ASHISH CHOUDHRY, MUMBAI V. ITO WD 3(1)(1), MUMBAI

ITA 6129/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48927 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: DILPREET SINGH ANAND
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 6129/MUM/2009 (ASSESSMENT YEAR: 2006-07) SHRI ASHISH I. CHOUDHRY INCOME TAX OFFICER - 3(1)(1 ) 402, RAHEJA KAMAL, 28TH ROAD MUMBAI BANDRA (W), MUMBAI 400050 VS. PAN - ACOPC 4585 C APPELLANT RESPONDENT APPELLANT BY: SHRI DILPREET SINGH ANAND RESPONDENT BY: SHRI SHRAVAN KUMAR O R D E R PER T.R. SOOD, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A) XXVII, MUMBAI DATED 28.08.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING 3 GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF CLAIM OF RS.2,27,785/- B EING INTEREST ON LOAN FOR OFFICE PREMISES CLAIMED ON PROPORTIONAT E BASIS AND REJECTING THE CLAIM OF THE APPELLANT THAT HE WAS US ING A PART OF HALL IN THE RESIDENTIAL PREMISES FOR MEETING AND CO NFERENCES PERTAINING TO HIS PROFESSION AS AN ACTOR, AND ALSO CONSEQUENTLY CONFIRMING THE DISALLOWANCE OF CLAIM OF DEPRECIATIO N AMOUNTING TO RS.3,48,232/- IN RESPECT OF THE SAID PORTION OF THE PREMISES. 2. THE APPELLANT SUBMITS THAT BEING IN THE FILM TRA DE AND AS AN ACTOR, THE APPELLANT IS REQUIRED TO HAVE MEETINGS, CONFERENCES, SITTING ETC. AT HIS HOUSE, AND AS SUCH THE CLAIM OF THE APPELLANT WITH RESPECT TO THE USE OF 312 SQ.FT. OF THE HALL A S BEING FOR THE PROFESSION IS FULLY JUSTIFIED AND HENCE THE COMMISS IONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE DISALLO WANCE OF CLAIM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF CLAIM OF 10% OUT OF TRAV ELLING AND CONVEYANCE EXPENSES AND 15% OUT OF SALES PROMOTION AND CLUB EXPENSES DISREGARDING THE FACT THAT ALL THE BILLS A ND VOUCHERS ARE ITA NO. 6129/MUM/2009 SHRI ASHISH CHOUDHRY 2 AVAILABLE AND FULLY VERIFIABLE AND THAT THE PROFESS ION OF THE APPELLANT IS OF THE NATURE REQUIRING THE SAME AND F URTHER THERE IS NO ELEMENT OF ANY PERSONAL NATURE THEREIN. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ASSESSEE HAS DEBI TED A SUM OF ` 2,27,785/- IN THE P & L ACCOUNT ON ACCOUNT OF INTEREST ON LOAN FOR OFFICE PREMISES. FURTHER, ASSESSEE HAD ALSO CLAIMED DEPRECIATION ON OFFICE PREMISES AMOUNTING TO ` 3,48,232/-. ON FURTHER ENQUIRY IT WAS FOUND THAT OF FICE PREMISES WERE PART OF RESIDENTIAL HOUSE AND ACCORDI NGLY ASSESSEE WAS ASKED TO GIVE REASONS FOR CLAIM OF INTEREST AND DEPRECIAT ION. IN RESPONSE IT WAS SUBMITTED THAT THE TOTAL BUILT UP AREA OF THE FLAT WAS 1148 SQ.FT. OUT OF WHICH DRAWING ROOM-CUM-CONFERENCE ROOM, MEASURING ABOUT 3 00 SQ.FT. WAS USED FOR OFFICE PURPOSES. A CERTIFICATE FROM DESIGNER WA S ALSO SUBMITTED. THE A.O. DID NOT ACCEPTED THE EXPLANATION AND OBSERVED THAT THERE WAS NO SEPARATE DRAWING ROOM EXCEPT THE DRAWING ROOM SHOWN IN THE P LAN USED AS OFFICE PREMISES AND THERE WAS A COMMON ENTRY TO THE INSIDE R OF THE HOUSE FOR OUTSIDERS AS WELL AS FAMILY MEMBERS. THEREFORE IT W AS NOT SEPARATE OFFICE. THE CERTIFICATE OF THE DESIGNER WAS ALSO NOT FOUND TO BE ACCEPTABLE AS THE SAME WAS NOT BASED ON APPROVED MUNICIPAL AUTHORITY S CERTIFICATE AND THE CERTIFICATE WAS NOT SIGNED BY ANY ARCHITECT. EVEN Q UALIFICATION OR LICENCE NUMBER WAS ALSO NOT MENTIONED. IN THIS BACKGROUND T HE CLAIM FOR INTEREST AS WELL AS DEPRECIATION WAS NOT ALLOWED. 4. BEFORE THE CIT(A) IT WAS MAINLY SUBMITTED THAT ASSE SSEE WAS AN ACTOR AND HAD NO OTHER PLACE TO GO TO DISCUSS VARIOUS FIL M PROJECTS. ASSESSEE BEING A PUBLIC FIGURE COULD NOT GO TO RESTAURANTS, ETC. F OR MEETING AND THAT IS WHY THE CONFERENCE ROOM/DRAWING ROOM WAS USED FOR HOLDI NG THE MEETINGS. IT WAS ALSO SUBMITTED THAT IT WAS NEVER CLAIMED THAT T HERE WAS A SEPARATE OFFICE. THE CLAIM WAS BASICALLY FOR THE PART OF THE DRAWING ROOM USED FOR BUSINESS PURPOSE. THE LEARNED CIT(A) DID NOT ACCEPT THE CLAIM VIDE PARA 3.3, WHICH IS AS UNDER: - 3.3 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER, THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND THE FACTS OF THE CASE. AT THE OUTSET, THE FLAT IN WHICH THE APPELLAN T IS RESIDING IS A FLAT MEANT FOR RESIDENTIAL PURPOSES IN A CO-OPERATIVE HO USING SOCIETY IN ITA NO. 6129/MUM/2009 SHRI ASHISH CHOUDHRY 3 BANDA (W), MUMBAI. THE CLAIM OF THE APPELLANT IS TH AT THE SAID FLAT WAS USED BY HIM FOR HIS OFFICE-CUM-RESIDENTIAL PURP OSES. THE ASSESSING OFFICER FOUND OUT THAT AS PER THE PLAN SU BMITTED IT WAS SEEN THAT THERE IS NO SEPARATE DRAWING ROOM EXCEPT DRAWING ROOM SHOWN IN THE PLAN CLAIMED TO HAVE BEEN USED FOR OFF ICE PURPOSES AND THIS DRAWING ROOM HAS A COMMON ENTRY TO THE INSIDE OF THE HOUSE FOR OUTSIDERS AS WELL AS FOR FAMILY MEMBERS OF THE HOUS E. THEREFORE, ALL THE GUESTS WILL BE USING THE SAME DRAWING ROOM. HEN CE, IT IS NOT A SEPARATE OFFICE PREMISE. THE ASSESSING OFFICER FURT HER OBSERVED THAT THE CERTIFICATE OF THE DESIGNER IS NOT ACCEPTABLE A S THE APPELLANT HAS NOT SUBMITTED THAT THE SAME WAS APPROVED BY THE MUN ICIPAL AUTHORITIES. FURTHER, THE CERTIFICATE OF THE DESIGN ER ALSO STATES THAT IT IS A DRAWING ROOM/CONFERENCE ROOM AND NOT EXCLUSIVE LY A CONFERENCE ROOM. FURTHERMORE, THE CERTIFICATE OF DESIGNER DOES NOT APPEAR TO BE SIGNED BY AN ARCHITECT AS THE QUALIFICATION/LICENCE NUMBER OF THE PERSON SIGNING THE LETTER IS NOT MENTIONED IN THE C ERTIFICATE. IN ADDITION TO THE ABOVE, THERE IS ANOTHER VERY IMPORTANT FACT, WHICH NEEDS TO BE HIGHLIGHTED IS THAT THE APPELLANT NEITHER BEFORE TH E AO NOR BEFORE THE UNDERSIGNED HAS GIVEN ANY DETAILS/PROOF OF THE OFFI CIAL MEETINGS WHICH TOOK PLACE IN THE SAID DRAWING ROOM IN CONNEC TION WITH HIS PROFESSIONAL ACTIVITIES. THE BASIC DETAILS LIKE NAM ES & ADDRESSES OF SUCH PERSONS WHO ATTENDED SUCH MEETINGS AND WHAT WA S THE RESULT OF THE SAME HAVE NOT BEEN PROVIDED BY THE APPELLANT . A GENERAL SAYING THAT THE APPELLANT HAD TO USE THE DRAWING RO OM TO DISCUSS THE DETAILS OF FILM PROJECTS WILL NOT SUFFICE WITHOUT T HE SAME BEING SUBSTANTIATED BY DETAILS AND EVIDENCES. FURTHER, IT IS A MATTER OF COMMON KNOWLEDGE THAT IN THE FILM INDUSTRY, IT IS T HE BUDDING ACTOR WHO HAS TO VISIT THE OFFICES/STUDIOS OF THE DIRECTO RS/PRODUCERS ETC. UNTIL THE ACTOR BECOMES A VERY ESTABLISHED AND KNOW N FIGURE. FURTHERMORE, THE PROPERTY, IN QUESTION, IS INDIVISI BLE AND CANNOT BE BIFURCATED INTO OFFICIAL AND PRIVATE. THERE IS ANOT HER IMPORTANT ASPECT TO IT THAT THE APPELLANT HAS CLAIMED DEDUCTION U/S. 24 OF ` 1,50,000/- WHICH IS ALLOWED AGAINST INCOME FROM HOUSE PROPERTY . THEREFORE, ADMITTEDLY THE APPELLANT WHILE CLAIMING THIS DEDUCT ION HAS ACCEPTED THAT THE WHOLE OF THE PROPERTY IS A SELF OCCUPIED P ROPERTY AND NOT A COMMERCIAL PROPERTY. THE APPELLANT WANTS TO HAVE TH E DOUBLE BENEFIT, FIRST OF THE WHOLE OF RS.1,50,000/- FOR RESIDENTIAL PROPERTY AND FURTHER CLAIM OF RS.2,27,785/- CLAIMING DRAWING ROOM USE AS OFFICE PREMISES. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE A.O. AND THE LEARNED CI T(A). THE BENCH POSED A SPECIFIC QUERY WHETHER ASSESSEE HAD SHOWN ANY OTH ER EXPENSES LIKE ELECTRICITY, ETC. ON ACCOUNT OF OFFICE. HE SUBMITTE D THAT NO OTHER EXPENDITURE WAS CLAIMED TO BE PERTAINING TO THE OFFICE. ITA NO. 6129/MUM/2009 SHRI ASHISH CHOUDHRY 4 6. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY SUPPOR TED THE ORDER OF THE CIT(A). 7. AFTER HEARING THE RIVAL SUBMISSIONS WE FIND THAT TH E DRAWING ROOM WAS PART OF THE HOUSE AND ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY SPECIFIC EVIDENCE TO SHOW THAT PART OF THE DRAWING ROOM WAS USED FOR OFFICE PURPOSES. IF THE DRAWING ROOM WAS USED FOR OFFICE PURPOSE, OB VIOUSLY SOME PART OF ELECTRICITY AND OTHER CHARGES COULD HAVE ALSO BEEN DEBITED AS EXPENDITURE. MOREOVER, AS DISCUSSED BY THE LEARNED CIT(A), ASSES SEE WAS A BUDDING ACTOR AND IN THE NORMAL CIRCUMSTANCES THE PRODUCER/DIRECT OR WOULD NOT COME TO HIS HOUSE RATHER HE WOULD GO TO THE HOUSE OF SUCH P RODUCER/DIRECTOR. FURTHER, NO EMPLOYEE HAS BEEN EMPLOYED BY THE ASSES SEE. IN THESE CIRCUMSTANCES IT IS VERY DIFFICULT TO BELIEVE THAT PART OF THE DRAWING ROOM WAS USED AS OFFICE PREMISES AND ACCORDINGLY WE ARE OF T HE VIEW THAT THE LEARNED CIT(A) HAS CORRECTLY CONFIRMED THE ACTION OF THE A. O. IN DISALLOWING THE CLAIM FOR INTEREST AND DEPRECIATION AND ACCORDINGLY WE CO NFIRM THE SAME. 8. REGARDING GROUND NO. 2, AFTER HEARING BOTH THE PART IES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ASSESSEE HAS CLAIMED TRAVELLING AND CONVEYANCE EXPENSES AMOUNTIN G TO ` 87,710/- AND ` 1,29,240/- RESPECTIVELY. THE A.O. DISALLOWED 10% OF THESE EXPENSES BECAUSE ASSESSEE HAD NOT MAINTAINED PROPER VOUCHERS FOR THE SAME. FURTHER ASSESSEE HAD ALSO CLAIMED SALES PROMOTION OF ` 1,12,445/- AND ` 16,813/- ON ACCOUNT OF CLUB EXPENSES. ON VERIFICATION THE A.O. NOTICED THAT THESE EXPENSES WERE INCURRED IN HOTELS, MAINLY ON ENTERTA INMENT. THE A.O. ALSO OBSERVED THAT ELEMENT OF EXPENDITURE FOR FRIENDS AN D FAMILY MEMBERS COULD NOT BE RULED OUT AND ACCORDINGLY DISALLOWED 20% OF THESE EXPENSES. 9. ON APPEAL THE LEARNED CIT(A) CONFIRMED THE DISALLOW ANCE ON THE GROUNDS OF TRAVELLING AND CONVEYANCE EXPENSES. HOWE VER, HE REDUCE THE ADDITION ON ACCOUNT OF SALES PROMOTION AND CLUB EXP ENSES TO 15%. 10. BOTH THE PARTIES WERE HEARD. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF T HE VIEW THAT THE ADDITION HAS BEEN MADE ON ADHOC BASIS AND THE A.O. HAS NOT PIN POINTED ITA NO. 6129/MUM/2009 SHRI ASHISH CHOUDHRY 5 ANY SPECIFIC DEFECT. FOR CONVEYANCE, SOMETIMES IT I S NOT POSSIBLE TO OBTAIN A PROPER VOUCHER. THEREFORE, WE ARE OF THE VIEW THAT THIS ADDITION IS NOT JUSTIFIED AND ACCORDINGLY WE DELETED THIS ADDITION. AS FAR AS ADDITION ON ACCOUNT OF SALES PROMOTION AND CLUB EXPENSES ARE CO NCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE COULD REFER ONLY TO THE IN COME & EXPENDITURE ACCOUNT WHERE THESE EXPENSES ARE MENTIONED BUT NO F URTHER DETAILS HAVE BEEN PROVIDED. IN THE ABSENCE OF DETAILS WE ARE OF THE VIEW THAT PERSONAL ELEMENT OF EXPENDITURE INCURRED CANNOT BE DENIED. A T THE SAME TIME KEEPING THE NATURE OF PROFESSION AND OTHER CIRCUMSTANCES IN VIEW WE FEEL THAT THE ADDITION HAS BEEN MADE ON HIGHER SIDE AND, THEREFOR E, WE RESTRICT THE SAME TO 10% OF THE SALES PROMOTION AND CLUB EXPENSES. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2011. SD/- SD/- (D. MANMOHAN) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 31 ST MAY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXVII, MUMBAI 4. THE CIT III, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.