Mr. Jyoti Kachroo, Noida V. JCIT, New Delhi

ITA 5739/DEL/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4173 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 13-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: DALIP K KAULI
• Keywords: Business income; Depreciation; Rule of consistency; Difference of opinion; Change of opinion; TDS; Set aside
• Section: 142(1); 37(1); 143(2)

Judgement Text

1 ITA NO. 5739/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 5739/DEL/2015 ( A .Y 2011-12) JYOTI KACHROO C/O. FIBERFILL INTERIORS AND CONSTRUCTIONS, B-64, SECTOR-65 NOIDA AEGPK9779L (APPELLANT) VS JCIT RANGE-36 NEW DELHI (RESPONDENT) APPELLANT BY SH. DALIP K. KAULI, FCA RESPONDENT BY SH. SURENDER PAL, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 14/8/2015 PASSED BY CIT(A)-19, NEW DELHI FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. DISALLOWANCE OF RS.5,00,000/- OUT OF DEPRECIATION ON BUILDING LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE BY SUSTAINING THE DISALLO WANCE OF RS.5,00,000/- OUT OF DEPRECIATION ON BUILDING AS DEPRECIATION ON LAND MADE BY LEARNED ASSESSING OFFICER. LEARNED CIT(A) HAS REVERSED THE DECISION OF HIS OWN COURT BY DISAGREEING WITH THE VIEW TAKEN BY THE EARLIER C IT(A) IN THIS CASE ONLY FOR THE AY 2010-11. FURTHER LEARNED CIT(A) HAS RELIED U PON THE INCOME TAX ACT OF 1922 AND JUDICIAL PRONOUNCEMENT WHICH ARE IRRELEVAN T AS ON DATE. DATE OF HEARING 14.02.2019 DATE OF PRONOUNCEMENT 13.03.2019 2 ITA NO. 5739/DEL/2015 2. DISALLOWANCE OF RS.3,87,595/- OUT OF DEPRECIATION ON BUILDING. LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS FUR THER ERRED IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE BY CONFIRMING THE DIS ALLOWANCE OF RS.3,87,5957- OUT OF DEPRECIATION ON BUILDING. 3. DISALLOWANCE OF RS.1,97,723/- OUT OF VEHICLE MAINT ENANCE, VEHICLE DEPRECIATION AND TELEPHONE EXPENSES. LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS AGA IN ERRED IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE BY ENHANCING DISALLOW ANCE FROM 5% TO 10% OF VEHICLE REPAIR, VEHICLE DEPRECIATION AND TELEPHONE EXPENSE AMOUNTING TO RS.1,97,725/-. THE DISALLOWANCE IS ARBITRARY AND NO T BASED ON EVIDENCES. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXEC UTION OF WORK CONTRACT OF CIVIL, INTERIOR, DESIGNER WORKS FOR CORPORATE AND N ON CORPORATE ENTITIES UNDER THE NAME AND STYLE OF FIBREFILL INTERIORS AND CONSTRUCT IONS. APART FROM BUSINESS INCOME, THE ASSESSEE IS ALSO DERIVING INCOME FROM H OUSE PROPERTY, SALARY FROM FIBREFILL INSULATION (INDIA) PVT. LTD. AND INCOME F ROM OTHER SOURCES. THE ASSESSEE FIELD RETURN OF INCOME DECLARING A TOTAL I NCOME OF RS. 1,49,55,295/- ON 23/3/2012. THE RETURN OF INCOME WAS PROCESSED U/S 143 (1) OF THE INCOME TAX ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED TO THE ASSESSEE. NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WERE ALSO ISSUED AND SERVED ON 26/7/2 013. IN RESPONSE TO THESE NOTICES, ASSESSEES REPRESENTATIVE APPEARED BEFORE THE ASSESSING OFFICER AND FURNISHED INFORMATION/DOCUMENTS CALLED FOR FROM TIM E TO TIME AND THE SAME WAS EXAMINED AND PLACED ON RECORD BY THE ASSESSING OFFICER. THE BUSINESS PERFORMANCE OF THE ASSESSEE OF THE YEAR UNDER CONSI DERATION AND COMPARATIVE FIGURES OF LAST TWO YEARS ARE SUMMARIZED AS FOLLOWS :- F.Y . GROSS CONTRACT RECEIPTS GROSS PROFIT NET PROFIT NET PROFIT% 2009 - 10 16,04,80,168 2,43,61,859 80,63,858 5.02 2010 - 11 25,77,18,566 2,79,89,723 78,61,390 3.05 3 ITA NO. 5739/DEL/2015 THUS, THE ASSESSING OFFICER OBSERVED THAT THERE W AS INCREASE IN THE TURNOVER AND GROSS PROFIT RATE OVER THE LAST YEAR, BUT THE NET PROFIT RATE HAS MARGINALLY DECLINED. THE ASSESSING OFFICER MADE A DDITION OF RS.5 LACS BY DISALLOWING DEPRECIATION OF VALUE OF LAND AT 10% AM OUNTING TO RS. 5 LACS OUT OF TOTAL DEPRECIATION OF RS. 16,62,903/-. THE ASSESSI NG OFFICER ALSO MADE AN ADDITION OF RS. 3,87,595/- OUT OF THE BALANCE AMOUN T OF DEPRECIATION CLAIM OF RS. 11,62,903/- WHICH IS 33.33% OF THE DEPRECIATION AMOUNTING TO RS. 3,87,595/-. THE ASSESSING OFFICER ALSO MADE ADDITI ON OF RS.29,389/- ON ACCOUNT OF INTEREST ON TDS. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS. 4,84,256/-AS REGARDS LATE PAYMENT OF EMPLOYEES CONT RIBUTION OF ESI U/S 2 (24) (X) READ WITH SECTION 36(1)(VA) OF THE ACT. THE AS SESSING OFFICER LASTLY MADE DISALLOWANCE OF RS. 2,03,916/- IN RESPECT OF EXPENS ES U/S 37(1) OF THE ACT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. AS REGARDS GROUND NO.1 RELATING TO DISALLOWANCE OF RS.5 LACS OUT OF DEPRECIATION ON BUILDINGS, THE LD. AR SUBMITTED THA T THE VALUE OF LAND WAS BIFURCATED FROM THE TOTAL CONSIDERATION OF RS.25 LA CS BY REGISTRAR, NOIDA ONLY TO SERVE THE PURPOSE OF DETERMINING THE AMOUNT OF STAM P DUTY PAYABLE AT THE TIME OF SALE CUM TRANSFER DEED PROPORTIONATE DISALLOWANC E ON HYPOTHETICAL VALUE OF LAND IS UNJUST AND UNCALLED FOR. THE LD. AR FURTHE R SUBMITTED THAT THE ASSESSEE PAID RS. 1,25,00,000/- FOR THE INDUSTRIAL BUILD UP FACTORY AS PER THE TRANSFER CUM SALE DEED AND NOT FOR LAND AND BUILDING SEPARAT ELY AS ASSUMED BY THE ASSESSING OFFICER. THUS, THERE IS NO BIFURCATION O F TOTAL CONSIDERATION OF RS.1,25,00,000/-. THE LD. AR POINTED OUT THAT THE ASSESSEE PURCHASED THE FULLY CONSTRUCTED BUILDING I.E. INDUSTRIAL BUILT UP FACTORY AND THE DESIGN AND LAY OUT OF THE STRUCTURE OF THE BUILDING WAS BEST SUITA BLE TO THE BUSINESS OF THE ASSESSEE. ALL CONSIDERATION FOR PURCHASE WERE MADE ONLY KEEPING IN VIEW THE SUITABILITY OF BUILDING STRUCTURE FOR ASSESSEES BU SINESS. THE LD. AR SUBMITTED 4 ITA NO. 5739/DEL/2015 THAT IN EARLIER ASSESSMENT YEAR AS WELL AS IN SUBSE QUENT ASSESSMENT YEARS, THE SAME HAS BEEN ALLOWED ON BUILDING BY THE REVENUE DE PARTMENT AND THERE IS A CHANGE OF OPINION/STAND IN THIS PARTICULAR YEAR AS WELL AS IN ASSESSMENT YEAR 2013-14. 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE REVENUE AUTHORITIES CONTINUOUSLY ALLO WED DEPRECIATION ON BUILDING IN EARLIER ASSESSMENT YEARS 2009-10, 2010-11, 2012- 13 & 2014-15 BUT SPECIFICALLY CHANGE ITS STAND IN THIS PARTICULAR YE AR AS WELL AS IN ASSESSMENT YEAR 2013-14 WITHOUT GIVING PROPER REASONING TOWARD S THE SAME. THUS, FOLLOWING RULE OF CONSISTENCY, GROUND NO.1 IS ALLOW ED. 8. AS REGARDS GROUND NO.2 RELATING TO DISALLOWANCE OF RS. 3,87,595/- OUT OF DEPRECIATION ON BUILDING PERTAINING TO RENTAL PORTI ON OF BUILDINGS, THE LD. AR SUBMITTED THAT THE BUILDING IS A SEPARATE BLOCK OF ASSET FOR DEPRECIATION PURPOSE CANNOT BE SEGREGATED FOR THE PURPOSE OF DISALLOWANC E OF DEPRECIATION AND HENCE, THE LD. AR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. OSWAL AGRO MILLS PVT. LTD. (SUPRA). 9. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER AND ORDER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN-FACT, FROM THE RECORDS IT CAN BE PERUSED THAT THE ASSESSEE PURCHASED THE FULLY CONSTRUCTED BUILDING I.E. INDUSTRIAL BUIL T UP FACTORY AND NOT THE LAND. THEREFORE, BIFURCATING THE VALUE OF LAND BY THE REG ISTRAR DOES NOT SPECIFY THE VALUE OF LAND AND BUILDING SEPARATELY. THEREFORE, I N LIGHT OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF OSWAL AGRO MILL S LTD. (2011) 197 TAXMAN 25 (DELHI) WHEREIN IT IS HELD THAT IT IS DIFFICULT TO MAINTAIN THE DETAILS OF EACH 5 ITA NO. 5739/DEL/2015 ASSETS SEPARATELY IN RESPECT OF THE LAND AND BUILDI NG CONSTRUCTIONS AND THE SAME WILL FRUSTRATE THE VERY PURPOSE OF THE PROVISI ONS IF IT IS DONE SO. THE HON'BLE HIGH COURT FURTHER HELD THAT IT IS ALSO ESS ENTIAL TO POINT THAT THE REVENUE IS NOT PUT TO ANY LOSS BY ADOPTING SUCH MET HOD AND ALLOWING DEPRECIATION AS THE SAME FORMS PART OF THE BLOCK OF ASSETS EVEN WHEN THAT PARTICULAR ASSET IS NOT IN USE IN THE RELEVANT ASSE SSMENT YEAR. THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE HON BLE DELHI HIGH COURT IN CASE OF OSWAL AGRO MILLS LTD. HENCE, GROUND NO.2 IS ALLO WED. 11. AS REGARDS GROUND NO.3, RELATING TO DISALLOWAN CE AT 10% AMOUNTING TO RS. 1,97,725/- OUT OF VEHICLE MAINTENANCE, THE SAME WAS ENHANCED BY THE CIT(A) WITHOUT ASSIGNING ANY REASONS. THE LD. AR S UBMITS THAT THE ASSESSEE HAD PRODUCED ALL THE DETAILED DOCUMENTS MAINTAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND NATURE AND THE BUSINESS OF THE ASSESSEE JUSTIFIED THE QUANTUM OF EXPENDITURE UNDER THESE HEADS OF ACCOUNT S. THE ASSESSEE ALSO FULFILS ALL THE CONDITIONS LAID DOWN FOR ALLOWABILI TY OF EXPENDITURE OF RESIDUAL NATURE U/S 37(1) OF THE ACT. THUS, THE LD. AR SUBM ITTED THAT THE EXPENSES ARE INCURRED FOR THE BUSINESS OF THE ASSESSEE AND DIREC TLY SPRING FROM CARRYING OUT THE SAME AND ARE NOT CAPITAL IN NATURE. 12. THE LD. DR RELIED UPON THE ORDERS OF THE ASSES SING OFFICER AND THE CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE DETAILS OF EXPENSES WERE GIVEN TO THE ASSESSING OFFICER BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS WHICH WA S NOT CONSIDERED BY THE ASSESSING OFFICER AS WELL AS CIT(A). BESIDES THAT THE CIT(A) HAS ENHANCED 5% TO 10% WHICH IS NOT AS PER THE SPECIFIC PROVISION PRES CRIBED U/S 37(1) OF THE ACT. THERE IS NO BASIS FOR ENHANCING THE EXPENSES AND FI RST OF ALL THE EXPENSES WERE PROPERLY EXPLAINED BY THE ASSESSEE DURING THE ASSES SMENT PROCEEDINGS. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A). G ROUND NO.3 IS ALLOWED. 6 ITA NO. 5739/DEL/2015 14. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2019 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 13/03/2019 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 7 ITA NO. 5739/DEL/2015 DATE OF DICTATION 14.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 3 . 0 3 .2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 3 . 0 3 .2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 3 . 0 3 .2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER