DCIT, New Delhi V. M/s. Sir Sobha Singh & Sons Pvt. Ltd., New Delhi

ITA 5844/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69352 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: MAHESH SAHAI
• Keywords: Depreciation; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI J.S. REDDY ITA NO. 5844/DEL/2012 ASSTT. YR: 2009-10 DCIT, CIRCLE 8(1), VS. M/S SIR SOBHA SINGH & SON S PVT. LTD. NEW DELHI. 1-A, JANPATH, NEW DELHI. PAN: AAACS 0008 F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SMT. RENUKA JAIN GUPTA SR. DR RESPONDENT BY : SHRI MAHESH SAHAI ADV. O R D E R PER R.P. TOLANI, J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER D ATED 21-8-2012 RELATING TO A.Y. 2009-10. SOLE EFFECTIVE GROUND RAI SED IS AS UNDER: IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 9,84,189/- M ADE BY THE ASSESSING OFFICER UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2. FACTS OF THE CASE, IN BRIEF ARE: THE ASSESSEE IS DERIVING INCOME FROM HOUSE PROPERTY KNOWN AS SUJAN SINGH PARK COMPLEX. ASSESSEE RECEIVES COMPOSITE RENT WHICH CONSTITUTES ELEMENTS OF ACTUAL RENT ON ACCOUNT OF LETTING OUT OF HOUSE PROPERTY, ELECTRICITY CHARGES, SALARY OF WATCHMEN AND MAINTENANCE STAFF ETC. IT IS CLAIMED BY THE ASSESSE E THAT IT HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY ON THE ACTUAL RENT RECEIVED FOR LETTING OUT OF HOUSE PROPERTY AND THE OTHER CHARGES LIKE PAYMENT OF HOUSE TAX, PROVISION FOR WATER, ELECTRICITY, SAL ARY OF WATCHMEN AND 2 MAINTENANCE STAFF ETC. HAS BEEN EXCLUDED FROM THE D EFINITION OF ALV. ASSESSEE HAS LONG HISTORY OF FRAMING ASSESSMENT U NDER THE HEAD HOUSE PROPERTY INCOME. ASSESSING OFFICER, HOWEVER, WAS O F THE VIEW THAT BY FINANCE ACT, 2001 SECTION 24 OF THE INCOME-TAX ACT HAS BEEN AMENDED WHEREBY W.E.F. 1-4-2002 I.E. A.Y. 2002-03, ALL OT HER RECEIPTS WERE TO BE INCLUDED IN ALV AND THE ASSESSEE WAS ELIGIBLE TO S TATUTORY DEDUCTION U/S 24 @ 30% OF SUCH ALV. ASSESSEE CITED EARLIER ITAT JUDG MENTS IN ITS FAVOUR, ASSESSING OFFICER HELD THAT THE ITAT JUDGMENTS RELA TED TO EARLIER ASSESSMENT YEARS I.E. PRIOR TO THE SAID 2001 FINANCE ACT AMEND MENT. CONSEQUENTLY, ASSESSING OFFICER ASSESSED THE ENTIRE COMPOSITE REN T RECEIPTS OF THE ASSESSEE AS ALV AND ACCORDINGLY TAXED IT UNDER THE HEAD INC OME FROM HOUSE PROPERTY. 2.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHE REIN THE CIT(A), DELETED THE ADDITION BY OBSERVING AS UNDER: THE APPELLANT DERIVES INCOME BY WAY OF RENT FROM V ARIOUS RESIDENTIAL FLATS SERVANT QUARTERS, GARAGE ETC AND HOTEL BLOCK FROM LETTING OUT ITS PROPERTY KNOWN AS SUJAN SINGH PARK COMPLEX. IT IS PLEADED THAT THE APPELLANT RECEIVES COMPOSITE RENT WHICH INCLUDES PAYMENT ON A/C HOUSE TAX, PROVI SION FOR WATER AND ELECTRICITY CHARGES, SALARIES OF WATCHMEN AND SWEEPERS, DEPRECIATION OF ASSETS USED FOR PROVIDING SERVICES BESIDES 1/3 RD OF MANAGERS SALARY. THIS METHOD OF COMPUTATION OF HOUSE PROPERTY INCOME IS BEING CONSISTENTLY FOLL OWED AND IN AYS 1949-50, 1950-51, 1985-86 AND 1989-90 TO 1991-9 2, THIS METHOD HAS BEEN UPHELD BY THE ITAT. THE AO HAS NOT FOLLOWED THE DECISION OF THE ITAT IN APPELLANTS OWN CASE ON THE GROUND THAT THE APPELLANT WAS NOT CLAIMING DEDUCTION CORRE CTLY. AFTER THE FINANCE ACT, 2001, THE AO STATED THAT ONLY DEDU CTION OF 30% OF THE ANNUAL VALUE WOULD BE ALLOWED. NO OTHER EXPENDITURE WOULD BE ALLOWED. THE ITAT IS THE FINAL FACT FINDING BODY AND ITS FIN DINGS ARE BINDING UNLESS THE CASE IS DISTINGUISHED ON FACT. I N AY 1997-98, 3 THE AO HAD ACCEPTED THE METHOD OF COMPUTATION REGUL ARLY EMPLOYED BY THE APPELLANT FOR ITS INCOME UNDER THE HEAD HOUSE PROPERTY FOLLOWING THE DECISION OF ITAT IN EARLIER ASSTT. YEARS. IN THE AY UNDER APPEAL, THE ACTION OF THE AO IN NOT FOLLOWING THE LD. ITAT WITHOUT BRINGING OUT ANY DISCREPANCY IN THE FACTS CANNOT BE JUSTIFIED. ACCOR DINGLY IT IS HELD THAT THE COMPUTATION OF HOUSE PROPERTY INCOM E IN THIS CASE BE MADE AS PER GUIDELINES PROVIDED BY THE ITAT BY TREATING THE AMOUNT RECEIVED/ RECEIVABLE AS COMPOSI TE RENT AND THEN ALLOWING DEDUCTION U/S 24. THE APPELLANT HAS SUBMITTED THAT THE ITAT DELHI HAS CONSISTENTLY HELD IN THE CASE OF THE APPELLANT THAT WHAT THE APPELLANT RECEIVES IS COMPOSITE RENT AND ANY EXPE NDITURE INCURRED WAS ALLOWED AS A DEDUCTION TO ARRIVE AT TH E ANNUAL VALUE. THEREFORE, DEDUCTION U/S 24 WAS ALLOWED. I AM IN AGREEMENT WITH THE CONTENTIONS OF THE APPEL LANT THAT THE APPLICABILITY OF THE ITATS DECISION RELATES TO COM PUTATION OF ANNUAL VALUE. THE METHOD OF COMPUTATION FOLLOWED BY THE APPELLANT IS UPHELD. THE ADDITION OF RS. 9,50,582/- IS DELETED. THIS GROUND OF APPEAL IS RULED IN FAVOUR OF THE APP ELLANT. AGGRIEVED, REVENUE IS BEFORE US. 3. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENDS THAT FOLLOWING IS THE ABSTRACT OF SEC. 24 PRIOR AND AFTE R THE SAID AMENDMENT: PRIOR TO AMENDMENT: '24. DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY.-(L ) INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY' SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAMELY:- (I) IN RESPECT OF REPAIRS OF, AND COLLECTION OF REN T FROM, THE PROPERTY, 'A SUM EQUAL TO ONE-FOURTH OF THE ANNUAL VALUE; 4 (II) THE AMOUNT OF ANY PREMIUM PAID TO INSURE THE P ROPERTY AGAINST RISK OF DAMAGE OR DESTRUCTION; (III) [***] (IV) WHERE THE PROPERTY IS SUBJECT TO AN ANNUAL CH ARGE (NOT BEING A CHARGE CREATED BY THE ASSESSEE VOLUNTARILY OR A CAPITAL CHARGE), THE AMOUNT OF SUCH CHARGE; (V) WHERE THE PROPERTY IS SUBJECT TO A GROUND RENT, THE AMOUNT OF SUCH GROUND RENT; (VI) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CA PITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL. AFTER THE AMENDMENT : '24. INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' SHALL BE COMPUTED AFTER MAKING THE FOLLOW ING DEDUCTIONS, NAMELY:- (A) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VA LUE; (B)WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTE D, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CA PITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL: ' 3.1. ACCORDING TO LD. DR IT CAN BE SEEN FROM THE AB OVE THAT THE INTENTION OF THE LEGISLATURE BEHIND THIS AMENDMENT IS TO THE EFFECT THAT APART FROM THE STATUTORY DEDUCTION AS MENTIONED IN SEC. 24 OF THE ACT, NO OTHER DEDUCTION SHALL BE ALLOWED TO BE ADJUSTED AGAINST THE HOUSE P ROPERTY INCOME. IT CAN ALSO BE NOTICED THAT PRIOR TO THE AMENDMENT THERE W AS NO PROVISION FOR STATUTORY DEDUCTION OF 30% AND THE REASON FOR INTRO DUCING STATUTORY DEDUCTION OF 30% IS TO ACCOMMODATE ALL KIND OF EXPE NSES RELATING TO THE PROPERTY UNDER ONE CAP OF DEDUCTION. AFTER THE FINA NCE ACT, 2001 THE 5 POSITION OF LAW ON THIS ISSUE IS VERY CLEAR THAT AP ART FROM DEDUCTION EQUAL TO 30% OF THE ANNUAL VALUE, IRRESPECTIVE OF ANY EXPEND ITURE INCURRED BY THE TAXPAYER, NO OTHER ALLOWANCE FOR REPAIRS, MAINTENAN CE ETC. WOULD BE ALLOWABLE. 4. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND V EHEMENTLY ARGUES THAT THE ASSESSING OFFICER HAS ERRONEOUSLY HELD THAT 'AF TER THE FINANCE ACT, 2001 THE PROVISION OF LAW ON THIS ISSUE IS VERY CLEAR TH AT APART FROM DEDUCTION EQUAL TO 30% OF THE ANNUAL VALUE IRRESPECTIVE OF AN Y EXPENDITURE INCURRED BY THE TAX PAYER NO OTHER ALLOWANCE FOR REPAIRS, MAINT ENANCE ETC. WOULD BE ALLOWED.' ASSESSING OFFICER HAS MISINTERPRETED THE EFFECT OF THE AMENDMENT FROM 1ST APRIL 2002 AS ENHANCED THE DEDUCTION FROM 1/4TH TO 30% OF THE ANNUAL VALUE AND VARIOUS OTHER DEDUCTIONS WHICH WER E AVAILABLE WERE DISCONTINUED, LIKE PREMIUM FOR INSURANCE, ANNUAL CH ARGE OTHER THAN THOSE VOLUNTARILY CREATED, CAPITAL CHARGE, GROUND RENT AN D ANY THEN REVENUE OR TAXES LEVIED BY THE STATE GOVERNMENT. ASSESSING OF FICER FAILED TO APPRECIATE THAT NONE OF THESE EXPENSES EITHER FORM A PART OF T HE COMPOSITE RENT RECEIVED OR A PART OF THE DEDUCTIONS CLAIMED BY THE APPELLAN T. THE AMENDMENT EFFECTIVE FROM APRIL 1, 2002 HAS NO IMPACT ON DIVIS ION OF COMPOSITE RENT AND SCOPE OF ALV. IT IS PLEADED THAT THIS CONTENTION HAS BEEN ACCEPTED BY THE TAX AUTHORITIES IN THE PAST. THE STATUTORY DEDUCTIO N OF 30% ON WHICH A DEGREE OF INFLEXIBILITY WAS INTRODUCED BY THE ABOVE AMENDM ENT HAS NO EFFECT ON WHAT CONSTITUTES 'RENT RECEIVED', WHICH REMAINS UNC HANGED. IT HAS BEEN ACCEPTED BY THE TAX DEPARTMENT IN THE PAST THAT TO ARRIVE AT RENT RECEIVED' OUT OF THE COMPOSITE RENT RECEIVED, EXPENSES INCURR ED ON BEHALF OF THE TENANT WERE TO BE EXCLUDED. ASSESSEE HAS ALWAYS BEEN ALLOW ED TO REDUCE FROM THE COMPOSITE RENT, EXPENSES WHICH WERE INCURRED ON BEH ALF OF THE TENANTS. 6 THUS, ADDITION OF RS. 9,84,189 TO 'INCOME FROM HOUS E PROPERTY' HAS BEEN INCORRECTLY MADE AND DESERVES TO BE DELETED. 4.1. THUS, ACCORDING TO ASSESSEE AS FAR AS THE NATU RE AND SCOPE OF ALV IS CONCERNED THERE IS NO CHANGE IN LAW BY THE SAID AM ENDMENT. THEREFORE, EVEN AFTER AMENDMENT WHAT REMAINS ASSESSABLE UNDER THE HOUSE PROPERTY INCOME WAS ACTUAL RENT RECEIVED FROM THE LETTING PR OPERTY AND NOT OTHER ELEMENT OF COMPOSITE RENT. ASSESSING OFFICER HAS MI SINTERPRETED THE AMENDMENT SO AS TO HOLD THAT THE SCOPE OF ALV HAS B EEN AMENDED WHICH IS NOT CORRECT INTERPRETATION OF AMENDMENT. THE ASSESS ING OFFICER IN THE GUISE OF AMENDMENT HAS ADVERSELY DISTURBED THE PROPOSIT ION WHICH REMAINS UNAMENDED AND SETTLED IN ASSESSEES CASE SINE 50 YE ARS EARLIER HISTORY. RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMEN T IN THE CASE OF RADHASOAMI SATSANG V. CIT 193 ITR 321 (SC) FOR THE PROPOSITION OF CONSISTENCY WHEN THERE IS NO CHANGE IN FACTS AND CI RCUMSTANCES OF THE ISSUES. 4.2. LD. COUNSEL FURTHER CONTENDS THAT DEPARTMENT I TSELF IN YEARS SUBSEQUENT TO A.Y. 2002-03 HAS ALLOWED THESE CLAIMS OF THE ASSESSEE AND IT IS ONLY IN A.Y. 2009-10 THAT A U TURN HAS BEEN TA KEN WITHOUT THERE BEING NO CHANGE IN FACTS AND CIRCUMSTANCE. IN AY 1985-86 THE ITAT DECIDED THE ISSUE IN ASSESSEES FAVOUR, ON REVENUES REFERENCE THE FOLLOWING QUESTION OF LAW WAS REFERRED TO HONBLE DELHI HIGH COURT U/S 25 6(1): WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITAT IS CORRECT IN ALLOWING DEDUCTIONS FOR SALARIES PAID TO WATCHMAN, SWEEPERS, MALIS ETC. DESPITE THE NON-ADMI SSIBILITY OF SAID EXPENSES FROM THE COMPUTATION OF INCOME FROM H OUSE PROPERTY AND THE NON APPLICABILITY OF THE PRINCIPLE OF RES- JUDICATA TO INCOME-TAX PROCEEDINGS. 7 4.3. BY THIS REFERENCE, THE ORDER OF THE ITAT IN FA VOUR OF THE HAS ATTAINED FINALITY. IT IS PLEADED THAT THE AMENDMENT HAVING N O EFFECT AND THE ISSUE HAVING BEEN SETTLED SINCE LAST 50 YEARS IN FAVOUR O F THE ASSESSEE NO INTERFERENCE IS CALLED FOR IN CIT(A)S ORDER. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW NO CHA NGE HAS BEEN BROUGHT BY THE FINANCE ACT, 2001 AS ALLEGED BY ASSESSING OFFIC ER VIS A VIS THE SCOPE OF THE ALV AS IT EXISTED PRIOR TO AMENDMENT. THE SCOPE OF ALV I.E. THE ANNUAL LETTING VALUE BEFORE AND AFTER AMENDMENT DOES NOT I NCLUDE VALUE OF OTHER AMENITIES PROVIDED AS PER SEPARATE AGREEMENTS OF TH E TENANTS AND THE OWNER FOR PROVIDING EXTRA FACILITIES LIKE WATCHMAN, SWEEP ER, MALI ETC. THE ASSESSEE AS IN PAST HAS PREPARED P&L A/C BY REFLECTING SEPAR ATE CHARGES RECEIVED FOR THESE FACILITIES AND ACTUAL EXPENDITURE INCURRED FO R TENANTS HAS BEEN DULY ACCOUNTED FOR. THE REMAINDER HAS BEEN RETURNED IN A CCORDANCE WITH LAW. AS WE HAVE HELD THAT THERE IS NO CHANGE BY WAY OF AMEN DMENT IN THE SCOPE OF ALV, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A), WHICH IS UPHELD. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18-10-2013. SD/- SD/- ( J.S. REDDY ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18-10-2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 8