NAVBHARAT ESTATE DEVELOPERS P. LTD, MUMBAI V. ITO 7(1)(4), MUMBAI

ITA 6076/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3514 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C P PATHAK
• Assessee Lawyers: KIRIT S SANGHVI
• Keywords: Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 6076/MUM/2009. ASSESSMENT YEAR : 2005-06. NAVBHARAT ESTATE DEVELOPERS P. LTD., THE INCOME TAX OFFICER, 501/502, NAVBHARAT ESTATE, VS. 7(1)(4), MUMBAI. ZAKARIA BUNDER ROAD, SEWRI (W), MUMBAI 400015. PAN AAACN1380N APPELLANT. RESPON DENT. APPEL LANT BY : SHRI KIRIT S. SANGHVI. RESPONDENT BY : SHRI C.P. PATHAK. . O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-VII, MUMBAI DATED 28-08-2009 ON THE FO LLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE ADDITION OF RS.5, 98,732/- OUT OF REPAIRS AND MAINTENANCE. THE AO BE DIRECTED TO ALLO W THE SAME OR IN APPROPRIATE AMOUNT. 2. THE LEARNED CIT(A) ERRED ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW IN NOT CONSIDERING THE SUBMISSIONS MADE AND THE PARTICULARS FILED IN RESPECT OF DEPRECIATION ALLOWA NCE IN RESPECT OF A CAR. 2 3. THE LEARNED CIT(A) ERRED ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF R S.1,78,104 BEING DEPRECIATION ALLOWANCE IN RESPECT OF A CAR. THE AO BE DIRECTED TO ALLOW THE SAME. 4. THE LEARNED CIT(A) ERRED ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE ADDITION OF RS.49 ,952 AND RS.200 IN RESPECT OF DIFFERENCE IN THE RELATIVE ACCOUNTS AS P ER THE BOOKS OF ACCOUNTS OF THE APPELLANT AND THE INFORMATION RECEI VED BY THE LEARNED AO UNDER THE ANNUAL INFORMATION REPORT (AIR). THE S AME MAY BE DIRECTED TO BE DELETED. 2. THE ASSESSEE CARRIES ON THE BUSINESS OF LAND DEV ELOPMENT, BUSINESS SERVICE CENTRE AND ANCILLARY SERVICES.. FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 31 ST OCT., 2005 DECLARING A TOTAL INCOME OF RS.8,67,798/-. HE FILED AN AUDITED PROFIT & LOSS A CCOUNT, BALANCE SHEET AND TAX AUDIT REPORT U/S 44AB AND A REPORT U/S 115JB. THE A O MADE A DISALLOWANCE OF RS.5,98,332/- ON REPAIRS AND MAINTENANCE. HE FURTHE R DISALLOWED DEPRECIATION ON MOTOR CAR ON THE GROUND THAT THE CAR IS NOT REGISTE RED IN THE NAME OF THE COMPANY. A FURTHER ADDITION IS MADE ON ACCOUNT OF ADDING DIF FERENCES IN PARTY ACCOUNTS. ON APPEAL, THE FIRST APPELLATE AUTHORITY GRANTED RELIE F ONLY ON THE ADDITION MADE ON ACCOUNT OF DIFFERENCES IN ACCOUNTS AND THE ANNUAL I NFORMATION REPORT. ON THE OTHER DISALLOWANCES/ADDITIONS, THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3. WE HAVE HEARD MR. KIRIT S. SANGHVI, LEARNED COUN SEL FOR THE ASSESSEE AND SHRI C.P. PATHAK, LEARNED DR. 4. ON THE ISSUE OF DISALLOWANCE ON ACCOUNT OF REPAI R AND MAINTENANCE EXPENDITURE, WE FIND THAT THE ASSESSEE HAS TAKEN A PREMISES ON LEASE FROM M/S NAVBHARAT POTTERIES LTD. AND HAS IN TURN LET OUT THE SAME TO VARIOUS PARTIES. THE CLAIM OF THE ASSESSEE THAT THE INCOME THEREFROM, IS TO BE ASSESSED UNDER THE HEAD 3 BUSINESS HAS BEEN ACCEPTED BY THE AO. THE ONLY BA SIS ON WHICH THE AO DISALLOWED PART OF THE CLAIM MADE BY THE ASSESSEE U NDER THE HEAD REPAIRS AND MAINTENANCE, IS THAT IT IS NOT THE DUTY OF THE ASS ESSEE TO INCUR THE EXPENDITURE FOR MAJOR REPAIRS AND MAINTENANCE. THE OTHER GROUND IS THAT THE OWNER M/S NAVBHARAT POTTERIES LTD. WOULD CLAIM DEDUCTION U/S 24 OF THE I.T. ACT. THE CIT(APPEALS) HELD THAT THE EXPENSES IN QUESTION ARE ALSO IN CAPI TAL NATURE. 5. AFTER PERUSING THE NATURE OF THE WORKS AND TAKIN G NOTE OF THE FACT THAT THE ASSESSEE IS ONLY A TENANT AND NOT THE OWNER OF THE PROPERTY, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE IS BAD IN LAW. COMING TO SECTION 24(A), IT READS AS UNDER : INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTION, NAME LY, A) A SUM EQUAL TO 30% OF THE ANNUAL VALUE NOWHERE IN THIS STATUTORY DEDUCTION, IT IS MENTIONE D THAT 30% IS GIVEN TOWARDS REPAIRS. THE EXPENDITURE INCURRED BY THE ASSESSEE C ANNOT BE HELD TO BE IN THE CAPITAL FIELD FOR THE REASON THAT, NO ENDURING ASSET OR BEN EFIT IS CREATED FOR THE ASSESSEE FROM SUCH EXPENDITURE. THE ASSESSEES BUSINESS, IS TO PROVIDE OFFICE SPACE AND PROVIDE ANCILLARY SERVICE. THE EXPENDITURE IS FOR T HE PURPOSE OF BUSINESS. THE ISSUE WHETHER THE ASSESSEE IS LEGALLY BOUND TO INCUR THIS EXPENDITURE OR NOT, IN OUR OPINION, DOES NOT DETERMINE THE ALLOWABILITY OF THE EXPENDITURE. THE FACT REMAINS THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE AND THE GENUINENESS OF THE SAME IS NOT IN DOUBT. THE ASSESSEE HAS NOT PREFERRED ANY CL AIM ON THE LANDLORD. THE UNDERSTANDING BETWEEN THE LANDLORD AND THE TENANT, DOES NOT PROHIBIT THE ASSESSEE FROM INCURRING SUCH EXPENDITURE. IN VIEW OF THE ABO VE DISCUSSION, WE ALLOW GROUND NO.1 OF THE ASSESSEE. 4 6. COMING TO GROUND NO.2 WHICH IS ON THE ISSUE OF D ISALLOWANCE OF DEPRECIATION ON MOTOR CAR, WE FIND THAT THE MOTOR C AR IS CAPITALIZED IN THE BOOKS OF THE COMPANY AND IT IS APPEARING AS AN ASSET OF THE COMPANY. A LOAN HAS BEEN TAKEN BY THE COMPANY AND THE INSTALMENTS ARE BEING PAID B Y IT. THE RUNNING AND MAINTENANCE EXPENDITURE IS INCURRED BY THE ASSESSEE COMPANY. JUST BECAUSE THE ASSET IS IN THE NAME OF THE DIRECTOR, IT IS NOT COR RECT TO DISALLOW THE DEPRECIATION ON THE MOTOR CAR. THUS WE ALLOW GROUND NO. 2 AND 3 OF THE ASSESSEE. 7. COMING TO GROUND NO.4, IN VIEW OF THE SMALLNESS OF THE AMOUNT, THE LEARNED COUNSEL FOR THE ASSESSEE, MR. KIRIT S. SANGHVI, DID NOT PRESS THE SAME, THOUGH ON MERITS HE HAS SUBMITTED THAT HE HAS A VERY GOOD CAS E. IN VIEW OF THE ABOVE SUBMISSION, WE DISMISS THIS GROUND AS NOT PRESSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC. , 2010. SD/- SD/- (VIJAY PAL RAO) (J. SU DHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST DEC., 2010. WAKODE 5 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH (TRUE COPY) BY ORDER ASSTT. REGIST RAR, ITAT, MUMBAI BENCHE S, MUMBAI.