DR. FRAINY PALIA, MUMBAI V. ASST CIT 11(2), MUMBAI

ITA 7199/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93221 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 24-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILIMA NADKARNI
• Assessee Lawyers: BEHARILAL
• Keywords: Depreciation; Principle of natural justice; Additional evidence; Revenue expenditure
• Section: 143(3); 32

Judgement Text

DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBER ITA NO. : 7 1 99 /MUM/20 1 2 (ASSESSMENT YEAR: 200 9 - 1 0) DR . FRAINY PALIA , PALACIMO, 6 TH FLOOR, SILVER OAKS ESTATE, B DESAI ROAD, MUMBAI - 400 0 2 6 .: PAN : A AH P P 6661 P VS ASST. COMMISSIONER OF INCOME TAX - 11 ( 2 ), ROOM NO. 479 , 4 TH F LOOR, AAYAKAR BHAVAN, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BEHARILAL RESPONDENT BY : SHRI NILIMA NADKARNI /DATE OF HEARING : 11 - 05 - 2015 / DATE OF PRONOUNCEMENT : 17 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : TH E AFORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 1 5 . 1 0 .201 2 , PASSED BY CIT(A) - 12 , MUMBAI , FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) F OR THE ASSESSMENT YEAR 200 9 - 1 0 ON THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE APPLICATION UNDER RULE 46A FOR ADMISSION OF ADDITIONAL EVIDENCE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THAT THERE WAS GROSS ABUSE OF THE PRINCIPLES OF NATURAL JUSTICE BY THE ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT ADEQUATE OPPORTUNITY WAS GRANTED TO THE APPELLANT AT THE TIME OF ASSE SSMENT PROCEEDINGS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT IMMOVABLE PROPERTY AT DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 2 MAHAPE WAS NOT PUT TO USE BY THE APPELLANT DURING THE YEAR. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING TH E ACTION OF THE ASSESSING OFFICER IN NOT GRANTING DEPRECIATION OF RS. 8,31,700/ - IN RESPECT OF PROPERTY AT MAHAPE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT GRANTING DEDUCTION ON ACC OUNT TO INTEREST OF RS. 5,41,290/ - . 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSES S EE SUBMITTED THAT GROUND NOS. 1, 2 & 3 ARE NOT PRESSED. ACCORDINGLY, THE SAME ARE TREATED AS DISMISSED. 3. THE OTHER GROUNDS RELATES TO DISALLOWANCE OF CLAIM OF DEPRE CIATION OF RS. 8,31,700/ - AND DISALLOWANCE OF CLAIM OF INTEREST OF RS. 5,41,290/ - . 4. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A DOCTOR BY PROFESSION, WHO HAS CLAIMED DEPRECIATION @ 10% FOR A BUILDING, MIDC GALA NO. 1 AT MAHAPE . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW WHETHER THE PROPERTY WHICH HAS BEEN PURCHASED HAS BEEN PUT TO USE FOR THE PROFESSIONAL /BUSINESS PURPOSE OR NOT. IN RESPONSE, THE ASSESSEE SUBMITTED THE POSSESSION LETTER AND OTHER RELEVANT DETAILS RELATING TO PURCHASE OF THE PROPERTY BEFORE 30 TH SEPTEMBER, 2008 . FROM THE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE , T HE ASSESSING OFFICER AGAIN REQUIRED THE ASSESSEE TO SUBMIT COPY OF ELECTRICITY BILLS, TELEPHONE BILLS OR ANY OTHER SUCH EVIDENCE TO ESTABLISH THAT PRO PERTY WAS PUT TO USE BEFORE 30 TH SEPTEMBER, 2008. HOWEVER, IN RESPONSE, THE ASSESSEE SUBMITTED THAT POSSESSION OF THE PROPERTY WAS TAKEN EARLI ER AND WAS IMMEDIATELY PUT TO U SE BY USING THE GODOWN SPACE FOR STORAGE OF PATIENT RECORDS, SURGICAL EQUIPMENTS AN D OTHER OLD EQUIPMENTS ETC. HOWEVER, NO SUPPORTING DOCUMENTS/BILLS WERE FURNISHED BY THE ASSESSEE, ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION OF RS. 8,37,700/ - . DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 3 5. FURHTER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBI TED INTEREST TO THE PROFIT AND LOSS ACCOUNT AT RS. 5,41,290/ - ON LOAN TAKEN FROM RELIANCE CAPITAL FOR THE PURCHASE OF THE GALA AT MAHAPE. THE ASSESSING OFFICER OBSERVED THAT SINCE THE PROPERTY WAS PURCHASED DURING THE YEAR , THEN WHY INTEREST SHOULD NOT BE CAPITALIZED . THE ASSESSEE SUBMITTED THAT THE LOAN WAS SANCTIONED VIDE LETTER DATED 06.09.2008 THEREFORE, THE WHOLE OF INTEREST OF RS. 5,41,290/ - HAS BEEN CLAIMED AS REVENUE EXPENDITURE. THE LD. ASSESSING OFFICER DISALLOWED THE SAID INTEREST ON THE GROUND T HAT SAME HAS TO B E TREATED AS R EVENUE EXPENDITURE IN VIEW OF PROVISO TO SECTION 36(1)(VII) OF THE ACT. ACCORDINGLY, THE INTEREST CLAIM WAS ALSO DISALLOWED. 6. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED VARIOUS ADDITIONAL EVIDENCES TO SHO W THAT THE ASSESS EE HAS RECEIVED THE POSSESSION OF THE PROPERTY IN THE MONTH OF SEPTEMBER ONLY AND IT WAS IN A READY TO USE STAGE . THE LETTER FROM THE MIDC DATED 19.11.2008 ACCORDING THE SANCTION TO USE IT FOR SPECIALTY M EDICAL F ACILITIES WAS THOUGH MADE AVAILABLE IN T HE MONTH OF NOVEMBER, HOWEVER, THE ASSESSEE HAD RECEIVED NOC FOR USING THE SAID GALA FROM MIDC MUCH EARLIER IN THE MONTH OF SEPTEMBER . HOWEVER, THE LD. CIT(A) HELD THAT SUCH AN ADDITIONAL EVIDENCE COULD NOT BE ALLOWED TO BE ADMITTED AS THE SAME WERE NOT FU RNISHED BEFORE THE AO IN SPITE OF OPPORTUNITIES GIVEN BY HIM. ACCORDINGLY, CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. REGARDING INTEREST ALSO, HE HAS UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE SAME GROUND THAT THE INTEREST PERTAINED TO TH E PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE AND HERE IN THIS CASE, THE INTEREST COMPONENT IS FOR THIS PERIOD ONLY AND, THEREFORE, SAME CANNOT BE ALLOWED AS A DEDUCTION. 7. BEFORE US , THE LD. COUNSEL SUBMITTED THAT NOW IT IS QUITE A SETTLED LAW THAT IF ASSET, PLANT OR MACHINERY IS READY FOR USE , THEN ALSO THE ASSESSEE IS ENTITLED FOR DEPRECIATION ; AND IN SUPPORT OF HIS DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 4 CONTENTION, THE LD. COUNS EL STRONGLY RELIED UPON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS CHENNAI PETROLEUM CORPORATION LTD, REPORTED IN [2013] 358 ITR 314. BESIDES THIS, HE SUBMITTED THAT THE ASSESSEE ALREADY GOT THE POSSESSION OF THE GALA A S ON 10.09.2008 AND TH E ASSESSEE HAD ACTUALLY TOOK T HE POSSESSION AS IT WAS ALREADY IN A READY STATE. LATER ON, MIDC GAVE ONLY ALLOTMENT USING IT FOR SPECIALTY MEDICAL PURPOSE. THUS, THIS LETTER MAY NOT BE RELEVANT AS ASSESSEE HAS ALREADY START ED USING THE GALA IN THE MONTH OF SEPTEMBER ONLY. REGARDING INTEREST , HE SUBMITTED THAT THE ASSESSEE HAD TAKEN LOAN FROM RELIANCE CAPITAL ON 06.09.2008 AND THE INTEREST WAS PAID FOR THE PERIOD 06.09.2008 TILL 31.03.2009 DURING WHICH THE GALA WAS ALREADY PUT TO USE FROM THE DATE OF POSSESSION. THEREFORE , INTEREST CANNOT BE DISALLOWED. 8. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 9. AFTER CONSIDERING RIVAL SUBMISSIONS AND ON PERUSAL ON THE IMPUGNED ORDER AND MATERIAL PLACED ON RECORD, WE FIND THAT SO FA R AS THE ISSUE OF CLAIM OF DEPRECIATION IS CONCERNED, IT IS BORNE OUT FROM THE RECORD THAT THE ASSESSEE HA S PURCHASED THE GALA BY WAY OF TENDER FROM MIDC. THE SAID TENDER WAS ACCEPTED AND GALA WAS ALLOTTED ON THE SAME DAY I.E. 10 TH SEPTEMBER, 2008 , WHICH I S EVIDENT FROM THE LETTER DATED 10.09.2008 FILED IN PAPER BOOK, PAGES 1 & 2. ALL THE PAYMENTS HAVE BEEN MADE UPTO 08.09.2008. THEREAFTER, THE ASSESSEE HAD WRITTEN A LETTER TO THE EXECUTIVE ENGINEER, MIDC ON 17.09.2008 , THAT THE POSSESSION HAVE BEEN TAKEN B Y THE ASSESSEE ON 17.09.2008 FROM DY. ENGINEER, MIDC. FURTHER THE ASSES S EE HAS AGAIN WRITTEN A LETTER TO THE MANAGER , MIDC THAT IT HAS ALREADY OBTAINED POSSESSION ON 17 TH SEPTEMBER, 2008 AND SINCE THEN THE SAID GALA HAS BEEN USED FOR ITS BUSINESS PURPOSE . ON 9 TH DECEMBER, 2008, THE MIDC WROTE A LETTER THAT IT HAS NO OBJECTION FOR USING THE GALA FOR THE PURPOSE OF MOBILE MEDICAL CENTER AND FOR STORING REQUIRED SAMPLES, COMPO NENTS USED FOR MEDICAL SERVICES . THE DEPARTMENTS CASE IS THAT PRIOR TO 30 TH DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 5 SEPT EMBER, 2008, THE ASSES S EE HAD NOT PUT TO USE THE SAID PROPERTY AS THE ASSESSEE COULD NOT FURNISH DOCUMENTARY EVIDENCE LIKE ELECTRICITY BILLS OR TELEPHONE BILLS ETC. IF THE ASSES S EE HAD ALREADY PURCHASED THE PROPERTY ON 10.09.2008 AND GOT THE POSSESSION ON 17.09.2008, THIS INTER ALIA GOES TO SHOW THAT THE SAID PROPERTY WAS ALREADY READY FOR USE. IF THE PROPERTY IS READY FOR USE THEN CLAIM FOR DEPRECIATION CANNOT BE DENIED. THE WORD USED IN SECTION 32 SHOULD BE UNDERSTOOD IN A WIDER SPECTRUM, SO AS TO EMB RACE NOT ONLY THE P A S S IVE USE BUT ALSO THE ACTIVE USE . T HUS , WE ARE OF THE OPINION THAT, SINCE THE PROPERTY WAS READY TO USE PRIOR TO 30 TH SEPTEMBER, 2008, THEREFORE, THE CLAIM FOR DEPRECIATION CANNOT BE DISALLOWED TO THE ASSESSEE. WE ACCORDINGLY ALLOW THE ASSESSEES CLAIM FOR DEPRECIATION. 10. ACCORDINGLY, GROUND NOS. 4 & 5 ARE TREATED AS ALLOWED. 11. AS REGARDS DISALLOWANCE OF INTEREST IS CONCERNED, WE FIND THAT THE LOAN WAS SANCTIONED ON 06.09.2008 AND ASSESSEE HAD TAKEN OVER THE POSSESSION OF THE PRO PERTY IN THE MONTH OF SEPTEMBER, 2008 ONLY, THEREFORE, THE INTEREST PERTAINING TO PERIOD 06.09.2008 TO 31.03.2009 CANNOT BE HELD THAT IT PERTAINS TO PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST - PUT - TO - USE. HERE IN THIS CASE, WE HAVE ALREADY HELD THAT ASSET WAS PUT TO USE IN THE MONTH OF SEPTEMBER, 2008 ONLY. ACCORDINGLY, SUCH AN EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE AND IS NOT H IT BY PROVISO TO SECTION 36( 1)(VII). ACCORDINGLY, GROUND NO. 6 RAISED BY THE ASSESS E E IS ALLOWED. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JU LY , 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 17 TH JU LY , 2015 FORMATTED: NOT STRIKETHROUGH DR. FRAINY PALIA ITA NO. 7199 /M/20 1 2 6 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 3 , MUMBAI 4 ) THE CIT 1 1 , MUMBAI . 5 ) , , / THE D.R. F BENCH, MUMBAI. 6 ) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS