KOHLI INDUSTRIES , Mumbai V. ITO-24(2)(3), Mumbai

ITA 768/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8111 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: R K BOTHRA
• Keywords: Revised return; Set aside
• Section: 80G; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL M EMBER ITA NO.768 & 769/MUM/2019 ( ASSESSMENT YEARS: 2013-14 & 2014-15 ) KOHLI INDUSTRIES 601, HILL-N-SEA 6 TH FLOOR, 72 PALLI HILL ROAD BANDRA (W) MUMBAI-400 050 VS. ITO-24(2)(3) PIRAMAL CHAMBERS LALBAUG MUMBAI-400 012 PAN/GIR NO. AA A FK6841R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI R.K.BOTHRA, AR REVENUE BY SHRI SACHCHIDANAND DUBE, DR DA TE OF HEARING 0 9 /01 /20 20 DATE OF PRONOUNCEME NT 22 / 01/2020 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEAL FILED BY THE ASSESSEE ARE DIRECTE D AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS), MUMBAI, BOTH DATED 31/12/2018 AND TH EY PERTAINS TO AY 2013-14 AND 2014-15. SINCE, THE FACTS ARE IDENTI CAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPE ALS WERE HEARD TOGETHER AND ARE DISPOSED-OFF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE, HAS MORE OR LESS RAISED COMMON GR OUNDS OF APPEAL FOR BOTH AYS. THEREFORE, FOR THE SAKE OF BR EVITY GROUNDS OF APPEAL FILED FOR AY 2013-14 ARE REPRODUCED AS UNDER :- ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 2 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE. THE LD.CIT(A) WAS CORRECT IN CONFIRMING THE DISALLOWANCES OF RS.8 3,389/- PAID AS SOCIETY CHARGES WHILE DETERMINING THE ANNUAL VALUE OF THE FLAT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. THE LD.CIT(A) WAS CORRECT IN CONFIRMING THE ADDITION OF RS. 13,60 5/- PAID AS DONATION TO LOCAL GANESH MANDALS ETC. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESEE IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURER OF GOODS, FILED ITS RETURN OF INCOME FOR AY 2013-14 ON 30/09/2013, DECLARING TOTAL INCOME AT RS. NIL. THE CASE WAS S ELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LD. AO NOTICED THAT THE ASSESEE HAS CLAIMED SOCIETY CHARGE S OF RS. 83,889/- FOR MAPLE SOCIETY (FOR FLAT AT POWAI), THE INCOME OF WHICH IS OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PRO PERTY, BUT CLAIMED THE SAID EXPENDITURE INTO THE PROFIT AND LO SS ACCOUNT. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN A S TO WHY EXPENDITURE RELATED TO INCOME FROM HOUSE PROPERTY S HALL NOT BE DISALLOWED. IN RESPONSE, THE ASSESEE VIDE LETTER, DATED 17/03/2016, SUBMITTED THAT SOCIETY CHARGES PAID TO MAPLE SOCIET Y OF WHICH INCOME IS DISCLOSED UNDER THE HEAD INCOME FROM HOUS E PROPERTY NOT ONLY RELATES TO SAID SOCIETY, BUT ALSO RELATES TO M ANUAL CHURCH SOCIETY AND THIS IS A SOCIETY, WHERE THE REGISTERED OFFICE OF THE FIRM IS SITUATED. THE LD. AO AFTER CONSIDERING THE RELEVANT SUBMISSION OF THE ASSESSEE NOTED THAT AS PER THE PROVISION OF SECTION 24(A) DEDUCTIONS EQUAL TO A SUM OF 30% OF THE ANNUAL VALUE IS ALLOWA BLE AND NO OTHER DEDUCTIONS ARE PERMISSIBLE AS PER THE LAW, BECAUSE DEDUCTIONS ALLOWED @ 30% WILL TAKE CARE ALL EXPENDITURE OF REP AIRS AND MAINTENANCE OF THE PROPERTY. THEREFORE, HE OPINED T HAT DEDUCTIONS CLAIMED TOWARDS SOCIETY CHARGES OUT OF RENTAL INCOM E IS NOT PERMITTED. SIMILARLY, THE LD. AO NOTICED THAT THE A SSESSEE HAS CLAIMED DEDUCTION FOR A SUM OF RS. 13,605/- UNDER T HE HEAD ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 3 DONATIONS, BUT ON VERIFICATION, IT WAS NOTICED TH AT SUCH DONATIONS HAS BEEN PAID TO LOCAL ORGANIZATIONS FOR GENASHA FE STIVAL. HENCE, THE SAME CANNOT BE ALLOWED AS DEDUCTIONS. WHEN THE ISSUE HAS BEEN DISCUSSED WITH THE LD. AR FOR THE ASSESSEE, HE HAS AGREED FOR DISALLOWANCES, BUT REQUESTED FOR DEDUCTIONS U/S 80G OF THE I.T.ACT, 1961. SINCE, THE ASSESEE HAS NOT CLAIMED DEDUCTIONS U/S 80G BY FILING REVISED RETURN, THE LD. AO HAS NOT CONSIDER THE CLAIM OF THE ASSESEE FOR DEDUCTIONS TOWARDS DONATIONS U/S 80G OF THE I.T.ACT, 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), BEFORE THE LD.CIT(A), THE ASSESEE HAS REITERATED ITS ARGUMENTS MADE BEFORE THE LD. AO , A LONG WITH CERTAIN JUDICIAL PRECEDENTS, IN RESPECT OF DISALLOWANCES OF SOCIETY CHARGES OUT OF GROSS RENTAL INCOME. SIMILARLY, THE ASSESSE E FURTHER SUBMITTED THAT INSOFAR AS, DONATIONS PAID TO LOCAL MANDALS FO R GANESHA FESTIVAL, SAID EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, BECAUSE THIS IS A COMPULSORY DONATION ONE HAS TO BE PAID TO LOCAL MANDAL IN ORDER TO RUN BUSINESS SMOOTHLY. 5. THE LD.CIT(A) AFTER CONSIDERING THE RELEVANT SUB MISSION OF THE ASSESEE AND ALSO TAKEN SUPPORT FROM THE DECISION OF ITAT, DELHI BENCH, IN THE CASE OF TUBE ROSE ESTATES (P.) LTD. 123 ITD 498 (DELHI) [2010] HELD THAT IF, EXPENSES LIKE SOCIETY CHARGES IS HELD TO BE ALLOWABLE, THEN NUMEROUS OTHER EXPENSES LIKE BRO KERAGE PROFESSIONAL FEES SALARY OR COMMISSION OF EMPLOYEE/ AGENT, WHO COLLECTS RENT CAN ALSO BE HAVE CLAIMED AND HELD TO BE ALLOWABLE AND THIS IS NOT MANDATE OF THE LAW. THEREFORE, HE OPINE D THAT PAYMENT OF SOCIETY CHARGES CANNOT BE ALLOWED AS DEDUCTION, EIT HER U/ 23 OR U/S ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 4 24 EXCEPT AS OTHERWISE PROVIDED U/S 24(A) @ 30% ON GROSS RENTAL INCOME. SINCE, THE ASSESSEE HAS CLAIMED DEDUCTIONS TOWARDS SOCIETY CHARGES OUT OF RENTAL INCOME, OVER AND ABOV E DEDUCTIONS CLAIMED U/S 24(A), THE LD. AO WAS RIGHT IN REJECTIN G THE CLAIM OF THE ASSESSE AND ACCORDINGLY, CONFIRMED DISALLOWANCES OF PAYMENT OF SOCIETY CHARGES. 6. INSOFAR AS, DISALLOWANCES OF DONATIONS PAID TO L OCAL MANDALS, THE LD.CIT(A) NOTED THAT EXPENDITURE INCURRED IS NO T FOR BUSINESS PURPOSE, BUT IT IS IN THE NATURE OF PERSONAL EXPENS ES, BECAUSE SAID DONATIONS ARE MEANT FOR RELIGIOUS FUNCTIONS. THEREF ORE, THE SAME CANNOT BE ALLOWED AS DEDUCTIONS. HE, FURTHER OBSERV ED THAT ASSESSE COULD HAVE CLAIMED DEDUCTION U/S 80G, IF THE LOCAL MANDALS HAD THE REQUISITE APPROVALS AS REQUIRED UNDER THE ACT. IN A BSENCE OF THE SAME, THE LD. AO IS CORRECT IN DISALLOWANCES OF DON ATIONS OF RS. 13,605/-. AGGRIEVED BY THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERAT ION FROM GROUND NO. 1 OF ASSESEE APPEAL IS DISALLOWANCES OF SOCIETY MAINTENANCE CHARGES CLAIMED BY THE ASSESEE. THE FACTS WITH REGA RD TO THE IMPUGNED DISPUTES ARE THAT THE ASSESEE HAS LET OUT A PROPERTY AT MAPLE SOCIETY, POWAI AND THE INCOME OF WHICH IS OFF ERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSE SSEE HAS DEBITED SOCIETY CHARGES OF RS. 83,889/- INTO THE PR OFIT AND LOSS ACCOUNT. THE LD. AO HAS DISALLOWED SAID CHARGES, ON THE GROUND THAT EXPENSES RELATED TO INCOME FROM HOUSE PROPERTY CANNOT BE ALLOWED AS DEDUCTION. ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 5 8. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) WAS ERRED IN CONFIRMED THE ACTION OF THE LD. AO IN DENY ING THE DEDUCTION FOR MUNICIPAL TAX AND OTHER SOCIETY CHARGES OF RS. 83,389/- WITHOUT APPRECIATING THE FACT THAT MUNICIPAL TAX PAID IS DE DUCTIBLE OUT OF GROSS ANNUAL VALUE. THE LD. AR, FURTHER SUBMITTED T HAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT, MUMBAI A BENCH I N THE CASE OF KANWALJIT SINGH P.KOHLI IN ITA NO. 839/ MUM/2014, W HERE IT WAS HELD THAT MUNICIPAL TAXES AND MAINTENANCE CHARGES H AS TO BE REDUCED FROM THE RENTAL INCOME. THE ASSESSEE HAS AL SO RELIED UPON THE DECISION OF ITAT, IN THE CASE OF MS. ALOO BEJA N DAVER IN ITA NOS. 2381 & 2382/MUM/2010. 9. THE LD. DR, ON THE OTHER HAND STRONGLY SUPPORTIN G ORDER OF THE LD.CIT(A) SUBMITTED THAT EXPENDITURE RELATED TO IN COME FROM HOUSE PROPERTY CANNOT BE ALLOWED AS DEDUCTION UNDER THE H EAD INCOME FROM BUSINESS OR PROFESSION. FURTHER, UNDER THE HEA D INCOME FROM HOUSE PROPERTY, ONLY DEDUCTION PERMISSIBLE IS THE STATUTORY DEDUCTION PROVIDED @ 30% U/S 24(A). SINCE, THE ASS ESSEE HAS ALREADY CLAIMED STATUTORY DEDUCTIONS @ 30% ON RENTA L INCOME, FURTHER DEDUCTIONS TOWARDS SOCIETY CHARGES OUT OF R ENTAL INCOME IS NOT PERMITTED. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. AS PER THE PROVISION OF SECTION 23 OF THE A CT, THE ANNUAL VALUE OF THE PROPERTY SHALL BE ACTUAL RENT RECEIVED LESS, THE TAX LEVIED BY ANY LOCAL AUTHORITY, IN RESPECT OF THE PROPERTY SO LET OUT. IN COMPUTING INCOME FROM HOUSE PROPERTY, THE ASSESSEE CAN CLAIM DEDUCTIONS FOR PROPERTY TAXES LEVIED BY THE LOCAL A UTHORITY, IF SUCH ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 6 TAXES HAS BEEN ACTUALLY PAID BY HIM DURING THE RELE VANT FINANCIAL YEAR. IN ADDITION, THE STATUTORY DEDUCTIONS @ 30% AS PROVIDED U/S 24(A) AND OTHER DEDUCTIONS LIKE INTEREST IS PERMISS IBLE, AS PER THE PROVISION OF THE ACT. IN LIGHT OF ABOVE LEGAL POSIT ION, IF YOU CONSIDER THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASS ESSEE HAS CLAIMED DEDUCTIONS TOWARDS SOCIETY CHARGES PAID TO MAPLE SO CIETY OUT OF RENTAL INCOME. NO DOUBT, IF THE AMOUNT CLAIMED BY T HE ASSESEE INCLUDES MUNICIPAL TAX LEVIED BY THE LOCAL AUTHORIT IES, THEN THE ASSESSEE IS ENTITLED FOR DEDUCTIONS TOWARDS SAID M UNICIPAL TAXES OUT OF RENTAL INCOME. BUT, IN RESPECT OF SOCIETY CHARGE S FOR MAINTENANCE OF PROPERTY NO DEDUCTIONS COULD BE ALLOWED, BECAUSE WHILE COMPUTING INCOME UNDER THE HEAD HOUSE PROPERTY, THE STATUTORY DEDUCTION @ 30% HAS BEEN PROVIDED, WHICH TAKE CARE ALL EXPENSE S RELATED TO REPAIRS AND MAINTENANCE OF THE PROPERTY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. AO, AS WELL AS THE LD.CIT(A) WAS RIGHT IN COMING TO THE CONCLUSION THAT NO FURT HER DEDUCTION IS ALLOWED TOWARDS ANY EXPENSES, WHEN STATUTORY DEDUCT IONS @ 30% IS PROVIDED U/S 24(A) OUT OF RENTAL INCOME. BUT, THE FACTS REMAINS THAT, DEDUCTION CLAIMED BY THE ASSESSEE INCLUDES AMOUNT P AID TOWARDS LOCAL TAXES IS NOT EMANATING FROM THE RECORDS. IT I S THE CLAIM OF THE ASSESSEE THAT IT INCLUDES MUNICIPAL TAXES, WHEREAS THE LD. AO NOTED THAT IT IS PAID FOR MAINTENANCE OF THE PROPERTY. TH EREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUES NEEDS TO GO BAC K TO THE FILE OF THE LD. AO TO ASCERTAIN THE CORRECT FACTS WITH REGA RD TO NATURE OF EXPENSES. IF, THE AMOUNT PAID TO SOCIETY CHARGES IN CLUDES MUNICIPAL TAXES LEVIED BY THE LOCAL AUTHORITIES, THEN TO THAT EXTENT THE LD. AO IS DIRECTED TO ALLOW DEDUCTIONS OUT OF RENTAL INCOME. IF THE AMOUNT RELATES TO MAINTENANCE OF PROPERTY, THEN THE LD. AO IS RIGHT IN DENYING DEDUCTIONS FOR SAID AMOUNT OUT OF RENTAL IN COME. ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 7 11. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.2 OF ASSESSE APPEAL IS DISALLOWANCES OF DONATION S OF RS. 13,605/-. THE ASSESSEE HAS CLAIMED DEDUCTIONS FOR D ONATIONS PAID TO LOCAL MANDALS SUCH AS GANESHA MANDALS ETC,. THE ASSESEE CLAIMS THAT THESE ARE COMPULSORY DONATIONS ONE HAS TO PAID TO LOCAL MANDAL IN ORDER TO RUN BUSINESS SMOOTHLY. WE FIND T HAT IT IS A GENERAL PRACTICE PREVAILING IN BUSINESS THAT IN SOME OCCASI ONS, THE BUSINESS PEOPLE NEEDS TO PAY CERTAIN DONATIONS TO LOCAL PEOP LES FOR CELEBRATIONS OF VARIOUS FESTIVALS AND FUNCTIONS AND THOSE DONATIONS ARE COMPULSORY IN NATURE IN ORDER TO SMOOTHLY CONDU CT THE BUSINESS OF THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERE D VIEW THAT DONATIONS PAID BY THE ASSESSEE TO LOCAL GANESHA MAN DALS ARE NECESSARILY INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND ARE DEDUCTIBLE U/S 37( 1) OF THE I.T.ACT, 1961. THEREFORE, WE DIRECT THE LD. AO TO DELETE ADD ITIONS MADE TOWARDS DISALLOWANCES OF DONATIONS. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 769/MUM/2019:- 13. THE ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO THE ISSUE, WHICH WE HAD CONSIDERED IN ITA NO. 768/MUM/2019 FOR AY 20 13-14. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS SHALL M UTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. THEREFORE, FOR SIMILA R REASONS, WE SET ASIDE THE APPEAL TO THE FILE OF THE LD. AO AND DIRE CT HIM TO ASCERTAIN THE NATURE OF EXPENSES IN PAYMENT MADE TO SOCIETY C HARGES AND ITA NOS.768 & 769/MUM/2019 KOHLI INDUSTRIES 8 DECIDE THE ISSUE IN ACCORDANCE WITH OUR FINDINGS GI VEN FOR AY 2013- 14. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 14. AS A RESULT, BOTH APPEALS FILED BY THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 /01/ 2020 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 22 /01/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//