SULAKSHANA SECURITIES LIMITED., MUMBAI V. INCOME-TAX OFFICER, 1(3)(2), MUMBAI

ITA 7271/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6648 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 7271 /MUM./201 1 ( / ASSESSMENT YEAR : 200 6 07 ) SULAKSHANA SECURITIES LTD. MAFATLAL HOUSE, H.T. PAREKH MARG BACKBAY RECLAMATION MUMBAI 400 020 .. / APPELLANT V/S INCOME TAX OFFICRE WARD 1(3)(2), AAYAKAR BHAVAN 10, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AABCS1783L / ASSESSEE BY : MR. GIRISH DAVE / REVENUE BY : MR . R.K. SAHU / DATE OF HEARING 11 .0 3 .201 4 / DATE OF ORDE R 11.04.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORESAID APPEAL HA S BEEN PREFERRED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER DATED 3 RD AUGUST 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS) I I , MUMBAI, FOR THE QUANTUM OF M/S. SEVANTILAL KANTILAL & CO. 2 ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 06 07 , VIDE WHICH, FOLLO WING GROUNDS HAVE BEEN RAISED: 1. THE LEARNED CIT(A) ERRED IN RESTRICTING THE DEDUCTION OF MAINTENANCE EXPENSES TO ` 5,69,054 BEING ELECTRICITY EXPENSES ON AIR CONDITIONING FROM THE TOTAL MAINTENANCE EXPENSES OF ` 21,91,176 WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 2. THE LEARNED CIT(A) ERRED IN HOLDING THE CLAIM OF MAINTENANCE EXPENSES AS EXCESSIVE AND UNREASONABLE AND CONCLUDING THAT ONLY ELECTRICITY EXPENSES FOR RUNNING OF AIR CONDITIONERS OUGHT TO BE ALLOWED. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT HE MAINTENANCE EXPENSES OF ` 21,91,176 WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INCOME FROM AIR CONDITIONING AND OTHER CHARGES RECEIVED AND THE SAME OUGHT TO BE ALLOWED AS DEDUCTION. 2 . THE ASS ESSEE COMPANY IS MAINLY DERIVING INCOME FROM LETTING OF PREMISES AND INCOME FROM OTHER SOURCES. DURING THE YEAR, THE ASSESSEE HAD SHOWN INCOME FROM RENTING OF THE PREMISES OF ` 13,28,434 AND AIR - CONDITIONING CHARGES AS WELL AS OTHER RECEIPTS OF ` 12,84,239 , WHICH HAS BEEN TREATED AS INCOME FROM OTHER SOURCES. FROM THE SAID INCOME, THE ASSESSEE HAS CLAIMED DEDUCTION OF PROPERTY MAINTENANCE EXPENDITURE OF ` 21,91,176. THE ASSESSING OFFICER HELD THAT THE AIR CONDITIONING CHARGES AND OTHER CHARGES AMOUNTING TO ` 12,84,239 SHOULD HAVE BEEN TAKEN AS PART OF THE INCOME FROM RENT ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY , AS THE ASSESSEE IS NOT PROVIDING AIR CONDITION ING AS A SEPARATE CONVENIENCE OR FACILITIES. THEREFORE, THE SAID RECEIPTS HAVE TO BE IN CLUDED IN RENTAL M/S. SEVANTILAL KANTILAL & CO. 3 INCOME. THUS, THE RENTAL INCOME WAS ASSESSED AT ` 26,12,673 AND AFTER DEDUCTION PROPERTY TAX AND DEDUCTION UNDER SECTION 24(1), INCOME FROM HOUSE PROPERTY WAS ASSESSED AT ` 14,42,491 AS AGAINST THE RETURNED INCOME OF ` 3,63,414. 3 . BEFORE TH E LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT MAFATLAL INDUSTRIES LTD. (FOR SHORT MFL ) WAS DECLARED AS SICK INDUSTRIES BY BIFR AND IDBI WAS APPOINTED AS OPERATING AGENCY UNDER SECTION 17(3) OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS ) ACT, 1985. THE BIFR SANCTIONED A SCHEME FOR REHABILITATION OF MIL ON 30 TH OCTOBER 2002, IN WHICH THE ASSESSEE COMPANY WAS IDENTIFIED AS SPECIAL PURPOSE VEHICLE INTO WHICH THE REAL ESTATE AND INVESTMENT BUSINESS OF MIL WAS DEMERGED. IN THIS MANNER, THE MAFATLAL CENTRE, THE PREMISES WHICH BELONGED TO MIL WAS PASSED ON TO THE ASSESSEE AND THE EXPENDITURE INCURRED BY THE MIL ON THE SAID PROPERTY WAS ALSO PASSED ON TO THE ASSESSEE. THUS, THE ASSESSEE TREATED THE INCOME FROM AIR CONDITIONING CHARGES ASSESSABL E UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND PROPERTY MAINTENANCE EXPENDITURE WAS CLAIMED AS DEDUCTION FROM THE SAID INCOME. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NO DIRECT AGREEMENT WITH THE TENANT FOR RENT AND AIR CONDITION. 4 . THE LEARNED COMMI SSIONER (APPEALS) HELD THAT IN THE EARLIER YEARS ALSO, INCOME FROM AIR CONDITIONING CHARGES HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES , THEREFORE, AS A MATTER OF CONSISTENCY, SUCH A TREATMENT HAS TO BE ACCEPTED IN THIS YEAR ALSO. HE FURTH ER NOTED THAT THE ASSESSEE HAS CLAIMED PROPERTY MAINTENANCE EXPENDITURE OF ` 21.91 LAKHS FROM THE AIR CONDITIONING CHARGES WHICH M/S. SEVANTILAL KANTILAL & CO. 4 HAS RESULTED INTO LOSS OF ` 9.06 LAKHS UNDER THE HEAD INCOME FROM OTHER SOURCES . SUCH EXPENDITURE ON ACCOUNT OF PROPERTY MAIN TENANCE EXPENDITURE WAS HELD TO BE EXCESSIVE AND UNREASONABLE. THUS, HE DIRECTED THE ASSESSING OFFICER TO ALLOW ONLY ELECTRICITY EXPENSES FOR RUNNING OF AIR CONDITIONING AND OTHER EXPENSES COULD NOT BE ALLOWED TO BE SET OFF AGAINST THE INCOME FROM OTHER SO URCES. 5 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2003 04 AND ALSO IN THE ASSESSMENT YEAR 2007 08 IN ASSESSEES OWN CASE. IN THE ASSESSMENT YEAR 2003 0 4, THE TRIBUNAL HELD THAT THE INCOME FROM AIR CONDITIONING CHARGES AND OTHER CHARGES HAVE TO BE ASSESSED AS INCOME FROM OTHER SOURCES AND WHILE COMPUTING THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES , THE ASSESSEE IS ENTITLED FOR DEDUCTION OF EXP ENSES UNDER SECTION 57. TO EXAMINE THE LIABILITY OF EXPENSES UNDER SECTION 57, THE MATTER WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER, VIDE ORDER DATED 6 TH JUNE 2013. SIMILARLY, IN THE ASSESSMENT YEAR 2007 08, THE TRIBUNAL, FOLLOWING THE ORDER F OR THE ASSESSMENT YEAR 2003 04, SET ASIDE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER ON SIMILAR GROUNDS. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE NATURE OF EXPENDITURE WHICH WERE INCURRED ON RUNNING OF AIR CONDITIONING RELATED CHARGES AND EXPENSES INCURRED ON OTHER UTILITIES. THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) IS NOT CORRECT INSOFAR AS ONLY ALLOWING ELECTRICITY EXPENSES AND THAT TO BE PURELY ON AD HOC BASIS WITHOUT ANALYZING THE NATURE OF OTHER EXPENSES WHICH ARE LI ABLE FOR DEDUCTION UNDER SECTION 57. M/S. SEVANTILAL KANTILAL & CO. 5 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED UPON THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILAB LE ON RECORD. INSOFAR AS THE ISSUE , WHETHER RECEIPT FROM AIRCONDITIONING AND OTHER CHARGES ARE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES OR UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS CONCERNED, THE SAME HAS BEEN SETTLED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE , BY HOLDING THAT SUCH RECEIPTS ARE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES , WHICH HAS BEEN ACCEPTED BY THE LEARNED COMMISSIONER (APPEALS) ALSO. HOWEVER, THE LEARNED COMMISSIONER (APPEALS), WITHOUT ANALYSING THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO MAFATLAL CENTRE BUILDING, HAS SIMPLY DIRECTED THE ASSESSING OFFICER TO ALLOW ELECTRICITY CHARGES ONLY. SUCH A DIRECTION IS WHOLLY MISCONCEIVED AS ALL THE NECESSARY EXPENDIT URES WHICH ARE ATTRIBUTABLE TO THE EARNING OF THE RECEIPTS WHICH ARE SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES HAS TO BE CONSIDERED UNDER SECTION 57(III ). THE TRIBUNAL ALSO GAVE SIMILAR DIRECTIONS TO THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE AF TER EXAMINING THE SAME UNDER SECTION 57. IN THIS YEAR ALSO, CONSISTENT WITH THE STAND TAKEN BY THE TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER AND DI RECT HIM TO CONSIDER THE EXPENSES AS SHOWN BY THE ASSESSEE AND TO SEE ITS DEDUCTIBILITY UNDER SECTION 57 OF THE ACT. THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. M/S. SEVANTILAL KANTILAL & CO. 6 8 . 8. IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11 TH APRIL 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 11 TH APRIL 2014 SD/ - SANJAY ARORA ACCOUNTANT MEMBER S D/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 11 TH APRIL 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / T HE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. P RIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI