M/s SNC Power Corporation Private Limited, Bangalore V. DCIT, Bangalore

ITA 65/BANG/2013

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5231 (ITAT-BANGALORE)
• Duration Of Justice: 7 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 15-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S TAMIL SELVAM
• Assessee Lawyers: V CHANDRASEKAR
• Keywords: Revenue expenditure
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE SHRI N V VASUDEVAN, VICE PRESIDENT AND BEFORE SHRI ARUN KUMAR GARODIA, AM ITA NO. 65/B/2013 ASSESSMENT YEAR : 2007 08 M/S SNC POWER CORPORATION PVT. LTD. , SNC HOUSE, 4 TH FLOOR, NO. 7, RESIDENCY ROAD, (OLD NO. 9, RAJA RAM MOHANROY ROAD) BANGALORE - 560025 PAN: AAJCS7901C VS. DCIT CIRCLE 12 (3), BANGALORE APPELLANT RESPONDENT ASSESSEE BY : S HRI V. CHANDRASEKAR, ADVOCATE REVENUE BY : SHRI S. TAMIL SELVAM, JCIT DR DATE OF HEARING : 1 4 . 0 1 .20 20 DATE OF PRONOUNCEMENT : 20 . 0 2 .20 20 O R D E R PER SHRI A.K. GARODIA, AM: THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED CIT (A) III BANGALORE DATED 31.10.2012 FOR A. Y. 2007 08. 2. IN COURSE OF HEARING, LEARNED AR OF THE ASSESSEE SUBMITTED THAT SYNOPSYS IS ALREADY FILED AND THIS APPEAL MAY BE DECIDED BY CONSIDERING THE SAME. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT GROUND NO. 1 AND 2 RAISED BY THE ASSESSEE ARE GENERAL AND NO SEPARATE ADJUDICATION IS CALLED FOR ABOUT THESE TWO GROUNDS. AS PER GROUND NO. 3, THE GRIEVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 775,310/- MADE BY THE AO. IN THIS REGARD, IN PARA (C) OF THE SYNOPSYS, IT IS SUBMITTED THAT THE ASSESSEE HAS INCURRED AN EXPENSE OF RS. 77,53,110/- AS WAGES IN RESPECT OF A TURNOVER OF MORE THAN RS. 15 CRORES AND THE AO MADE AN ADHOC DISALLOWANCE OF RS. 15 LACS AND LEARNED CIT (A) CONFIRMED PART ITA NOS.65/B/2013 DISALLOWANCE TO THE EXTENT OF 10% OF WAGES WORKED OUT AT RS. 775,310/-. IT IS SUBMITTED THAT THIS ADHOC DISALLOWANCE SHOULD BE DELETED. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). WE FIND THAT IT IS NOTED BY CIT (A) THAT AS PER THE AO, THESE EXPENSES ARE INCURRED IN CASH AND ONLY SUPPORTING AVAILABLE IS SELF- MADE VOUCHER. LEARNED CIT (A) RESTRICTED THE DISALLOWANCE TO 10% OF WAGES EXPENSE AS AGAINST ABOUT 20% DISALLOWANCE MADE BY THE AO. BEFORE US, THE ASSESSEE HAS NOT FURNISHED ANY COMPARISON CHART OF WAGES EXPENSES PERCENTAGE IN THE PRESENT YEAR AND EARLIER YEARS. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 3 IS REJECTED. 4. AS PER GROUND NO. 4, THE GRIEVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 100,000/- MADE BY THE AO. IN THIS REGARD, IN PARA (D) OF THE SYNOPSYS, IT IS SUBMITTED THAT THE AO HAD DISALLOWED A SUM OF RS. 5 LACS OUT OF SITE EXPENSES WHICH IS REDUCED TO RS. 1 LAC BY CIT (A). IT IS SUBMITTED THAT BARRING A SUM OF RS. 84,374/-, ENTIRE SITE EXPENSES ARE ON ACCOUNT OF RECOVERY IN RUNNING BILLS OF THE ASSESSEE AND THE BALANCE IS ON ACCOUNT OF PETTY PAYMENTS TO DRIVERS ETC. AND HENCE, THIS DISALLOWANCE SHOULD BE DELETED. WE FIND THAT IN PARA 8.1 OF HIS ORDER, IT IS OBSERVED BY CIT (A) THAT THE AO WAS NOT JUSTIFIED IN MAKING THIS DISALLOWANCE ON ESTIMATE BASIS. HE HAS ALSO OBSERVED THAT THE EXPENSES ARE BROADLY COVERED BY THE CONTRACT TERMS. HE ALSO OBSERVED THAT THE AO SHOULD HAVE HIGHLIGHTED SOME ANOMALIES IN THE CLAIM. THEREAFTER HE OBSERVES THAT THE AO NOTES IN GENERAL TERMS IN THE REMAND REPORT THAT BILLS/VOUCHERS WERE NOT PRODUCED IN FULL FOR VERIFICATION AND STILL, HE PARTLY CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS. 1 LAC OUT OF RS. 5 LACS DISALLOWED BY THE AO. IN VIEW OF THESE FINDINGS OF CIT (A) AS NOTED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT IN THE FACTS OF THE PRESENT CASE, NO DISALLOWANCE IS JUSTIFIED AND HENCE, WE DELETE THIS DISALLOWANCE OF RS. 1 LAC. GROUND NO. 4 IS ALLOWED. 5. AS PER GROUND NO. 5, THE GRIEVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 138,17,096/- MADE BY THE AO TOWARDS COST OF SUPER STRUCTURE. IN THIS REGARD, IN PARA (A) OF THE SYNOPSYS, IT IS SUBMITTED THAT THE SUPER STRUCTURE OF 43,900 SQUARE FEET IS CONSTRUCTED ON LEASE HOLD LAND AND THIS BUILDING IS PARTLY USED FOR BUSINESS AND PARTLY LET OUT. IT IS ALSO SUBMITTED THAT ITA NOS.65/B/2013 THE AREA USED FOR BUSINESS IS 14,300 SQUARE FEET AND THE AREA LET OUT IS 29,600 SQUARE FEET (TOTAL 43,900 SQUARE FEET). IT IS ALSO SUBMITTED THAT THE AMOUNT SPENT ON THE BUILDING PORTION USED FOR BUSINESS IS RS. 138,17,096/- AND BALANCE RS. 286,80,422/- (TOTAL RS. 424,97,518/-). IS FOR LET OUT PORTION. THE ASSESSEE CLAIMED THAT THIS AMOUNT OF RS. 138,17,096/- SPENT ON THE BUILDING PORTION USED FOR BUSINESS SHOULD BE ALLOWED AS REVENUE EXPENDITURE BUT THE SAME WAS DISALLOWED. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. MADRAS AUTO SERVICES (P) LTD., 233 ITR 468 AND OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. TVS LEAN LOGISTICS PRIVATE LIMITED, 293 ITR 432. AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. MADRAS AUTO SERVICES (P) LTD.(SUPRA), THE ASSESSEE SPENT THE AMOUNTS IN QUESTION IN ORDER TO CONSTRUCT A NEW BUILDING AFTER DEMOLISHING THE OLD BUILDING BUT IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE ASSESSEE THAT THE BUILDING WAS CONSTRUCTED AFTER DEMOLISHING THE OLD BUILDING. HENCE, IN OUR OPINION, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE. 6. IN THE CASE OF CIT VS. TVS LEAN LOGISTICS PRIVATE LIMITED (SUPRA), THESE FACTS ARE SIMILAR THAT BUILDING WAS CONSTRUCTED ON LEASEHOLD LAND AS IN THE PRESENT CASE BUT THERE IS A VITAL DIFFERENCE IN FACTS OF THIS CASE AND THE PRESENT CASE. IN THE PRESENT CASE, OUT OF TOTAL AREA OF SQUARE FEET, ONLY 14,300 SQUARE FEET IS USED FOR BUSINESS AND MAJOR PORTION OF 29,600 SQUARE FEET SQUARE FEET IS LET OUT. HENCE, IN THE PRESENT CASE, A SMALL PORTION OF A LET-OUT HOUSE PROPERTY IS USED FOR BUSINESS WHEREAS IN THAT CASE, ENTIRE BUILDING WAS USED FOR BUSINESS. THE CLAIM OF THE ASSESSEE OF RS. 138,17,096/- IS WORKED OUT ON PROPORTIONATE BASIS BEING MULTIPLICATION OF 14,300 SQUARE FEET TO RS. 968.00 BEING AVERAGE COST OF ONE SQUARE FEET. IN THE PRESENT CASE, EVEN THIS PORTION USED FOR BUSINESS IN THE PRESENT YEAR CAN BE LET OUT AT ANY POINT OF TIME BECAUSE MAJOR PORTION IS ALREADY LET OUT. FOR A BUILDING CONSTRUCTED FOR LETTING OUT, THERE IS NO PROVISION IN THE ACT TO ALLOW THE COST OF CONSTRUCTION AS REVENUE EXPENDITURE. SINCE, MAJOR PORTION OF THE BUILDING IN THE PRESENT CASE IS ALREADY LET OUT, THIS BUILDING IS A LET- OUT BUILDING AND NOT BUSINESS BUILDING. HENCE, IN OUR CONSIDERED OPINION, THIS JUDGMENT OF HONBLE MADRAS HIGH COURT IS NOT ITA NOS.65/B/2013 APPLICABLE IN THE FACTS OF THE PRESENT CASE. ACCORDINGLY, GROUND NO. 5 IS REJECTED. 6. AS PER GROUND NO. 6, THE GRIEVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 468,600/- MADE BY THE AO TOWARDS THE LEASE RENT. IN THIS REGARD, IN PARA (E) OF THE SYNOPSYS, IT IS SUBMITTED THAT THE ASESSEE HAS ALREADY DISALLOWED LEASE RENT OF RS. 6 LACS IN THE COMPUTATION OF INCOME AVAILABLE ON PAGE 54 OF THE PAPER BOOK AND HENCE, DISALLOWANCE OF LEASE RENT BY THE AO AMOUNTS TO DOUBLE DISALLOWANCE AND THEREFORE, IT SHOULD BE DELETED. WE FIND THAT AS PER THE COMPUTATION AVAILABLE ON PAGE 54 OF THE PAPER BOOK, AN ADDITION OF RS. 6 LACS IS MADE ON ACCOUNT OF LEASE RENT BUT THE SAME IS CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM HOUSE PROPERTY AND THE AO DISALLOWED RS. 6 LACS SO CLAIMED BY THE ASSESSEE AND THERE IS NO SEPARATE DISALLOWANCE OF RS. 480,000/-. THE CONTENTION THAT THERE IS DOUBLE DISALLOWANCE IS NOT CORRECT BECAUSE DEDUCTION IS VERY MUCH CLAIMED IN THE COMPUTATION AVAILABLE ON PAGE 54 OF THE PAPER BOOK AND IT IS DISALLOWED BY THE AO BY OBSERVING THAT FOR COMPUTING INCOME UNDER THE HEAD HOUSE PROPERTY, DEDUCTION ON ACCOUNT OF GROUND RENT IS NOT ALLOWABLE. WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 6 IS ALSO REJECTED. 7. AS PER GROUND NO. 7, THE GRIEVANCE OF THE ASSESSEE IS ABOUT CONFIRMING OF THE DISALLOWANCE OF RS. 10,21,444/- MADE BY THE AO TOWARDS THE ASSESSEES CLAIM FOR AMORTIZATION OF THE COST OF THE LET- OUT PROPERTY. IN THIS REGARD, IN PARA (B) OF THE SYNOPSYS, IT IS SUBMITTED RELIANCE IS PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF SHANKARNARYANA INDUSTRIES AND PLANTATIONS PVT. LTD. IN ITA NO. 860/BANG/1995 DATED 22.08.1997. COPY OF THIS TRIBUNAL ORDER IS ALSO SUBMITTED. IN THIS TRIBUNAL ORDER, THE TRIBUNAL HAS NOTED ABOUT ANOTHER TRIBUNAL ORDER WHICH IS AGAINST THE ASSESSEE BUT THE TRIBUNAL FOLLOWED THAT TRIBUNAL ORDER WHICH IS IN FAVOUR OF THE ASSESSEE BUT IT IS NOT CLEAR AS TO WHAT IS THE EXACT BASIS OF THOSE TRIBUNAL ORDERS WHICH ARE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THERE IS DIVERSION OF A PORTION OF INCOME AT SOURCE. IN THE TRIBUNAL ORDER WHICH IS AGAINST THE ASSESSEE HAVING BEEN RENDERED IN THE CASE OF L. S. ENTERPRISES IN ITA NO. 940/BANG/1989 DATED 21.02.1995, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE ON THIS ITA NOS.65/B/2013 BASIS THAT NO SUCH DEDUCTION IS ALLOWABLE U/S 23 AND 24 OF I. T. ACT. SINCE, A VALID BASIS IS GIVEN BY THE TRIBUNAL FOR DECIDING THE ISSUE AGAINST THE ASSESSEE AND THERE IS NO VALID BASIS IN THE TRIBUNAL ORDER IN WHICH, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND SINCE, NO DEDUCTION IS IN FACT ALLOWABLE U/S 23 & 24 OF THE I T ACT ABOUT COST OF BUILDING LET OUT EVEN IF CONSTRUCTED ON LEASE HOLD LAND AND FOR COMPUTING ANNUAL RENT U/S 22 & 23, WHAT IS RELEVANT IS THE AMOUNT OF RENT RECEIVED OR RECEIVABLE AND THERE IS NO SCOPE OF ANY DEDUCTION ON ACCOUNT OF DIVERSION OF A PORTION OF INCOME AT SOURCE, WE HOLD THAT THIS CLAIM OF THE ASSESSEE IS NOT ALLOWABLE. ACCORDINGLY, GROUND NO. 7 IS ALSO REJECTED. 8. THE ISSUE RAISED IN GROUND NO. 8 ABOUT INTEREST U/S 234D IS CONSEQUENTIAL AND NO ADJUDICATION IS REQUIRED. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N. V. VASUDEVAN) (ARUN KUMAR GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE FEBRUARY, 2020. /MS/ COPY TO: 1. APPELLANT 4. CIT (A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.