ACIT, CHENNAI V. Express Infrastructure Private Limited, CHENNAI

ITA 716/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7695 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.691 & 690/MDS/2016 / ASSESSMENT YEARS : 2011-12 & 2012-13 M/S. EXPRESS INFRASTRUCTURE PRIVATE LTD., NO.2, CLUB HOUSE ROAD, MOUNT ROAD, CHENNAI 600 002. PAN : AABCE5521G V. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI. ( /APPELLANT) ( !' /RESPONDENT) & ./ ITA NOS.716 & 717/MDS/2016 / ASSESSMENT YEARS : 2011-12 & 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI. V. M/S. EXPRESS INFRASTRUCTURE PRIVATE LTD., NO.2, CLUB HOUSE ROAD, MOUNT ROAD, CHENNAI 600 002. PAN : AABCE5521G ( /APPELLANT) ( !' /RESPONDENT) #$ %&'& /ASSESSEE BY : SHRI G. BASKAR, ADVOCATE ( %&'& /REVENUE BY : SHRI G.M. DAS, CIT % /DATE OF HEARING : 31.01.2017 % /DATE OF PRONOUNCEMENT : 28.02.2017 2 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : [ BOTH THE ASSESSEE AND THE REVENUE FILED THE APPEA LS AGAINST THE COMMON ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 6, CHENNAI DATED 19.01.2016 FOR THE ASSESSMENT YEAR S 2011-12 & 2012- 13. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THE SAME TOGETHER AND DISPOSING OFF THE SAME BY THIS COMMON ORDER. 2. SHRI G. M. DAS, THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERATION IN BO TH THE DEPARTMENT APPEALS IS WITH REGARD TO THE SCHEME OF PRE-CLOSURE CHARGES FOR SWITCHING OVER ONE LENDER TO ANOTHER. ACCORDING TO THE LD. D.R., THE ASSESSEE CLAIMED PRE-CLOSURE CHARGES FROM ONE VENDER TO ANOTHER. RE FERRING TO SECTION 24 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), T HE LD.D.R., POINTED OUT THAT WHAT WAS ALLOWABLE UNDER SECTION 24 OF THE ACT IS INTEREST PAID BY THE ASSESSEE AND NOT THE PRINCIPAL AMOUNT. THEREFO RE, THE ASSESSEE CANNOT CLAIM ANY DEDUCTION WITH REGARD TO PRE-CLOSU RE CHARGES, SINCE THE SAME BEING THE PRINCIPAL LOAN. 2.1. ON THE CONTRARY SHRI G. BASKAR, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE COMMISSIONER HAS NOT ALLOWED THE CLAIM OF THE 3 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 ASSESSEE STRAIGHT AWAY. THE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE. AFTER VERIFICATION IN FACT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE WITH REGARD TO PRE-CLOSURE CHARGES. NOW THE APPEAL IS PENDING BEF ORE THE CIT (APPEALS). THEREFORE, THE LD. COUNSEL SUBMITTED TH AT THE CIT (APPEALS) MAY BE DIRECTED TO DISPOSE THE CLAIM OF THE ASSESSE E TOWARDS PRE- CLOSURE CHARGES INDEPENDENTLY ON MERIT WITHOUT ANY INFLUENCE BY ANY OF THE OBSERVATION MADE BY THE CIT (APPEALS) IN THE IM PUGNED ORDER. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE CLAIMED DEDUCTION IN RESPECT OF PRE-CLOSURE CHARGES FOR MOV ING ONE VENDER TO ANOTHER. FROM THE MATERIAL AVAILABLE ON RECORD, IT APPEARS THE ASSESSEE BORROWED LOANS FOR THE PURPOSE OF CONSTRUCTION. TH E QUESTION ARISES FOR CONSIDERATION IS WHETHER PRE-CLOSURE CHARGES WOULD FORM PART OF THE PRINCIPAL BORROWED OR IT IS AN INTEREST. IF THE PR E-CLOSURE CHARGES ARE TO BE TREATED AS INTEREST, THEN IT HAS TO BE ALLOWED UNDE R SECTION 24B OF THE ACT. REVENUE HOWEVER CONTENDS THAT THE PRE-CLOSURE CANNO T BE CONSTRUED AS INTEREST AND WOULD BE CONSTRUED ONLY AS PRINCIPAL A MOUNT. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE EVEN AFTER THE IMPUGNED ORDER OF THE COMMISSIONER, THE ASSESSING OFFICER HA S PASSED THE ORDER DISALLOWING THE CLAIM OF THE ASSESSEE AND NOW THE A PPEAL IS PENDING BEFORE THE CIT (APPEALS). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED 4 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 OPINION THAT THE CIT (APPEALS) HAS TO CONSIDER THE APPEAL INDEPENDENTLY IN ACCORDANCE WITH LAW WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVATION MADE BY THE CIT (APPEALS) IN THE ORDER WHICH IS IMP UGNED BEFORE THIS TRIBUNAL. WITH THE ABOVE OBSERVATION, THE ORDER O F THE CIT (APPEALS) IS VACATED. 3. THE NEXT GROUND OF APPEAL IS WITH REGARD TO CLAI M OF DEPRECIATION. WE HEARD SHRI G.M. DAS, THE LD. DEPARTMENTAL REPRES ENTATIVE AND SHRI G. BASKAR, THE LD. COUNSEL FOR THE ASSESSEE. ADMIT TEDLY, THE ASSESSEE CLAIMED DEPRECIATION IN RESPECT OF PLANT AND MACHIN ERY LIKE AC, FIRE FIGHTING EQUIPMENTS ETC. REFERRING TO THE ORDER OF THIS TRIBUNAL IN JCIT V CHENNAI CITI CENTRE HOLDINGS PVT. LTD. IN ITA NOS.1 000 & 1001/MDS/2016 DATED 23.09.2016, THE LD. COUNSEL SUBMITTED THAT IN IDENTICAL SET OF FACT THAT THIS TRIBUNAL ALLOWED THE CLAIM OF DEPRECIATIO N IN RESPECT OF PLANT AND MACHINERY. IT IS NOT IN DISPUTE THAT CENTRALIZED AC, CLEANING MACHINE, WATER COOLER, SSG SYSTEM ARE INSTALLED IN THE PREMI SES OF THE ASSESSEE AND THE ASSESSEE IS CLAIMING DEPRECIATION UNDER SEC TION 57 (II) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT WHEN THE MACHINERY WAS INSTALLED AND USED IN THE PREMISES OF THE ASSES SEE AND USED FOR THE PURPOSE OF BUSINESS, THE ASSESSEE IS ENTITLED FOR D EPRECIATION. THEREFORE THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIRMED. 5 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 4. NOW COMING TO THE ASSESSEES APPEAL, THE FIRST G ROUND OF APPEAL IS WITH REGARD TO DISALLOWANCE OF 50% OF THE CORPOR ATE OFFICE EXPENDITURE. 4.1 SHRI G. BASKAR, THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEE WAS OFFE RED FOR TAXATION UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER ALL OTHER RECEIPTS LIKE CAR PARKING CHARGES, UTILITY CHARGES, EVENT MA NAGEMENT AND ADVERTISING ARE OFFERED FOR TAXATION UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER DISALLOWED THE CLAI M OF THE ASSESSEE TO THE EXTENT OF 50% PERTAINING TO PROPERTY INCOME. T HE LD. COUNSEL SUBMITTED THAT RENTAL INCOME WAS RECEIVED BY THE AS SESSEE FROM THE EXPRESS MALL WHICH IS LOCATED IN THE HEART OF THE C ITY. ON A QUERY FROM THE BENCH, HOW THE RENTAL INCOME FROM EXPRESS MALL WAS CLAIMED AS INCOME FROM HOUSE PROPERTY, THE LD. COUNSEL SUBMITT ED THAT THE ASSESSEE HAS CLAIMED THIS AS BUSINESS INCOME, HOWEVER THE AS SESSING OFFICER TREATED THE SAME AS INCOME FROM HOUSE PROPERTY. TH E ASSESSING OFFICER HAS ALSO DISALLOWED 50% OF THE COMMON EXPENDITURE O N ADHOC BASIS. REFERRING TO THE ORDER OF THIS TRIBUNAL IN EXPRESS NEWSPAPERS P LTD V DCIT IN ITA NOS.1792 & 1793/MDS/2014 DATED 11.03.20 15, AN IDENTICAL DISALLOWANCE WAS DELETED BY THIS TRIBUNAL. 4.2 SHRI G.M. DAS, THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THE ASSESSEE HAS RECEIVED RENTAL INCOME AND AL SO EARNED INCOME 6 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 FROM OTHER SOURCES. EVEN THOUGH, THE EXPENDITURE F OR EARNING THE INCOME FROM OTHER SOURCES IS ALLOWABLE ONE, FOR THE PURPOS E OF RENTAL INCOME THE ASSESSEE CANNOT CLAIM ANYTHING AS EXPENDITURE EITHE R THAN WHAT WAS ALLOWABLE UNDER SECTION 24 OF THE ACT. THEREFORE, THE ASSESSING OFFICER DISALLOWED 50% OF THE EXPENDITURE WHICH IS RELATABL E TO THE RENTAL INCOME. 4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHT LY SUBMITTED BY THE LD. COUNSEL, THE ASSESSING OFFICER DISALLOWED 50% OF TH E COMMON EXPENDITURE ON THE GROUND THAT THE SAME MAY BE ATTR IBUTABLE TO RENTAL INCOME. ON IDENTICAL SET OF FACT, THIS TRIBUNAL IN THE SISTER CONCERN OF THE ASSESSEE FOUND THAT THE DISALLOWANCE CANNOT BE JUST IFIED. ACCORDINGLY, THE SAME WAS DELETED. IN VIEW OF THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 & 2009-10 IN EXPRESS NEWSPA PERS P LTD., ( SUPRA), WE ARE UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTH ORITIES. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF SECURITY DEPOSIT FORFEITED. 5.1 SHRI G. BASKAR, THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE INCOME OF THE ASSESSEE WAS FROM LETDOWN OF THE PROPERTY. THE 7 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 ASSESSEE HAS ALSO RECEIVED SECURITY DEPOSIT WHILE L ETDOWN OF THE PROPERTY. IN THE COURSE OF LETDOWN OF THE PROPERTY , THE ASSESSEE HAS FORFEITED THE SECURITY DEPOSIT. SINCE, THE SECURIT Y DEPOSIT WAS FORFEITED, THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER T HAT IT CANNOT BE CONSTRUED AS INCOME FROM HOUSE PROPERTY. HENCE THE SAME HAS TO BE EXCLUDED. HOWEVER, THE ASSESSING OFFICER FOUND THA T IT IS INCOME OF THE ASSESSEE. THE CIT (APPEALS) ALSO CONFIRMED THE ORD ER OF THE ASSESSING OFFICER. ACCORDING TO THE LD. COUNSEL, SINCE THIS WAS THE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE WHICH WAS FORFEITED, THERE FORE IT IS NOT LIABLE FOR TAXATION. 5.1 WE HEARD SHRI G.M. DAS, THE LD. DEPARTMENTAL RE PRESENTATIVE ALSO. ONCE THE SECURITY DEPOSIT RECEIVED BY THE AS SESSEE IN THE COURSE OF LETDOWN OF THE PROPERTY WAS FORFEITED, THE SAME HAS TO BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE, THE CIT (APPEAL S) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 5.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT WHAT WAS FORFEITED BY THE ASSESSEE IS THE SECURITY DEPOS IT RECEIVED IN THE COURSE OF LETDOWN OF THE PROPERTY. ONCE THE SECUR ITY DEPOSIT WAS FORFEITED, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE SAME HAS TO BE CONSTRUED AS INCOME OF THE ASSESSEE. IT IS NOT IN DISPUTE THAT SECURITY 8 I.T.A. NOS.690 & 691/MDS/2016 I.T.A. NOS.716 & 717/MDS/2016 DEPOSIT WAS NOT TAKEN AS INCOME IN THE YEAR IN WHIC H IT WAS RECEIVED. THEREFORE, THE CIT (APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. 6. IN THE RESULT BOTH THE APPEALS OF THE REVENUE IN ITA NOS. 716 & 717 OF 2016 ARE DISMISSED. HOWEVER BOTH THE APPEAL S OF THE ASSESSEE IN ITA NOS. 690 & 691 ARE PARTIALLY ALLOWED. ORDER PRONOUNCED ON 28 TH FEBRUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 28 TH FEBRUARY, 2017. JR. % ! $ ) $ /COPY TO: 1. /APPELLANT 2. !' /RESPONDENT 3. *+ ( )/CIT(A)-6, CHENNAI 4. *+ /CIT 5. ! $ /DR 6. ,- /GF.