UNIQUE SERVICES HEAT TREATERS P.LTD, MUMBAI V. DCIT CIR 4, THANE

ITA 7508/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2801 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S V KAL W INT
• Keywords: Business income; Depreciation; Fair market value; Unabsorbed depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM ./ I.T.A. NO . 7508 / MUM/20 1 3 ( / ASSESSMENT YEA R : 200 7 - 08 ) M/S UNIQUE SERVICES HEAT TREATERS PRIVATE LIMITED C/O J H JOSHI AND CO., CHARTERED ACCOUNTANT, 786A, EASTER HEIGHTS, 4 TH ROAD, TPS III, SANTACRUZ (E), MUMBAI - 400055 / VS. DY.COMMISSIONER OF INCOME TAX CIRCLE 1(1), THANE. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACU4302J / APPELLANT BY SHRI S V KAL W INT / RESPONDENT BY SHRI PRAMOD NIKALJE / DATE OF HEARING : 3 .11 . 201 5 / DATE OF PRONOUNCEMENT: 3 .11. 201 5 / O R D E R P ER B R BASKARAN, AM: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 07.10.2003 PASSED BY LD CIT(A) - II, THANE AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. TH E ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) RENDERED ON THE FOLLOWING ISSUES: - ( A ) ENHANCEMENT OF RENTAL INCOME RECEIVED ON LETTING OUT FACTORY BUILDING AND MACHINERY FROM RS.54,000/ - TO RS.2,91,803/ - . ( B ) DISALLOWANCE OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. ITA NO. 75 08 / MUM/20 1 3 2 ( C ) NON - GRANTING OF ELIGIBLE DEPRECIATION AGAINST THE RENTAL INCOME. ( D ) NON - GRANTING OF DEDUCTION OF BROUGHT FORWARD DEPRECIATION. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF HEAT TREATMENT AND ALLIED SERVICES. IT HAD DISCONTINUED THE BUSINESS AND DURING THE YEAR UNDER CONSIDERATION, IT LET OUT ITS FACTORY BUILDING AND MACHINERY TO ITS SISTER CONCERN NAMED M/S UNILOC FASTNERS PVT LTD. IN RESPECT OF FACTORY BUILDING AND MACHINERY, IT HAD RECEIVED RENT AL INCOME OF RS.54,000/ - . IT IS PECULIAR TO NOTE THAT THE EXPENSES PERTAINING TO M/S UNILOC FASTENERS PVT LTD WERE ACCOUNTED THROUGH THE BOOKS OF ASSESSEE, I.E., IT IS SHOWN THAT THE ASSESSEE HAD INCURRED THOSE EXPENSES AND GOT REIMBURSEMENTS FROM ITS SIS TER CONCERN. 3. THE AO TOOK THE VIEW THAT THE RENTAL INCOME OF RS.54,000/ - REFERRED ABOVE WAS VERY LOW. ACCORDINGLY , HE COMPUTED THE FAIR MARKET VALUE (FMV) OF RENTAL INCOME AT RS.2,91,803/ - BY TAKING THE RENTAL VALUE OF BUILDING AT RS.25 PER SQ.FT AND THE RENTAL VALUE OF MACHINERY AT 20% OF WRITTEN DOWN VALUE (WDV). THE AO ALSO ASSESSED THE RENTAL INCOME AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAME SHOULD BE TAKEN AS BUSINESS INCOME. IN THIS PROCESS, THE AO DID N OT ALLOW VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4 . WE NOTICE THAT THE AO HAS MADE HIS OWN ESTIMATE OF RENTAL INCOME WITHOUT BRINGING ANY MATERIAL ON RECORD. THE LD. COUNSEL SUBMITTED THAT THE RENTAL INCOME OF RS.25 PER SQ.FT. AS WELL AS 20% WDV OF PLANT AND MACHINERY IS ON HIGHER SIDE. HOWEVER, THE LD.AR ALSO COULD NOT ITA NO. 75 08 / MUM/20 1 3 3 SUBSTANTIATE HIS CONTENTION WITH ANY MATERIAL. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW TH AT THIS ISSUE MAY BE PUT TO REST BY DETERMINING THE RENTAL INCOME VIA - MEDIA. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE WOULD MEET ENDS OF JUSTICE IF THE RENTAL INCOME IS ESTIMATED AT RS.1,80,000 / - . WE ORDER ACCORDINGLY. IN VIEW OF THE ABOVE , ORDE R OF THE LD.CIT(A) ON THIS ISSUE STANDS SET ASIDE AND THE AO IS DIRECTED TO ADOPT THE RENTAL INCOME AT RS.1,80,000/ - . 5. THE NEXT ISSUE RELATES TO NON ALLOWANCE OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. WE HAVE EARLIER NOTICED THAT THE AO ASSESSED TH E RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THOUGH THE ASSESSEE CLAIMED THAT SAME IS REQUIRED TO BE ASSESSED AS BUSINESS INCOME, IT WAS NOT SHOWN TO US THAT LETTING OF FACTORY AND PLANT AND MACHINERY WAS ON ACCOUNT OF TEMPORARY LULL IN THE B USINESS OF THE ASSESSEE. ACCORDINGLY, WE ARE OF THE THAT THE LD.CIT(A) WAS JUSTIFIED IN ASSESSING THE RENTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. WITH REGARD TO THE OTHER EXPENSES CLAIMED BY THE ASSESSEE, WE NOTICE THAT THE CONSUMABLES TO THE TUNE OF RS.5810/ - IS ALLOWABLE U/S 31 OF THE ACT R.W.S. 57(II) OF THE ACT. THE OTHER EXPENSES CLAIMED BY THE ASSESSEE, IN OUR VIEW CANNOT BE CONSIDERED AS EXPENDITURE AS THEY CANNOT BE CONSIDERED AS HAVING EXPENDED WHOLLY AND EXCLUSIVELY FOR THE EARNIN G OF RENTAL INCOME. ACCORDINGLY, WE CONFIRM THE ORDER OF TAX AUTH ORITIES IN NOT ALLOWING THE OTHER EXPENSES . 6 . THE NEXT ISSUE RELATES TO NON - G RANTING OF DEDUCTION OF DEPRECIATION OF THE CURRENT YEAR AND ALSO BROUGHT FORWARD DEPRECIATION . WE SET AS IDE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GRANT DEDUCTION OF ELIGIBLE AMOUNT OF DEPRECIATION AS WELL AS BROUGHT FORWARD UNABSORBED DEPRECIATION. ITA NO. 75 08 / MUM/20 1 3 4 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE . PRONOUNCED ACCORDINGLY ON 3RD NOVEMBER , 2 015. 3RD NOV , 2 015 S D SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 3RD NOV , 2 015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, T RUE COPY (ASSTT. REGISTRAR ) , /ITAT, MUMBAI