Classic Motors P.Ltd, New Delhi V. DCIT, New Delhi

ITA 6325/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2838 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K BATRA
• Keywords: Business income; Depreciation; Business expenditure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER I.T.A. NO.6325/DEL/2015 ASSESSMENT YEAR: 2012-13 CLASSIC MOTORS PVT. LTD., 101, COMPETENT HOUSE, F-14, CONNAUGHT PLACE, NEW DELHI PAN-AABCC9312R VS. DCIT, CIRCLE - 6(1) NEW DELHI [APPELLANT] [RESPONDENT] ASSESSEE BY: SH. A.K. BATRA, C.A. RESPONDENT BY: SMT. RINKU SINGH, SR. DR DATE OF HEARING: 26 02 2019 DATE OF PRONOUNCEMENT: 28 02 2019 O R D E R PER R.K. PANDA, A.M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 25 TH AUGUST, 2015 OF THE CIT(A), NEW DELHI RELATING TO ASSESSMENT YEAR 2012- 13. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IS AS UNDER: - I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE C OMMISSIONER (APPEALS) IS WRONG IS DISALLOWING A SUM OF RS. 13,8 4,172/- ON ACCOUNT OF REPAIR & MAINTENANCE EXPENSES. ITA NO. 6325/DEL/2015 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 21 ST SEPTEMBER, 2012 DECLARING TOTAL INCOME OF RS. 1,93,33,963/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED EXPE NSES OF RS. 13,84,172/- ON ACCOUNT OF REPAIRS AND MAINTENANCE OF BUILDING. SINCE THE ASSESSEE IS CLAIMING 30% DEDUCTION ON INCOME FROM HOUSE PROPERT Y, THE AO DISALLOWED THE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF REPAIR AND MAINTENANCE. 3.1 BEFORE CIT(A), THE ASSESSEE FILED THE DETAILS O F THE EXPENSES WHICH ARE AS UNDER:- PLACE WHERE FUN & FAIR LOCATED A-38, MOHAN CO-OPERATIVE INDL. ESTATE, MATHURA ROAD, NEW DELHI 11,41,460,00 RENTED ACCOMMODATION A-39, MOHAN CO-OPERATIVE INDL. ESTATE, MAHTURA ROAD, NEW DELHI 1,46,483.00 REGISTERED OFFICE OF THE COMPANY LG-1, LG-2, GROUND FLOOR, 5 BHIKAJI CAMA PLACE, NEW DELHI 63,453.00 ADMINISTRATIVE OFFICE OF THE CO. FLAT # 101, 102, 117-120, F- 14, COMPETENT HOUSE, CONNAUGHT PLACE, NEW DELHI- 110001 32,776.00 4. SO FAR AS THE PROPERTY AT A-38 MOHAN CO-OPERATIV E INDL. ESTATE IS CONCERNED, IT WAS SUBMITTED THAT NO RENOVATION WAS CARRIED OUT FOR PREVIOUS YEARS AND DURING THE YEAR, THE RENOVATION WAS CARRI ED OUT SO THAT THE PLACE COULD ATTRACT MORE CUSTOMERS. SO FAR AS A-39 MOHAN CO-OPERATIVE INDL. ESTATE IS CONCERNED, IT WAS SUBMITTED THAT THE SAME IS LET OUT AND REPAIR EXPENSES WAS CLAIMED INADVERTENTLY. SO FAR AS THE OTHER TWO PROP ERTIES ARE CONCERNED, IT WAS SUBMITTED THAT THESE ARE THE REGISTERED OFFICE AND ADMINISTRATIVE OFFICE OF THE COMPANY. ITA NO. 6325/DEL/2015 3 4.1 HOWEVER, THE LEARNED CIT(A) WAS ALSO NOT SATIS FIED BY THE ARGUMENT OF THE ASSESSEE. HE OBSERVED THAT THE ASSESSEE HIMS ELF HAD ADMITTED THAT THE EXPENSES OF LET OUT PREMISES SHOULD BE DISALLOWED. SO FAR AS THE EXPENDITURE ON REPAIRS OF THE SELF OCCUPIED PROPERTIES ARE CONC ERNED, SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE IN THE FORM OF BILLS/VOUCH ERS TO SUBSTANTIATE THE SAME OR TO ESTABLISH THAT THE EXPENSES WERE OF REVENUE A ND NOT CAPITAL IN NATURE, THE LEARNED CIT(A) DISALLOWED THE CLAIM. 5. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN TH E ASSESSMENT YEAR 2010-11. THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE AO BY OBSERVING AS UNDER:- 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. ON A SPECIFIC QUERY, THE ID. AR ADMITTED TH AT PROPERTY AT 5, BHIKAJI CAMA PLACE WAS PARTLY LET OUT AND PARTLY USED AS THE ASS ESSEES REGISTERED OFFICE. OUT OF TOTAL AREA OF THIS PROPERTY AT 177.25 METRES, THE A REA LET OUT WAS OF 105.44 METRES. THE ID. AR ALSO ADMITTED THAT THE PROPERTY AT A-39 MOHAN COOPERATIVE, MATHURA ROAD, WAS LET OUT AND WAS NOT USED FOR THE PURPOSES OF BUSINESS. SINCE THE ASSESSEE HAS EARNED RENTAL INCOME OF OVER RS. 60 LAC AND CLA IMED STANDARD DEDUCTION @ 30%, THERE CANNOT BE ANY QUESTION OF ALLOWING ANY REPAIR S AND MAINTENANCE OF THE PROPERTIES WHICH HAVE BEEN LET OUT. THE ID. CIT(A) HAS DISALLOWED 50% OF REPAIRS AND MAINTENANCE EXPENSES IN RELATION TO THE PROPERTY AT A-38, MOHAN COOPERATIVE, MATHURA ROAD, WHICH WAS STATED BY THE ID. AR TO HAV E BEEN USED FOR BUSINESS PURPOSE. AS AGAINST THAT, THE CLAIM OF THE ASSESSEE IS THAT THIS PROPERTY WAS NOT USED FOR LETTING OUT AND, HENCE, NO DISALLOWANCE BE MADE TO THIS EXTENT. AS THE NECESSARY DETAILS OF EXPENSES INCURRED IN RESPECT OF THE PROP ERTIES LET OUT ARE NOT SPECIFICALLY AVAILABLE, I CONSIDER IT EXPEDIENT TO SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR RESTRICTING THE DE DUCTION QUA THE PROPERTIES USED FOR THE BUSINESS PURPOSE. THE AO IS DIRECTED TO FIRST I DENTITY THE PROPERTIES LET OUT FULLY OR PARTLY AND, THE, DISALLOW THE REPAIRS AND MAINTENAN CE EXPENSES RELATABLE TO SUCH LET OUT PROPERTIES. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD. 7. SINCE THE ASSESSEE IN THE INSTANT CASE ADMITTEDL Y HAD NOT FURNISHED THE BILLS AND VOUCHERS BEFORE THE LD. CIT(A) OR B EFORE THE AO, THEREFORE, ITA NO. 6325/DEL/2015 4 FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2011-12 WE RESTORE THE ISSUE TO THE FILE OF TH E AO WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIAT E ITS CASE AND DECIDE THE ISSUE AS PER FACT AND LAW. NEEDLESS TO SAY THE AO S HALL KEEP IN MIND THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2009-10, 2010-11 AND 2011-12 ON THIS ISSUE. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 2 RAISED BY THE ASSESSEE IS AS UNDER: - II. THAT THE COMMISSIONER (APPEALS) IS WRONG IN DISAL LOWING A SUM OF RS. 14,28,000/- ON ACCOUNT OF OTHER EXPENSES. 9. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS CLAIMED OTHER EXPENSES AMOUNTING TO RS. 58,08,929/- EXCLUDING REP AIR AND MAINTENANCE OF BUILDING. THESE EXPENSES RELATE TO ADVERTISEMENT AN D PUBLICITY, ELECTRICITY CHARGES, INSURANCE CHARGES PRINTING AND STATIONARY CHARGES, DONATION, BROKERAGE ETC. OUT OF THESE EXPENSES, THE ASSESSEE COMPANY HAD ADDED 50% OF THE EXPENSES UNDER THE HEAD DONATION AND SERVICE TAX ADDITIONAL DEMAND. HOWEVER, HE COULD NOT RELATE THE BALANCE EXPENSES A MOUNT OF RS. 57,12,003/- FOR ANY PARTICULAR ACTIVITY. SINCE THE ASSESSEE COU LD NOT EXPLAIN AS TO HOW THESE EXPENSES ARE ALLOWABLE AS BUSINESS EXPENSES, THE AO DISALLOWED AN AMOUNT OF RS. 14,28,000/- ON AN ADHOC BASIS BEING 25% OF SUCH EXPENDITURE. IN APPEAL THE LEARNED CIT(A) FOLLOWING HIS ORDER FOR ASSESSMENT Y EAR 2011-12 UPHELD THE ACTION OF THE AO. AGGRIEVED WITH SUCH ORDER OF THE ASSESSEE IS BEFORE THE TRIBUNAL. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DI SALLOWED 25% OF OTHER EXPENSES ON ADHOC BASIS IN ABSENCE OF ANY EXPLANATI ON BY THE ASSESSEE AS TO HOW THESE EXPENSES ARE RELATABLE TO THE BUSINESS OF THE ASSESSEE. WE FIND THE ITA NO. 6325/DEL/2015 5 LEARNED CIT(A) FOLLOWING THE ORDER OF HIS PREDECESS OR FOR ASSESSMENT YEAR 2011-12 UPHELD THE ACTION OF THE AO. WE FIND IDENTI CAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE P RECEDING YEAR AND THE TRIBUNAL FOLLOWING THE ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010- 11 HAD ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVI NG AS UNDER:- AT THE OUTSET, WE FIND THAT SIMILAR ISSUE HAS ALRE ADY BEEN DECIDED BY THE HONBLE ITAT IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 IN ITAT NO. 5384/DEL/2014 VIDE ORDER DATED 16.6.2016. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AO HAS MADE AN ADH OC 25% DISALLOWANCE OF EXPENSES BY OBSERVING THAT THE REVENUE FROM THE B USINESS WAS MUCH LESS THAN THE EXPENSES INCURRED. APART FROM THAT, HE HAS NOT DISPUTED THE FACTUM OF THE ASSESSEE HAVING ACTUALLY INCURRED THE SE EXPENSES FOR THE PURPOSE OF ITS BUSINESS. SIMPLY BECAUSE THE BUSINESS RECEIPTS ARE LESS, CANNOT BE A REASON TO DISALLOW THE EXPENDITURE INCURRE D OTHERWISE FOR THE PURPOSE OF BUSINESS. I, THEREFORE, ORDER TO DELETE THE DISALLOWANCE OF RS. 6,17,549/- SUSTAINED IN THE FIRST APPEAL. THIS GROUN D IS ALLOWED. RESPECTFULLY FOLLOWING THE SAME, WE REVERSE THE ORDER OF LOWER AUTHORITIES AND THUS GROUND OF APPEAL FILED BY THE ASSESSEE IS A LLOWED. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE SAME. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR THE TWO IMMEDIATELY PRECEDING ASSESSMENT Y EARS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 12. GROUND NO. 3 RAISED BY THE ASSESSEE IS AS UNDER :- III. THAT THE COMMISSIONER (APPEALS) IS WRONG IN DISA LLOWING DEPRECIATION OF RS. 23,27,656/-. 13. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS CLAIMED DEPRECIATION OF 48,56,220/- AGAINST THE INCOME AMOUNTING TO RS. 6,44,769/- FROM FUN & FAIR. SINCE THE ASSESSEE IS CARRYING ON BUSINESS OF GAMES AND TOYS, THE AO ALLOWED ITA NO. 6325/DEL/2015 6 THE DEPRECIATION OF RS. 2,00,907/- ON GAMES AND TOY S MACHINES. HOWEVER, HE DISALLOWED THE CLAIM OF DEPRECIATION AMOUNTING TO R S. 23,27,656/- BEING 50% OF DEPRECIATION ON ACCOUNT OF PLANT AND MACHINERY, VEHICLES AND OTHER ITEMS ON WHICH DEPRECIATION HAS BEEN CLAIMED. IN APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D THE AO DISALLOWED DEPRECIATION OF 23,27,656/- BEING 50% OF DEPRECIAT ION ON PLANT AND MACHINERY, VEHICLES AND OTHER ITEMS WHICH HAS BEEN UPHELD BY THE CIT(A). WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNA L IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE TRIB UNAL IN ITA NO. 5385/DEL/2014 ORDER DATED 30.11.2017 HAS ALLOWED TH E CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER:- 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT SIMI LAR ISSUE HAS BEEN MADE IN ITA NO. 5384/DEL/2014 IN THE OWN CASE OF THE ASSESSE E WHEREIN THE HONBLE HAS DECIDED THE ISSUE AS UNDER:- '8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS NOTED FROM THE IMPUGNED ORD ER THAT THE ASSESSEE CLAIMED DEPRECIATION UNDER THE 'BUILDING' BLOCK IN R ESPECT OF THREE BUILDINGS, WHICH WERE USED FOR THE BUSINESS PURPOSE. IT SHOWS THAT DEPRECIATION ON THE LET OUT BUILDING(S) WAS NOT CLAIM ED. AS REGARDS DEPRECIATION ON OTHER ASSETS, I FIND THAT THE A.O. HAS HERE AGAIN GIVEN SIMILAR REASONING FOR RESTRICTING THE DEPRECIATION B Y OBSERVING THAT THE BUSINESS ACTIVITY WAS AT A LOWER LEVEL. ONCE THERE A RE ASSETS INCLUDING PLANT AND MACHINERY, VEHICLES, COMPUTERS, ETC. WHICH I ARE BEING USED FOR THE PURPOSE OF BUSINESS FROM EARLIER YEARS, THE A.O. CANN OT DISALLOW DEPRECIATION ON SUCH ASSETS SIMPLY BY PRESUMING THA T SUCH ASSETS MUST NOT HAVE BEEN USED FOR THE PURPOSE OF BUSINESS. THE A.O. HAS ADMITTED THAT THE ASSESSEE CARRIED ON THE BUSINESS ACTIVITY OF GA ME AND TOYS. I AM UNABLE TO APPRECIATE AS TO HOW HIS BUSINESS UNDER THE GIVEN CIRCUMSTANCES CAN BE CARRIED ON WITHOUT THE PLANT AND MACHINERY, VEHICLE, COMPUTERS, ETC., ALL OF WHICH ARE NECESSARY ITEMS FOR CARRYING ON THE BUSINESS ACTIVITY. IN MY CONSIDERED OPINION, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN ITA NO. 6325/DEL/2015 7 RESTRICTING THE DEPRECIATION ON AD HOC BASIS WHEN THE ASSETS WERE USED FOR THE BUSINESS PURPOSE. I ORDER FOR THE DELETION OF A DDITION. RESPECTFULLY FOLLOWING THE SAME, WE REVERSE THE ORDER OF LOWER AUTHORITIES AND THUS GROUND OF APPEAL FILED BY THE ASSESSEE IS ALLO WED. 15. SINCE THE LEARNED CIT(A) UPHELD ACTION OF THE A O BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2011- 12 AND SINCE THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR ASSESSMEN T YEAR 2011-12, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE TWO PRECEDING YEARS, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE. THE GROUN D RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 16. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND GROUND NOS. 2 AND 3 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019. SD/ - SD/ - [K.N. CHARY] [R.K. PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28.02.2019 SH COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT AS SISTANT REGISTRAR ITA NO. 6325/DEL/2015 8 SL. NO. PARTICULARS DATE 1. DATE OF DICTATION 26.02.2019 DATE ON WHICH THE DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. DRAFT PLACED BEFORE THE OTHER MEMBER 4. APPROVED DRAFT COMES TO THE SR. PS/PS 5. KEPT FOR PRONOUNCEMENT ON 6. FINAL ORDER RECEIVED AFTER PRONOUNCEMENT 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILES GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR 10. DATE OF DISPATCH OF ORDER 11. DATE OF UPLOADING 28.02.2019