANT COULD NOT BE ALLOCATED TO THE EARNING OF THE RENTAL INCOME WAS WHOLLY UNJUSTI FIED, VITIATING THE ALLOCATION ATTEMPTED/APPLIED IN PARA 13 OF THE IMPUGNED ORDER. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVIN G ACCEPTED THE ASSESSMENT OF AMENITY INCOME UNDER THE HEAD 'INCOME FROM BUSINESS' AND FU RTHER HAVING NOT DISPUTED THE INCURRING OF EXPENSES FOR EARNING SUCH INCOME, THE SUSTENANCE OF ALLOCATION OF EXPENSES ARTIFICIALLY WAS WHOLLY UNJUSTIFIED AND ERRONEOUS. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVIN G REJECTED THE CLAIM FOR EXPENSES INCURRED PROPORTIONATELY IN PARA 5 OF THE IMPUGNED ORDER FOR CREATING THE RIGHT IN THE LEASE IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY, T HE DENIAL OF DEDUCTION OF SUCH EXPENSES EITHER FULLY OR PROPORTIONATELY IN COMPUTI NG THE AMENITY INCOME UNDER THE HEAD 'INCOME FROM BUSINESS' IN PARA 13(3) OF THE IMPUGNED ORDER WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS/ARGUMENTS AT THE TIME OF HEARING. FOR THE AY 2014-15 : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-1, CHENNAI DATED 30.11.2017 IN I.TA.NO.298/CLT(A)-1/2016-17 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. ITA NOS.57 & 58/CHNY/2018 :- 3 -: 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALLO WANCE OF EXPENSES INCURRED PROPORTIONATELY TO THE EXTENT OF RS,19,22,400/- FOR GETTING THE LEASEHOLD RIGHTS WHICH LED TO THE EARNING OF THE RENTAL INCOME IN THE COMPUTATION OF INCOME HOUSE PROPERTY AT PARA 5 WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) ERRED IN SUSTAINING THE ALLOCAT ION OF THE EXPENSES FOR EARNING RENTAL INCOME AND FOR EARNING AMENITY CHARGES IN PROPORTIO N TO THE TURNOVER/INCOME EARNED THERE FROM (63:37) WHICH RESULTED IN ENHANCEMENT OF THE IN COME EARNED FROM AMENITIES FOR TAXATION UNDER THE HEAD 'INCOME FROM BUSINESS' WITH OUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE R EJECTION OF THE CLAIM FOR EXPENSES BASED ON THE FACTS AVAILABLE ON RECORD WHICH ACCORDING TO THE APPELLANT COULD NOT BE ALLOCATED TO THE EARNING OF THE RENTAL INCOME WAS WHOLLY UNJUSTI FIED, VITIATING THE ALLOCATION ATTEMPTED/APPLIED IN PARA 13 OF THE IMPUGNED ORDER. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVIN G ACCEPTED THE ASSESSMENT OF AMENITY INCOME UNDER THE HEAD 'INCOME FROM BUSINESS' AND FU RTHER HAVING NOT DISPUTED THE INCURRING OF EXPENSES FOR EARNING SUCH INCOME, THE SUSTENANCE OF ALLOCATION OF EXPENSES ARTIFICIALLY WAS WHOLLY UNJUSTIFIED AND ERRONEOUS. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVIN G REJECTED THE CLAIM FOR EXPENSES INCURRED PROPORTIONATELY IN PARA 5 OF THE IMPUGNED ORDER FOR CREATING THE RIGHT IN THE LEASE IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY, T HE DENIAL OF DEDUCTION OF SUCH EXPENSES EITHER FULLY OR PROPORTIONATELY IN COMPUTI NG THE AMENITY INCOME UNDER THE HEAD 'INCOME FROM BUSINESS IN PARA 13(3) OF THE IMPUGNED ORDER WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. , 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS/ARGUMENTS AT THE TIME OF HEARING. 4. IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE IS A COMPANY WHICH IS IN THE BUSINESS OF PROPERTY DEVELOPMENT AND REAL ESTATE. IT WAS A SUBMISSION THAT THE ASSESSEE HAD DERIVED RENTAL INC OME FROM LETTING OUT OF THE PREMISES. IT WAS A SUBMISSION THAT THE ASSESSE E HAD ALSO RECEIVED AMENITY CHARGES IN RESPECT OF THE PROPERTY LET OUT. IT WAS A SUBMISSION THAT THE RENTAL INCOME HAD BEEN OFFERED UNDER THE H EAD INCOME FROM HOUSE PROPERTY AND THE AMENITY CHARGES HAD BEEN OF FERED UNDER THE HEAD INCOME FROM BUSINESS. IT WAS A SUBMISSION T HAT THE AO HAD TREATED THE INCOME RECEIVED BY THE ASSESSEE FROM AM ENITY CHARGES WHICH HAD BEEN OFFERED UNDER THE HEAD INCOME FROM BUSINE SS AS LIABLE TO BE ITA NOS.57 & 58/CHNY/2018 :- 4 -: ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . IT WAS A SUBMISSION THAT ON APPEAL, THE LD.CIT(A) HAD DELETE D THE ADDITION BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AYS 2006-07, 2007-08, 2 008-09 & 2009-10 AND HAD HELD THAT THE AMENITY INCOME TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS AND NOT FROM HOUSE PROPERTY. HOWEVER, THE LD.CIT(A) HAD UPHELD THE STAND OF THE AO THAT THE E XPENSES INCURRED WAS LIABLE TO BE APPORTIONED BETWEEN THE INCOME FROM H OUSE PROPERTY AND THE INCOME FROM BUSINESS AND ONLY THE PROPORTION OF THE EXPENDITURE UNDER THE HEAD INCOME FROM BUSINESS IS LIABLE TO BE ALLOWED. IT WAS A SUBMISSION THAT THE ISSUE IS SQUARELY COVERED BY TH E DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. A.R. FOUNDATIONS PVT. LTD., FOR THE AY 2014-15, SISTER CONCERN OF THE ASS ESSEE, WHEREIN IN PARA NO.5, IT HAS BEEN HELD AS FOLLOWS: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AD MITTEDLY, THE ASSESSEE IS A COMPANY. THE BUSINESS OF THE ASSESSEE-COMPANY IS REAL ESTATE AND DEVELOPMENT. THE BUSINESS OF THE ASSESSEE BEING PUTTING UP OF BUILDINGS, SELLING THE M, OR LEASING THEM OUT, AS THE BUSINESS REQUIRES. THE INCOME FROM SUCH BUSINESS IS ASSESSED UNDER THE SPECIFIED FIVE HEADS OF INCOME UNDER THE INCOME TAX ACT, 1961. JUST BECAUSE THE INCOME EARNED BY THE ASSESSEE FROM ITS BUSINESS OF LEASING OUT OF BUILDINGS IS AS SESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IT WOULD NOT MEAN THAT THE BUSINES S EXPENSES OF THE ASSESSEE-COMPANY WOULD NOT BE ALLOWABLE. THE STATUTORY EXPENDITURE I NCURRED BY THE ASSESSEE FOR MAINTENANCE OF STATUS AS A COMPANY, ADMITTEDLY IS E XPENDITURE, WHICH IS LIABLE TO BE ALLOWED. THUS, THE EMPLOYEES BENEFIT EXPENSES UNDE R SCHEDULE-19, IS ADMITTEDLY ALLOWABLE EXPENDITURE AND CANNOT BE APPORTIONED. IN RESPECT O F SCHEDULE-20, BEING FINANCE COST, THE SAME BEING IN RESPECT OF THE INTEREST PAID TO THE B ANK AND ALSO THE BANKING CHARGES, BEING FOR THE BUSINESS OF THE ASSESSEE IS AN ALLOWABLE EX PENDITURE. COMING TO OTHER EXPENSES, THE ASSESSEE ITSELF IN ITS COMPUTATION OF TOTAL INC OME HAS CLAIMED THE RATES AND TAXES IN RESPECT OF THE PROPERTY, WHEN COMPUTING THE INCOME FROM THE HOUSE PROPERTY. THE COMPUTATION OF TOTAL INCOME CLEARLY SHOWS THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION IN RESPECT OF THE LEASED OUT PROPERTY. THE INCOME D ERIVED FROM LETTING OUT ACTIVITY HAS BEEN OFFERED AND ASSESSED UNDER THE HEAD INCOME FROM HO USE PROPERTY BY THE ASSESSEE. THIS BEING SO, PERUSAL OF THE STATEMENT OF TOTAL INCOME AS FILED BY THE ASSESSEE ALONG WITH THE RETURN, CLEARLY SHOWS THAT IT IS ONLY THE EXPENDITU RE IN RELATION TO THE EARNING OF THE INCOME FROM THE AMENITIES AND THE STATUTORY EXPENDITURE IN RELATION TO THE ASSESSEE-COMPANY, WHICH ARE BEING CLAIMED BY THE ASSESSEE. THE REVENU E HAS NOT BEEN ABLE TO POINT OUT ANY OF THE EXPENSES, WHICH HAVE BEEN CLAIMED BY THE ASS ESSEE AGAINST THE INCOME FROM THE AMENITIES, WHICH IS LIABLE TO BE APPORTIONED. THE A PPORTIONMENT DONE BY THE ASSESSING OFFICER IS ALSO NOT SPECIFIC. THIS BEING SO, WE ARE OF THE VIEW THAT THE APPORTIONMENT OF THE ITA NOS.57 & 58/CHNY/2018 :- 5 -: EXPENDITURE AS DONE BY THE LD. ASSESSING OFFICER IS UNSUSTAINABLE AND CONSEQUENTLY, WE DELETE THE SAME. 5. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND THE LD.CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 7. AS IT IS NOTICED THAT THE ISSUE IS NOW SQUARELY CO VERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.A.R. FOUNDATIONS PVT. LTD., WHICH HAS BEEN EXTRACTED ABO VE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.A.R. FOUNDATIONS PVT. LTD., REFERRED TO SUPR A, IS HELD THAT THE APPORTIONMENT OF THE EXPENDITURE AS DONE BY THE AO AND AS UPHELD BY THE LD.CIT(A) IS UNSUSTAINABLE AND CONSEQUENTLY, THE SA ME STANDS DELETED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 25 TH DAY OF JULY, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 25 TH JULY, 2019. TLN ITA NOS.57 & 58/CHNY/2018 :- 6 -: , *45 65 /COPY TO: 1. ) /APPELLANT 4. 7 /CIT 2. *+) /RESPONDENT 5. 5 * /DR 3. 7 ( ) /CIT(A) 6. /GF